Questions and Answers of Managerial Accounting Tools For Business Decision Making 9th

The December 1996 issue of Accounting Horizons contains an article by Carol B. Cheatham and Leo R. Cheatham entitled "Redesigning Cost Systems: Is Standard Costing Obsolete?"InstructionsRead the
At Lofton Manufacturing Company, production workers in the Painting Department ate paid on the basis of productivity. The labor time standard for a unit ol production is established through periodic
Keynes Company sells both radios and cassette players at the following per unit data:What is the number of radios and cassette players that Keynes must sell in order to break even if fixed costs are
What steps an Frequently involved in management's decision making process
Your roommate, Bill Blair, contends that accounting contributes to most of the steps in management's decision-making process. Is your roommate correct? Explain.'
Judy Segura asks your help concerning the relevance: of variable and fixed costs in incremental analysis. Help Judy with her problem.
Kai Wei Company has an opportunity to buy parts at $$7$ each that currently cost $$10$ to make. What manufacturing costs are relevant to this make-or-buy decision?
Your roommate, Cassie Helbrecht, is confused about sunk costs. Explain to your roommate the meaning of sunk costs and their relevance to a decision to retain or replace equipment.
Juanita Perez Inc. has one product line that is un- profitable. What circumstances may cause overall company net income to be lower if the unprofitable product line is eliminated?
The sales mix of Cambridge Company's two products is 5:2. What does 5:2 mean? What effect, if any, does a company's sales mix have on CVP analysis?
Ansara Company sells two products, X and Y. Their unit contribution margins are $$52$ and $$70$. respectively, and their sales mix is 2:1. What is the weighted average unit contribution margin?
Amy Company is considering two alternatives. Alternative A will have sales ol $$160,000$ and costs of $$100,000$. Alternative B will have sales of $$180,000$ and costs ol $$125,000$. Compare
In Melbourne Company it costs $$30$ per unit ($$20$ variable and $$10$ fixed) to make a product that normally sells for $$45$. A foreign wholesaler oilers in buy 3,000 units at $$25$ each.
Zurich Manufacturing incurs unit costs of $$8.50$ ($$5.50$ variable and $$3$ fixed) in making a subassembly part for its Finished product. A supplier oilers to make 10.000 of the assembly part
Abrogena Inc. makes unfinished bookcases that it sells for $$60$. Production cosisaie $$35$ variable and S10 fixed. Because it has unused capacity, Abrogena is considering finishing the bookcases
Wright Company has a factory machine with a book value of $$90,000$ and a remaining useful life of 4 years. A new machine is available at a cost of $$250,000$. This machine will have a 4-year
Alesch, Inc., manufactures goll clubs in three models. For the year, the Big Bart line has a net loss of $$10,000$ from sales $$200,000$, variable expenses $$180,000$, and fixed expenses
Wigdor Company sells three units of AA to one unit of BB; the two products have contribution margins of $$100$ and $$180$, respectively. Fixed costs are $$300,000$. Compute the unit sales at
In Astorga Company, data concerning two products are: Contribution margin per unit—Product A $$10$, Product B $12; machine hours required for one unit —Product A 2.5, Product B 4. Compute the
Wallway Company manufactures toasters. For the first 8 months of 2002, the company reported the following operating results while operating at 75% of plant capacity:Cost of goods sold was 70%
Baer Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity, and variable manufacturing overhead is charged to production at the rate
Andrea Valencia recently opened her own basket weaving studio. She sells finished baskets in addition to the raw materials needed by customers to weave baskets of their own. Andrea has put together a
Florescent Minerals processes materials extracted bom mines. The most common raw material that it processes results in three joint products: Sarco, Barco, and Larco. Each of these products can be
Barrila Enterprises uses a word processing computer to handle its sales invoices.Lately, business has been so good that it takes an extra 3 hours per night, plus ever} third Saturday, to keep up with
Michelle Tracy, a recent graduate of Rolling's accounting program, evaluated the operating performance of Poway Company's six divisions. Michelle made the following presentation to Povvay's Board of
The following information is selected from the records of Burnside Company, which produces and sells two products.Fixed manufacturing overhead costs are $$248,000$, and fixed selling and
Top Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2002, the company reported the following operat- ing results while operating at 90%
Simpson Manufacturing Company has four operating divisions. During the first quarter of 2002, the company reported aggregate income from operations of $$120,000$ and the following divisional
Juan Castorena Company manufactures two models of televisions, Super clear and Ultra clear. Unit data for each model are as follows.Monthly fixed costs are: manufacturing overhead $80,000; selling
Top Sports Inc. manufactures basketballs for the National Basketball Association (NBA). For the first 6 months of 2002, the company reported the following operating results while operating at 90% of
The management of Caesar Manufacturing Company is trying to decide u bet her to continue manufacturing a part or to bu\ it Irom an outside supplier. The part, called WISCO, is a component ol the
Simpson Manufacturing Company has four operating divisions. During the first quarter of 2002, the company reported aggregate income from operations of $120,000 and the following divisional
Juan Castorama Company manufactures two models of televisions. Super clear and Ultra clear. Unit data for each model are as follows.Monthly fixed costs are: manufacturing overhead $80,000; selling
Saldajeno Company is considering the purchase of a new machine. The invoice price of the machine is $$125,000$, freight charges are estimated to be $$4,000$, and installation costs are expected
Electronix Plus manufactures private-label small electronic products, such as alarm clocks, calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products are sold as
Many companies today choose to outsource even key elements of product de- sign and development. PEP designs is a leading supplier of outsourced engineering and manufacturing product development for
Halves Vhidd is a production manager at a metal fabricating plant. Last night he read an article about a new piece of equipment that would dramatically reduce his divisions costs. Harvey was very
The April 1998 issue of Management Accounting includes an article by Julie Hartenstein and Marjorie Piatt entitled "Why Product Development Teams Need Management Accountants."InstructionsRead the
Harold Dean became Chief Executive Officer of Wriston Manufacturing two years ago. At the time, the company was reporting lagging profits, and Harold was brought in to "stir things up." The company
Petra Varnak claims the formula for the cash payback technique is the same as the formula for the annual rate of return technique. Is Petra correct? What is the formula for the cash payback technique?
