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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

A manager of an investment center can improve ROI by:(a) increasing average operating assets.(b) reducing sales.(c) increasing variable costs.(d) reducing variable and/or controllable fixed
In the formula for return on investment (ROI), the factors for controllable margin and operating assets are, respectively:(a) controllable margin percentage and total operating assets.(b)
In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show:(a) profit center margin.(b) controllable margin.(c) net income.(d) income from
To evaluate the performance of a profit center manager, upper management needs detailed information about:(a) controllable costs.(b) controllable revenues.(c) controllable costs and revenues.(d)
The accounting department of a manufacturing company is an example of:(a) a cost center. (c) an investment center.(b) a profit center. (d) a contribution center.AppendixLO1
Responsibility reports for cost centers:(a) distinguish between fixed and variable costs.(b) use static budget data.(c) include both controllable and noncontrollable costs.(d) include only
Responsibility centers include:(a) cost centers. (c) investment centers.(b) profit centers. (d) All of the above.AppendixLO1
Under responsibility accounting, the evaluation of a manager’s performance is based on matters that the manager:(a) directly controls.(b) directly and indirectly controls.(c) indirectly
At 9,000 direct labor hours, the flexible budget for indirect materials is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should
At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 10,000 direct labor hours, a horizontal line drawn from the total
A static budget is useful in controlling costs when cost behavior is:(a) mixed. (c) variable.(b) fixed. (d) linear.AppendixLO1
A static budget is:(a) a projection of budget data at several levels of activity within the relevant range of activity.(b) a projection of budget data at a single level of activity.(c) compared to a
A production manager in a manufacturing company would most likely receive a:(a) sales report.(b) income statement.(c) scrap report.(d) shipping department overhead report.AppendixLO1
Budget reports are prepared:(a) daily. (c) monthly.(b) weekly. (d) All of the above.AppendixLO1
Budgetary control involves all but one of the following:(a) modifying future plans.(b) analyzing differences.(c) using static budgets.(d) determining differences between actual and planned
Explain the basis and formula used in evaluating performance in investment centers.AppendixLO1
Identify the content of responsibility reports for profi t centers.AppendixLO1
Indicate the features of responsibility reports for cost centers.AppendixLO1
Describe the concept of responsibility accounting.AppendixLO1
Explain the development of fl exible budgets and the usefulness of fl exible budget reports.AppendixLO1
Evaluate the usefulness of static budget reports.AppendixLO1
Shiraz Rugs began operations on February 1. It uses a perpetual inventory system.During February, the company had the following purchases and sales.Purchases Date Units Unit Cost Sales Units Feb. 1
Liberty Inc. is a retailer operating in Centralia. Liberty uses the perpetual inventory method. All sales returns from customers result in the goods being returned to inventory.(Assume that the
Suppose this information is available for the Automotive Sector of NoGo Motor Company for 2014. NoGo uses the LIFO inventory method.(in millions)Beginning inventory $ 10,017 Ending inventory 10,121
You have the following information for Limex Watches. Limex uses the periodic method of accounting for its inventory transactions. Limex carries only one brand of hand-crafted jeweled watches—all
You have the following information for Crystal Inc. for the month ended May 31, 2014. Crystal uses a periodic method for inventory.Unit Cost or Date Description Units Selling Price May 1 Beginning
The management of Weigel Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2014 the accounting records show these data.Inventory,
Smythe Company Inc. had a beginning inventory of 200 units of Product ERV at a cost of $6 per unit. During the year, purchases were:Jan. 24 800 units at $7 Aug. 19 600 units at $ 9 Apr. 12 400 units
