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business
managerial accounting decision making

Questions and Answers of Managerial Accounting Decision Making

The concepts of total quality management, just-in-time, and the theory of constraints can be applied to service organizations.a. All organizations use processes to deliver their goods or services to
NCCB produces pool tables and billiard supplies. The company is considering changes in the billiard ball production process that would reduce operating costs but would not affect any physical aspects
Madrid Manufacturing Company produces roller skates designed for use in indoor skating rinks. Over the past five years, Madrid has seen sales decline significantly. The company has not added any new
Quick Drain Plumbing has six full-time plumbers who perform residential and commercial plumbing services. Based on a review of service records over the last several months, it was noted that, on
Many manufacturing companies experience inventory losses. These losses often result from excess inventory that must be handled, stored, and accounted for, during which time it risks being damaged,
Dexter Pharmaceuticals manufactures a variety of over-the-counter pain relievers. Each employee in the production area of Dexter has been trained on a single piece of equipment, which they operate
Mitchell Gabriel is the plant manager for Carry-All Company. Carry-All produces a soft shell book bag/attaché that is popular with students and young business professionals. During production, the
Leeza Vicaro is a divisional manager for Liddon Industries. Leeza is responsible for the production at three of Liddon's plants. Production at Plant 1 provides components to Plant 2, which in turn
Tom Mast is a lathe operator for a company that manufactures precision metal products. The the is the first step in the manufacturing process. Jobs begin at the lathe based on customer orders that
Brayton Manufacturing has been utilizing JIT concepts in its single manufacturing plant for the past year. One of the key elements in Brayton's production process is the ability of any worker to
Alverez Manufacturing produces five different types of battery-operated hand tools. There are four production departments at Alverez, each of which performs similar functions on the various products.
Traditionally, companies have designed their plant floors so that similar machines are grouped together. Such a process-oriented layout results in all drill presses in one place, all lathes in one
Step 4 in Goldratt's theory of constraints (TOC) involves improving performance on a constraint. Identify two examples of how managers may improve performance on a constrained resource. Explain.
Why is a commitment to continuous improvement necessary for the successful implementation of a total quality production process? Is the commitment to continuous improvement isolated to the
As discussed in this chapter, managers are hired as agents to make decisions in the best interests of the owners. Often, employment contracts are put into place to help align the goals of managers
Timberline Corporation is a multi-divisional manufacturing company. Each of the two division managers has responsibility for sales, costs, and profitability. Division 1 has three manufacturing
Darius Taylor, manager of the Industrial Products Division, was preparing for his annual performance evaluation. Though Darius has been successful in generating sales growth and controlling
As discussed in this chapter, the use of ROI by managers can create incentives for managers to make short-term decisions that have negative effects on long-term performance. However, ROI, if used
Carter Consumer Products has three operating divisions, which are appropriately treated as investment centers. Each of the investment centers is run by a divisional manager. The managers are
The following is Tennis Today's financial statement for the year ending December 31, 2006, in total and by division:\section*{Required}A. If the stockholders own shares of the company in total, and
An internationally known electric guitar manufacturer produces its legendary instruments from a variety of purchased components. Suppliers are held accountable for strict quality standards. To ensure
Carol Rolfson is a divisional manager for Klinger Products. Carol operates a division that manufactures clocks and timepieces that are distributed through retail stores. Over the past year, Carol's
The Promotion and Advertising Department at Jefferson Corporation coordinates point of purchase promotions for its distributors. Employees of this department are graphic arts or marketing majors who
Salvo Corporation produces cast metal parts used in the plumbing industry. The company is organized into two divisions, mining and casting. Managers of the two divisions are evaluated based on
At its Video Division, Crew Enterprises manufactures computer monitors. These can be sold internally to the EDD Division of Crew or externally to independent customers. Sales and costs of the most
The USA Company's Box Division produces cardboard boxes used for packaging microwavable fast foods. The Consumer Products Division produces a variety of fast-food entrees that are packaged in boxes.
Decentralized service organizations face many of the same problems as those faced by manufacturing companies. Service organization managers are responsible for profitable, efficient operations that
Waldo and Company, LLP, is a partnership that provides public accounting services. Waldo has three offices located in New Orleans, Baton Rouge, and Lafayette. Each of the offices employs
As part of an effort to increase sales and profit margin, Music Makers' management is adopting a transfer pricing plan. The copying and packaging departments have been placed under divisional
Golden Grain Foods produces consumer food products including cereals, dessert mixes, microwave popcorn, snack foods, and mixes that enhance and simplify meal preparation. During the previous year,
Cameo Products has two divisions: Office Products and Furniture. Divisional managers are encouraged to maximize ROI at their respective divisions. Managers are free to decide whether goods will be
Write a short definition of each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Listed below are a number of actions that could be taken by managers within the context of Obj. 1 an owner/agent relationship. For each decision, determine whether an agent's actions are consistent
The organizational structure of a decentralized organization often contains four levels, as folObj. 2 lows:Organizational level Cost center Revenue center Profit center Investment center Match the
Following are a variety of performance measures used to evaluate responsibility centers in decentralized organizations. For each performance measure, identify the organizational level for which the
The following are independent situations.1. LonnMark, Inc., operates a satellite plant that produces components for many of the company's products. The plant is operated by a plant manager, who
In 1903, the du Pont cousins acquired the assets of E.I. Du Pont de Nemours and Company obj. 3 in exchange for bonds. In the language of today, the cousins conducted a leveraged buyout of the
LaKeesha Roberts is a successful division manager for Textron Industries. Her division's ROI Obj. 4 currently is \(22 \%\). Roberts is evaluating a plant expansion opportunity that is expected to
The following information for the past two years relates to a division of Wheel Company: Obj. 4a. Compute the return on investment for both years.b. Compute the margin and turnover ratio for each
Calculate the missing information for each of the four companies. Treat each company independently. Sales revenue Company 1 $10.000 Company 2 Company 3 Company 4 $20,000 $148,000 Expenses 7.000 ?
