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management accounting

Questions and Answers of Management Accounting

Suppose a Zellers store has the following data: Accounts receivable, May 31: (0.3 × May sales of $350,000) = $105,000 Monthly forecast sales: June, $430,000; July, $440,000; August,
All sales of Jenny’s Jeans and Uniforms (JJU) are made on credit. Sales are billed twice monthly, on the 5th of the month for the last half of the prior month’s sales and on the 20th of the month
Ronco Products, a wholesaler of fishing equipment, budgeted the following sales for the indicated months: All merchandise is marked up to sell at its invoice cost plus 25 percent. Target
Enter the word or phrase that best completes each sentence. 1. The financial budget process includes the following budgets: a.___________________b.___________________c.___________________2.
What are financial planning models?
What factors influence the sales forecast?
Differentiate between a sales forecast and a sales budget.
What is the principal objective of a cash budget?
Explain the relationship between the sales (or service) forecast and cost-driver activity.
"Budgeting is an unnecessary burden on many managers. It takes time away from important day-to-day problems." Do you agree? Explain.
"Pro forma statements are those statements prepared in conjunction with continuous budgets." Do you agree? Explain.
“Capital budgets are plans for managing long-term debt and common shares. Do you agree? Explain.
“Budgets are primarily a tool used to limit expenditures." Do you agree? Explain.
Is budgeting used primarily for scorekeeping, attention directing, or problem solving?
Wallaby Kite Company, a small Melbourne firm that sells kites on the Web, wants a master budget for the three months beginning January 1, 2012. It desires an ending minimum cash balance of $20,000
You are the new manager of the Rapidbuy Electronics store in West Edmonton Mall. Top management of Rapidbuy Electronics is convinced that management training should include the active participation
Calgary Pipefitters Ltd. (CPL) is considering the purchase of a new fabricating machine for $40,000. The new machine will replace an old machine that has a book value of $10,000 but can be sold for
In November 2006 Charles Bird, President of Bird Packaging Co. in Guelph, Ontario, was trying to decide whether the company should purchase a new scoringprinting machine. The attraction of the new
Desteur Plastics Limited (DPL) manufactures a wide range of household plastic products for kitchens and bathrooms. The company’s products are sold primarily to large retailers, including department
Tube and Pipe Ltd. (T&P) was founded in the early 1970s and its sales grew very rapidly until the beginning of the 1980s. At that time, several competitors expanded their operations and sales by
Steve Hammer started his contracting business, Hammer Contractors (HC), six years ago and now owns three machines: a bulldozer, an excavator, and a front-end loader. His business is primarily
Ydeeps Limited was incorporated under the Ontario Business Corporations Act four months ago. The owner of Ydeeps, Mr. M. Sadim, incorporated the company because he believed that he would be investing
Refer to the preceding problem, E7-12. Using FIFO, answer the same questions.Data From Exercises 12Earthtones Paint Company uses a process-cost system. Materials are added at the beginning of a
Earthtones Paint Company uses a process-cost system. Materials are added at the beginning of a particular process, and conversion costs are incurred uniformly. Work-in-process at the beginning of the
Position Company manufactures an automotive GPS product. The manufacturing costs of the Assembly Department were:For simplicity, assume that this is a two-department company— assembly and
Consider the following data for 2010:
Fill in the unknowns:* Degree of completion: direct materials, 80%; conversion costs, 40%.† Degree of completion: direct materials, 40%; conversion costs, 10%. (Step 2) Equivalent Units (Step 1)
The production department of Garcia Paints Inc. had the following flow of litres of latex paint for the month of April:Litres completed:From work-in-process on April
Roxbury Clinic has been under pressure to keep costs down. The clinic administrator has been managing various revenue-producing centers to maximize contributions to the recovery of the operating
Suppose the Norlo Canadian Pacific Railway is considering replacement of a power jack tamper, used for maintenance of track, with a new automatic raising device that can be attached to a production
Assume that new equipment will cost $100,000 in cash and that the old machine cost $84,000 and can be sold now for $16,000 cash. Annual cash savings of $15,000 are expected for 10 years. 1.
Study Exhibit 10-2. Suppose the annual cash inflow will be $2,500 rather than $2,000. What is the internal rate of return? Exhibit 10-2 Oniginal investment, $6,075. Useful lif,for yar. Anual csh
Fill in the blanks. Number of Years 28 18 $ 7,000 Amount of annual cash inflow* $10,000 $ $ 80,000 Required initial investment $29,099 Internal rate of return 18% 16% Minimum desired rate of return
Sally’s Subs is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the system (including installation of special
Suppose the Thunder Bay Parks Department is considering the purchase of a new, more efficient pool heater for its Moorcroft Swimming Pool at a cost of $15,000. It should save $3,000 in cash operating
De Luca Company is considering two possible investments, each of which requires an initial investment of $12,000. Investment A will provide a cash flow of $3,000 at the end of each year for 4 years.
