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managerial accounting decision making

Questions and Answers of Managerial Accounting Decision Making

Safety Stock: Reorder Point. The following information relates to Eagle Company's Material A Annual usage on units) Working days (per year) Normal lead time working days) Maximum lead time (in
Estimating Annual L'sage. Garmar, Inc., has determined the following data for a given year: Economic order quantity Estandard order size) Total cost to place purchase orders for the year. Cost to
Define managerial accounting.
If there are no official "rules" for managerial accounting, as there are for financial accounting, how can managerial accounting be studied systematically?
Describe differences between managerial accounting and financial accounting.
In what ways are financial accounting and managerial accounting similar?
Why is managerial accounting important for profit-oriented organizations?
Since not-for-profit organizations, by definition, are not concerned with making profits, why should they use managerial accounting concepts?
What is the difference between authority and responsibility?
How is responsibility accounting related to managerial accounting?
List the three levels of management.
What is the difference between line and staff?
How does the management function of planning differ from that of controlling?
Where does decision-making fit into the functions of management?
What is the primary feature that distinguishes a centralized firm from a decentralized firm?
What is a segment? How does it relate to managerial accounting?
Since managerial accounting is concerned with management decision-making, and since controllers perform a staff function, why is their role important in managerial accounting?
What is the relationship between the CPA certificate and the CMA certificate?
What are some of the types of decisions that are made with the help of managerial accounting?
Why shouldn't a manager be given responsibility without authority?
Since a line manager, rather than an accountant, is typically the one who makes the final decision. how is the management accountant affected by ethical considerations?
Assume that the controller for Southern Food Stores' operations in Louisiana (Exhibit I-1) notes that the inventory ratios for the stores in New Orleans are significantly more favorable than those of
Joan Tyler started a small manufacturing company, JT Enterprises, at the beginning of 2005 . Joan has prepared the following income statement for the first quarter of operations.The variable cost of
Write a short definition of each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Audrey buys a new tanning bed for her salon. The tanning bed costs \(\$ 6,000\). The tanning bed generates cash flows of \(\$ 2,500\) the first year, \(\$ 3,500\) the second year, and \(\$ 5,000\)
Alison Mayer, owner of a sports complex, is considering adding a climbing wall. The climbing wall costs \(\$ 30,000\). Alison estimates the climbing wall will generate cash flows of \(\$ 8,000\) the
Shannon bought an ice cream truck for \(\$ 20,000\). Her net income was \(\$ 3,500\) the first year, \(2 \$ 5,000\) the second year, and \(\$ 6,500\) the third year of business. Calculate the
Stephanie bought a stereo system for her DJ service for \(\$ 4,000\). Her net income was \(\$ 500\) the first year, \(\$ 900\) the second year, and \(\$ 1,000\) the third year of business. Calculate
Gerrish Corporation bought a new machine for \(\$ 50,000\). The net income from this machine is \(\$ 8,000\) in year 1 and \(\$ 10,000\) in year 2. In order to obtain an accounting rate of return of
Kelly Sloan, purchasing manager at an Internet service provider, bought a new server for \$ 4,000\). The net income from this machine is \(\$ 700\) in year 1 and \(\$ 900\) in year 2. In order to
Amy Sims runs an advertisement firm. She estimates that a \(\$ 7,000\) high-resolution printer will result in increased cash inflows of \(\$ 2,000\) in year \(1, \$ 4,000\) in year 2 , and \(\$
Ryan, owner of a furniture business, currently leases a small building for \(\$ 20,000\) per year. He is considering leasing a large store for his furniture business. He estimates the new store will
Bill, owner of a video arcade, is considering buying a new game. The game would cost \(\$ 5,000\). He estimates the new game will result in increased cash inflows of \(\$ 2,000\) in year \(1, \$
Mike Gallager, owner of a bowling alley, is considering buying a new pool table. The pool table would cost \(\$ 3,000\). He estimates the pool table will result in increased cash inflows of \(\$
Geory, general manager at a water park, installed a new waterslide with an estimated use-ful life of 10 years. The waterslide will generate cash inflows of \(\$ 10,000\) each year over the next 10
Henry, manager of a widget factory, bought a new machine with an estimated useful life of five years. The machine will generate cash inflows of \(\$ 12,000\) each year over the next five years. The
Briggs Corporation, a lawn mowing service, bought a new commercial lawn mower. The mower costs \(\$ 12,000\) and is expected to have a service life of five years. At the end of five years, the lawn
Fix-It-Yourself, a rental equipment store, bought a jackhammer. The jackhammer costs \(\$ 8,000\) oand is expected to have a service life of six years. At the end of six years, the jackhammer can be
Matt invested \(\$ 100,000\) to open Steakhouse. He withdrew \(\$ 10,000\) at the end of each year for three years. At the end of the third year, Matt sold the restaurant for \(\$ 120,000\) cash. His