Lifetime Distribution markets classic children’s books. At the beginning of June, Lifetime had in beginning inventory 1,200 books with a unit cost of $3. During June, Lifetime made the following
Sun Company is trying to determine the value of its ending inventory as of March 31, 2014, the company’s year-end. The following transactions occurred, and the accountant asked your help in
Lambert Center began operations on July 1. It uses a perpetual inventory system.During July, the company had the following purchases and sales.Purchases Date Units Unit Cost Sales Units July 1 7 $62
Pember Inc. is a retailer operating in Edmonton, Alberta. Pember uses the perpetual inventory method. Assume that there are no credit transactions; all amounts are settled in cash. You are provided
Suppose this information (in millions) is available for the Automotive and Other Operations Divisions of General Motors Corporation for a recent year. General Motors uses the LIFO inventory
You have the following information for Wooderson Gems. Wooderson uses the periodic method of accounting for its inventory transactions. Wooderson only carries one brand and size of diamonds—all are
You have the following information for Vincent Inc. for the month ended October 31, 2014. Vincent uses a periodic method for inventory.Unit Cost or Date Description Units Selling Price Oct. 1
The management of Tinker Inc. asks your help in determining the comparative effects of the FIFO and LIFO inventory cost flow methods. For 2014, the accounting records show these data.Inventory,
Groves Company Inc. had a beginning inventory of 100 units of Product MLN at a cost of $8 per unit. During the year, purchases were:Feb. 20 600 units at $ 9 Aug. 12 400 units at $11 May 5 500 units
Dunbar Distribution markets CDs of numerous performing artists. At the beginning of March, Dunbar had in beginning inventory 2,500 CDs with a unit cost of $7. During March, Dunbar made the following
Aber Limited is trying to determine the value of its ending inventory as of February 28, 2014, the company’s year-end. The accountant counted everything that was in the warehouse, as of February
Holcomb Company reported these income statement data for a 2-year period.2014 2013 Sales revenue $250,000 $210,000 Beginning inventory 40,000 32,000 Cost of goods purchased 202,000 173,000 Cost of
Foyle Hardware reported cost of goods sold as follows.2014 2013 Beginning inventory $ 30,000 $ 20,000 Cost of goods purchased 175,000 164,000 Cost of goods available for sale 205,000 184,000 Less:
Information about Delmott is presented in E6-4. Additional data regarding the company’s sales of Xpert snowboards are provided below. Assume that Delmott uses a perpetual inventory system.Date
Inventory data for Eggers Company are presented in E6-7.Instructions(a) Calculate the cost of the ending inventory and the cost of goods sold for each cost flow assumption, using a perpetual
Deere & Company is a global manufacturer and distributor of agricultural, construction, and forestry equipment. Suppose it reported the following information in its 2014 annual report.(in millions)
Suppose this information is available for PepsiCo, Inc. for 2012, 2013, and 2014.(in millions) 2012 2013 2014 Beginning inventory $ 1,926 $ 2,290 $ 2,522 Ending inventory 2,290 2,522 2,618 Cost of
Birk Camera Shop Inc. uses the lower-of-cost-or-market basis for its inventory. The following data are available at December 31.Market Units Cost/Unit Value/Unit Cameras Minolta 5 $170 $158 Canon 7
The following comparative information is available for Keysor Company for 2014.LIFO FIFO Sales revenue $86,000 $86,000 Cost of goods sold 38,000 29,000 Operating expenses(including depreciation)
Eggers Company reports the following for the month of June.Date Explanation Units Unit Cost Total Cost June 1 Inventory 120 $5 $ 600 12 Purchase 370 6 2,220 23 Purchase 200 7 1,400 30 Inventory 230
On December 1, Quality Electronics has three DVD players left in stock. All are identical, all are priced to sell at $85. One of the three DVD players left in stock, with serial#1012, was purchased
Horne Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 74 units were sold.Date Explanation Units Unit Cost Total Cost May 1 Inventory 30 $ 9 $270
Delmott sells a snowboard, Xpert, that is popular with snowboard enthusiasts.Below is information relating to Delmott’s purchases of Xpert snowboards during September.During the same month, 102
