Questions and Answers of Fundamental Managerial Accounting Concepts 10th

Customer Satisfaction Performance Measures The following are possible performance measures of customer satisfaction:1. Purchase cost to customer 2. Customer defection rate 3. Returns by customers 4.
Internal Processes Performance Measures The following are possible performance measures of internal processes:1. Cost of replacement parts 2. Lead time (order to delivery)3. Lead time (idea to
Performance Measures of Learning and Growth The following are performance measures of learning and growth:1. Number of new certifications or degrees 2. Average life cycle time of personal computers
Balanced Scorecard Linkages The following are examples of performance measures in a balanced scorecard:1. ROI 2. Percentage of employees having leadership opportunities 3. Repair cycle time 4.
Classifying Balanced Scorecard Elements Listed below are a number of scorecard measures for a manufacturing company.a. Number of new customersb. Percentage of customers who place multiple ordersc.
Balanced Scorecard and Incentives Recall from the chapter the discussion of the oil drillers from the former Soviet Union who won a production competition based on the number of meters drilled. Those
Thinking about the Balanced Scorecard Albert Einstein once commented that “sometimes what can be counted doesn’t count, and what can’t be counted is what really counts.” A business executive
Applying the Balanced Scorecard to a Bank You have just been hired as the CFO of Bridger Bank, a small community bank in your town. Management is currently in the process of creating a balanced
Applying the EVA® Performance Measure to a Start-Up Company Two good friends, Mike Morley and John Baird, got together after graduating with MBA degrees in international business and decided to form
Applying the EVA® Performance Measure to a Large Company Sperry Space and Aeronautics is a research and development firm that contracts with the government to design specialized equipment for use in
JIT Inventory The president of Penman Corporation, John Burton, has asked you, the company’s controller, to advise him on whether Penman should develop a just-in-time (JIT) inventory system. Your
Applying the Balanced Scorecard to Manufacturing Martin, Inc., manufactures pleasure and fishing boats. Management’s goals and objectives for the company are:1. Goal: To be the industry leader in
Applying the Balanced Scorecard to a Small Business You are an optometrist with your own practice. For the past 20 years, you have focused almost exclusively on profitability of your practice as your
Applying the Balanced Scorecard to an Internet Company ServiceComm, Inc. is a technology company that manufactures, installs, and services cellular towers for cellular phone companies. These towers
Applying the Balanced Scorecard to a University The dean of your business school has determined that there are four major drivers of success for her business school. Those success drivers are having
Applying the Balanced Scorecard to a Church As an accountant and active member of a local church, you have been asked by your pastor to help him develop a Balanced Scorecard management system for the
Understanding the Cost of Capital A friend of yours is currently the president of a large company. The two of you are having lunch one day when she asks your opinion on a decision she is trying to
Costs of Quality (Starving Sailor Restaurant)You are the leader of a group of investors that is planning to open a nationwide chain of seafood restaurants that you will call “Starving Sailor
Strategy for Developing a Balanced Scorecard A company is interested in developing a Balanced Scorecard approach to evaluating and enhancing its performance. It is looking at two ways of
How Soon Can You Make Us a Balanced Scorecard?You are currently the controller for a large manufacturing company. The president of the company calls you to his office and states the following: “I
Get Those Business School Ratings Up!You are the dean of the business school at North Central University. You have recently gone through a strategic planning process involving representatives from
You Decide: Can a just-in-time inventory system help companies minimize inventory costs, or is JIT too expensive and cumbersome to implement?Lately, you have heard a lot of talk about just-in-time
You Decide: Does total quality management help a company revamp and improve its business operations, or is it too much of an administrative burden that takes away from the company’s primary
You Decide: Should the Balanced Scorecard concept be a “one-size fits all,” or is the Balanced Scorecard more effective when it is catered to and created with an individual company in mind?You
Wal-Mart Use the income statement and balance sheet for Wal-Mart (see Appendix A) to gather the necessary information to calculate Wal-Mart’s Economic Value Added (EVA®) for 2006 and 2005.