Elizabeth Ann invested \(\$ 80,000\) to start a business at the beginning of 2004 . She withdrew \$ 5,000\) at the end of each year for three years. At the end of the third year, Elizabeth sold the
The Wild Side Bowling Alley is planning to invest in pinball machines and pool tables for use by its patrons. The equipment will cost \(\$ 3,896\) to acquire and will have an estimated service life
John's Arcade is planning on purchasing a virtual reality simulator for \(\$ 210,000\). The simulator's estimated service life is seven years with a residual value of \(\$ 25,000\). The simulator is
Alice owns a tow truck company. She is considering buying a new tow truck for \(\$ 55,000\). The service life of the truck is five years. At the end of the five years, Alice estimates she can sell
Jim owns an ice cream store. He is considering buying a new waffle cone machine for \(\$ 600\). The service life of the machine is five years. At the end of the five years, Jim estimates he can sell
A machine was purchased for \(\$ 10,000\). The net income from the machine is as follows:\section*{Required}A. Calculate the accounting rate of return.B. What are the drawbacks to using the
The cash flows from two capital expenditure projects follow. The discount rate is \(10 \%\).\section*{Required}A. What are the payback periods for both projects?B. What is the NPV for both
John is considering two capital expenditure projects; however, he has only enough money to do one project. The cash flows follow and the discount rate is \(12 \%\).\section*{Required}A. What is the
Mark Brown has an opportunity to invest in a bicycle franchise shop under a nationally recognized brand name. Mark has assembled the following information and estimates relating to this
Billy Boehm has a chance to invest in a company that manufactures televisions. Billy obtained the following information for his investment analysis:1. Rent on the manufacturing facility is \(\$
A piece of labor-saving equipment is available to Armtech Company that could be used to reduce costs at one of its plants. Relevant data related to this particular equipment are as
Automation of the shipping department at Computer Mart would save labor costs. Details about the automation equipment are as follows:\section*{Required}A. Compute the payback period for the
Community Drycleaning would like to purchase a new machine for cleaning large quilts and comforters. The current cleaning operation on quilts and comforters is done by hand. The new machine would
Community Drycleaning would like to purchase a new machine for cleaning large quilts and comforters. The current cleaning operation on quilts and comforters is done by hand. The new machine would
John bought stock valued at \(\$ 10,000\). He received a cash dividend of \(\$ 300\) in year \(1, \$ 350\) in year 2 , and \(\$ 400\) in year 3. The cash dividends were not reinvested. At the end of
Tony Setimi, president of Solidex Machinery, is considering the purchase of an automated stamping machine. In reviewing the figures prepared by the production department, Tony has noted that the
A local printing company is trying to decide if it should install an automated job sorter. The details of the sorter are as follows:\section*{Required}A. Compute the net annual cost savings that
Feldman Cages manufactures cages for pets. Joe, the VP of operations at Feldman Cages, is considering a major capital investment decision. It would cost \(\$ 2,000,000\) to put new, highly automated
Smith Electronics manufactures portable CD players. Lillian Perez, the VP of operations at Smith Electronics, is considering a major capital investment decision. It would cost \(\$ 2,500,000\) to put
Ally Kat is the manager of the continuing education division of Rayford Enterprises, a large financial services firm. The division provides seminars and workshops for Rayford employees to keep them
A phone company with a discount rate of \(8 \%\) is considering two investments.\section*{Required}A. Calculate the NPV for both services.B. If the phone company can provide only one service
As an additional cost savings measure, Music Makers is considering the purchase of a computerized office management system. The system would cost \(\$ 98,000\). It would have an expected life of 48
In which of the following situations would it be appropriate to accept a project under the net present value method?I. Net present value is positive.II. Net present value is zero.III. Net present
Leroy Mandel is investigating the possibility of starting a hardware business. Leroy would sell home products, supplies, and maintenance materials. He has determined that the initial cost of the
Perfect Chef Company is constantly developing and marketing new cooking accessories. Based on past experience in forecasting cash flows for a new product, Perfect Chef has been able to predict cash
Liberty School is a private institution offering preschool and kindergarten classes. All teachers are experts in the field of early childhood education. To support the primary function of classroom
Paradise Air is a small airline company located in the Florida Keys. The company provides transportation services to various Caribbean islands. Because Paradise Air competes directly with major
Refer to Self-Study Problem 2 for an introduction to Paradise Air.\section*{Required}A. Discuss various strategies Paradise Air can use to improve quality and reduce the cost of performing
Service organizations deliver intangible products (or services) to their customers.a. Though their products are intangible, service organizations have processes for delivering their services.b.