One attribute of the balanced scorecard approach lies in performance measure diversity. For each scorecard category, identify appropriate performance measures from the following list: Scorecard
ROI is computed by multiplying a margin times turnover as follows:The ROI measure is intended to motivate managers to make their divisions lean, efficient, and profitable. However, the exclusive use
Following are a variety of performance measures that could be used with the balanced score card approach. Classify each measure as financial, internal business processes, customer satisfaction, or
Tide Company has two divisions, Division A and Division B. Division A currently sells comOponents to Division B for \(\$ 10\) per unit. The cost of Division A to produce a component follows:Division
Java-Time Coffee Company is organized into two divisions. Division A roasts, blends, and Obj. 6 packages gourmet coffees for sale to specialty shops and coffee bars. Division B designs and produces
SportCo, Inc., is a multi-divisional company that produces and sells athletic equipment. vision 1 produces components for a variety of products, while Division 2 assembles the components and packages
For each transfer pricing method identified, match the appropriate strength and weakness.Obj. 7 Transfer pricing methoda. Cost-basedb. Market-basedc. Negotiated Strength or weakness 1. Easy to apply
Tandem Manufacturing transfers a product between two plants. The product has variable costs Obj. 7 of \(\$ 65\) per unit and fixed overhead costs of \(\$ 25\) per unit. This product can be purchased
The Frame Division of Reliable Computers manufactures storage housings for personal and Obj. 7 midsize computers, which it sells externally to computer manufacturers. The division is operating at
Transfer pricing terminology includes the concepts of floor and ceiling, representing the seller's obj. 7 minimum acceptable price and buyer's maximum acceptable price, respectively. The following
Decentralized service organizations may be classified into a variety of responsibility centers including cost centers, profit centers, and investment centers. Following are a variety of
Soldwell Bankers operates a national chain of realty offices. While some activities are con-ducted centrally, others are conducted on a decentralized basis. The following activities were conducted by
John Randazzo is the owner of a successful machine shop that produces automotive brake components for national auto parts chains. These auto stores sell "after-market" parts to replace those made by
Rachel Yablonka assumed the responsibilities as executive manager of the Chair Division, Office Furniture and Fixtures, Inc. (OFF), on January 1, 2005, taking the place of her recently promoted
The Dobson Specialty Valve Division of American Industrial Group, Inc. (AIG) develops and manufactures complex valves and fittings for commercial uses. AIG has long operated other divisions engaged
A retail organization may prepare a merchandise purchases bud- get similar to the production budget illustrated in Exhibit 7. As- sume a retail company that sells outdoor equipment expects to sell
Assume the managers for the retail company introduced in Self- Study Problem I want to predict administrative expenses for the company during the months of January, February, and March. They believe
Assume a company's management has forecast sales of $30,000, $37,000, $40,000, and $62,000, for June, July, August, and Sep- tember, respectively. They estimate that 80 percent of their sales are
The transaction system records actual events. The budget system records expected events.a. Pro forma, or predicted, financial statements are prepared by combining information from various budgets.b.
A master budget has the following components:a. The sales budget shows the quantity and price of goods expected to be sold during the coming period.b. The production budget shows the type and
The cash budget summarizes expected cash collections and payments during an accounting period.a. A schedule of cash collections identifies the timing and amount of expected cash receipts.b. A
The budgeting culture influences the success of a company's budgeting efforts.a. Budget revisions may become necessary if assumptions made during the budgeting process later are found to be
Budgeting in service companies differs in some respects from budgeting in manufacturing companies.a. Workers in service companies often perform more than one type of service at the same time, making
Why do managers compare expected results and actual results at the end of a fiscal period, after their actions can no longer influence results for that period?
Why is communication among marketing and production managers necessary when developing a master budget?
Why is the production budget necessary for estimating labor costs?
Why is it important to the budgeting process to have an accurate sales forecast?
Paul Reynolds recently was hired as a salesman for The Rocky Company, which sells gardening tools and potting soil through retail outlets. Paul has been asked to attend a meeting next week to discuss
Markle Company is a merchandising firm that operates 26 stores. Marvle Industries is a manufacturer that operates a single plant. Both firms prepare detailed master budgets each year. How will the
Vantage Incorporated is preparing a master budget for the coming quarter of operations. As part of the budget process, inventory policies are being reviewed at a senior management planning meeting.
