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managerial accounting
Questions and Answers of
Managerial Accounting
Contrast a rolling forecast with the master budget. Discuss the potential advantages of a rolling forecast.
Several components of the master budget are listed as follows:● Direct materials budget● Cost of goods sold budget● Production budget● Budgeted balance sheet● Manufacturing overhead
Mindy Copper saw a budget for the home delivery business in which all costs were calculated as a percentage of revenues. She has asked you for clarification. Specifically, she would like your opinion
Why is there a need for a combined cash budget if the company has already prepared the income statement?
Quality Cases, a small company that provides services and makes protective cases for phones and tablets, has gathered data to prepare a master budget. Assume the following data for Quality
What are some of the major differences between a cash receipts and disbursements budget and a budget income statement? Sales Cost of Goods Sold Selling and Administrative Investing Financing Cash
A master budget should be prepared annually by top management and revised monthly or even weekly by middle- and lower-level managers so that the numbers are up to date. Do you agree? If you do not
Discuss whether operational or nonfinancial data should be considered in the budgeting process.
What is the difference in the master budget for a manufacturer versus the master budget for a merchandiser?
Flexible budgets are synonymous with rolling budgets. Do you agree? Discuss if you disagree.
Find an article that discusses the budgeting process. Write a one-page summary of the article that includes discussion of the relevant internal and external factors and risks. Make sure to cite your
Why do companies compile a budget balance sheet?
The following information is known about Marilyn Company:● The company anticipates sales of 20,000 units in July.● The company plans to have 3,000 units at the end of July as desired ending
Explain why examining cost behavior is important when using cost-volume-profit analysis.
For each of the following statements, indicate whether the statement is true or false.a. Companies with the highest degree of operating leverage include those in service industries, such as insurance
Assume the following information is known for Wonderful Wallets Company:● The average sales price per unit is $40.● Variable costs per wallet are $12, and fixed costs are $2,184.● The relevant
What is meant by the term operating leverage? How is operating leverage relevant to cost-volume-profit analysis?
Able Company manufactures and sells boxes of envelopes. The company sold 50,000 boxes of envelopes, with revenue of $200,000, variable costs of $120,000, and operating income of $30,000.a. What is
Fancy Company reported a contribution margin of $10 per unit. The company’s fixed costs per period were $30,000. Sales were $48,000 for the 3,200 units sold during the period. The income tax rate
For each of the following independent situations, compute the required calculations.a. Basic Company has fixed costs of $50,000 and breakeven sales of $250,000. What is the projected income at
Incentive Company compensates salespeople on a monthly basis at 5% of the average sales achieved in the previous three months and 10% if the monthly sales exceed the average monthly sales of the
Name some internal and external business risks that a company needs to consider for cost-volume-profit analysis. Why is it important to consider these risks?
Low Volume Company reported the following results for last year:a. What is the contribution margin per unit?b. What are fixed costs?c. To break even, how many additional units would the company have
Assume that the breakeven point of Dollar Company is $37,500 in terms of sales. Fixed costs are $15,000.a. What is the contribution margin ratio?b. What is the sales price if the variable costs are
For each of the following changes, indicate the effect on contribution margin and breakeven point. Use + for increase, – for decrease, and 0 for no effect. Change (a) New data analytics software
Mixed Company is evaluating the following two options:Option A: Sell a product domestically that will require a significant capital investment of $400,000 and variable costs of $20 per unit. The
Most companies have a sales mix (they sell more than one type of product or service). For each of the following, provide an example of a product line or service line: grocery stores, hospitals,
Clean Company reported the following information on its current-year contribution margin income statement:a. What was the dollar amount of the margin of safety?b. The marketing department suggests
If a company has a sales mix, the company cannot perform cost-volume-profit analysis. Do you agree? If you do not agree, explain.
Natsuko Company produces decorative art figurines with the following sales mix:a. What is the weighted average contribution margin and weighted average contribution margin ratio?b. What is the number
When analyzing cost-volume-profit scenarios, what other information would you seek beyond just the costs, revenues, and volume?
Thompson is interested in entering the after-school tutoring business. He estimates that his fixed costs will be $18,000 per year and his variable costs will be 25% of sales. His tutoring price is
Identify two advantages and two disadvantages of using CVP analysis.
