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managerial accounting decision making

Questions and Answers of Managerial Accounting Decision Making

1. All of the following are advantages of a computerized accounting system EXCEPT:a. many accounting cycle steps are performed by the computer.b. it is easier to control than a manual system.c. it is
Kwiki Oil Co. completed job number 1007 on March 8, 2004. The job required an F150
Atta Baby Company produces infant seats for use in automobiles. During a recent fiscal period, the company incurred the following cost:The company produced and sold 3,190 seats at \(\$ 50\) per seat.
Calhoun Carpets is considering a new line of carpeting for boats. The carpet would cost $3.00 a yard to make and would sell for $10.00 a yard. Calhoun would have to build a new plant and buy new
Kokomo Manufacturing Company produces a single product, model airplanes. A list of selected cost and operating data for last year follows:\section*{Required}A. Assuming that Kokomo uses absorption
Manufacturing costs may be classified according to their behavior with respect to changes in production volume as follows:a. Variable costs change in total with volume but are fixed per unit.b. Fixed
Companies can use two different methods to assign product cost.a. The variable-costing method classifies costs by behavior, breaking costs down into variable and fixed components.b. The
Key to variable costing is contribution margin, the difference between sales and variable expenses over a period. Profit is the contribution margin less fixed expenses.
The variable-costing method helps managers understand the relationship among costs, volume, and profits, an understanding that is basic to breakeven-point analysis, targetprofit analysis, and
Operating risk increases as the percentage of fixed costs to total costs rises.
Both variable and absorption costing can be used to calculate unit product cost, an important element in a company's pricing decisions.a. Using variable costing, only those production costs that vary
The way in which the methods treat inventory also has an impact on the net income figure each produces-a factor in the evaluation of managerial performance.
Variable costing is a managerial tool.a. Its proponents insist that it is more accurate than absorption costing and that it is critical to managerial decisions about costs, volume, and profits.b. Its
Absorption costing must be used for financial reporting. Some companies also use absorption costing for internal decision making.a. Absorption costing can be more effective than variable costing for
Service organizations, like manufacturing companies, rely on variable or absorption costing to make managerial decisions, particularly decisions about pricing.
You decide to study for an upcoming accounting exam with a friend. Your friend says that Obj. 1 fixed costs are considered fixed because they remain constant, or "fixed," for each unit produced. Do
Pagoda Company manufactures metal picture-framing materials. Part of the manufacturing Obj. 1 process is the coating and painting of the metal with finishes. Management of Pagoda believes the
Explain the importance of cost behavior as it relates to various levels of production activity. obj. 1 Why is information about cost behavior important to managers? Identify some decisions that
Jane Pratt is the president of Capital Products, Inc. Capital manufactures adjustable baseball Obj. 2 caps embroidered with the logos of college teams. The company is planning to produce a special
Ampco Industries, Inc., produces audio and video circuit boards. Ampco sold 12,500 circuit boards Obj. 2 last month, which was its breakeven point in sales units. Explain what the breakeven point is.
Enterprises produces and sells a specialty soft drink called PowerPunch. The contribution marObj. 2 gin ratio for PowerPunch is \(40 \%\). What percentage of total sales is used to cover variable
Snow Manufacturing Company produces a snowshoe that is sold in many parts of the upper Midwest. The company's production manager has decided to change the materials used in the production process, a
An automobile manufacturer is considering buying new robotic welders for its frame assembly Obj. 3 operations that will replace existing manual welding. This change is expected to result in lower
Hendee Productions Company does personal and commercial videotaping. Hendee accumulates Obj. 4 the cost of each video production on a per-job basis using the variable-costing method. Pete Conrad, the
Sam Merchant was recently hired as a cost accountant by Dolls and Such Manufacturing. The obj. 4 company's management desires more useful information. The controller asked Sam to review the company's
Over the past year, Darren, Inc., has seen its finished goods inventory go up significantly. Dar- prepares financial statements for its stockholders using absorption costing. The company prepares
Juanita Perez is the president of Allgood Manufacturing, Inc. Allgood manufactures electric Obj. 4 power tools. The company uses the absorption-costing method. Over the past year, sales increased
7-13 Suppose that the number of units in a company's ending inventory equals the number of units Obj. 4 in its beginning inventory and that its fixed costs have not changed from the previous year.
