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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

Vino Verite Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells, in 1 -gallon jugs, roughly 800,000 gallons per year of a low-cost,
Farm and Home Veterinary Clinic is a small-town partnership that offers two primary services, farm animal services and pet care services. Providing veterinary care to farm animals requires travel to
Wilkins Corporation manufactures safes-large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Wilkins is analyzing the profitability of its two
Dewey and Cheatam is a law firm that is initiating an activity-based costing system. Jim Dewey, the senior partner and strong supporter of ABC, has prepared the following list of activities performed
Lift Jack Company, as shown in Illustration 17-3, page 869, has seven activity cost pools and two products. It expects to produce 200,000 units of its automo- bile scissors jack and 80,000 units of
Gomez Company identifies three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is \(\$ 180,000, \$ 325,000\), and
Computer Parts, Inc., a manufacturer of computer chips, employs activity-based costing. The following budgeted data for each of the activity cost pools is provided below for the year 2010.For 2010,
Jerry Lewis Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non-value-added. (a) Purchasing.
Rowan and Martin is an architectural firm that is contemplating the installation of activity-based costing. The following activities are performed daily by staff architects. Classify these activities
Atkins Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly.
McNally Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2010,
Crosby Company has several processing departments. Costs charged to the Assembly Department for October 2010 totaled \(\$ 1,354,400\) as follows.Production records show that 25,000 units were in
Kiley Company manufactures bicycles and tricycles. For both products, materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Production and cost
Some of you may ultimately own or manage a small manufacturing company. Suppose you manage Logan Company, which manufactures bird houses in four departments. The first department is Sawing. It is
What is the result if a company uses the wrong "cost driver" to assign manufacturing overhead?
In what ways has cost accounting probably become more critical for Microsoft in recent years?
What criteria should be considered when selecting a cost accounting system for a service company?
Silva Co. started and completed 2,000 units for the period. Its beginning inventory is 600 units \(25 \%\) complete and its ending inventory is 400 units \(20 \%\) complete. Silva uses the FIFO
The Welding Department of Hirohama Manufacturing Company has the following production and manufacturing cost data for February 2010. All materials are added at the beginning of the process. Hirohama
In a production cost report, units to be accounted for are calculated as:(a) Units started into production + Units in ending work in process.(b) Units started into production - Units in beginning
Lowry Manufacturing uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2010, Job No. 25 was the only job in process. The costs incurred
Chris Duncan is a contractor specializing in custom-built jacuzzis. On May 1, 2010 , his ledger contains the following data.The Manufacturing Overhead account has debit totals of \(\$ 12,500\) and
Eckstein Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct
What type of costs do you think the company had been underestimating?
What types of costs will service companies report in job order cost systems?
What feature of these businesses creates an incentive to misstate cost accounting data on particular jobs? What can customers do to protect themselves from overbilling?
Ladoca Company, a manufacturer of tennis rackets, started proctuction in November 2010. For the preceding 5 years Ladoca had been a retailer of sports equipment. After a thorough survey of tennis
The following data were taken from the records of Ruiz Manufacturing Company for the year ended December 31, 2010.Instructions:(a) Prepare a cost of goods manufactured schedule. (Assume all raw
Agler Company is a manufacturer of toys. Its controller, Joyce Rotzen, resigned in August 2010. An inexperienced assistant accountant has prepared the following income statement for the month of
What are some of the steps that this company has taken in order to ensure that production meets demand?
Why might Nissan production require significantly fewer labor hours?
Why is it important to keep track of costs that are incurred to improve product quality?
Medina Manufacturing Company uses a simple manufacturing accounting system. At the end of its fiscal year on August 31, 2010, the adjusted trial balance contains the following accounts.Physical
Direct materials are a: Product Cost Manufacturing Overhead Period Cost (a) Yes Yes No (b) Yes No No (c) Yes Yes Yes (d) No No No
The formula to determine the cost of goods manufactured is:(a) Beginning raw materials inventory + Total manufacturing costs - Ending work in process inventory.(b) Beginning work in process inventory
Examples of recent trends in the economic environment of U.S. businesses are:(a) increasing deregulation, decreasing global conpetition, and a shift toward providing services rather than goods.(b)
If a company takes a large restructuring charge, what is the effect on the company's current income statements versus future ones?