Able Company manufactures and sells boxes of envelopes. The company sold 50,000 boxes of envelopes at a contribution margin of $80,000 or $1.60 per unit. The total fixed costs were $50,000. The
Natasha is interested starting an after-school gymnastics program for kids ages 5 to 10. She estimates that her fixed costs will be $9,000 per year and her contribution margin will be $15 per hour.
Following are important terms described in Chapter 8:a. Post-auditb. Incremental analysisc. Total quality managementd. Inspection pointe. Avoidable costf. Split-off pointg. Relevant costsh.
In an input-process-output system for relevant costing special decisions, the input is the data gathered, the process is the analysis of the specific decision, and the output is the units or service
The following represents the activity for last year:a. What is the contribution margin?b. What is the gross margin?c. Why is contribution margin different than gross margin? Is contribution margin
Give the definition of opportunity costs. Discuss whether opportunity costs are relevant for product costing, planning and control, and special decisions.
Janitorial Service, Inc., manufactures household cleaners. Revenue per unit is $6.50. The household cleaners have a cost of goods sold of $6.00 per unit, of which $3.20 is for allocated fixed
Veronic Company sells shoes for an average of $100 per pair. Variable manufacturing costs in 2022 were $220,000 and variable selling costs were $20,000. Total sales in 2022 were $600,000. The total
Relevant information for special decisions must be the same in the future as in the past, be different between alternatives, and be precise. Do you agree? Explain.
Mighty Confectioners faces the decision of whether to make or buy specialty cupcakes. Manufacturing costs per unit for the cupcakes are direct materials, $0.50; direct labor $2; and variable
Ideal Movers has the following product lines:The Packing line includes “junk removal.” Maximum production time for the company is 500 hours per year. Fixed costs will not be affected.a. What is
The Apple Everything Company has three products with the following data:a. Which product should be processed further (if any)?b. Which of the following pieces of information should
Gonska manufactures 20,000 units of computer accessories per year and sells them for $9.00 each. The costs per unit are as follows:Bailey has offered to sell Gonska the 20,000 units of part G for
Describe the decision-making process in general. Consider one decision that you have faced in the last month and discuss what relevant factors you used to analyze the decision.
Canasi currently makes 10,000 units of part D with the following costs per unit: direct materials, $6; direct labor, $15; variable overhead, $6; and fixed overhead, $8. Eriksen has offered to sell
To make appropriate decisions, companies attempt to consider not only the quantifiable costs but also relevant qualitative costs. It is also helpful to estimate in dollars the qualitative factors so
For a make or buy decision, only the relevant future variable manufacturing costs need to be considered. Do you agree? Explain.
Many mistakes are made in business because the relevant amounts and factors are not properly identified rather than because the amounts are not correctly calculated.For each of the following
We Are Printers has decided to discontinue its basic printer model. The company has some partially completed units on hand with incurred costs of $50 per unit. The company could complete the printers
Management is considering dropping a product line. The freed-up productive capacity can be used elsewhere. Management ignores the fixed costs and examines only the contribution margin of the product
For a make or buy decision, the company produced the following fishbone diagram outlining problems with one of the new products. The company is considering paying considerably more just to buy the
Contentious Law Firm offers litigation, divorce, and estate planning services. The partners are concerned about the profitability of their litigation business. If the firm drops the litigation work,
Pet Services offers two product lines: home sitting and grooming. Income statement data for the most recent year is presented below:a. Assuming fixed costs remain unchanged, how would dropping the
Alive Company sells two cosmetics products, Bright and Shine, with contribution margins per unit of $10 and $14, respectively. Bright takes 2 hours to produce and Shine 3½ hours. The total machine
Give the criteria used to analyze whether to introduce a new product line to replace an existing one.
Le Industries is considering a special order of 1,000 units at $64 per unit. Currently, Le sells 11,000 units at $98 per unit. The current per-unit costs are $47 cost of goods sold and $18 selling
The increase in total profits from accepting a special order is the number of units in the special order multiplied by the gross margin. Do you agree? Explain.