Futura Industries Remember the last time you walked through a grocery store? Did you notice all of the shelves holding the food? If you are like most people, you probably did not pay much attention
Deming in Japan As noted in this chapter, the ideas of W. Edward Deming received little attention in the United States in the late 1940s and early 1950s. Deming then moved to Japan where his ideas
“Family” Business Martin Beemer is the purchasing manager for the police department in a large metropolitan city. The city has 13,000 police officers. The city currently purchases police uniforms
More Than Just the Numbers You have found in your study of accounting that accountants generally focus on the numbers.Their job is to summarize financial results and provide information for decision
Applying the EVA® Performance Measure to a Large Company Rockwell International is a multinational company with the following financial results for 2009:The effective tax rate for Rockwell is 40%.
Applying the Balanced Scorecard to a School District Knowlton School District is currently developing a balanced scorecard to be used by all the schools in the district (K-12). At a meeting with all
Differential Costs, Sunk Costs, and Opportunity Costs Which one of the following statements is false?a. A sunk cost is one that has already been incurred.b. Differential costs can be eliminated in
Sunk Costs Which one of the following would be considered a sunk cost?a. Variable cost of materials to build a new productb. Additional insurance for a new product linec. The total amount paid to
Differential Costs and Decision Making St. Mary Mills, Inc. (SMM) uses high-quality looms to manufacture its textile products. SMM has decided to replace one of its looms and has researched the
Special Order Pricing The company is deciding whether to accept a special order. The company’s costs for the most recent year were as follows:The company produced 100,000 units in the most recent
Special Orders—The Seller’s Decision At the end of a very mild winter, the company has enough raw materials to produce 1,000 coats, and the materials can be used only for coats. The material is
Making or Buying Manufactured Parts The company currently makes a part used in the production of its best-selling product.The company has the option to buy this same part from a supplier for $55 per
Exiting a Market Using the following information, decide whether the company should close any of its stores: Sales revenue Variable costs Direct fixed costs Indirect fixed costs Store 1 Store 2 Store
Entering a Market Refer to the data in PE 21-7. The company’s main customer is considering whether to merge with the company (and its three stores). If the merger takes place, the efficiencies
Additional Processing Panaca Pork Products produces and sells ham, bacon, and sausage. For years, Panaca has sold only one version of its three products. However, Panaca is now considering
Contribution Margin Percentage Using the following information, compute the contribution margin percentage for each product. Selling price Variable costs Product A Product B $394 256 $140 77
Critical Resource Factor Refer to the data in PE 21-10. Product A requires three units of the company’s critical resource, while Product B requires only two units. Compute the contribution margin
Setting Selling Prices: Contribution Approach The company prices its products using a 40% markup on total variable cost to cover fixed costs and to provide a reasonable return on investment. Using
Setting Selling Prices: Functional Cost Approach Refer to PE 21-12. Assume that the company prices its products using a 30% markup on total manufacturing cost to cover selling and administrative
Qualitative Factors Sturdy Chair Company manufactures wooden chairs. In producing the chairs, a great deal of scrap wood is created. The company currently uses the wood as fuel in a factory
Special Order Pricing You are the controller for Tippets Watch Company, a manufacturer of high-quality watches.The company has excess watches, which it has not been able to market through its own
Make-or-Buy Decisions Nelson Car Audio needs 500 amplifiers to complete this month’s car stereo shipment. If Nelson Car Audio buys rather than makes the amplifiers, some of the facilities still
Make-or-Buy Decisions Miller Manufacturing builds and markets personal computers for home and small business use. The company has been approached by an outside supplier offering to provide LCD
Make-or-Buy Decisions Tricia Company has been manufacturing 9,000 units of part Y for its products. The unit cost for the part is as follows:A supplier has offered to sell 9,000 units of part Y to
Purchasing Services from Outside Dr. Anderson, a local dentist, is considering reducing his office staff and outsourcing the management of his accounts receivable. Currently, he has an office manager
Joint Costs and Further Processing Pure Paint Company has been known for years for its two excellent interior wall paints:Nice & Smooth and Rich & Thick. The company has discovered that by processing
Sell Now or Process Further Colorado Steak Company (CSC) uses a joint process to manufacture three types of beef:roasts, steaks, and ground beef. Each product can be sold at the point of separation,
Discontinuing a Product Line Swanton Company currently sells three products: desk calendars, pen sets, and paper-clip holders.The company is thinking of discontinuing the production and sale of