Zielinsky Company has an opportunity to invest $5,000 in a new automated lathe that will reduce annual operating costs by $1,000 per year and will have an economic life of seven years. 1.
The Halifax Office Equipment Company has offered to sell some new packaging equipment to the Bernard Company. The list price is $36,000, but Halifax has agreed to allow a trade-in allowance of
Fill in the blanks. Number of Years 18 20 28 Amount of annual cash $ 9,000 $ 8,000 $12,000 $ inflow* $80,000 $65,000 $27,000 Required initial investment $ Minimum desired rate of 14% 20% 25%
Banerjee Company expects to receive $200 at the end of each of the next five years and an additional $1,000 at the end of the fifth year. Therefore, the total payments will be $2,000. What is the NPV
1. Suppose you borrow $100,000 now at 12 percent interest, compounded annually. You will repay the borrowed amount plus interest in a lump sum at the end of eight years. How much must you repay? Use
Suppose Honda Canada wishes to borrow money from BMO. They agree on an annual rate of 10 percent. 1. Suppose Honda agrees to repay $500 million at the end of four years. How much will BMO lend
Chinn Wong wishes to purchase a $600,000 house. She has accumulated a $120,000 down payment, but she wishes to borrow $480,000 on a 30-year mortgage. For simplicity, assume annual mortgage payments
Name three ways to recognize risk in capital budgeting.
“We can’t use sensitivity analysis because our cash-flow predictions are too inaccurate." Comment.
Capital investments are always more profitable in inflationary times because the cash inflows from operations generally increase with inflation. Comment on this statement.
How much CCA is taken in the first year if a $10,000 asset is depreciated on a 20 percent declining-balance schedule? How much in the second year?
What are the major influences on the present value of a tax deduction?
Distinguish between average and marginal tax rates
What is the basic flaw in the payback model?
"The higher the interest rate, the less I worry about errors in predicting terminal values." Do you agree? Explain.
Why should the differential approach to alternatives always lead to the same decision as the total project approach?
"Not-for-profit organizations do not use DCF because their cost of capital is zero." Do you agree? Explain.
"The higher the minimum rate of return desired, the higher the price that a company will be willing to pay for cost-saving equipment." Do you agree? Explain.
Can net present value ever be negative? Why?
Why is discounted cash flow a superior method for capital budgeting?
The president of E-Games, an online gaming company, is considering the purchase of some equipment used for the development of new games. The cost is $400,000 and the economic life is five years.
A manager of Olympic Mutual Funds is contemplating acquiring servers to operate its Web site. The servers will cost $660,000 cash and will have zero terminal salvage value. The useful life will be
Panadagan Vacuums Limited (PVL) is a worldwide leader in the manufacturing of industrial vacuums. The company is located in Thorold, Ontario. PVL sells vacuums to distributors in North America,
Maxim Auto Parts Ltd. has operated three automobile parts manufacturing plants in Ontario for many years. Two produce engine parts, and the third makes seats (“the seat division”). In recent
“I will give you my decision in about a week,” said Georges Villedary, director-general of the Le Centre Sheraton, Montreal, as he put down the phone and looked pensively at the letter before
JOB, PROCESS, AND HYBRID COSTING Form groups of three to six students. For each of the following production processes, assess whether a job-cost, process-cost, or hybrid cost system is most likely to
Sonor Instruments Co. uses three operations in sequence to make two models of its depth finders for sport fishing. Consider the following:1. Operation 2 was highly automated. Product costs depended
Oak Furniture Co. manufactures a variety of wooden chairs. The company’s manufacturing operations and costs applied to products for June wereThree styles of chairs were produced in June. The
A Birmingham, UK, company manufactures and sells digital voice recorders. Business is booming. Various materials are added at various stages in the assembly department. Costs are accounted for on a
The following data pertain to the Blending Department at Fasten Chemicals for April:Units:Work-in-process, March 31
Given the following information, compute the unit conversion cost for the month of February for the Benjamin Company, using the FIFO process-costing method. Show details of your calculations.Units
The Fujita Company uses the FIFO process-costing method. Consider the following for July:Beginning inventory, 15,000 units, 70 percent completed regarding direct materials, which cost
Ajax Meter Company manufactures a variety of measuring instruments. One product is an altimeter used by hikers and mountain climbers. Ajax adopted a JIT viewpoint with an automated,
Canada Revenue Agency (CRA) must process millions of income tax returns yearly. When the taxpayer sends in a return, documents such as withholding statements and cheques are matched against the data
Consider the potato chip production process at a company such as Old Dutch Foods. Old Dutch uses a continuous flow technology that is suited for high volumes of product. The Calgary plant uses