Mateo Inc. had the following inventory situations to consider at January 31, its year-end.(a) Goods held on consignment for Schrader Corp. since December 12.(b) Goods shipped on consignment to Lyman
Kevin Farley, an auditor with Koews CPAs, is performing a review of Knight Company’s Inventory account. Knight did not have a good year, and top management is under pressure to boost reported
Columbia Bank and Trust is considering giving Gallup Company a loan. Before doing so, it decides that further discussions with Gallup’s accountant may be desirable.One area of particular concern is
Early in 2014, Defoor Company switched to a just-in-time inventory system.Its sales and inventory amounts for 2013 and 2014 are shown below.2013 2014 Sales revenue $3,120,000 $3,713,000 Cost of goods
Farwell Company sells three different categories of tools (small, medium and large). The cost and market value of its inventory of tools are as follows.Cost Market Small $ 64,000 $ 61,000 Medium
The accounting records of Tuel Electronics show the following data.Beginning inventory 3,000 units at $5 Purchases 8,000 units at $7 Sales 9,400 units at $10 Determine cost of goods sold during the
Dobler Company just took its physical inventory on December 31. The count of inventory items on hand at the company’s business locations resulted in a total inventory cost of $300,000. In reviewing
Nickels Company reports net income of $92,000 in 2014. However, ending inventory was understated by $7,000. What is the correct net income for 2014? What effect, if any, will this error have on total
Hogan’s Department Store uses a perpetual inventory system. Data for product E2-D2 include the purchases shown on page 315.Number Unit Date of Units Price May 7 50 $10 July 28 30 15 On June 1,
Winnebago Industries, Inc. is a leading manufacturer of motor homes. Suppose Winnebago reported ending inventory at August 29, 2014, of $46,850,000 under the LIFO inventory method. In the notes to
Suppose at December 31 of a recent year, the following information (in thousands)was available for sunglasses manufacturer Oakley, Inc.: ending inventory $155,377;beginning inventory $119,035; cost
Sadowski Video Center accumulates the following cost and market data at December 31.Inventory Cost Market Categories Data Data Cameras $12,500 $13,400 Camcorders 9,000 9,500 DVDs 13,000 12,200
For each of the following cases, state whether the statement is true for LIFO or for FIFO. Assume that prices are rising.(a) Results in a higher quality of earnings ratio.(b) Results in higher
In its first month of operation, Kuhlman Company purchased 100 units of inventory for $6, then 200 units for $7, and finally 140 units for $8. At the end of the month, 180 units remained. Compute the
The management of Rosenquist Corp. is considering the effects of various inventorycosting methods on its financial statements and its income tax expense. Assuming that the price the company pays for
Data for Giffin Company are presented in BE6-2. Compute the cost of the ending inventory under the average-cost method. (Round the cost per unit to three decimal places.)AppendixLO1
In its first month of operations, Giffin Company made three purchases of merchandise in the following sequence: (1) 300 units at $6, (2) 400 units at $8, and (3) 500 units at $9. Assuming there are
Tiffee Company identifies the following items for possible inclusion in the physical inventory. Indicate whether each item should be included or excluded from the inventory taking.(a) 900 units of
Marshall Company discovers in 2014 that its ending inventory at December 31, 2013, was $5,000 understated.What effect will this error have on (a) 2013 net income, (b) 2014 net income, and (c) the
How does the average-cost method of inventory costing differ between a perpetual inventory system and a periodic inventory system?AppendixLO1
Under what circumstances might inventory turnover be too high—that is, what possible negative consequences might occur?AppendixLO1
Dipoto Company’s balance sheet shows Inventory$162,800. What additional disclosures should be made?AppendixLO1
Rondeli Music Center has five TVs on hand at the balance sheet date that cost $400 each. The current replacement cost is $350 per unit. Under the lowerof-cost-or-market basis of accounting for