Coyote Battery Company manufactures rechargeable nickel cadmium batteries. The company Obj. 4 uses the variable-costing method to accumulate inventory costs. At the end of its fiscal year, Coyote has
Jan and Fran Hook are hairdressers with over 40 years of experience between them. Recently Obj. 4 they decided to combine their savings and buy a factory to produce men's hairpieces. Jan has assumed
Absorption costing defers certain costs. Which costs are deferred? Where? When are these Obj. 4 costs expensed? How does variable costing treat these costs?
Randy Lightfoot is vice president of operations for MultiCo, Inc. He is responsible for the operations of the company's two manufacturing plants, one in Atlanta and one in St. Louis. Each plant has a
Ruth Peevey is president of Tuffee Tools Company. Tuffee manufactures a wide variety of hand tools and sells them throughout the South. Ruth just completed a review of next year's budget and plans,
Write a short definition of each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Use (a) variable costs, (b) fixed costs, (c) semivariable costs, and (d) step-pattern costs to classify each of the following costs based on its cost behavior. Provide a brief explanation of your
The data for costs \(\mathrm{A}, \mathrm{B}\), and \(\mathrm{C}\) are as follows. Determine the cost behavior (variable, fixed, or semi ariable) of Cost \(\mathrm{A}\), Cost \(\mathrm{B}\), and Cost
Sheldon Nast, an entry-level cost accountant, was asked by his supervisor to analyze maintenance costs. Sheldon produced the following plot of maintenance costs by production level:a. Do maintenance
Taylor, Inc., produces a child's wall clock that chimes the tune "Three Blind Mice" every hour. The contribution margin for this clock is \(\$ 8\), and the breakeven point is 8,000 units. How much
The following partial information is from Brown Bag, Inc.'s income statement for 2006, preObj. 2 pared using variable costing:Brown Bag's contribution margin ratio is \(40 \%\). What percentage of
Double R Company's most recent income statement, prepared on a contribution-margin bssis, is as follows:Prepare a new income statement under each of the following independent conditions:a. Sales
Joey Company manufactures a product that sells for \(\$ 27\) per unit. Its variable costs are \(\$ 15\) per unit, and its fixed costs are \(\$ 132,000\) per year.a. What is the product's contribution
Penquin Industries, Inc., manufactures a variety of plastic food containers and serving dishes. The company's income statement for this year in a variable-costing format is as follows:Penquin's
JLC Enterprises is a rapidly growing gardening supply company. Information for the year just ended is as follows:What is JLC's breakeven point in dollars? Sales revenue Units sold Unit contribution
Green Acres is a lawn care service. Rachel Webb, the owner of the service, is trying to increase her number of regular customers. She has developed several proposals and is trying to decide which one
Carbon Industries, Inc., is considering buying new equipment to use in the manufacture of its product. The new machines, which would increase production capacity, would also require annual fixed
Home Company never advertises. The Ad group, an advertising agency that has been trying to win Home over, claims that an aggressive advertising campaign would increase Home's sales by \(22 \%\). A
Stillman, Inc., manufactures light bulb filaments and other miscellaneous parts for electronic obj. 3 equipment. Stillman has the opportunity to fill a large special order for a new customer. The
Matt Ledesma has recently been hired as vice president for marketing by Glencoe, Inc. Matt is convinced that Glencoe should launch a major new promotion that includes a tie-in with a movie. For every
Carol's Creations produces and markets a unique product. The president of the company has set a target profit of \(\$ 50,025\) for the coming year. Cost information for the company is as follows:a.
