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horngrens cost accounting a managerial emphasis
Questions and Answers of
Horngrens Cost Accounting A Managerial Emphasis
Describe the accrual accounting rate-of-return method. What are its main strengths and weaknesses?LO1
“The trouble with discounted cash flow techniques is that they ignore amortization costs.”Do you agree? Explain.LO1
“Let’s be more practical. DCF is not the gospel. Managers should not become so enchanted with DCF that strategic considerations are overlooked.” Do you agree? Explain.LO1
“The net present value method is the preferred method for capital budgeting decisions.Therefore, managers will always use it.” Do you agree? Explain.LO1
“All overhead costs are relevant in NPV analysis.” Do you agree? Explain.LO1
List and briefly describe the five major categories of cash flows included in capital investment projects.LO1
“Managers’ control of job projects generally focuses on four critical success factors.” Identify those factors.LO1
Bill Watts, president of Western Publications, accepts a capital-budgeting project advocated by Division X. This is the division in which the president spent his first 10 years with the company. On
How can capital budgeting tools assist in evaluating a manager who is responsible for retaining customers of a cellular telephone company?LO1
Exercises in compound interest. ‘To be sure that you understand how to use the tables in Appendix A at the end of this book, solve the following exercises. Ignore income tax considerations.(The
Comparison of approaches in capital budgeting. A company is considering a project that OO requires purchasing a particular asset. Data pertaining to the purchase are shown below.REQUIRED 1. Determine
New assets: comparison of approaches in capital budgeting. Panayiotis, the owner and Oo manager of Micos Ltd., is evaluating the acquisition of new equipment needed to attend a 9 piscount factor, new
Comparison of approaches to capital budgeting. Oshawa Contractors is thinking of buy-: ing, at a cost of $300,000, a new crane that is expected to save $80,000 in cash operating costs a Ee per year.
Comparison of approaches to capital budgeting. GTA Financial Services estimates that it can save $20,000 a year in cash operating costs for the next 10 years if it redesigns the layout of its office
Comparison of projects, no income taxes. (CMA, adapted). New Bio Corporation is a 1. Plan 1 NPV, ($3,901,725) rapidly growing biotech company that has a required rate of return of 12%. It plans to
Payback period, net present value. A company is considering buying a $250,000 produc-Salvage NPV,$ 12,830 tion machine. It estimates that the machine would cost $12,000 per year to operate, but would
Net present value, internal rate of return, sensitivity analysis. Muskoka Landscaping 1a. Discount factor 3.6048 Ltd. is planning to buy equipment costing $25,000 to improve its services. The
Equipment replacement, net present value, relevant costs, payback. Edgeley Inc., a logis-: tics operator located in Concord, Ontario, is considering replacing one of its tractor trailers a
Payback and NPV methods, no income taxes. (CMA, adapted) Portage Transportation Services is analyzing capital expenditure proposals for the improvement of its cross-docking facilities. The capital
DCF, accrual accounting rate of return, working capital, evaluation of performance. Edilcan Inc. has been offered an automated special-purpose welder (robot) for $60,000. The machine is expected to
Selling a plant, IRR, and AARR. (CMA, adapted) The Crossroad Company is an interna-1. NPV, Option 1, $340,000 1.a. Present value of 5-year tional clothing manufacturer. Its Santa Monica plant will
New equipment purchase. Norberto Garcia, general manager of the Argentinean sub- sidiary of Innovation Inc., is considering the purchase of new industrial equipment to improve efficiency at its
NPV and customer profitability. Ready Ink and Paper Ltd. sells and distributes office sup- plies for printers and photocopy machines; its overall margin on sales is 10%. Ready Ink and Paper has
DCF, sensitivity analysis, no income taxes. (CMA, adapted) Applewood Manufacturing Ltd. produces a variety of hand tools that are directly sold to local hardware stores in Alberta. The company's
NPV, IRR, and sensitivity analysis. Crumbly Cookie Company is considering expanding by buying a new (additional) machine that costs $42,000, has zero terminal disposal value, and has a 10-year useful
Payback, even and uneven cash flows. You have the opportunity to expand your business by purchasing new equipment for $159,000. You expect to incur fixed costs of $96,000 per year to use this new
NPV and AARR, goal-congruence issues. Nate Stately, a manager of the Plate Division for the Great Slate Manufacturing company, has the opportunity to expand the division by investing in additional
Payback, net present value, relevant costs, sensitivity analysis. The Students' Association of Your University has been operating a cafeteria, but it is considering converting it to a com- pletely
Recognizing cash flows for capital investment projects. Ludmilla Quagg owns af itness ee centre and is thinking of replacing the old Fit-O-Matic machine with a brand new Flab-Buster 9. pnnyaicash