How might management influence a company's current ratio?
Why might adding extra pages to the annual report not be beneficial to investors and analysts? What should be management's overriding objective in financial reporting?
Plano Corporation reported net income \(\$ 24,000\); net sales \(\$ 400,000\); and average assets \(\$ 600,000\) for 2010. What is the 2010 profit margin ratio?(a) \(6 \%\)(c) \(40 \%\).(b) \(12
Compute the days in inventory for 2010.(a) 64.4 days(b) 60.8 days.(c) 6 days.(d) 24 days
Compute the current ratio for 2010.(a) \(1.26: 1\)(b) \(3.0: 1\)(c) \(0.80: 1\)(d) \(3.75: 1\)
Compute the profit margin ratio for 2010.(a) \(17.1 \%\)(b) \(18.1 \%\)(c) \(37.9 \%\)(d) \(5.9 \%\)
Compute the return on common stockholders' equity for 2010(a) \(47.9 \%\).(b) \(51.7 \%\)(c) \(40.7 \%\)(d) \(44.0 \%\)
Compute the times interest earned for 2010.(a) 11.2 times(b) 65.3 times(c) 14.0 times(d) 13.0 times
What amount did Tootsie Roll Industries report as "Other comprehensive earnings" in 2007? By what percentage did Tootsie Roll's "Comprehensive earnings" differ from its "Net earnings"?
In general, why do differences exist between net income and net cash provided by operating activities?
Why do companies have negative cash from operations during the introductory phase?
Why does GM's cash provided by operating activities drop so precipitously when the company's sales figures decline?
The cash debt coverage ratio is:(a) a measure of liquidity.(b) a measure of profitability.(c) net income divided by average total liabilities.(d) a measure of solvency.
Rensing Corporation had these transactions during 2010.(a) Purchased a machine for \(\$ 30,000\), giving a long-term note in exchange.(b) Issued \(\$ 50,000\) par value common stock for cash.Classify
Jerez Company reported net income of \(\$ 190,000\) for 2010 . Jerez also reported depreciation expense of \(\$ 35,000\) and a loss of \(\$ 5,000\) on the sale of equipment. The comparative balance
The 2006 income statement for McDonald's Corporation shows cost of goods sold \(\$ 5,349.7\) million and operating expenses (including depreciation expense of \(\$ 1,249.9\) million) \(\$ 11,791.6\)
Tomlinson Corporation has paid 60 consecutive quarterly cash dividends ( 15 years). The last 6 months have been a real cash drain on the company, however, as profit margins have been greatly narrowed
In addition to regulatory cost, what is another reason why some owners choose not to take their companies public?
For stocks traded on organized stock exchanges, how are the dollar prices per share established? What factors might influence the price of shares in the marketplace?
What signal might a large stock repurchase send to investors regarding management's belief about the company's growth opportunities?
What factors must management consider in deciding how large a dividend to pay?
Raptor Inc. has retained earnings of \(\$ 500,000\) and total stockholders' equity of \(\$ 2,000,000\). It has 100,000 shares of \(\$ 8\) par value common stock outstanding, which is currently
In the stockholders' equity section of the balance sheet, common stock:(a) is listed before preferred stock.(b) is listed after retained earnings.(c) is part of paid-in capital.(d) is subtracted from
Roger is nearing retirement and would like to invest in a stock that will provide a good steady income. Roger should choose a stock with a:(a) high current ratio.(b) high dividend payout.(c) high
Due to five years of record earnings at Sing CD Corporation, the market price of its 500,000 shares of \($2\) par value common stock tripled from \($15\) per share to \($45\). During this period,
Jennifer Corporation has issued 300,000 shares of \($3\) par value common stock. It is authorized to issue 600,000 shares. The paid-in capital in excess of par value on the common stock is
The drop in stock prices did not change the debt to total assets ratios of these companies. Discuss how the perception of a high debt to total assets ratio changed before and after the fall in stock
Explain how the sale of plant assets could improve the company's solvency.
How can financial ratios such as those covered in this chapter provide protection for creditors?
To illustrate the usefulness of financial calculators on the Web.Instructions:Choose one of the many financial decisions listed at the site. Fill in inputs based on two different sets of assumptions.
