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horngrens cost accounting a managerial emphasis

Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

Give examples of four categories of cash flows considered in capital budgeting analyses.LO1
Distinguish between the total-project approach and the differential approach to choosing between two capital budgeting projects.LO1
“Accounting amortization is an irrelevant factor in deciding whether to replace an existing 2 delivery vehicle with a more energy-efficient vehicle.” Do you agree? Explain.LO1
“Income taxes only play a role in capital budgeting because of capital cost allowance tax savings.”Do you agree? Explain.LO1
What are the two basic types of capital cost allowance classes? fees :LO1
Distinguish between the nominal rate of return and the real rate of return.LO1
What are the two internally consistent approaches to incorporating inflation into DCF analysis?LO1
What approaches might be used to recognize risk in capital budgeting?LO1
“In practice there is no single rate that a given company can use as a guide for sifting among all projects.” Do you agree? Explain.LO1
“Discounted cash flow techniques are relevant only to profit-seeking organizations.” Do you agree? Explain. .LO1
“The excess present value index or profitability index is a useful guide when allocating limited funds among projects.” Do you agree? Explain. .LO1
“The net present value method and the internal rate-of-return method always rank different projects identically.” Do you agree? Explain.LO1
New equipment purchase. Presentation Graphics prepares slides and other 1.a. aids for indi- Total present value of viduals making presentations. It estimates it can save $42,000 a year in cash
Automated materials-handling capital project, income taxes, sensitivity analysis. Just-1.a Total present value in-Time Distributors, an operator of a large distribution network of health-related
Total-project versus differential approach, income taxes. A specialized automobile parts 1a Total present value manufacturer is considering the acquisition of a new machine. The new machine is far
Project risk, required rate of return. Northern Petroleum is considering two capital f Tataliesentvalue projects. The first project, viewed as a high-risk investment, is drilling equipment for oil
Income taxes and inflation. An investment of $254,200 in special tools, with a life expectancy of four years and a residual price of $24,000, is being examined at December 31, a total present value
Inflation and not-for-profit institution, no tax aspects. KopiPro is considering the pur- ©chase of a photocopying machine for $5,500 on December 31, 2010. It has a useful life of five present value
Excess present value index. The ChipTech Company is considering the acquisition offour ©capital investment projects. The projects under consideration are mutually exclusive. The —_ gycess present
Comparison of projects with unequal lives. Melanie Leblanc, the general manager of Worldwide Foods Inc., has asked Frank Devine, the management accountant, to prepare an analysis for two mutually
New equipment purchase, income taxes. Anna's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of four years. The estimated pretax cash flows for the oven are
New equipment purchase, income taxes. Innovation Inc. is considering the purchase of a new industrial electric motor to improve efficiency at its Fremont plant. The motor has an estimated useful life
Selling a plant, income taxes. (CMA, adapted) The Crossroad Company is an international clothing manufacturer. Its Winnipeg plant will become idle on December 31, 2008. Peter Laney, the corporate
Equipment replacement, income taxes. (CMA, adapted) Microvac is considering the pur- chase of a new, more efficient pump on January 1, 2012 (four years later). The new pump costs $807,500. The pump
Capital budgeting, make versus buy, income taxes, relevant costs. (CMA, adapted) The equipment owned and operated by the Protect-it Company and used to manufacture waste containers must be replaced
Capital budgeting, inventory changes. (M. Wolfson,J . 1N.e t cash flow aftetra x, Harris, adapted) Comfort Footwear Inc. is considering whether to add a new line of running shoes to be sold to its
Mining, income taxes, inflation, sensitivity analysis. (CMA, adapted) Frank Hart, Sparkling Enterprises' controller, has gathered the following data to analyze an investment in new mining equipment
Capital project, inflation, income taxes. Pipe-it Inc. wishes to modernize its facilities which refurbish used pipeline equipment. Robotic machinery appears to be the best option for the spot-welding
Ranking of capital budgeting projects, alternative selection methods, capital rationing. (CMA, adapted) Conglomerates has not yet told Sam Pilon what the total amount of funds available for capital
NPV and inflation. Cost-Less Foods is considering replacing all of its old cash registers 1. Present value of annuity with new ones. The old registers are fully depreciated and have no disposal
NPV, inflation and taxes (continuation of 22-32). Refer to the information in the preceding 1. Total present value problem, but now assume that the tax rate is 30% and that you are not ignoring
Governance, discounted cash-flow analysis. Claude Marchand, the manager of Home-1 Total presept value stead Products, a wholly owned division of Crosslink Inc., has asked Thandie Ng, the manof tax
Introduction of new product, income taxes. (W. Bruns, adapted) Sales of a new product line for Petrus S.A. as of December 2010 are forecast at SFr. 2,400,000 per year, from which a sales commission
Equipment replacement, income taxes, unequal project lives, governance. (CMA, 1. Total present value adapted) Mark Hatcher, CFO, was instrumental in convincing the board of directors of of recurring
Why do better decisions regarding the purchasing and managing of goods for sale frequently cause dramatic percentage increases in net income?LO1
Name five cost categories that are important in managing goods for sale in a retail organization.LO1
What assumptions are made when using the simplest version of the economic order quantity(EOQ) decision model?LO1
Give examples of costs included in annual carrying costs of inventory when using the EOQ decision model.LO1
