they benefit the organization and do less damage to employees than it seems on the surface.

For
example, some activities try to open up the employee’s hidde

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1. What are the signs (symptoms) of conflict in this case? 2. Use the conflict model to (a)
identify the structural causes of conflict and (b) discuss the escalation of conflict described in
this case. 3. If you were Dan Jensen, what action would you take in this situation? Tamarack
Industries manufactures motorboats

List the eight influence tactics described in this chapter in terms of how they are used by students
to influence their course instructors. Which influence tactic is applied most often? Which is
applied least often, in your opinion? To what extent is each influence tactic considered legitimate
behavior or organizationa

What is the one greatest strength of a pluralistic society? What is the one greatest weakness? Do
these characteristics work for or against business?

Choose any group of stakeholders listed in the stakeholder/responsibility matrix in Figure and
identify the four types of responsibilities the firm has to that stakeholdergroup.

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Chances are that the school you are attending is currently undergoing some sort of change to
adapt more closely to its environment. Discuss the external forces that are driving the change.
What internal drivers for change also exist?

Find two newspaper ads for management or executive positions. What leadership competencies
are mentioned in these ads?

1. On the basis of the model of emotions and attitudes in Chapter 4, explain how the changes at
Pike Place Fish Market improved job satisfaction and reduced turnover. How did these attitude
changes affect customer satisfaction? 2. Goal setting is discussed as an important activity at Pike
Place. Evaluate the effective

1. What type of team was formed here? Was it necessary, in your opinion? 2. Use the team
effectiveness model and related information in this chapter to identify the strengths and
weaknesses of this team’s environment, design, and processes. 3. Assuming that these four
people must continue to work as a team, recommend

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Acme Corp. is planning to acquire Beta Corp., which operates in a different industry.
Acme’s culture is entrepreneurial and fast-paced, whereas Beta employees value slow,
deliberate decision making by consensus. Which merger strategy would you recommend to
minimize culture shock when Acme acquires Beta? Explain your

Identify a current political leader (e.g., president, governor, mayor) and his or her recent
accomplishments. Now, using the implicit leadership perspective, think of ways that these
accomplishments of the leader may be overstated. In other words, explain why they may be due
to factors other than the leader.

A company in a country that is just entering the information age intends to introduce e-mail for
office staff at its three buildings located throughout the city. Describe two benefits as well as two
potential problems that employees will likely experience with this medium.

Does socially responsible or ethical investing seem to you to be a legitimate way in which the
average citizen might demonstrate her or his concern for CSR? Discuss.

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1. What individual and team-building skills do participants believe will be improved by the hula
hoops? 2. To what extent would each of these activities influence team dynamics back on the
job? What conditions might further improve the transfer of team dynamics from these activities
to the workplace? Companies have mo

1. On the basis of the information in this case study, describe the competencies that seem
strongest in John Mack. 2. To what extent has John Mack exhibited transformational leadership
behaviors to shift Morgan Stanley’s culture and decision making? John J. Mack, who had left
Morgan Stanley four years earlier, was b

Informal groups exist in almost every form of social organization. What types of informal groups
exist in your classroom? Why are students motivated to belong to these informal groups?

1. Identify the main reasons raised in this article why executives meet employees and clients
face-to- face rather than through other communication channels. Are all of these reasons logical,
or are some overstated? 2. In this world of globalization and information technology, discuss the
skills and knowledge that thes

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1. John Hood claims that he has no power or authority in his job. Is he correct? What sources of
power work for and against him during this change process? 2. What influence tactics has Hood
used that are most apparent in this case study? 3. What influence tactics have professors and
other stakeholders used to resist H

The CEO of a manufacturing firm wants everyone to support the organization’s dominant
culture of lean efficiency and hard work. The CEO has introduced a new reward system to
reinforce this culture and personally interviews all professional and managerial applicants to
ensure that they bring similar values to the orga

Explain in your own words the differences among the production, managerial, and stakeholder
views of the firm.

In discussions of business and society, why is there a tendency to focus on large rather than
small- or medium-sized firms? Have the corporate ethics scandals of the early 2000s affected
small- and medium-sized firms? If so, in what ways have these firms been affected?

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Suppose that you are vice president of branch services at the Bank of East Lansing. You notice
that several branches have consistently low customer service ratings even though there are no
apparent differences in resources or staff characteristics. Describe an appreciative inquiry
process in one of these branches that

Suppose that you are part of a virtual team and must persuade other team members about an
important matter (such as switching suppliers or altering the project deadline). Assuming that
you cannot visit these people in person, what can you do to maximize your persuasiveness?