Recognizing cash flows for capital investment projects, NPV. Met-All Manufacturing ©o manufactures over 20,000 different products made from metal, including building materials, i Annuafeasmtowiran
Equipment replacement, relevant costs, sensitivity analysis. The engineering department LI of an automotive supplier specialized in manufacturing seating systems has developed a ee $600,000 machine
Special order, relevant costs, capital budgeting. (A. Spero, adapted) Toys Inc. sells neon-A Netracramental benefit coated Nightglow cars to several local toy stores. It has the capacity to make
Capital budgeting, computer-integrated manufacturing, sensitivity. Locomotive Engines Inc. is planning to replace the process control system in all of its three production lines. The current system
Defensive and offensive strategies in capital budgeting. (CMA, adapted) The manage- ment of Kleinburg Industrial Bakery is analyzing two competing investment projects and they must decide which one
Net present value, internal rate of return, sensitivity analysis. Francesca Freed wants a Burg-N-Fry franchise. The buy-in is $500,000. Burg-N-Fry headquarters tells Francesca that typical annual
Relevant costs, capital budgeting, strategic decision. (M. Porporato, adapted) Wilcox is a family-owned company that has been making microwaves for almost 20 years. The company's production line
Analyze the impact of income taxes on operating and capital cash flows and calculate the after-tax NPV of investments LO1
Apply the total-project approach and the differential approach appropriately to different capital budgeting decisions LO1
Apply the concepts of real and nominal ROR to account for inflation in capital budgeting LO1
Analyze alternative approaches used to recognize the degree of risk in capital budgeting projects and explain the usefulness of excess present value index in capital budgeting LO1
Implement capital budgeting in not-for-profit organizations and explain why IRR and NPV may rank projects differently LO1
Analyze five categories of costs associated with goods for sale and balance ordering costs and carrying costs using the economic order quantity (EOQ) decision model LO1
Analyze and reduce conflicts that can arise between EOQ decision models and models used for performance evaluation LO1
Analyze the relevant benefits and costs of JIT alternatives LO1
Differentiate a materials requirements planning (MRP) strategy from ERP strategy of supply-chain management LO1
Analyze how backflush costing can simplify traditional job-costing systems LO1
Why is there an unmistakable trend in manufacturing to improve quality?LO1
Distinguish among spoilage, reworked units, and scrap.LO1
"Normal spoilage is planned spoilage." Discuss.LO1
"Costs of abnormal spoilage are losses." Explain.LO1
"What has been regarded as normal spoilage in the past is not necessarily acceptable as nor- mal spoilage in the present or future." Explain.LO1
"Units of abnormal spoilage are inferred rather than identified." Explain.LO1
"In accounting for spoiled goods, we are dealing with cost assignment rather than cost incur- rence." Explain.LO1
"Total input includes abnormal as well as normal spoilage and is, therefore, inappropriate as a basis for computing normal spoilage." Do you agree? Explain.LO1
"The point of inspection is the key to the allocation of spoilage costs." Do you agree? Explain.LO1
"The unit cost of normal spoilage is the same as the unit cost of abnormal spoilage." Do you agree? Explain.LO1
"In job costing, the costs of normal spoilage that occur while a specific job is being done are charged to the specific job." Do you agree? Explain.LO1
"The costs of reworking defective units are always charged to the specific jobs where the defects were originally discovered." Do you agree? Explain.LO1
"Abnormal rework costs should be charged to a loss account, not to manufacturing over- head." Do you agree? Explain.LO1
When is a company justified in inventorying scrap?LO1
How do managers use information about scrap?LO1
Normal and abnormal spoilage in units. The following data, in physical units, describe a grinding process for January:Inspection occurs at the 100% completion stage. Normal spoilage is 5% of the good
Weighted-average method, spoilage, equivalent units. (CMA, adapted) Consider the fol- lowing data for November 2010 from Grey Manufacturing Company, which makes silk pennants and uses a
Weighted-average method, assigning costs (continuation of 18-17). REQUIRED For the data in Exercise 18-17, summarize total costs to account for, calculate the cost per equivalent unit for direct
FIFO method, spoilage, equivalent units. Refer to the information in Exercise 18-17. Sup- pose Grey Manufacturing Company uses the FIFO method of process costing instead of the weighted-average
FIFO method, assigning costs (continuation of 18-19). REQUIRED For the data in Exercise 18-19, use the FIFO method to summarize total costs to account for, calculate the cost per equivalent unit for
Weighted-average method, spoilage. Appleton Company makes wooden toys in its Forming Department, and it uses the weighted-average method of process costing. All direct materials are added at the