Give three examples of opportunity costs that typically are not recorded in accounting systems, although they are relevant to the EOQ model.LO1
What are the steps in computing the cost of a prediction error when using the EOQ decision model?LO1
Why might goal-congruence issues arise when an EOQ model is used to guide decisions on how much to order?LO1
Describe just-in-time (JIT) purchasing and its benefits.LO1
What are three factors causing reductions in the cost to place purchase orders of guppiy-chain Strategies: JIT, materials?LO1
Describe how the Internet can be used to reduce the costs of placing purchase orders.LO1
What is supply-chain analysis and how can it benefit manufacturers and retailers?LO1
What are some obstacles to companies adopting a supply-chain approach?LO1
What are the main features in a JIT production system?LO1
Distinguish job-costing systems using sequential tracking from backflush costing.LO1
Describe three different versions of backflush costing.LO1
EOQ for a retailer. The Cloth Centre sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags.
Sensitivity of EOQ to changes in relevant ordering and carrying costs. Alyia Company's annual demand for Model X253 is 10,000 units. Alyia is unsure about the relevant carrying cost per unit per year
Economic order quantity for retailer, ordering and carrying costs. Office Emporium (OE) is deciding the purchase order quantity for a new modem product. Annual demand is 24,000 units. Ordering costs
Purchase order size for retailer, EOQ, just-in-time purchasing. The 24-Hour Mart oper- ates a chain of supermarkets. Its best-selling soft drink is Fruitslice. Demand (D) in April for Fruitslice at
JIT production, relevant benefits, relevant costs. The Champion Hardware Company manufactures specialty brass door handles at its Kitchener plant. Champion is considering implementing a JIT
Backflush costing, two trigger points, materials purchase and sale (continuation of 20-24). Assume the same facts as in Exercise 20-24, except that Road Warrior now uses a backflush costing system
Backflush costing, two trigger points, completion of production and sale (continuation ©of 20-24). Assume the same facts as in Exercise 20-24, except now Road Warrior uses only |. conversion Costs
Inventory management and the balanced scorecard. Devin Sports Cars (DSC) has imple- ©mented a balanced scorecard to measure and support its just-in-time production system. eknareasaineente In the
Effect of different order quantities on ordering costs and carrying costs, EOQ. Koala @Blue, a retailer of bed and bath linen, sells 234,000 packages of Mona Lisa designer sheets —_ _Jotal relevant
EOQ, uncertainty, safety stock, reorder point. Clarkson Shoe Go. produces and sells 2. Weekty demand, 2.500 pairs excellent quality walking shoes. After production, the shoes are distributed to 20
JIT purchasing, relevant benefits, relevant costs. (CMA, adapted) The Margro Corpora-1. Total incremental costs, tion is an automotive supplier that uses automatic turning machines to manufacture
Backflush costing and JIT production. The Acton Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in
Backflush, two trigger points, completion of production and sale (continuation of 20-31). Assume the same facts as in Problem LO1 20-31 except now there are only two trigger points: the completion of
Backflush, two trigger points, completion of production and sale (continuation of 20-31). Assume the same facts as in Problem 20-31 except now there are only two trigger points: the completion of
Relevant benefits and costs of JIT purchasing. Hardesty Medical Instruments is consider- ing JIT implementation in 2010. Hardesty's annual demand for product XJ-200, a surgical scalpel, is 20,000
Supplier evaluation and relevant costs of quality and timely deliveries (continuation of 20-34). Hardesty Medical Instruments installed a JIT purchasing system in 2010 and selected Morrison
Supplier evaluation and relevant costs of quality and timely deliveries. Copeland Sport- ing Goods is evaluating two suppliers of footballs, Big Red and Quality Sports. Pertinent information about
Effect of management evaluation criteria on EOQ model. Computers 4 U is an online company that sells computers to individual consumers. The annual demand for one model that will be shipped from the
Effect of EOQ ordering on supplier costs (continuation of 20-37). IMBest Comput- 2 ers supplies computers to Computers 4 U. Terry Moore, the president of IMBest, is 1.S etup cost pleased to hear that
Supply-chain effects on total relevant inventory cost. Cow Spot Computer Co. outsources ©the production of motherboards for its computers. It has narrowed down its choice of suppliers L Total cost,
Lean accounting. Flexible Security Devices (FSD) has introduced a just-in-time production ©process and is considering the adoption of lean accounting principles to support its new pro- 9 Value
Supply-chain analysis, company viewpoints. Manufacturing companies participating in a supply-chain initiative linking manufacturers and retailers recently made the following com- ments on the
Backflush costing, income manipulation, governance. Shira Honig, the chief financial officer of Silicon Valley Computer, is an enthusiastic advocate of just-in-time production. The SVC Keyboard
Apply the concept of the time value of money to capital budgeting decisions LO1
Evaluate discounted cash flow (DCF) and non-DCF methods to calculate rate of return (ROR)LO1
Apply the concept of relevance to DCF methods of capital budgeting LO1
Assess the complexities in capital budgeting within an interdependent set of value- chain business functions LO1
Apply the concept of defensive strategic investment to the capital budgeting process LO1
“Capital budgeting has.the same focus as accrual accounting.” Do you agree? Explain.LO1
List and briefly describe each of the six parts in the capital budgeting decision process.LO1
What is the essence of the discounted cash flow method?LO1
“Only quantitative outcomes are relevant in capital budgeting analyses.” Do you agree?Explain.LO1
How can sensitivity analysis be incorporated in DCF analysis?LO1
What is the payback method? What are its main strengths and weaknesses?LO1
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

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