Adding a New Product Cuda, Inc., is thinking about adding a new product line. Marketing surveys indicate that sales of the new product would be 100,000 units. Each unit sells for $8. Direct variable
Contribution Margin per Unit of a Critical Resource Haws Electronics produces two products, CD players and clock radios. Both products are extremely popular, and the company can sell as many of
Critical Resource Constraints B&B Manufacturing (BBM) makes two types of lawnmower engines which it supplies to lawnmower manufacturers: a turbo and a self-propelling engine. The company has
Pricing Regular Products Medical Care, Inc., is considering what price to charge for Sparkle, a toothpaste that is sold in its leased store at a hospital. The accountant has been asked to prepare an
Special Order Pricing Midwest Company manufactures portable radios. Shop Smart, a large retail merchandiser, wants to buy 200,000 radios from Midwest Company for $12 each. The radio would carry Shop
Make-or-Buy Decisions Logan Company manufactures several toy products. One is a large plastic truck, which requires a plastic truck body, two metal axles, and four rubber wheels. Logan currently
Choosing between Two Machines Bruce’s Bakery is thinking of making its own Danishes. Two machines, A and B, are being considered for purchase. The company now purchases the Danishes from an outside
Purchasing Services from Outside Northeast Reinsurance Company is growing rapidly. As it has grown, it has added legal staff to provide for its legal services. One of the principals of the company is
Unifying Concepts: Make-or-Buy Decisions (Differential Costs and Opportunity Costs)Snow Corporation manufactures commercial freezers for use in restaurant kitchens. The company is planning to produce
Processing Past the Point of Separation Style Company manufactures three items, S1, S2, and S3, which are used in the production of fabrics. Each item can be sold at the point that all three are
Dropping a Product Line Bryce Baseballs manufactures baseballs, baseball bats, and baseball gloves. The company is thinking of dropping baseball gloves as a product line. The following report was
Adding and Dropping Product Lines Park Manufacturing Company has been producing three products: Frisbees, Volleyballs, and Croquet. Now that the plant has been shifted to an assembly-line operation,
Shutting Down or Continuing Operations End Trail Campground is open year-round. However, 80% of its revenues are generated from May through October. Because only 20% of the revenues are generated
Determining Production with a Critical Resource Limitation Clarity Corporation produces three sizes of television sets: 10-inch screen, 19-inch screen, and 24-inch screen. The revenues and costs per
Determining Production with a Critical Resource Limitation A company is examining two of its products, X-121 and Y-707. The following information is being reviewed:Required:1. Which item should the
Contribution Margin per Unit of a Critical Resource Dresser, Inc., manufactures three super-sports-hero dolls: Super Dunk, Pete Tulip, and Zonk.Production, however, is limited by the skilled labor
Unifying Concepts: Production and Advertising Cole Company manufactures only two products—a battery charger and a testing machine for automobile engines. An average of 30,000 chargers and 50,000
Normal Selling Price Chojna Lighting Supply manufactures desktop and ceiling-mounted light fixtures. The company is seeking to come up with a reasonable price for its desktop executive
Buying from Inside or Outside the Company E & B Company has two divisions, processing and finishing. The Finishing Division has been purchasing certain products from the Processing Division at a
You Decide: Which is more important to a company’s overall success and profitability:quantitative or qualitative factors?Often a company is judged based on the strength of financial indicators,
Microsoft Find the most recent Form 10-K for Microsoft. Read through the report to determine how many segments of business exist within Microsoft. What approach does Microsoft appear to use in
Main Line Pictures, Inc., versus Kim Basinger Hollywood produces a lot of entertainment, including accounting entertainment! In early 1993, the Superior Court of the State of California (Los Angeles
Ameripill Company Located in Bartow, Alabama, the Pharmaceutical Division of Ameripill Company ranks among the top 15 drug companies in the world. The European Unit of the Pharmaceutical Division is
Play World, Inc.Roger Smith, the controller of Play World, Inc., a toy company, has just completed an analysis of a make-or-buy decision with respect to a particular part for one of the new toys the
Airline Ticket Prices If you have ever shopped for airline tickets, you are aware of the tremendous diversity in ticket prices for the same flight, even for those who sit in the same section
Whether to Make or Buy a Part Schill Manufacturing Company makes lawn mowers. It has been buying a component from a regular supplier for $11.50 per unit. Because Schill recently has been operating at
Measuring Level of Activity Which one of the following is not an activity base used by a company?a. Number of defects per hour in an assembly plantb. Number of units sold for a merchandising firmc.
