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management and cost accounting
Questions and Answers of
Management And Cost Accounting
A.R. Oma, Inc. manufactures a line of men's perfumes and after-shaving lotions. The manufacturing process is basically a series of mixing operations with the addition of certain aromatic and coloring
Clarkson Company is a large multi-division firm with several plants in each division. A comprehensive budgeting system is used for planning operations and measuring performance. The annual budgeting
During your examination of the financial statements of Benjamin Industries, the president requested your assistance in the evaluation of several financial management problems in his home appliances
The Justa Corporation produces and sells three products. The three products: A, B, and \(\mathrm{C}\), are sold in a local market and in a regional market. At the end of the first quarter of the
DePaolo Industries manufactures carpets, furniture, and foam in three separate divisions. DePaolo's operating statement for 20XX is reproduced below.Additional information regarding DePaolo's
Identify four activity capacity concepts that are used in determining a fixed factory overhead application rate, and for each describe the interpretation of the volume variance.
With variable costing, what is the contribution? Does it have a more descriptive name?
What advantages over absorption costing does variable costing offer for internal reporting?
In a standard absorption costing system, how is the fixed factory overhead rate determined? The variable factory overhead rate?
Describe the differences in the income statement presentation between absorption costing and variable costing.
How do net incomes reported under absorption costing and variable costing compare when: (a) Inventory quantities increase during the reporting period? Why? (b) Inventory quantities decrease during
Identify the costs which are considered as product costs under (a) absorption costing, and (b) variable costing. Explain the rationale for any differences.
Cost accounting systems may exist in many different forms. What are the factors which distinguish between the different types of cost accounting systems?
Why is absorption costing sometimes called full costing system? Why is variable costing system sometimes called direct costing system? Are direct costs always varaible costs?
The use of normal activity capacity as the activity level in computing fixed overhead rates has been practiced by some major corporations in the automobile and steel industries. Why might the use of
What reasons can you suggest that variable costing is not acceptable for purposes of external reporting?
How does throughput costing differ from absorption costing and variable costing?
The following standards have been developed for the product of Gimlet Corp.Required:(a) Calculate inventoriable unit cost under absorption costing.(b) Calculate inventoriable unit cost under variable
Diamond Company manufactures a single product: Product A, at its western plant. The corporate planning staff has projected the following annual sales and production plan for Product A over the
During September the Brewer Corporation recorded direct materials costs of \(\$ 18,000\). A total of 5,000 direct labor hours were expended at an average rate of \(\$ 6.00\) per hour. Variable
Midway Manufacturing Company produces a single product and utilizes a direct costing system, based on historical costs, for internal reporting purposes. During 20X1, 200,000 units were sold at a
JV Company began its operations on January 1, 20X1, and produces a single product that sells for \(\$ 7.00\) per unit. Standard capacity is 100,000 units per year. 100,000 units were produced and
Fleet, Inc. manufactured 700 units of Product A, a new product, in 20X1. Product A's variable and fixed manufacturing costs per unit were \(\$ 6.00\) and \(\$ 2.00\), respectively. The inventory of
A company had income of \(\$ 50,000\) using variable costing for a given period. Beginning and ending inventories for that period were 13,000 units and 18,000 units, respectively.Required:Ignoring
The following information is available for Keller Corporation's new product line:\There was no inventory at the beginning of the year. During the year 12,500 units were produced and 10,000 units were
Sarah Manufacturing Co. is a producer of men's slacks in a variety of styles, colors, and price ranges, which uses a standard direct costing system for internal reporting. During October Job \#423
Maypool Corporation is the major consumer appliance manufacturer in a country that experiences no inflation. The company produces a variety of large appliances for the home such as stoves,
The following annual flexible budget has been prepared for use in making decisions relating to Product \(\mathrm{X}\).The 200,000 unit budget has been adopted and will be used for allocating fixed
Blaine Company produces and sells a single product, called X. The following data are available for the year ended December 31, 20X1:{Required:}(1) Determine the cost per unit if variable costing is
On August 5, 20X2, Jack Jackson, controller for Wixson Company, arrived at his office to find the company president in a rage. "These income statements you've prepared for June and July are
Management of Bicent Company uses the following unit costs for the one product it manufactures:Required:Prepare projected income statements for June 20X1 for management purposes under each of the
The following data relate to a year's budgeted activity for Patsy Corporation, a single product company:{Required:}Total fixed costs remain unchanged within the relevant range of 25,000 units. Total
Playtime, Inc. is a nationwide manufacturer of leisure products. In September of 20X2, the manager of the Men's Swimwear Division is considering the division's production schedule for the fourth
Norwood Corporation is considering changing its method of inventory valuation from absorption costing to direct costing and engaged you to determine the effect of the proposed change on the \(20
Sun Company, a wholly owned subsidiary of Guardian, Inc., produces and sells three main product lines. The company employs a standard cost accounting system for record-keeping purposes.At the
Milner Manufacturing Company uses a job order costing system and standard costs. It manufactures one product whose standard cost is as follows:Required:(a) Based on the standard costs, compute the
The S.T. Shire Company uses direct costing for internal management purposes and absorption costing for external reporting purposes. Thus, at the end of each year financial information must be
Forward Corporation is a progressive and fast-growing company. The company's executive committee consists of the president and the four vice presidents who report to the president-marketing,
BBG Corporation is a manufacturer of a synthetic element. Gary Voss, President of the company, has been eager to get the operating results for the just completed fiscal year. He was surprised when
Caprice Company manufactures and sells two products-a small portable office file cabinet that it has made for over 15 years and a home/travel file introduced recently. The files are made in Caprice's
Throughput Costing, Variable Costing and Absorption Costing The following data relates to year 20XX for Plano Manufacturing Company:Required:(a) Calculate cost of goods sold under throughput costing,
What characteristics distinguish project planning decisions from other types of managerial decisions? What are some examples of project planning decisions?