Atwater Enterprises sold 5,000 units of product A during July. It reported the following sales and cost information for the month:Suppose Atwater increases the selling price of product A by \(10
In planning its operations for next year, Petrie, Inc. estimated sales of \(\$ 6,000,000\) and the following costs:Calculate Petrie's breakeven point in sales dollars. Direct materials Direct labor
The following CVP graph shows the relationships in one company among costs, volume, and profits:a. Label each of the lettered elements on the graph.b. List the lettered elements in the graph that
Yellow Jacket Company manufactures one product, an organic bath soap. Information concerning production during the past year is as follows:a. What is unit product cost using absorption costing?b.
Azure Company went into business two years ago. Information concerning production, costs, sales, and inventory levels for the last two years is as follows:a. Calculate unit product cost using
Proto, Inc., manufactures a single product. The company's production results, sales, costs, and inventory levels last year is as follows:Calculate the total fixed manufacturing overhead costs and the
During 2005, C \& R Industries, Inc., produced 10,000 units and sold 8,000 units of its product. It began 2005 with no units in its finished goods inventory. The ending balance in finished goods
Hill County Bank, a small, locally owned institution, is reexamining the way it prices its services. The bank's managers are concerned that some of their customers are less profitable than was
Tim Ricker lives in Atlanta. He is a toolmaker for Georgia Industries, a manufacturer of heavy equipment such as backhoes, graders, and earthmoving equipment. Tim makes specialty tools and jigs that
\(O b s\) Refer to the facts presented in \(\mathrm{P}^{-}-1\).\section*{Required}A. For financial reporting purposes, are Tim and Ann's salaries and expenses considered a product cost or a period
A. For financial reporting purposes, are Tim and Ann's salaries and expenses considered a product cost or a period expense?B. As illustrated in the problem, top management at Georgia Industries has
Lauren Stephens owns William's Restaurant, which sells hamburgers for carry out or drive through only. Each hamburger sells for \(\$ 2\). Lauren employs several part-time employees and a full-time
Shiny Company produces a line of cleaning products for both industrial and household use. While most of the company's products are processed independently, a few are related, such as Glow and Satin
Skyler Industries, Inc., produces and sells swimwear. The following information is for a recent period:\section*{Required}A. What is the unit contribution margin? What are some actions Skyler could
Elizabeth McClary recently began a small snowboard company called Pure Powder. She and her staff have assembled cost information regarding the snowboards.The snowboards sell for \(\$
Small Fries is a company that processes gourmet potatoes into little french fries. Each pack- age has a contribution margin of $2.50. Small Fries has total fixed costs of $40,000 each pe- riod. The
Two CVP graphs and cost information for two unrelated companies, each of which manufactures a single product, follow:\section*{Required}A. Complete each graph by adding a total-cost line and the
Nathan Dechter is the controller of Specialty Candies, Inc., a manufacturer of candies and confections. The company's executive planning committee has asked Nathan to prepare an analysis of two
Douglas Cabinet Company manufactures a single model of bathroom cabinet. The company's contribution margin ratio is \(45 \%\). Douglas is considering an advertising campaign that would cost \(\$
Jerry Sanchez is president of Heatco, Inc., a manufacturer of a single product. He is comparing this year's income statement with last year's and is wondering why net income is different for the same
A company that makes cameras uses both variable and absorption costing. The following information pertains to the year just ended:\section*{Required}A. Prepare an income statement using absorption
Beat You to the Punch is a young company specializing in computer game software. The company is facing stiff competition from larger, well-established companies. These companies are lowering their
Cedar Products is a company that produces wooden novelties. The controller has been asked by the president to review the company's costing methods. Currently, the company uses absorption costing for
MT Designs, Inc., manufactures a motorcycle accessory. The company was very successful in 2006 and demand for their product was much higher than anticipated. Use the following production and sales
John Chang is president of Clean Machines, a new car washing service that makes house calls. John has decided that his goal for the coming year is to earn a profit of \(\$ 40,000\). Clean Machines
