Archives: Solution Manual

23-21 To compensate Marks for taking on uncontrollable risk, AMCO must pay him additional amounts within the structure of the ROI-based arrangement. Thus, compensating Marks only on the basis of performance-based incentives will cost AMCO more money, on average, than […]

23-1 CHAPTER 23 PERFORMANCE MEASUREMENT, COMPENSATION, AND MULTINATIONAL CONSIDERATIONS 23-1 Examples of financial and nonfinancial measures of performance are Financial: ROI, residual income, economic value added, and return on sales Nonfinancial: Customer perspective: Market share, customer satisfaction 23-2 The three […]

22-37 22-31 (40 min.) Multinational transfer pricing, global tax minimization. Supergrow, Inc., based in Des Moines, Iowa, sells high-end fertilizers. Supergrow has two divisions: ▪ North Italy mining division, which mines potash in northern Italy ▪ U.S. processing division, which […]

22-21 22-25 (20 min.) Transfer-pricing dispute. The Kelly-Elias Corporation, manufacturer of tractors and other heavy farm equipment, is organized along decentralized product lines, with each manufacturing division operating as a separate profit center. Each division manager has been delegated full […]

22-1 CHAPTER 22 MANAGEMENT CONTROL SYSTEMS, TRANSFER PRICING, AND MULTINATIONAL CONSIDERATIONS 22-1 A management control system is a means of gathering and using information to aid and coordinate the planning and control decisions throughout an organization and to guide the […]

21-41 21-31 (20 min.) DCF, sensitivity analysis, no income taxes. (CMA, adapted) Invigor Corporation is an international manufacturer of fragrances for women. Management at Invigor is considering expanding the product line to men’s fragrances. From the best estimates of the […]

21-21 2. Accrual accounting rate of return based on net initial investment: Net initial investment = $186,000 Annual after-tax operating income = $65,800 – $45,000 depreciation = $20,800 Accrual accounting rate of return = $20,800 $186,000 = 11.18%. 21-22 SOLUTION […]

21-1 CHAPTER 21 CAPITAL BUDGETING AND COST ANALYSIS 21-1 No. Capital budgeting focuses on an individual investment project throughout its life, recognizing the time value of money. The life of a project is often longer than a year. Accrual accounting […]

20-32 SOLUTION 1. The relevant costs of purchasing from Gold Star Breads and Grandma’s Bakery are: Cost Category Gold Star Breads Grandma’s Bakery Purchase costs 2,400 buns × $2.50 per bun 2,400 buns × $2.00 per bun $6,000 $4,800 Ordering […]

20-21 20-26 (30 min.) EOQ, uncertainty, safety stock, reorder point. Stewart Corporation is a major automobile manufacturer. It purchases steering wheels from Coase Corporation. Annual demand is 10,400 steering wheels per year or 200 steering wheels per week. The ordering […]

20-1 CHAPTER 20 INVENTORY MANAGEMENT, JUST-IN-TIME, AND SIMPLIFIED COSTING METHODS 20-1 Cost of goods sold (in retail organizations) or direct materials costs (in organizations with a manufacturing function) as a percentage of sales frequently exceeds net income as a percentage […]

19-39 SOLUTION 1a. Average waiting time for an order of Z39 ( ) ( ) ( ) 2 Annual average number Manufacturing time of orders of Z39 per order of Z39 Annual machine Annual average number Manufacturing time 2 capacity […]

19-21 2. At 420 students seen a day, ( ) ( ) 2 = Average number Time taken to advise a student of students per day Wait time Average amount Maximum amount Time taken to 2 of time available advise […]

19-1 CHAPTER 19 BALANCED SCORECARD: QUALITY, TIME, AND THE THEORY OF CONSTRAINTS 19-1 Quality costs (including the opportunity cost of lost sales because of poor quality) can be as much as 10% to 20% of sales revenues of many organizations. […]

18-38 PANEL B: Summarize the Total Costs to Account for, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed, Spoiled Units, and Units in Ending Work-in-Process Inventory Total Production Costs Transferred- in Costs Direct Materials Conversion […]

18-21 2. The cost per equivalent unit of beginning inventory and of work done in the current period differ substantially: Beginning Inventory Work Done in Current Period Direct materials Conversion costs Total cost per unit $118.60 ($142,321  1,200 equiv. […]