Harold Stine Company uses the internal rate of re- turn method. What is the decision rule for this method?
Your classmate, Joe Livingston, is confused about the factors that are included in the annual rate of return technique. What is the formula for this technique?
Sara Kay is trying to understand the term "cost of capital." Define the term and indicate its relevance to the decision ride under the annual rate of return technique.
Russell Company is considering purchasing new equipment for $$450,000$. It is expected that the equipment will produce annual net income of $$15,000$ over its 10-year useful life. Annual
Gruner Company accumulates the following data concerning a proposed capital investment: cash cost $$280,000$, annual cash inflow $$50,000$, present value factor of cash inflows for 10 years 5.65
Travis Corporation, an amusement park, is considering a capital investment in a new exhibit. The exhibit would cost $$140,000$ and have an estimated useful life of 5 years.It will be sold for
Shandling Bottling Corporation is considering the purchase of a new bottling machine. The machine would cost $$200,000$ and has an estimated useful life of 8 years with zero salvage value.
Bierko Company is considering two different, mutually exclusive capital expenditure proposals. Project A will cost $$395,000$, has an expected useful life of 10 years, a salvage value of zero, and
Swayze Company is performing a post-audit of a project completed one year ago.The initial estimates were that the project would cost $$250,000$, would have a useful life of 9 years, zero salvage
Selleck Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $$180,000$, has an estimated useful life of 8
Marlowe Corporation is considering investing in a new facility. The estimated cost of the facility is $$1,931,000$. It will be used for 12 years, then sold for $$600,000$. The facility will
Caan Oil Company is considering investing in a new oil well. It is expected that the oil well will increase annual revenues by $$120,000$ and will increase annual expenses by $$80,000$ including
Padong Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost
Danny Sutton Manufacturing Company is considering three new projects, each requiring an equipment investment of $$24,000$. Each project will last for 3 years and produce the Following " cash
TekCare Corp. is considering purchasing one of two new diagnostic machines.Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates
Baldwin Corporation is involved in the business of injection molding of plastics.It is considering the purchase of a new computer-aided design and manufacturing machine for $$481,000$. The company
Novak Company is considering three capital expenditure projects. Relevant data for the projects are as followsAnnual income is constant over the life of the project. Each project is expected to have
Hair Fare is considering opening a new hair salon in Pompador, California. The cost of building a new salon is $$250,000$. A new salon will normally generate annual rev- enues of $$70,000$, with
Wamser Service Center just purchased an automobile hoist for $$39,000$. The hoist has an 8-year life and an estimated salvage value of $$3,000$. Installation costs and freight charges were
Bosworth Company is considering a capital investment of $$168,000$ in additional productive facilities. The new machinery is expected to have a useful life of 6 years with no salvage value.
