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business
introduction to management accounting
Questions and Answers of
Introduction To Management Accounting
Why do you think these questions were extremely difficult for Microsoft to answer as the company considered the development of the Windows XP version of Microsoft Windows as a potential capital
If Elizabeth could earn a 17 percent return on an investment in Hoffman Company stock (or some other company), what would you advise her to do?Explain your reasoning.
If you owned stock in a publicly traded company, in which group of companies in Exhibit 8-3 would you want your company to be?Assume Elizabeth buys the Boardman stock and consistently earns an 8
If you are certain you could earn a 20 percent return on an investment in some other company’s stock, what would you do? Explain your reasoning.Assume you own stock in a publicly traded company and
Because a publicly traded company receives money only when its stock is originally issued, why do you think it would care about the stock’s market value in the stock market?Assume you own stock in
What would you think about a company whose stock was selling for \($50\) a share in January and \($12\) a share in December?
When you consider that companies are generally in business to earn a profit, why might it be acceptable to select a capital project that promises a return that is just equal to the weighted average
Under what circumstances do you think a company might accept one capital project over another even though the project selected promises a lower return?
Do you think there would ever be a situation when a company should proceed with a capital project even though the project promises a return lower than the cost of capital? Explain your reasoning.
What do you think might cause a company to reject a proposed capital project even though it promises a return significantly higher than the cost of capital?
How would you explain the difference between present value and net present value?
Should a business accept or reject a project with an NPV of zero? Explain your reasoning.
What suggestions would you make to help Monolith eliminate the kind of “game” being played by Mary, Fred, and Bill?
Following are the elements of the planning process as discussed in this chapter, with some characteristics pertaining to those elements.a. Goalsb. Strategic planc. Capital budgetd. Operating
The Marcus Company is in the process of determining a return rate to use for its cost of capital.Upon review of the financial statements it was determined that the total interest bearing debt is
The Byrne Company is in the process of determining a return rate to use for its cost of capital. Upon review of the financial statements it was determined that the total interest bearing debt is
The Cunningham Company is in the process of determining a return rate to use for its cost of capital.Upon review of the financial statements it was determined that the total interest bearing debt is
Following in random order are the four steps for evaluating a capital expenditure:Required: In the space provided, indicate a logical sequence of the steps for evaluating a capital expenditure. a. b.
Florence Kundrat owns Discount Fashions. She is contemplating the purchase of a soda machine, which would be used to sell soft drinks to customers for $0.75 each. The following estimates are
Brianna Garcia is contemplating the purchase of an ice cream vending machine, which would be used to sell ice cream to customers for $2 each. The following estimates are available:Required: Determine
Javier Cruz is contemplating the purchase of a machine that will automate the production of baseball bats in his factory. The following estimates are available:Required: Determine the net present
Dahlia Garcia is contemplating the purchase of a machine that will automate the production of hosiery in her factory. The following estimates are available:Required: Determine the net present value
Michael Diaz Sporting Goods is considering the purchase of a machine that is used to cut material to make baseball gloves. The cost of the machine is \($265,000\). The machine has an estimated useful
Carlos Urriola Manufacturing is considering the purchase of a computer-controlled manufacturing machine that is used in its factory. The cost of the machine \($3,600,000\). The machine has an
Frank Eiroa is considering the purchase of an engine lift for use in his marine repair business.He has determined that a used lift is available for \($5,500\). The engine lift has an estimated useful
Alfredo Lomando is considering the purchase of an industrial glass cutting machine for use in his business. He has determined that a used glass cutter is available for \($25,800\). The cutter has an
The owner of Wynn Sports Cards is contemplating the purchase of a machine which will automate the production of baseball cards in her factory. The following estimates are available:Required:
Kevin Petty owns Discount Parts, Inc. He is contemplating the purchase of a brake lathe that could be used to refurbish brake parts for customers. The following estimates are available:Required:
Paola Grillon owns Grillon Skin Care Products. She is contemplating the purchase of an industrial mixer that would be used to mix cosmetics in her factory. The following estimates are available:
Elianne Vinas owns Vinas Shoe Company. She is contemplating the purchase of a cutting machine that would be used to make shoes in her factory. The following estimates are available:Required:
George Gonzalez Construction Company is considering the purchase of a new road grader. The cost of the road grader is \($68,000\). The road grader has an estimated useful life of seven years and an
Wesley Parks Pencil Company is considering the purchase of a new machine to make pencils.The cost of the machine is \($248,000\). The pencil machine has an estimated useful life of 10 years and an
Sylvia Heain’s Catering Service is considering the purchase of new energy-efficient cooking equipment. The cost of the new equipment is \($78,000\). The equipment has an estimated useful life of
Penny Williams is contemplating the purchase of a new computer system for her company, Williams Manufacturing. She has made the following estimates:Required:a. Determine the internal rate of return
Valdez Moving and Storage is contemplating the purchase of a new delivery truck. The following estimates are available:Required:a. Determine the internal rate of return for the truck purchase.b.