Susan Broyer is a marketing manager for Glow Industries, which produces lamps and lighting fixtures. Susan's department is preparing a sales budget for the company's lighting fixtures. She has issued
Frank Sheffield is the vice president of finance for Hercules Company. Recently, Hercules completed preparation of its master budget for the coming year. Frank has scheduled a meeting with the
If management prepares a pro forma income statement that suggests the company will be proftable, why is a cash budget necessary?
Why is an understanding of an organization's cost structure necessary for successfully prepar Objing a master budget?
Why is employee participation important when developing a budget?
Leroy Smith is the production manager of Alum Company. In addition to his salary, Leroy receives bonus compensation based solely on his ability to meet the budgeted production of units. Comment on
Discuss the implications associated with a budgetary approach in which budgetary data are imposed on managers from above. Contrast such an approach with one in which budgetary data are self-imposed
Rona Abraham is the purchasing manager for Flextech Incorporated, a manufacturer of furniture and bedding. Rona knows that as part of her bonus compensation, she must meet the material purchasing
Lester Arbuckle is owner of Sheetco, a manufacturer of snow shovels. Lester and his managers Obj. 4 do no budgeting or planning for Sheetco. Sheetco management does not anticipate problems that
Service firms do not manufacture products; therefore, budgeting is not important to service Obj. 5 firms. Do you agree? Explain your answer. online.
Match the following budgets with their definitions.Obj. 2a. sales budgetb. production budgetc. direct materials budgetd. direct labor budgete. manufacturing overhead budgetf. selling and
Hoop Action manufactures basketballs, which it sells for \(\$ 50\) each. Cash collections from sales O : are expected to be \(80 \%\) in the quarter of the sale and \(20 \%\) in the following
Spooks Company makes a popular Halloween mask. Peak sales are in October of each year. Obj. 2 The company's partial sales budget, in units, for 2004 is as follows:The company has an inventory policy
Razor Sharp produces a hedge trimmer used for lawn care. The company's sales budget for Obj. 2 April through July is as follows:The company has an inventory policy in which the end-of-month inventory
Young Company produces a dietary product called Veggy Bars. Each six-ounce Veggy Bar Obj. 2 contains five ounces of mixed vegetables, which Young purchases for \(\$ .05\) an ounce. Budgeted sales of
Refer to the data in E8-6. Each Veggy Bar requires . 02 direct labor hour. The average labor Obj. 2 rate is \(\$ 10\) per hour.Prepare a direct labor budget for the first quarter of 2004 , showing
Chugalot Company produces soda mugs. Each 32-ounce mug contains 1.1 pounds of glass, Obj. 2 which Chugalot purchases for \(\$ 1.05\) a pound. Budgeted production of mugs for the first four months of
Refer to the data in E8-8. Each mug requires .05 direct labor hour. The average labor rate is obj. 2 \$20 per hour.Prepare a direct labor budget for the first quarter of 2004 , showing the number of
Office Supply 4U manufactures staplers. The activity base used to allocate overhead is direct Obj. 2 labor hours. The variable overhead rate is estimated at \(\$ 1.50\) per direct labor hour for 2004
A + Company manufactures study guides for students. A + sells its study guides through doorObj. 2 to-door sales. Its salespeople receive a \(\$ 20\) commission per book sold. Fixed annual selling and
Tough Terrain Company manufactures professional quality lawn mowers. Tough Terrain inobj. 2 curs variable selling expenses of \(\$ 15\) per lawn mower. Other annual selling and administrative
On April 30, Sterling Enterprises had an inventory of 38,000 units of finished goods, and it Objs. 2, 3 had accounts receivable totaling \(\$ 85,000\). Sales, in units, have been budgeted as follows
Elm Company makes a product that has peak sales in September of each year. Excerpts from Obj. 3 the annual sales budget are as follows:The company is in the process of preparing a cash budget for the
Beany-Toys Company makes small toys that it sells to retailers. Following are excerpts from Obj. 3 the annual sales budget:The company is in the process of preparing a cash budget for the third
Cross Blade manufactures pocket knifes. The activity base used to allocate overhead is machine Obj. 3 hours. The variable overhead rate is estimated at \(\$ 4\) per machine hour for 2004. The fixed
Say Cheese Company manufactures picture frames that sell for \(\$ 25\) per frame. Say Cheese does not maintain an inventory; all items produced are sold during the period. Thus, all production costs
Technology Team manufactures laptops that sell for \(\$ 2,200\) each. Assume Technology Team does not maintain an inventory; all items produced are sold during the period. Thus, all production costs
Kim Incorporated is preparing its master budget for 2004. Shown at the top of the next page are expected cash inflows and outflows resulting from the sales, purchases, and administrative budgets. In
Noise Hollow launched a new stereo in January. The budget for the stereo is as follows:Actual units of materials required per finished good were 12 units in January and 11 units in February. Actual
Bob Haskins is the purchasing manager for Regal Products. Each year Regal Products develops a master budget. Bob is responsible for preparing a purchasing budget, which he bases on budgeted levels of

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