Give some examples of decision making situations in which qualitative factors may affect management's choice of alternatives.
What is the role of the cost accountant in making project planning decisions?
Describe the advantages of the contribution approach over absorption costing methods in evaluating decision alternatives.
In what situations might the use of the relevant cost approach to project planning decisions be preferred over the contribution approach?
How can limitations on production capacity affect the choice of alternatives in (a) a special order decision, and (b) a make or buy decision?
What types of costs may be relevant to a project planning decision even though they will never be recorded in the accounts?
What is a "sunk cost?" When is such a cost relevant to a project planning decision?
Is depreciation on equipment ever an incremental cost? Should the amount of depreciation ever affect the choice between alternatives in a project planning decision?
Some project planning decisions involve incremental cash flows over an extended period of time. What modifications should be made to the relevant cost approach in such situations?
Evaluate the following statement: "A firm should always attempt to maximize production and sale of the product with the highest contribution margin."
Why is a linear programming model useful in solving the product mix problem?
Distinguish between the corner points approach and the iso-profit line approach for finding the optimal solution in a linear programming problem.
Why are fixed costs not incorporated in linear programming models? How should fixed costs be treated in evaluating the profitability of the optimal solution?
Identify the basic assumptions underlying any linear programming model.
Valley Plumbing Co. has 500 rusted plumbing fixtures that are carried in inventory at a purchase cost of \(\$ 3,000\). If the fixtures are reworked for \(\$ 1,000\), they can be sold for \(\$
The Lantern Corporation has 1,000 obsolete lanterns that are carried in inventory at a manufacturing cost of \(\$ 20,000\). If the lanterns are re-machined for \(\$ 5,000\), they could be sold for
Marathon Manufacturing, which produces running shoes, has enough idle capacity available to accept a special order of 1,000 pairs of shoes at \(\$ 24\) per pair. The following data has been obtained
Relay Corporation manufactures batons. Relay can manufacture 300,000 batons a year at a variable cost of \(\$ 750,000\) and a fixed cost of \(\$ 450,000\). Based on Relay's predictions, 240,000
American Motor Company annually manufactures 100,000 units of its Part No. 42356, a bearing, for use in the production of its automobiles. The following costs will be incurred for this part in the
The Reno Company manufactures Part No. 498 for use in its production cycle. The cost per unit for 20,000 units of Part No. 498 is as follows:The Tray Company has offered to sell 20,000 units of Part
Standard costs and other data for two component parts used by Griffon Electronics are presented below:In past years, Griffon has manufactured all of its required components; however, in \(20
Maxwell Company has an opportunity to acquire a new machine to replace one of its present machines. The new machine would cost \(\$ 90,000\), have a five-year life, and no estimated salvage value.
