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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

At Jaymes Company, it costs $30 per unit ($20 variable and $10 fixed) to make a product at full capacity that normally sells for $45. A foreign wholesaler offers to buy 3,000 units at $25 each.
Bogart Company is considering two alternatives. Alternative A will have revenues of $160,000 and costs of $100,000. Alternative B will have revenues of $180,000 and costs of $125,000. Compare
The steps in management’s decision-making process are listed in random order below. Indicate the order in which the steps should be executed.________ Make a decision. ________ Review results of the
Huang Inc. has one product line that is unprofitable.What circumstances may cause overall company net income to be lower if the unprofitable product line is eliminated?AppendixLO1
Your roommate, Gale Dunham, 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.AppendixLO1
How are allocated joint costs treated when making a sell-or-process-further decision?AppendixLO1
What are joint products? What accounting issue results from the production process that creates joint products?AppendixLO1
What is the decision rule in deciding whether to sell a product or process it further?AppendixLO1
Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy decision?AppendixLO1
Emil Corporation has an opportunity to buy parts at $9 each that currently cost $12 to make. What manufacturing costs are relevant to this make-or-buy decision?AppendixLO1
What data are relevant in deciding whether to accept an order at a special price?AppendixLO1
Sydney Greene asks for your help concerning the relevance of variable and fixed costs in incremental analysis. Help Sydney with her problem.AppendixLO1
“Incremental analysis involves the accumulation of information concerning a single course of action.” Do you agree? Why?AppendixLO1
Your roommate, Anna Polis, contends that accounting contributes to most of the steps in management’s decision-making process. Is your roommate correct?Explain.AppendixLO1
What steps are frequently involved in management’s decision-making process?AppendixLO1
A segment of Hazard Inc. has the following data.Sales $200,000 Variable expenses 140,000 Fixed expenses 100,000 If this segment is eliminated, what will be the effect on the remaining company? Assume
If an unprofitable segment is eliminated:(a) net income will always increase.(b) variable expenses of the eliminated segment will have to be absorbed by other segments.(c) fixed expenses allocated to
In a decision to retain or replace equipment, the book value of the old equipment is a (an):(a) opportunity cost. (c) incremental cost.(b) sunk cost. (d) marginal cost.AppendixLO1
Walton, Inc. makes an unassembled product that it currently sells for $55. Production costs are $20. Walton is considering assembling the product and selling it for $68. The cost to assemble the
The decision rule in a sell-or-process-further decision is process further as long as the incremental revenue from processing exceeds:(a) incremental processing costs.(b) variable processing
Derek is performing incremental analysis in a makeor-buy decision for Item X. If Derek buys Item X, he can use its released productive capacity to produce Item Z. Derek will sell Item Z for $12,000
In a make-or-buy decision, relevant costs are:(a) manufacturing costs that will be saved.(b) the purchase price of the units.(c) the opportunity cost.(d) All of the above.AppendixLO1
Jobart Company is currently operating at full capacity.It is considering buying a part from an outside supplier rather than making it in-house. If Jobart purchases the part, it can use the released
It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200. Product Z200 sells for $30. A buyer offers to purchase 3,000 units at$18 each. The seller will incur special
It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200 that sells for $30.A foreign buyer offers to purchase 3,000 units at $18 each. If the special offer is accepted
A company is considering the following alternatives:Alternative A Alternative B Revenues $50,000 $50,000 Variable costs 24,000 24,000 Fixed costs 12,000 15,000 Which of the following are relevant in
In making business decisions, management ordinarily considers:(a) quantitative factors but not qualitative factors.(b) financial information only.(c) both financial and nonfinancial information.(d)
Incremental analysis is the process of identifying the financial data that:(a) do not change under alternative courses of action.(b) change under alternative courses of action.(c) are mixed under
Three of the steps in management’s decision-making process are (1) review results of decision, (2) determine and evaluate possible courses of action, and (3)make the decision. The steps are
Identify the relevant costs in deciding whether to eliminate an unprofi table segment or product.AppendixLO1
Identify the relevant costs to be considered in repairing, retaining, or replacing equipment.AppendixLO1
Identify the relevant costs in determining whether to sell or process materials further.AppendixLO1
Identify the relevant costs in a make-or-buy decision.AppendixLO1
Identify the relevant costs in accepting an order at a special price.AppendixLO1
Describe the concept of incremental analysis.AppendixLO1
Identify the steps in management’s decision-making process.AppendixLO1
Describe the essential features of a cost-volume-profi t income statement.AppendixLO1
Creative Crates Co. produces wooden crates used for shipping products by ocean liner. In 2014, Creative incurred the following costs.Wood used in crate production $54,000 Nails (considered insignifi
Langdon Company produced 9,000 units during the past year, but only 8,200 of the units were sold. The following additional information is also available.Direct materials used $79,000 Direct labor
Felde Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2014, the company incurred the following costs.Variable Costs per Unit Direct materials $7.50
An investment banker is analyzing two companies that specialize in the production and sale of candied yams. Traditional Yams uses a labor-intensive approach, and Auto-Yams uses a mechanized system.