Hank Maupin & Company is in the process of replacing its existing computer system. The following three proposals are being considered:Required:a. Determine the internal rate of return for each of
David Wilson Equipment Company is in the process of selecting some new manufacturing equipment. The following three proposals are being considered:Required:a. Determine the internal rate of return
Dunn Manufacturing Company is considering the purchase of a factory that makes valves.These valves would be used by Dunn to manufacture water pumps. The purchase would require an initial outlay of
Tom Robinson owns Discount Hardware. He is contemplating the purchase of a copy machine which would be used to make copies to sell to customers for five cents each. The following estimates are
Rebecca Pons owns Pons Magic Makers Manufacturing. She is contemplating the purchase of a machine that would be used to manufacture various products that would be sold to magic shops. The following
Claudia Vargas is contemplating the purchase of a machine that would be used in her business.The following estimates are available:Required: Determine the payback period for the machine purchase.
Cesar Nieto is contemplating the purchase of a machine that would be used in his business.The following estimates are available:Required: Determine the payback period for the machine purchase.
Junior Gonzales Racing Fuel is considering the purchase of a fuel truck that he would use to sell gasoline at motor sport racing events in Puerto Rico. He has determined that a used truck is
Veronica Torres is considering opening a ceramic studio. She has determined that it would require an investment of $14,000 to open the store. She believes that the cash inflows would grow each year
Karen Calloway is considering adding a new style of gym shorts to her product line. She has determined that it would require an investment of $22,000 to add the new style shorts.She believes that the
BRV Construction Company is contemplating the purchase of scaffolding at the cost of \($32,000\). Currently, the company rents similar scaffolding for use at each of its construction sites. The
Smith and Smith & Associates is contemplating the purchase of equipment that would cost \($196,600\). Currently, the company rents similar equipment for \($45,076\) per year. The proposed new
Condore & Company is contemplating the purchase of a machine that would cost \($142,790\). The machine would provide an annual contribution margin of \($47,262.55\) each year. The proposed new
Frank’s Marine Service purchased a forklift five years ago for \($16,000\). When it was purchased, the forklift had an estimated useful life of 10 years and a residual value of $4,000.The forklift
Al Hart of Hart Engineering is considering the purchase of a new copy machine. He purchased the old machine two years ago for \($8,500\). When it was purchased the old machine had an estimated useful
The managers at AAA Manufacturing Company are considering replacing an industrial mixer used in the company’s factory. The company’s cost of capital is 10 percent.Required:a. Prepare a relevant
The managers at General Manufacturing Company are considering replacing the industrial lathe used in the company’s factory. The company’s cost of capital is 12 percent.Required:a. Prepare a
John Paul Hudik, president of Hudik Boat Hauling, is considering replacing the company’s industrial lift used to haul boats. The new lift would allow the company to lift larger boats out of the
The managers at Wilma Manufacturing are considering replacing a printing press with a new, high-speed model. The company’s cost of capital is 12 percent.Required:a. Prepare a relevant cost schedule
Greg Gluck Marine borrowed $5,000 from National Bank on January 1, 2004.Required:a. Assuming 9 percent simple interest is charged, calculate interest for 2004, 2005, and 2006.b. Assuming 9 percent
Gary borrowed $8,000 from Orlando National Bank on January 1, 2004.Required:a. Assuming 8 percent simple interest is charged, calculate interest for 2004, 2005, and 2006.b. Assuming 8 percent
Cam borrowed $2,000 from Miami National Bank on January 1, 2004.Required:a. Assuming 6 percent simple interest is charged, calculate interest for 2004, 2005, and 2006.b. Assuming 6 percent compound
Susan Jones made the following investments on January 1, 2004:1. \($2,000\) at 10 percent for 5 years 2. \($12,000\) at 4 percent for 8 years 3. \($9,000\) at 14 percent for 15 years Assume the
Ivan Zhang made the following investments on January 1, 2004:1. \($3,000\) at 8 percent for 6 years 2. \($4,000\) at 6 percent for 8 years 3. \($5,000\) at 10 percent for 5 years Assume the
Orlando Gonzalez made the following investments on January 1, 2004:1. \($1,000\) at 14 percent for 3 years 2. \($2,000\) at 10 percent for 5 years 3. \($4,000\) at 8 percent for 8 years Assume the
Consider the following investments:1. $2,000 at the end of each of the next five years at 10 percent interest compounded annually. '2. $12,000 at the end of each of the next eight years at 4 percent
Consider the following investments.1. $12,000 at the end of each of the next three years at 12 percent interest compounded annually.2. $16,000 at the end of each of the next five years at 10 percent
Consider the following investments.1. $1,000 at the end of each of the next five years at 6 percent interest compounded annually.2. $1,000 at the end of each of the next five years at 8 percent
Jim Johnson is planning to buy a new car when he graduates from college in three years.He would like to invest a single amount now, in order to have the $24,000 he estimates the car will
Lowell Pitman needs to have \($50,000\) at the end of five years. Lowell would like to invest a single amount now, to have the \($50,000\) in five years.Required: Calculate the amount Lowell must
Lauren Elsea is planning to buy a house when she graduates from college. She would like to have \($20,000\) for the down payment. Lauren would like to invest a single amount now, to have the
Linda Chidister is planning to send her son, Edward, to college. While he is in college, Linda intends to give him $3,000 at the end of each year.Required: How much must Linda invest today so she
Alex Malpin is planning to spend the next three years doing research in China. An Asian studies research institute has agreed to pay Alex $20,000 at the end of each of the three years he is in
Photo Factory is planning to purchase some photo processing equipment from Ace Equipment Company. The equipment will provide cash flow of $15,000 at the end of each of the next eight years.Required:
Refer to the decision faced by Jessica’s parents in Disney World. Which criteria of relevance did the $56 baby-sitting cost fail to meet? Explain your reasoning.