18-1 CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 18-1 Managers have found that improved quality and intolerance for high spoilage have lowered overall costs and increased sales. value compared to the total sales value of the product. 18-3 Yes. Normal spoilage […]

17-57 2. The equivalent units of work done in beginning inventory is as follows: Transferred-in costs, 1,260  100% = 1,260; direct materials, 1,260  0% = 0; and conversion costs, 1,260  50% = 630. The cost per equivalent […]

17-41 2. Solution Exhibit 17-34A computes the equivalent units of work done to date in the Testing Department for transferred-in costs, direct materials, and conversion costs. 3. Solution Exhibit 17-34B summarizes total Testing Department costs for October 2014, calculates the […]

17-21 17-26 (35–40 min.) Transferred-in costs, weighted-average method. Trendy Clothing, Inc., is a manufacturer of winter clothes. It has a knitting department and a finishing department. This exercise focuses on the finishing department. Direct materials are added at the end […]

17-1 CHAPTER 17 PROCESS COSTING 17-1 Industries using process costing in their manufacturing areas include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips, beverages, and breakfast cereals. 17-3 Equivalent units is a derived amount of output […]

16-41 SOLUTION A diagram of the situation is in Solution Exhibit 16-30. 1. a. Sales value at splitoff method. Monthly Unit Output Selling Price Per Unit Sales Value of Total Prodn. at Splitoff Weighting Joint Costs Allocated Studs (Building) 82,000 […]

16-21 SOLUTION 1a. PANEL A: Allocation of Joint Costs using Sales Value at Splitoff Method Special B/ Beef Ramen Special S/ Shrimp Ramen Total Sales value of total production at splitoff point (20,000 tons  $5 per ton; 28,000  […]

16-1 CHAPTER 16 COST ALLOCATION: JOINT PRODUCTS AND BYPRODUCTS 16-1 Exhibit 16-1 presents many examples of joint products from four different general industries. These include: Industry Separable Products at the Splitoff Point Food Processing: • Lamb • Lamb cuts, tripe, […]

15-41 Stage 3: A B X Y Original amounts $210,000 $ 90,000 — — Allocation of A (300,000) 60,000 (20%) $150,000 (50%) $ 90,000 (30%) Allocation of B 90,000 (60%) (150,000) 15,000 (10%) 45,000 (30%) Totals accounted for $ 0 […]

15-21 15-25 (20 min.) Revenue allocation, bundled products. Essence Company blends and sells designer fragrances. It has a Men’s Fragrances Division and a Women’s Fragrances Division, each with different sales strategies, distribution channels, and product offerings. Essence is now considering […]

15-1 CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS, COMMON COSTS, AND REVENUES 15-1 The single-rate (cost-allocation) method makes no distinction between fixed costs and variable costs in the cost pool. It allocates costs in each cost pool to cost objects using […]

14-60 Required: 1. Compute the actual and budgeted contribution margins in dollars for each product and in total for the third quarter of 2014. 2. Calculate the actual and budgeted sales mixes for the three products for the third quarter […]

14-41 14-30 (30 min.) Customer profitability in a manufacturing firm. Antelope Manufacturing makes a component called A1030. This component is manufactured only when ordered by a customer, so Antelope keeps no inventory of A1030. The list price is $115 per […]

14-21 14-22 (25 min.) Cost allocation to divisions. Holbrook Corporation has three divisions: pulp, paper, and fibers. Holbrook’s new controller, Paul Weber, is reviewing the allocation of fixed corporate-overhead costs to the three divisions. He is presented with the following […]

14-1 CHAPTER 14 COST ALLOCATION, CUSTOMER-PROFITABILITY ANALYSIS, AND SALES-VARIANCE ANALYSIS 14-1 Disagree. Cost accounting data plays a key role in many management planning and control decisions. The division president will be able to make better operating and strategy decisions by […]

13-35 3. Comment on your answers to requirements 1 and 2. Why are they the same or different? SOLUTION 1. Georgia Temps’ full cost per hour of supplying contract labor is Variable costs $13 Fixed costs ($168,000 ÷ 84,000 hours) […]

13-21 fewer units, which leads to higher fixed cost per unit. The product is still more profitable than in the growth phase, but not as profitable as in maturity. The company may need to analyze the probability that the price […]