Arquitectos Interiores of Juarez, Mexico, is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen.Alfonso Jiminez, Arquitectos’
The CVP income statements shown below are available for Armstrong Company and Contador Company.Armstrong Co. Contador Co.Sales $500,000 $500,000 Variable costs 240,000 50,000 Contribution margin
Billings Company manufactures and sells two products. Relevant per unit data concerning each product follow.Product Basic Deluxe Selling price $40 $52 Variable costs $20 $22 Machine hours .5 .8
Dalton Inc. produces and sells three products. Unit data concerning each product is shown below.Product D E F Selling price $200 $300 $250 Direct labor costs 30 80 35 Other variable costs 95 80 145
Spencer Company manufactures and sells three products. Relevant per unit data concerning each product are given below.Product A B C Selling price $8 $12 $15 Variable costs and expenses $3 $10 $12
Personal Electronix sells iPads and iPods. The business is divided into two divisions along product lines. CVP income statements for a recent quarter’s activity are presented below.iPad Division
Palmer Golf Accessories sells golf shoes, gloves, and a laser-guided range-finder that measures distance. Shown below are unit cost and sales data.Pairs of Pairs of Range-Shoes Gloves Finder Unit
Express Delivery is a rapidly growing delivery service. Last year, 80% of its revenue came from the delivery of mailing “pouches” and small, standardized delivery boxes (which provides a 20%
Qwik Repairs has over 200 auto-maintenance service outlets nationwide. It provides primarily two lines of service: oil changes and brake repair. Oil change–related services represent 70% of its
Yard Tools manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and contribution margin per unit are as follows.Contribution Sales Mix Margin per Unit Lawnmowers 20% $30 Weed-trimmers
Hall Company had sales in 2014 of $1,560,000 on 60,000 units. Variable costs totaled $720,000, and fixed costs totaled $500,000.A new raw material is available that will decrease the variable costs
Comfi Airways, Inc., a small two-plane passenger airline, has asked for your assistance in some basic analysis of its operations. Both planes seat 10 passengers each, and they fly commuters from
Norton Company reports the following operating results for the month of August: sales $310,000 (units 5,000); variable costs $210,000; and fixed costs $75,000.Management is considering the following
In the month of June, Jose Hebert’s Beauty Salon gave 4,000 haircuts, shampoos, and permanents at an average price of $30. During the month, fixed costs were $16,800 and variable costs were 75% of
The Bonita Inn is trying to determine its break-even point. The inn has 75 rooms that are rented at $60 a night. Operating costs are as follows.Salaries $8,800 per month Utilities 2,400 per month
Eye Spy Corporation manufactures and sells three different types of binoculars.They are referred to as Good, Better, and Best binoculars. Grinding and polishing time is limited. More time is required
Snow Cap Springs produces and sells water filtration systems for homeowners.Information regarding its three models is shown below.Basic Basic Plus Premium Total Units sold 750 450 300 1,500 Selling
Queensland Company reports the following operating results for the month of April.QUEENSLAND COMPANY CVP Income Statement For the Month Ended April 30, 2014 Total Per Unit Sales (9,000 units)
Amanda Inc. sold 10,000 units and recorded sales of $400,000 for the first month of 2014. In making the sales, the company incurred the following costs and expenses.Variable Fixed Cost of goods sold
Howser Company’s fixed overhead costs are $4 per unit, and its variable overhead costs are $8 per unit. In the first month of operations, 50,000 units are produced, and 48,000 units are sold. Write
Burns Company incurred the following costs during the year: direct materials$20 per unit; direct labor $14 per unit; variable manufacturing overhead $15 per unit; variable selling and administrative
Information concerning The Rock Company is provided in BE19-16. What are the total product costs for the company under absorption costing?AppendixLO1
The Rock Company produces basketballs. It incurred the following costs during the year.Direct materials $14,400 Direct labor $25,600 Fixed manufacturing overhead $12,000 Variable manufacturing
Ger Corporation manufactures two products with the following characteristics.Contribution Margin Machine Hours per Unit Required for Production Product 1 $42 .15 hours Product 2 $35 .10 hours If
The degree of operating leverage for Montana Corp. and APK Co. are 1.6 and 5.4, respectively. Both have net incomes of $50,000. Determine their respective contribution margins.AppendixLO1
Presented on the next page are variable costing income statements for Logan Company and Morgan Company. They are in the same industry, with the same net incomes, but different cost structures.Logan
Sam’s Shingle Corporation is considering the purchase of a new automated shingle-cutting machine. The new machine will reduce variable labor costs but will increase depreciation expense.