Letitia Green owns a small, independent off-Broadway theater. Her theater is about to begin performing a new play titled "Franklin County Blues." Letitia has invested her own funds to get the play
Consultants specializes in computer systems design and programming. Most of the company's employees have a background in both computers and management. PS's average job takes three to four months to
Music Makers expects to produce and sell 500,000 CDs each month. The sales price per unit is $2.45. Variable costs per unit are $1.20. Total fixed costs per month are $540,000. The com- pany's target
1. The breakeven point is that point where:a. total sales revenue equals total variable and fixed expenses.b. total contribution margin equals total fixed expenses.c. Both a and \(\mathrm{b}\) are
Knight Manufacturing produces three different products: A, B, and C. Knight applies overhead to the products on the basis of direct labor dollars. The company has collected the following information
Which method, job-order costing or process costing, would be most appropriate for each of the following organizations? Briefly justify your answer.a. A paint manufacturerb. A glue manufacturerc. An
Halyard Company uses two departments, braiding and finishing. to produce its primary product, inch diameter rope. During June, the braiding department transferred 30,000 yards of braided rope to the
Fizz Pop produces one product (a soft drink that flows through two departments, mixing and bottling. Costs in WIP inventory on March 1 included $4,000 of materials and $2,500 of conversion costs.
Most companies use either process costing or job-order costing to assign costs to units of products.a. Each method is more effective in certain processing environments.
Equivalent units are used to determine unit costs for materials and conversion.
Process costing yields an average cost for each unit produced during a particular period.a. The departmental production report summarizes costs and units that flow through a department each period.b.
During a family gathering you announce that you are studying managerial accounting and Obj. 1 fully understand product costing. Your brother says that he works for a company that assigns product
Clark Lights produces lightbulbs. The plant is new, and the process is highly automated. All Obj. 1 production is completed in a single two-step department. First, a bulb casing is made and is passed
Which method, job order or process costing, would be the most appropriate for each of the Obj. 1 following organizations? Under what circumstances would managers choose job order costing? Under what
You work in consulting and have been hired to redesign Hoyt Industries' costing systems.Obj. 1 Hoyt produces soft drinks. You have already decided to use normal costing to measure costs, but must
Carter Lumber Company processes timber into finished lumber. For 20 years, Carter has calobj. 1 culated the cost of lumber using job-order costing. Each production run was treated as a separate job.
The equivalent unit calculation adjusts ending WIP for partially completed units. The purObj. 2 pose is to make the cost per equivalent unit more accurate. Can you think of a situation in which
Pegasus Wire Harness Company produces an electrical-wire harness used in the automotive Obj. 2 industry. Pegasus accounts for product costs using process costing. Managers of Pegasus focus on two
The equivalent unit calculation attaches material, labor, and overhead costs equally to each Obj. 2 unit produced during an accounting period. Under what circumstances does this system produce
How might a manager use a departmental production report to understand and manage costs? Obj. 3
Assume you are the manager of the third department in a three-department process. Your obj. 3 company uses process costing to determine its product costs. When a product passes through your
Paula Locum is a department manager for Dempsey Lumber Mill. She supervises the kiln dryObj. 3 ing operations and is directly responsible for ten employees and three large kiln dryers. Each month,
For each characteristic listed below, indicate whether the characteristic is more descriptive of obj. 1 a (a) job-order costing system or a (b) process costing system.1. More detailed information is
If you were the manager of each of the following firms or companies, which costing system obj. 1 would you recommend: (a) job-order costing or (b) process costing?1. An oil refinery 2. A ship builder
Wise Foods Company produces a high-protein food product. The following information reObj. 2 lates to the baking department's activities during the month of April:Prepare a physical flow schedule and
Medi-Syrup is a large cough syrup producer. The cough syrup passes through several stages Obj. 2 during production. In department B, the following activity was recorded for October:- Beginning

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