Management of Consolidated Industries Inc. is considering closing its Oilfield Supply Manufacturing Division due to unfavourable and uncertain conditions in the oil markets. Each of the following
A cable television network is considering cancelling the program Toronto Lawyer because it is watched by only 2.3 percent of the audience in its Monday evening time slot. It would be replaced by
A large automobile-parts plant was constructed four years ago in an Ontario city served by two railroads. The PC Railroad purchased 40 specialized 20-metre freight cars as a direct result of the
A new $300,000 machine is expected to have a five-year life and terminal value of zero. It can produce 40,000 units a year at a variable cost of $4 per unit. The variable cost is $6 per unit with an
A petrochemical factory produces two products, L and M, as a result of a joint process. Both products are sold to manufacturers as ingredients for assorted chemical products. Product L sells at
Assume that a division of Sony Inc. makes an electronic component for its speakers. Its manufacturing process for the component is a highly automated part of a just-intime production system. All
Starbucks purchases and roasts high-quality, whole-bean coffees, its hallmark, and sells them, along with other coffee-related products, primarily through its company-operated retail stores. Suppose
Tempor Corp. estimates it will produce 30,000 units of a part that goes into its final product. It currently produces this part internally, but is considering outsourcing this activity. Current
Refer to 9-A3. 1. Suppose the “decision model favoured by top management consisted of a comparison of a three-year accumulation of wealth under each alternative. Which alternative would you
Consider the following data: 1. Prepare a cost comparison of all relevant items for the next three years together. Ignore taxes. 2. Prepare a cost comparison that includes both relevant and
Debraceny Company’s unit costs of manufacturing and selling a given item at the planned activity level of 10,000 units per month are Ignore income taxes in all requirements. These four parts
The manager of operations of Air Canada is trying to decide whether to adopt a new discount fare. Focus on one 134-seat airplane now operating at a 56 percent load factor. That is, on average the
A growing corporation in a large city has offered a 200-room hotel a one-year contract to rent 40 rooms at reduced rates of $50 per room instead of the regular rate of $86 per room. The corporation
Magna International Inc., based in Aurora, Ontario, is a global engineer and manufacturer of highly advanced vehicles and automotive parts. Magna’s 2009 sales were US$23.7 billion. It frequently
Assume the same facts as in the preceding problem. However, also assume that the variable costs per room, per day, are $10. 1. Suppose the best estimate is a 62 percent general occupancy rate
Hotels operates many hotels throughout the world. Suppose one of its Calgary hotels is facing difficult times because of the opening of several new competing hotels. To accommodate its flight
An administrator at Sacred Heart Hospital is considering how to use some space made available when the outpatient clinic moved to a new building. She has narrowed her choices as follows: 1. Use
Brandon Company produces and sells a product that has variable costs of $9 per unit and fixed costs of $110,000 per year. 1. Compute the unit cost at a production and sales level of 10,000 units
Dr. Renee Behr is a psychiatrist who is in heavy demand. Even though she has raised her fees considerably during the past five years, Dr. Behr still cannot accommodate all the patients who wish to
Thomas bought a new truck in Calgary with a list price, including options, of $21,000. The dealer had given her a “generous trade-in allowance ?of $5,000 on her old truck that had a wholesale price
Three years ago, the Oak Street TCBY bought a frozen yogurt machine for $8,000. A salesman has just suggested to the TCBY manager that she replace the machine with a new, $12,500 machine. The manager
A local bookstore bought more “NHL Stars ?calendars than it could sell. It was nearly April and 200 calendars remained in stock. The store paid $4.50 each for the calendars and normally sold them
From a particular joint process, Edgerton company produces three products, A, B, and C. Each product may be sold at the point of split-off or processed further. Additional processing requires no
Refer to the preceding exercise. Suppose Vernon Nectars can use the released facilities in another manufacturing activity that makes a contribution to profits of $75,000 or can rent them out for
Assume that Vernon Nectars reports the following costs to make 500-ml bottles for its Juice Cocktails: Another manufacturer offers to sell Vernon Nectars the bottles for $0.25. The capacity now
Oliver Kamp has just made the final payment on his mortgage. He could continue to live in the home; cash expenses for repairs and maintenance (after any tax effects) would be $500 monthly.
Martina Bridgeman is a lawyer employed by a large law firm at a salary of $110,000 per year. She is considering whether to become a sole practitioner, which would probably generate $350,000 in
Give an example of a situation where the performance evaluation model is not consistent with the decision model.
"Machinery sales personnel sometimes erroneously brag about the low unit costs of using their machines." Identify one source of an error concerning the estimation of unit costs.

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