In Briggs Company, data concerning two products are contribution margin per unit—Product A $12, Product B $15; machine hours required for one unit—Product A 2, Product B 3. Compute the
Faune Furniture Co. consists of two divisions, Bedroom Division and Dining Room Division. The results of operations for the most recent quarter are:Bedroom Dining Room Division Division Total Sales
Peine Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its three product lines is birthday candles 30%, standard tapered candles 50%, and large scented candles
Information for Markowis Corporation is given in BE19-7. If the company has fixed costs of $213,000, how many units of each model must the company sell in order to break even?AppendixLO1
Markowis Corporation sells three different models of mosquito “zapper.” Model A12 sells for $50 and has variable costs of $40. Model B22 sells for $100 and has variable costs of $70. Model C124
For Kosko Company actual sales are $1,200,000 and break-even sales are$960,000. Compute (a) the margin of safety in dollars and (b) the margin of safety ratio.AppendixLO1
For Ortega Company, variable costs are 60% of sales, and fixed costs are$210,000. Management’s net income goal is $60,000. Compute the required sales needed to achieve management’s target net
Dilts Company has a unit selling price of $400, variable costs per unit of $250, and fixed costs of $210,000. Compute the break-even point in units using (a) the mathematical equation and (b)
Wesland Corp. had total variable costs of $175,000, total fixed costs of $120,000, and total revenues of $250,000. Compute the required sales in dollars to break even.AppendixLO1
Hamby Inc. has sales of $2,000,000 for the first quarter of 2014. In making the sales, the company incurred the following costs and expenses.Variable Fixed Cost of goods sold $760,000 $600,000
Determine the missing amounts.Unit Selling Unit Variable Contribution Contribution Price Costs Margin per Unit Margin Ratio 1 $250 $180 (a) (b)2 $500 (c) $300 (d)3 (e) (f) $330 30%AppendixLO1
In the long run, will net income be higher or lower under variable costing compared to absorption costing?AppendixLO1
If production is greater than sales, how does absorption costing net income differ from variable costing net income?AppendixLO1
If production equals sales, what, if any, is the difference between net income under absorption costing versus under variable costing?AppendixLO1
Doc Rowan Corporation sells one product, its waterproof hiking boot. It began operations in the current year and had an ending inventory of 8,500 units. The company sold 20,000 units throughout the
(a) What is the major rationale for the use of variable costing?(b) Discuss why variable costing may not be used for financial reporting purposes.AppendixLO1
Distinguish between absorption costing and variable costing.AppendixLO1
Pine Company has a degree of operating leverage of 8. Fir Company has a degree of operating leverage of 4. Interpret these measures.AppendixLO1
What is a measure of operating leverage, and how is it calculated?AppendixLO1
How does the replacement of manual labor with automated equipment affect a company’s cost structure?What implications does this have for its operating leverage and break-even point?AppendixLO1
What is operating leverage? How does a company increase its operating leverage?AppendixLO1
What is meant by “cost structure?” Explain how a company’s cost structure affects its break-even point.AppendixLO1
What is the theory of constraints? Provide some examples of possible constraints for a manufacturer.AppendixLO1
How is the contribution margin per unit of limited resource computed?AppendixLO1
What approach should be used to calculate the breakeven point of a company that has many products?AppendixLO1
Performance Company sells two types of performance tires. The lower-priced model is guaranteed for only 50,000 miles; the higher-priced model is guaranteed for 150,000 miles. The unit contribution
What is meant by the term sales mix? How does sales mix affect the calculation of the break-even point?AppendixLO1
If management chooses to reduce its selling price to match that of a competitor, how will the break-even point be affected?AppendixLO1
The traditional income statement for Wheat Company shows sales $900,000, cost of goods sold $500,000, and operating expenses $200,000. Assuming all costs and expenses are 75% variable and 25% fixed,
Describe the features of a CVP income statement that make it more useful for management decisionmaking than the traditional income statement that is prepared for external users.AppendixLO1
Distinguish between a traditional income statement and a CVP income statement.AppendixLO1
Provide three examples of management decisions that benefit from CVP analysis.AppendixLO1

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