13-1 CHAPTER 13 PRICING DECISIONS AND COST MANAGEMENT 13-1 The three major influences on pricing decisions are 1. Customers 2. Competitors 3. Costs 13-3 Four purposes of cost allocation are as follows: 1. To provide information for economic decisions 2. […]

12-37 2. Would you have included some measure of employee satisfaction and employee training in the learning-and-growth perspective? Are these objectives critical to Petrocal for implementing its strategy? Why or why not? Explain briefly. 3. Explain how Petrocal did not […]

12-21 to maintain each year (that is, the number of jobs it can do each year). Software-implementation support costs do not vary with the actual number of jobs done that year. Required: 1. Is Southland Corporation’s strategy one of product […]

12-1 CHAPTER 12 STRATEGY, BALANCED SCORECARD, AND STRATEGIC PROFITABILITY ANALYSIS 12-1 Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. 12-2 The five key forces to consider in industry analysis […]

11-53 11-42 (30 min.) Dropping a product line, selling more tours Mechum River Anglers, a division of Old Dominion Travel, offers two types of guided fly fishing tours, Basic and Deluxe. Operating income for each tour type in 2014 is […]

11-41 11-36 (30 min.) Make versus buy, activity-based costing, opportunity costs. The Lexington Company produces gas grills. This year’s expected production is 20,000 units. Currently, Lexington makes the side burners for its grills. Each grill includes two side burners. Lexington’s […]

11-26 (20 min.) Choosing customers. Rodeo Printers operates a printing press with a monthly capacity of 4,000 machine-hours. Rodeo has two main customers: Trent Corporation and Julie Corporation. Data on each customer for January are: Julie Corporation indicates that it […]

11-1 CHAPTER 11 DECISION MAKING AND RELEVANT INFORMATION 11-1 The five steps in the decision process outlined in Exhibit 11-1 of the text are 1. Identify the problem and uncertainties. 2. Obtain information. 3. Make predictions about the future. 4. […]

10-72 10-42 (40–50 min.) Purchasing Department cost drivers, activity-based costing, simple regression analysis. Designer Wear operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Barry Lee, assistant to the president of Designer Wear, […]

10-61 1. Inbee is keen to examine the relationship between direct labor consumption and output levels. She decides to estimate this relationship using a simple linear regression based on the monthly data. Verify that the following is the result obtained […]

10-41 SOLUTION EXHIBIT 10-33A Plot and Regression Line for Units Inspected versus Inspection Costs for Parker Manufacturing 1. Both number of units inspected and inspection labor-hours are plausible cost drivers for inspection costs. The number of units inspected is likely […]

10-21 Baiman has recently become aware of regression analysis. He estimated the following regression equation with overhead costs as the dependent variable and labor-hours as the independent variable: Required: 1. Plot the relationship between overhead costs and labor-hours. Draw the […]

10-1 CHAPTER 10 DETERMINING HOW COSTS BEHAVE 10-1 The two assumptions are 1. Variations in the level of a single activity (the cost driver) explain the variations in the related total costs. 10-2 Three alternative linear cost functions are 1. […]

xvii Exhibit P-5 (Continued) Chapter Number Context 11 11-19 Special order, activity-based costing 11-20 Make versus buy, activity-based costing 11-24 Filing cabinets; theory of constraints, throughput margin 12 12-16 Balanced scorecard 12-17 Analysis of growth, price-recovery and productivity components 12-18 […]

i ALTERNATIVE SUGGESTED CHAPTER SEQUENCES The Preface to Cost Accounting noted that our aim in organizing the material was to present a modular, flexible organization that permits a course to be custom tailored. This section presents six possible sequences for […]

9-55 2. Suppose PLF actually produces 300,000 bulbs. Calculate the production-volume variance using each level of capacity to compute the fixed manufacturing overhead allocation rate. 3. Assume PLF has no beginning inventory. If this year’s actual sales are 225,000 bulbs, […]

9-41 increased income. In addition, it does nothing to hold the manager responsible for the poor decisions from the organization’s standpoint. 3b. 26,000 Books 32,500 Books 33,800 Books 1) Inventory change: End inventory ─ begin inventory 0 6,500 books 7,800 […]