Have you ever made a decision and later realized that you mistakenly let irrelevant factors affect your choice? Explain.
What are the relevant quantitative factors you should consider in making your decision?Assume you are planning a trip from Miami to Texas to visit some friends. You have a job, but your boss will let
What are the relevant qualitative factors you should consider in making your decision?Assume you are planning a trip from Miami to Texas to visit some friends. You have a job, but your boss will let
Assuming all purchases and sales of computer systems are cash transactions, how much cash would Bill need to buy the new system?
Now that we know the relevant quantitative information associated with the computer replacement, what qualitative factors should Bill consider before he makes his final decision?
What would happen if you treated every order as a special order and routinely disregarded fixed cost considerations from your pricing decisions?
Assume that the production manager at Alumafloat reminds you that four years ago sales skyrocketed for a while. Demand was so great that production increased to the limit of the company’s capacity.
What qualitative factors should you consider regarding accepting an order to sell Sears the boats for less than the price you charge your regular customers? For example, what would your regular
What will happen to the cost of producing other Microbake products if your decision is overturned and the company outsources the timer assemblies?
What qualitative factors should managers at Microbake consider with respect to their outsourcing decision?
The production manager at Ace Manufacturing is contemplating whether he should upgrade some old production equipment. He is considering the following factors:Required: For each item listed, indicate
Tom Robinson is thinking about buying a portable computer. He has a computer at home, but the portable computer would allow him to work during his frequent business trips.Tom is trying to convince
Tina Alberts is thinking about trading her car for a new one. Her present car is only three years old, completely paid for, but out of warranty. The car’s original cost was $22,000.Lately, the car
Jean Parks is a salesperson for Quality Food Products, Inc. She is considering a 250-mile trip to visit a potential customer, ByLots. Following are factors she is pondering.Required: For each item
Jean Parks is a salesperson for Quality Food Products, Inc. She is considering a 250-mile trip to visit a potential customer, ByLots. Following are factors she is pondering.Required: For each item
Managers at Ace Manufacturing are considering upgrading some production equipment.They are considering the following factors:Required: For each item listed, indicate whether it is quantitative (A) or
Assume that you are deciding whether to live in a campus dormitory room or an offcampus apartment.Required:a. List all the costs that come to mind for each alternative as you think about this
Assume that you are deciding what to do next summer. You are considering two alternatives:Go to summer school, or tour Europe.Required:a. List all the costs that come to mind for each alternative as
George Binkley’s car is seven years old. The car is no longer under warranty and requires frequent repairs. George is trying to decide whether to buy a new car. He has asked you what you think
The managers at Miami Manufacturing Company are considering replacing the industrial mixer used in the company’s factory. Information about the old mixer: Cost Estimated useful life Estimated
The managers at General Manufacturing Company are considering replacing the industrial lathe used in the company’s factory.Required: Prepare a relevant cost schedule showing the benefit of keeping
John Paul Hudik, president of J. P. Hudik Boat Hauling, is considering replacing the company’s industrial lift used to haul boats. The new lift would allow the company to lift larger boats out of
The managers at Wilma Manufacturing are considering replacing a printing press with a new, high-speed model.Required: Prepare a relevant cost schedule showing the benefit of keeping the old printing
Photo Express operates a small camera store in Ft. Lauderdale, Florida. The store has two departments, camera sales and photo finishing. Rent, utilities, and other operating expenses are allocated to
The Largo Gift Hut operates a small souvenir shop in Key Largo, Florida. The shop has two departments, retail sales and mail order. Rent, utilities, and other operating expenses are allocated to the
Microline is considering buying computer cabinets from an outside vendor. Currently, Microline makes the cabinets in its own manufacturing facility. Microline can buy the cabinets for $15 each. The
Gem Products is considering buying the casters it uses in the manufacture of office chairs from an outside vendor. Currently, Gem Products makes the casters in its own manufacturing facility. Gem
RJ Manufacturing is considering buying the mounting brackets it uses to make its fire extinguishers from an outside supplier. Currently, RJ Manufacturing makes the brackets in its own manufacturing
Jumbo Chinese Restaurant operates a small laundry facility to launder the uniforms, tablecloths, and other linens used by its restaurant chain. Jumbo’s laundry operation occupies space in an
Abraham Manufacturing produces 22,000 rubber engine mounts each year for use in its electric cart manufacturing plant. Abraham’s engine mounts have an excellent reputation for strength and
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