Corricten Company borrows \(\$ 88,500\) on September 1, 2010, from Harrington State Bank by signing an \(\$ 88,500,12 \%\), one-year note. What is the accrued interest at December 31, 2010?(a) \(\$
Andre Company has total proceeds from sales of \(\$ 4,515\). If the proceeds include sales taxes of \(5 \%\), what is the amount to be credited to Sales?(a) \(\$ 4,000\).(b) \(\$ 4,300\)(c) \(\$
Cuso Inc. issues 10 -year bonds with a maturity value of \(\$ 200,000\). If the bonds are issued at a premium, this indicates that:(a) the contractual interest rate exceeds the market interest
Kant Corporation retires its \(\$ 100,000\) face value bonds at 105 on January 1, following the payment of interest. The carrying value of the bonds at the redemption date is \(\$ 103,745\). The
Which of the following is not a measure of liquidity?(a) Debt to total assets ratio.(b) Working capital.(c) Current ratio.(d) Current cash debt coverage.
On January 1 Pierce Corporation issues \(\$ 500,000\), 5 -year, \(12 \%\) bonds at 96 with interest payable on January 1 . The entry on December 31 to record accrued bond interest and the
On January 1, Daisey Duke Inc. issued \(\$ 1,000,000\), 10 -year, \(9 \%\) bonds for \(\$ 938,554\). The market rate of interest for these bonds is \(10 \%\). Interest is payable annually on December
On January 1, Anthony Corporation issued \(\$ 1,000,000,14 \%, 5\)-year bonds with interest payable on December 31.The bonds sold for \(\$ 1,072,096\). The market rate of interest for these bonds was
Why might airline managers choose to lease rather than purchase their planes?
How does measuring marketing ROI support the overall efforts of the organization?
How should ESPN account for the \(\$ 1.1\) billion per year franchise fee?
Do you think that this treatment would be allowed under U.S. GAAP?
Assume that Drummond Corp. purchases a delivery truck for \($15,000\) cash plus sales taxes of \($900\) and delivery costs of \($500.\) The buyer also pays \($200\) for painting and lettering,
Kant Enterprises purchased a truck for \(\$ 11,000\) on ( 80 g) January 1,2009 . The truck will have an estimated salvage value of \(\$ 1,000\) at the end of 5 years. If you use the units-of-activity
When would it be appropriate for a company to lower its allowance for doubtful accounts as a percentage of its receivables?
How would reported net income likely differ during the first year of this promotion if Mitsubishi used the direct write-off method versus the allowance method?
What steps should the banks have taken to ensure the accuracy of financial information provided on loan applications?
What issues should management consider in deciding whether to factor its receivables?
Why would unsupervised employees or employees who report to each other represent potential internal control threats?
Why would a company's stock price fall if it reports deficiencies in its internal controls?
In 2010 Patterson Wholesale Company had net credit sales of \(\$ 750,000\). On January 1,2010 , Allowance for Doubtful Accounts had a credit balance of \(\$ 18,000\). During 2010, \(\$ 30,000\) of
Fraud Bureaut is a free service, established to alert consumers and investors about prior complaints relating to online vendors, including sellers at online auctions, and to provide consumers,
What steps might the companies take to avoid such a serious disruption in the future?
What effect does an overstatement of inventory have on a company's financial statements?
Why is inventory control important to managers such as those at Wal-Mart and Best Buy?
If a perpetual system keeps track of inventory on a daily basis, why do companies ever need to do a physical count?
If a company expects significant returns, what are the implications for revenue recognition?
Why have investors and analysts demanded more accuracy in isolating "Other gains and losses" from operating items?
Explain how Wal-Mart's profitability gave it a strategic advantage over Kmart.
Aerosmith Company's accounting records show the following at the year-end December 31, 2010. Purchase Discounts Freight-in Purchases Beginning Inventory Ending Inventory Purchase Returns $ 3,400
Arbor Corporation had reported the following amounts at December 31, 2010: Sales \(\$ 184,000\); ending inventory \(\$ 11,600\); beginning inventory \(\$ 17,200\); purchases \(\$ 60,400\); purchase
What is a post-audit? What are the potential benefi ts of a post-audit?
On January 1, Xiang Corporation issues \($500,000,\) 5-year, 12% bonds at 96 with interest payable on January 1. The entry on December 31 to record accrued bond interest and the amortization of bond

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