Standard costing method, spoilage, and journal entries. Aaron Inc. is a manufacturer of vents for water heaters. The company uses a process-costing system to account for its workin-process
Weighted-average method, spoilage. Chipcity Inc. is a fast-growing manufacturer of computer chips. Direct materials are added at the start of the production process. Conversion costs are added evenly
FIFO method, spoilage. Refer to the information in Exercise 18-23.% REQUIRED :Do Exercise 18-23 using the FIFO method of process costing.LO1
Standard-costing method, spoilage. Refer to the information in Exercise 18-23. Suppose Total costs to account for Chipcity determines standard costs of $200 per equivalent unit for direct materials
Physical units, inspection at various stages of completion. Normal spoilage is 7% of the Normal spoitage at 15%, 8,190 good units passing inspection in a forging process. In March, a total of 12,000
Spoilage and job costing. (L. Bamber) Bamber Kitchens produces a variety of items in 1. Unit cost of remaining cases, accordance with special job orders from hospitals, plant cafeterias, and
Reworked units, costs of rework. Grey Goods assembles washing machines at its Cami bridge plant. In February 2010, 60 tumbler units that cost $44 each from a new supplier were¥ defective and had to
Weighted-average method, spoilage. Lang Manufacturing Company uses the weighted-average method of process costing. All direct materials are added at the beginning of the process, and conversion costs
FIFO method, spoilage. Refer to the information in Problem 18-30.REQUIRED Do Problem 18-30 using the FIFO method. Note that you first need to calculate the equivalent units of work done in the
Standard-costing method, spoilage. Refer to the information in Problem 18-30. Suppose Lang determines standard costs of $9.60 per equivalent unit for direct materials and $12.00 per equivalent unit
Weighted-average method, spoilage. Windsor Company is a food-processing company. It; operates under the weighted-average method of process costing and has two departments, pee Seana ry or Cleaning
FIFO method, spoilage. Refer to the information in Problem 18-33.1.To tal equi Be sak narat REQUIRED period only, 20,000 units Do Problem 18-33 using the FIFO method of process costing. (Problem
Weighted-average method, Packaging Department (continuation of 18-3 3). In Windsor Company’s Packaging Department, conversion costs are added evenly during the Q process, and direct materials are
FIFO method, Packaging Department (continuation of 18-34). Refer to the information in Problem 18-35 except for the transferred-in costs for May, which equal the total cost of good units completed
Physical units, inspection at various stages of completion. Normal spoilage is 6% of the good units passing inspection in a forging process. In March, a total of 10,000 units were spoiled. Other data
Weighted-average method, inspection at 80% completion. (A. Atkinson) Ottawa Manu- facturing is a furniture manufacturer with two departments: moulding and finishing. The company uses the
Job-cost spoilage and scrap. (F. Mayne) Canadian Metal Fabricator Ltd. has a large job, No. 2734, that calls for producing various ore bins, chutes, and metal boxes for enlarging a copper
Spoilage in job costing. Whitefish Machine Shop is a manufacturer of motorized carts for vacation resorts. Pat Cruz, the plant manager of Whitefish, obtains the following information for Job #10 in
Rework in job costing, journal entry (continuation of 18-40). Assume that the five spoiled units of Whitefish Machine Shop's Job # 10 can be reworked for a total cost of $1,800. A total cost of
Job costing, rework. Solutions Corporation is a manufacturer of computer chips based in “>Nepean. It manufactures two types of computer chips, CS1 and CS2. The costs of manufacturing each CS1 chip,
Job costing, spoilage, governance. (CMA, adapted) Richmond Company manufactures @products that often require specification changes or modifications to meet customers’ needs. | {Normal spoilage,
FIFO method, spoilage, working backward. The Cooking Department of Spicier Inc. uses a process-costing system. Direct materials are added at the beginning of the cooking process.Conversion costs are
Apply balanced scorecard (BSC) concepts to the analysis of quality LO1
Analyze quality-control problems using three methods LO1
Analyze the benefits of using both financial and nonfinancial measures of quality LO1
Evaluate methods using time as a competitive tool LO1
Evaluate the strengths and weaknesses of the theory of constraints (TOC) and activity-based costing (ABC) for managing bottlenecks LO1
Describe two benefits of improving quality.LO1
How does conformance quality differ from quality of design? Explain.LO1
Name two items classified as prevention costs.LO1
Distinguish between internal failure costs and external failure costs.LO1
Describe three methods that companies use to identify quality problems.LO1
"Companies should focus on financial measures of quality because these are the only meas- ures of quality that can be linked to bottom-line performance." Do you agree? Explain.LO1
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