Superior Lessons offers three product lines: music lessons, sports lessons, and early grades tutoring after school lessons. The following represents the income statements for the most recent
Joint costs are relevant for special decisions of whether to produce products further, since the joint cost must be incurred. Do you agree? Explain.
Chundas is considering dropping product X, which last year reported a net loss of $12,000. The income statement showed variable costs of $70,000 and sales of $90,000. If product X is dropped, the
Superior Lessons offers three product lines: music lessons, sports lessons, and early grades tutoring after school lessons. The following charts were produced using Google Sheets to visualize the
When considering whether to rework defective products, management should focus on which products require the least amount of direct materials to correct. Do you agree? Explain.
Indicate whether each of the following statements is true or false.a. Important qualitative considerations for a special order include all of the following: impact on current customers if they learn
Snacks Company is considering adding a new product line called Party Munchies. The company currently has excess productive capacity that could be used to produce Party Munchies. Each Party Munchies
In a multiproduct firm with multiple constraints, the product with the highest contribution margin per unit should be the only product produced. Do you agree? Explain.
The following articles provide some insight into the current and emerging trends and considerations in supply chain management. Select one of the articles from the list below.“Mitigating Supply
Companies should never sell any product lines with revenues below the variable costs. Do you agree? Explain.
Liles Company sells a product for $110 per unit. In 2022, it reported sales of $770,000 and a contribution margin of $308,000. The gross profit percentage was 50%. Variable costs consist of
Give five special decisions discussed in the chapter.
Review each of the following independent scenarios.Scenario 1: A salesperson was able to secure a special order that would increase his commission for this period. He is concerned that production
Administrative costs should typically be ignored for special decisions since they will not be avoidable and, therefore, do not represent relevant costs. Do you agree? Explain.
Find an article that discusses the role of data analytics in supply chain management. Write a one-page summary of the article. Make sure to cite your sources.
In deciding how to price special orders, the cost of goods sold during the period should be considered. Do you agree? Explain.
The production costs up to the inspection point are irrelevant to scrap or rework decisions for defective units. Do you agree? Explain.
Fixed costs are always sunk costs and are thus irrelevant. Do you agree? Explain.
Past information, although always irrelevant for special decisions, may be very useful. Future information is not reliable because future amounts are only estimates; it is also probably not very
Gross profit is synonymous with contribution margin. Do you agree? Explain.
Discuss why topics such as supply chain and theory of constraints are important when considering relevant costing decisions.
Why do companies conduct post-audit reviews of their relevant costing decisions?
Describe why data analytics is relevant to supply chain management. Recall that supply chain management is the process of designing, implementing, controlling, and monitoring all activities along the
The Humble Company determined that feet of lumber was the appropriate measure of activity for the cutting department. A sample of actual cost data for 2022 was selected as follows:a. Draw the sample
PNH Company produces plastic specialty toys. In 2022, the company produced and sold 80,000 toys. Each toy was sold at $8 and has the following production costs:Selling and administrative costs for
For each of the following statements, indicate whether the statement is true or false.a. The high–low method is superior to regression analysis because the high–low method consistently uses the
Confused Company is considering changing its legal fee representation. Information on the current and proposed annual costs is as follows:● Current structure: $7,000 fixed retainer fee and $120 per
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.●
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.●
Examine these graphs for Kristen Company and answer the following questions.Assume that if activity increased beyond 40 units, a new relevant range would apply (for example, if fixed costs are
Discuss the differences between fixed costs, variable costs, and mixed costs.
Identify the cost behavior in the graph. Dollars 400 350 300 250 200 150 100 50 0 0 10 Total Mixed Costs ? 20 ? Activity (Units) 30 40 ?
Assume the following information is known for Simple Watches Company:● The average sales price per unit is $37.● Total costs at the lowest observed activity of 150 units are $3,822 and at the
Hi-Tech Company sells small labeling machines for $60 each. Expected units, sales, and total costs in the next four quarters are as follows:a. What are fixed costs? Assume that the linear
Which information is found in the contribution margin statement that is not found in the traditional (functional) income statement?
All Weather Company makes umbrellas and outerwear items for rainy and snowy days. It had the following cost structure for the past year:a. What is the product cost per unit and gross margin per unit
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