Alison Hinck is studying for the next accounting midterm examination. What should Alison know about(a) departing from the cost basis of accounting for inventories and (b) the meaning of “market”
What inventory cost flow method does Tootsie Roll Industries use for U.S. inventories? What method does it use for foreign inventories? (Hint: You will need to examine the notes for Tootsie Roll’s
Discuss the impact the use of LIFO has on taxes paid, cash flows, and the quality of earnings ratio relative to the impact of FIFO when prices are increasing.AppendixLO1
George Orear, a mid-level product manager for Theresa’s Shoes, thinks his company should switch from LIFO to FIFO. He says, “My bonus is based on net income. If we switch it will increase net
Espinosa Corporation has been using the FIFO cost flow method during a prolonged period of inflation.During the same time period, Espinosa has been paying out all of its net income as dividends. What
In a period of rising prices, the inventory reported in Long Company’s balance sheet is close to the current cost of the inventory, whereas Windsor Company’s inventory is considerably below its
Which assumed inventory cost flow method:(a) usually parallels the actual physical flow of merchandise?(b) divides cost of goods available for sale by total units available for sale to determine a
What is the major advantage and major disadvantage of the specific identification method of inventory costing?AppendixLO1
Stan Koevner believes that the allocation of cost of goods available for sale should be based on the actual physical flow of the goods. Explain to Stan why this may be both impractical and
Nida Hat Shop received a shipment of hats for which it paid the wholesaler $2,940. The price of the hats was $3,000, but Nida was given a $60 cash discount and required to pay freight charges of $75.
Indicate the terms of sale that will result in the goods being included in (1) Millar’s December 31 inventory and (2) Branyan’s December 31 inventory.(b) Under what circumstances should Millar
(a) Millar Company ships merchandise to Branyan Corporation on December 30. The merchandise reaches the buyer on January AppendixLO1
Your friend Jill Wurtz has been hired to help take the physical inventory in Proehl’s Hardware Store. Explain to Jill what this job will entail.AppendixLO1
What is just-in-time inventory management?What are its potential advantages?AppendixLO1
Harold Company overstated its inventory by $15,000 at December 31, 2014. It did not correct the error in 2014 or 2015. As a result, Harold’s stockholders’equity was:(a) overstated at December 31,
Carlos Company had beginning inventory of $80,000, ending inventory of $110,000, cost of goods sold of$285,000, and sales of $475,000. Carlos’s days in inventory is:(a) 73 days. (c) 102.5 days.(b)
Which of these would cause inventory turnover to increase the most?(a) Increasing the amount of inventory on hand.(b) Keeping the amount of inventory on hand constant but increasing sales.(c) Keeping
The lower-of-cost-or-market rule for inventory is an example of the application of:(a) the conservatism convention.(b) the historical cost principle.(c) the materiality concept.(d) the economic
In periods of rising prices, LIFO will produce:(a) higher net income than FIFO.(b) the same net income as FIFO.(c) lower net income than FIFO.(d) higher net income than average-cost.AppendixLO1
Davidson Electronics has the following:Units Unit Cost Inventory, Jan. 1 5,000 $ 8 Purchase, April 2 15,000 10 Purchase, Aug. 28 20,000 12 If Davidson has 7,000 units on hand at December 31, the cost
From the data in Question 4, what is the cost of the ending inventory under LIFO?(a) $113,000. (c) $99,000.(b) $108,000. (d) $100,000.AppendixLO1
Determine the correct amount of inventory that Railway should report.(a) $230,000. (c) $228,000.(b) $215,000. (d) $193,000.AppendixLO1
As a result of a thorough physical inventory, Railway Company determined that it had inventory worth $180,000 at December 31, 2014. This count did not take into consideration the following
When is a physical inventory usually taken?(a) When the company has its greatest amount of inventory.(b) When a limited number of goods are being sold or received.(c) At the end of the company’s
Compute and interpret the inventory turnover.AppendixLO1
Determine how to classify inventory and inventory quantities.AppendixLO1

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