The partnership of Malle and Stine is considering three long-term capital in- vestment proposals. Relevant data on each project are as follows.Salvage value is expected to be zero at the end of each
Sarah Kay is managing director of the City Day Care Center. City is currently set up as a lull-lime child care facility for children between the ages of 12 months and 6 years. Sarah Kay is trying to
Fresh Water Testing is considering investing in a new testing device. It has two options: Option A would have an initial lower cost but would require a significant ex- penditure for rebuilding after
The Chula Vista Sanitation Company is considering the purchase of a garbage truck. The $70,000 price tag for a new truck would represent a major expenditure for the company. Vu Duong, owner of the
Wang Corp. is thinking about opening an ice hockey camp in Idaho. In order to start the camp the company would need to purchase land, and build two ice rinks and a dormitory-type sleeping and dining
The Bell and Howell partnership is considering three long-term capital investment proposals. Each investment has a useful life of 5 years. Relevant data on each project are as follows.Depreciation is
Jason Parker is an accounting major at a midwestern state university located approximately 60 miles from a major city. Many of the students attending the university are from the metropolitan area and
White Cliff Clinic is considering investing in new heart monitoring equipment.It has two options: Option A would have an initial lower cost but would require a significant expenditure tor rebuilding
Santana Auto Care is considering the purchase of a new tow truck. The garage Compute net present value doesn't currently have a tow truck, and the $$50,000$ price tag for a new truck would
Lafluer Corp. is thinking about opening a soccer camp in southern California. In order to start the camp, the company would need to purchase land, and build four soccer fields and a dormitory-type
Bolus Company is considering the purchase of a new machine. The invoice price of the machine is $$112,000$, freight charges are estimated to be $$3,000$, and installation costs are expected to be
Hawk Skateboards is considering building a new plant. Robert Optimist, the company's marketing manager, is an enthusiastic supporter of the new plant. Roberta Wunder land, the company's chief
The April 21, 1997, issue of Forbes includes an article by Toni Mack entitled"The Tiger Is on the ProwlInstructionsRead the article and answer the following questions.(a) What have been the relative
Bristle Brush Company operates in a state where corporate taxes and workers'compensation insurance rates have recently doubled. Bristle's president has just assigned you the task of preparing an
Martinez Toys has examined the market for toy train locomotives. It believes there is a market niche in which it can sell locomotives at $$80$ apiece. It estimates that 10,000 of these loco-
Sprague Company is considering developing a new product. The company has gathered the following information on this product. Expected total unit cost Estimated investment for new product Desired ROI
The following information is provided for Shaq Co. for the new product it recently introduced.Total unit cost $$30$ Desired ROI per unit $$10$ Target selling price $$40$ What would be Shaq
Jimenez's Electrical Repair has decided to price its work on a time and materials basis. It estimates the following costs for the year related to labor.Technician wages and benefits $$100,000$
Waterville Corporation produces a filter that has a per unit cost of $$15$. The company would like a 30%markup percentage. Using cost-plus pricing, determine the per unit selling price.
Stillsville Corporation manufactures an electronic switch for dishwashers. The cost base per unit, excluding selling and administrative expenses, is $60.The per unit cost of selling and
Ramirez manufactures a standard cabinet for a DVD player. The variable cost per unit is $$15$. The fixed cost per unit is $$10$. The desired ROI per unit is $5.Compute the markup percentage on
When is time and material pricing most often used?Describe the process of time and material pricing.
If a company uses the cost-based approach to trans- fer pricing, should it use actual cost or standard cost? Explain your answer.
Walter Corporation manufactures a fiber optic connector. The variable cost per unit is $$16$. The fixed cost per unit is $$9$. The company's desired ROI per unit is $$3$. Compute the markup
Marcus Company manufactures computer hard drives. The market for hard drives is very competitive. The current market price for a computer hard drive is $$45$. Marcus would like a profit of $$12$
Nien Corporation produces snowboards. The following per unit cost information is available: direct materials $12; direct labor $8; variable manufacturing over head $6; fixed manufacturing
Timo Corporation produces high-performance rotors. It expects to produce 50,000 rotors in the coming year. It has invested $$10,000,000$ to produce rotors. The com- pany has a required return on
Michener Corporation produces microwave units. The following per unit cost information is available: direct materials $36; direct labor $24; variable manufacturing overhead $18; fixed manufacturing
Mary's Small Engine Repair charges $$45$ per hour of labor. It has a material loading charge of 60%. On a recent job replacing the engine of a riding lawnmower, Mary worked 10.5 hours and used
Vinegar Corporation makes a commercial-grade cooking griddle. The following information is available for Vinegar Corporation's anticipated annual volume of 30,000 units.The company uses a 50% markup
Frost Corporation makes a mechanical stuffed alligator that sings the Martian national anthem. The following information is available for Frost Corporation's anticipated annual volume of 500,000
Engles Corporation produces industrial robots for high-precision manufacturing. The following information is given for Engles Corporation.The company has a desired ROI of 18%. It has invested assets
Dobbs Remanufacturing rebuilds spot welders for manufacturers. The following budgeted cost data for 2003 is available for Dobbs.The company desires a $$35$ profit margin per hour of labor and a 25%
Jack's Custom Electronics (JCE) sells and installs complete security, computer, audio, and video systems for homes. On newly constructed homes it provides bids using time and material pricing. The
Loud Play Corporation manufactures car stereos. It is a division of Rust Bucket Motors, which manufactures vehicles. Loud Play sells car stereos to Rust Bucket, as well as to other vehicle
Alameda Corporation needs to set a target price for its newly designed product The following data relate to this new product.These costs are based on a budgeted volume of 90,000 units produced and
Morgan Electronics Inc. is in the process of setting a selling price on a new CDL. component it has just developed. The following cost estimates for this component have been provided by the
Bud's Auto Bodj Shop has budgeted the following time and material for 2002.Bud's budgets M)00 hours of repair time in 2002. It will bill a profit of $7 per labor hour along with a 40% profit markup
High Flying Sounds is a record company with a number of record labels. Each record label has contracts with a number of recording artists. It also owns a recording studio called Definite Loud Noise.
Watertown Pump Company makes irrigation pump systems. The company is divided into a number of autonomous divisions that can either sell to internal units or sell externally. All divisions are located

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