Variable Costs Which one of the following would not be a variable cost for a construction company?a. Cost of trusses used to construct a roof for a houseb. Cost of windows to be installed in a
Linearity of Variable Costs within the Relevant Range The company has assembled the following data about its variable costs:The company is currently producing 3,300 units. According to these data,
Fixed Costs If the level of activity increases during the month, does the fixed cost per unit increase, decrease, or remain constant?
Break-Even Computation B&B company reports the following items:Using the above information, compute the company’s monthly break-even point (in units). Direct materials per unit 2.25 Direct
Stepped Fixed Costs The company pays $3,000 per month to each of its four production supervisors. Each supervisor can handle the workload associated with up to 2,400 units of production per month;the
Mixed Costs The company’s president receives a $100,000 base salary and a bonus of 0.5% of sales for the year. How much will the president earn at a sales level of $2,750,000 for the year?
Scattergraph Method Which one of the following statements is incorrect?a. The scattergraph method can be somewhat subjective depending on where one visually places the regression line.b. The
Using the High-Low Method to Estimate the Variable Cost Rate The company reports the following utility costs for different levels of activity during the first half of the year:Using the high-low
Using the High-Low Method to Estimate Fixed Costs Refer to the data in PE 20-9. Using the high-low method, estimate the fixed costs per month based on the variable cost rate (computed in PE 20-9).
Contribution Margin Income Statement The company sells desks for $550 each. The variable cost per desk is $385. The company’s monthly fixed costs are $72,000. Prepare a contribution margin income
Contribution Margin Ratio and Variable Cost Ratio Refer to the data in PE 20-11. Compute the contribution margin ratio and the variable cost ratio.
The C-V-P Equation The company sells riding lawnmowers for $2,395 each. The variable cost per lawnmower is$1,645. The company’s monthly fixed costs are $141,000. Using the C-V-P equation, compute
Break-Even Units The company sells shovels for $27.75 each. The variable cost per shovel is $14.25. The company’s monthly fixed costs are $2,538. Compute the number of shovels the company must sell
Determining Sales Volume to Achieve Target Income Refer to the data in PE 20-14. How many shovels must the company sell to achieve a profit of $10,000?
Determining Sales Volume to Achieve Target Return on Sales The company sells pianos for $7,000 each. The variable cost per piano is $5,500. The company has fixed costs per month of $45,000. Compute
Break-Even Sales Revenue The company has a variable cost ratio of 55% and monthly fixed costs of $144,000. What is the company’s break-even point in terms of sales dollars?
C-V-P Analysis with Simultaneous Changes in Several Variables The company currently sells 50,000 feet of cable each month for $3.50 per foot. The variable cost of the cable is $1.10 per foot, and
C-V-P Analysis with Simultaneous Changes in Several Variables Refer to the data in PE 20-18. The company is considering whether to change its production process to reduce the variable cost per foot
Interpreting a C-V-P Graph Look at the given C-V-P graph. Which one of the following sets of labels correctly labels items A, B, and C in the C-V-P graph?a. A: Total cost line; B: Fixed costs; C:
Interpreting a Profit Graph Look at the given profit graph. Which one of the following sets of labels correctly labels items A, B, and C in the profit graph?a. A: Area of loss; B: Break-even point;

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