Joe Carolina is considering the purchase of a new car. His current vehicle is a 9 year old Mercedes which has a resale value of \(\$ 3,500\) and has a remaining life of approximately 3 years. Joe has
Contribution Approach to Production Decisions}The officers of Bradshaw Company are reviewing the profitability of the company's four products and the potential effect of several proposals for varying
Berg and Sons build custom made pleasure boats which range in price from \(\$ 10,000\) to \(\$ 250,000\). For the past 30 years, Mr. Berg, Sr. has determined the selling price of each boat by
The Vernom Corporation, which produces and sells to wholesalers a highly successful line of summer lotions and insect repellents, has decided to diversify in order to stabilize sales throughout the
You have been engaged to assist the management of the Arcadia Corporation in arriving at certain decisions. Arcadia has its home office in Ohio and leases factory buildings in Texas, Montana and
Nubo Manufacturing, Inc. is presently operating at \(50 \%\) of practical capacity producing about 50,000 units annually of a patented electronic component. Nubo recently received an offer from a
Valbec Company manufactures and distributes toy doll houses. The toy industry is a seasonal business. 'Therefore, a large portion of Valbec's sales occur in the late summer and fall.The projected
The management of Bay Company is considering a proposal to install a third production department within its existing factory building. With the company's present production setup, raw material is
George Jackson operates a small machine shop. He manufactures one standard product available from many other similar businesses and he also manufactures products to customer order. His accountant
The Keylo Co. manufactures a line of plastic products that are sold through hardware stores. The company sales have declined slightly for the past two years leaving them with idle plants and
Marshall Manufacturing, Inc. has produced two products, Z and P, at its Richmond plant for several years. On March 31, 20X2, P was dropped from the product line. Marshall manufactures and sells
A typewriter manufacturer is considering dropping its manual typewriter product line due to consistent losses from this model over the past three years. The recent poor performance of this product
Solve for the values of \(A\) and \(B\) that maximize the total contribution margin expressed as:{Required:}Use the corner points approach. Z=2A+5B Subject to: 2A+B 5200 4A + 5B < 500 A, B 0
Solve for the values of \(\mathrm{X}\) and \(\mathrm{Y}\) that maximize the total contribution margin expressed{Required:}Use the iso-profit line approach. 2=5X+10Y Subject to: X + Y 400 2X+5Y 1,000
The Brown Company produces two products: \(\mathrm{X}\) and \(\mathrm{Y}\). The unit contribution margins are \(\$ 8\) and \(\$ 5\) for \(X\) and \(Y\), respectively. Production information is given
The Four-Season Corporation manufactures two products: H and C. Product H requires two units of materials and 4 direct labor hours. Product \(\mathrm{C}\) requires four units of materials and two
The cost accountant of the Stangren Corporation, your client, wants your opinion of a technique suggested to him by a young accounting graduate he employed as a cost analyst. The following
The Tripro Company produces and sells three products hereafter referred to as Products A, B, and C. The company is currently changing its shortrange planning approach in an attempt to incorporate
The controller of the Rustler Company attended a seminar on linear programming and feels that some of the concepts may be useful in planning operations for the coming year. The Rustler Company
The Beta Corporation manufactures office equipment and distributes its products through wholesale distributors.Beta Corporation recently learned of a patent on the production of a semi-automatic
Define the following terms:Economic order quantity, Reorder point, Lead time, Safety stock, and Stockout costs.
True or False--Indicate "true" or "false" for each of the following statements and explain why.(1) If the lead time of delivery is known with certainty, no safety stock would be needed.(2) An
Why is inventory management important to a firm? How do modern managers exercise effective management over the investment in inventories?
What is the optimal inventory level in a firm?
What information is useful to managers in properly planning and controling inventory?
Briefly discuss and compare three methods of determining the economic order quantity.
Discuss the trade-offs in costs involved in determining the economic order quantity.
Why are quantity discounts important in inventory management decisions?
Inventories usually are an important asset for both manufacturing and merchandising firms. A proper balance of inventory quantities is desirable from several standpoints. Maintaining such a balance
The following data refer to various annual costs relating to the inventory of a singleproduct company:Required:What is the annual carrying cost per unit? Cost per Unit Transportation-in on
Expected annual usage of a particular raw material is \(2,000,000\) units, and the standard order size is 10,000 units. The invoice cost of each unit is \(\$ 500\), and the cost to place one purchase
Barter Corporation has been buying Product \(\mathrm{A}\) in lots of 1,200 units which represents a four months' supply. The cost per unit is \(\$ 100\); the order cost is \(\$ 200\) per order; and
Brady Sporting Goods Incorporated buys baseballs at \(\$ 20\) per dozen from its wholesaler. Brady will sell 36,000 dozen baseballs evenly throughout the year. Brady desires a \(10 \%\) return on its
The Polly Company wishes to determine the amount of safety stock that it should maintain for Product \(\mathrm{D}\) that will result in the lowest cost. The following information is
The Thornton Company has found that its ordering cost of a raw material is \(\$ 20\) and the carrying cost is \(\$ 1\) per average unit of inventory per year. The company uses 10,000 units of raw
The W \& S Department Store has a requirement for a product line that amounts to 40,000 units per year. The unit purchase cost of the product is \(\$ 4\). The manager of the store estimates the cost
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