Support department costs must be allocated to revenue-producing departments for a full understanding of the cost of delivering services.a. Reciprocal service arrangements exist among support
Service companies need high-quality cost management systems to understand the cost of providing services to their customers.
Like manufacturing companies, service companies monitor their operations and seek ways to improve their processes to promote efficiency and improve quality.a. Operations restructuring involves
Big Al's Car Care provides auto repairs such as tune-ups, brake work, and engine overhauls on all models of cars. Over \(60 \%\) of the revenue generated by Big Al's is from the sale of parts. Would
Nickles Consulting Services is a nonprofit organization that provides free legal assistance to clients who meet certain income criteria. The company's funding is obtained by means of fund-raising
Estella Rodriquez is a staff accountant for Baylor Software. Baylor has two separate departments, programming and consultation. The programming department provides services for small manufacturing
What information must be known or estimated in order to allocate support department costs to revenue-producing departments?
Trans Comm Airline flies domestic routes among several large regional airports. What information would management need in order to allocate the costs of services such as baggage handling, ticketing,
Would you consider the step-down method of cost allocation to be more accurate than the simultaneous algebraic equation method of allocating service costs? Why or why not? What are the limitations or
Service industries do not deliver a product to their customers; therefore, product costing concerns are limited to manufacturing organizations. Do you agree or disagree? Explain your answer.
Southern Technical College is an accredited university that grants two- and four-year degrees.The registration process at Southern requires students to stand in long lines to obtain forms for the
A-1 Appliance Repair provides in-home service for major brands of household appliances. The company has six trucks staffed by service technicians, which it dispatches based on phone orders. Mark
Write a short definition of each of the terms listed in the Terms and Concepts Defined in this Chapter section.
Complete the following statements: a. A b. The exists when support departments exchange services. method could be used to allocate or costs from service departments to revenue-producing departments.
Support department costs are allocated to revenue-producing departments. Often a reciproocal relationship exists among the support departments.a. Prepare a sketch to illustrate how costs would flow
Following are various departments that may be found in an organization. Classify each department as a support or revenue-producing department. Explain. Cafeteria (in a manufacturing organization)
Sandy Lodges Hospital historically has used a facility-wide cost-to-charge ratio to determine the cost of various procedures. Cost and revenue data for a 12-month period are as follows:a. Calculate
Assume Rockton Bank has two revenue-producing departments: mortgage lending and small Obj. 2 business lending. To support the activities of these departments, Rockton uses three departments:
Phillip Technologies has two support departments, \(\mathrm{A}\) and \(\mathrm{B}\), that provide services to producing departments, C and D. Direct costs for service departments A and B are \(\$
Samson Enterprises uses the step-down method to allocate service department costs to revenue producing departments. The support departments, personnel and janitorial, allocate their costs based on
The algebraic method for allocating service department costs recognizes reciprocity among various departments. In the real world, computer programs solve complex allocations when a company must
The following illustration shows reciprocal service relationships expressed in percentages of effort provided.a. Explain the relationships shown in the illustration.b. Express the reciprocal service
Mary Taylor fell and broke her clavicle while on a university-sponsored weekend rock-climbing expedition. Mary was transported to the emergency room at a local hospital where she received services
Bill Watts awoke with intense pain in his side. After a 911 call, he was transported to the emergency room at Lodi Community Hospital, where he underwent surgery for a ruptured appendix. The surgical
Jack Turner was reviewing his hospital bill upon returning to his home following a five-day stay in Stockton Community Hospital. He required two hours of surgery upon admission to the hospital's
Glendale City Hospital uses a facility-wide cost-to-charge ratio to estimate the cost of prooviding a variety of medical services. The hospital has the following departments and associated financial
Zippy Shipping Lines transports high-value freight across the Gulf of Mexico from New Orleans, Louisiana, to Miami, Florida. The company competes directly with trucking lines and air carriers.
Complete the following definitions. a. b. involves a complete evaluation of the relationships among multiple processes and is conducted to improve the quality and efficiency of services provided to
Operations restructuring, outcomes data dissemination, and critical path are three strategies used by service (as well as manufacturing) organizations to improve efficiency and to reduce costs.
Minneapolis Physician Partners (MPP) is considering adding laboratory equipment to permit restructure of the clinical process of gathering and analyzing blood samples. Currently the process is as
Dr. Walston is an accounting professor in a major state university. As part of the reaccreditation process, the college is systematically evaluating the quality and rigor of teaching within the
William Davidson, departmental manager for an engineering consulting firm, recently attended a meeting to discuss a proposal for a new firm-wide cost accounting system. The proposal would change the

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