This chapter describes three levels of interdependence that exist in interpersonal and intergroup
relationships. Identify examples of each level in your work or school activities. How do these
three levels affect potential conflict for you?

Jane has just been appointed as purchasing manager of Tacoma Technologies Corp. The previous
purchasing manager, who recently retired, was known for his “winner-take-all” approach
to suppliers. He continually fought for more discounts and was skeptical about any special deals
that suppliers would propose. A few sup

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1. Why does Johnson & Johnson place so much importance on the Credo? 2. How does Johnson
& Johnson ensure that managers understand and apply the Credo in their daily decisions and
actions? Johnson & Johnson (J&J) is a family-oriented health care and personal products
company with about 330 operating units and more tha

Differentiate between primary and secondary social and nonsocial stakeholders in a business
situation. Give examples of each.

Suppose you are asked by senior officers of a city government to identify ways to reinforce a
new culture of teamwork and collaboration. The senior executive group clearly supports these
values, but it wants everyone in the organization to embrace them. Identify four types of
activities that would strengthen these cult
Senior management at a consumer goods company wants you to investigate the feasibility of
using a virtual reality platform (such as Second Life) for monthly online meetings involving its
three-dozen sales managers located in several cities and countries. Use the social acceptance and
media-richness factors described in

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Deskins Manufacturing Company has four operating divisions. During the first quarter of 2010
the company reported total income from operations of $61,000 and the following results for the
divisions. Analysis reveals the following percentages of variable costs in each division.
Discontinuance of any division woul

1. Why would productivity jump at Best Buy under ROWE, compared to the traditional
employment arrangement where employees are expected to be at the office? 2. What effect
would the ROWE program have on workplace stress? Explain your answer. 3. What are the
limitations and risks of the ROWE program? Which jobs and empl

1. Identify the main conditions at Ford described in this case study that seem to have generated
dysfunctional conflict. 2. What has Mulally done to reduce or remove these sources of conflict?
In what ways has he encouraged or created more conflict? 3. The opening paragraphs of this case
study describe a conflict inci

Transformational leadership is the most popular perspective of leadership. However, it is far

from perfect. Discuss the limitations of transformational leadership.

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Describe the inquisitional approach to resolving disputes between employees or work units.
Discuss its appropriateness in organizational settings, including the suitability of its use with a
multigenerational workforce.

“Decision making is management’s most important function.” Do you agree? Why or

why not?

Betty Dillman is an accounting major at a midwestern state university located approximately 60

miles from a major city. Many of the students attending the university are from the metropolitan
area and visit their homes regularly on the weekends. Betty, an entrepreneur at heart, realizes that
few good commuting alternat

Timmons Corporation is considering three long-term capital investment proposals. Relevant data
on each project are as follows. Salvage value is expected to be zero at the end of each project.
Depreciation is computed by the straight-line method. The company’s minimum rate of
return is the company’s cost of capi

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In 2010, Hadicke Company had a break-even point of $350,000 based on a selling price of $7
per unit and fixed costs of $105,000. In 2011, the selling price and the variable cost per unit did
not change, but the break-even point increased to $420,000. Instructions (a) Compute the
variable cost per unit and the contribu

Barone Company manufactures private-label small electronic products, such as alarm clocks,
calculators, kitchen timers, stopwatches, and automatic pencil sharpeners. Some of the products
are sold as sets, and others are sold individually. Products are studied as to their sales potential,
and then cost estimates are mad

Two types of present value tables may be used with the discounted cash flow technique. Identify
the tables and the circumstance(s) when each table should be used.

In what ways can the budgeting process create incentives for unethical behavior?

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Wendy Dobson is the managing director of the Wichita Day Care Center. Wichita is currently set
up as a full-time child care facility for children between the ages of 12 months and 6 years.
Wendy is trying to determine whether the center should expand its facilities to incorporate a
newborn care room for infants between

Hector Ruiz is trying to understand the term “cost of capital.” Define the term, and indicate
its relevance to the decision rule under the annual rate of return technique.

Polzin Company had sales in 2010 of $1,500,000 on 60,000 units. Variable costs totaled
$840,000, and fixed costs totaled $500,000. A new raw material is available that will decrease
the variable costs per unit by 20% (or $2.80). However, to process the new raw material, fixed
operating costs will increase by $60,000.

Terry Lemay is unclear as to the difference between the balance sheets of a merchandising
company and a manufacturing company. Explain the difference to Terry.

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Maranantha Box Corporation is considering adding another machine for the manufacture of
corrugated cardboard. The machine would cost $700,000. It would have an estimated life of 6
years and no salvage value. The company estimates that annual cash inflows would increase by
$300,000 and that annual cash outflows would in

Founded in 1983, the Beverly Hills Fan Company is located in Woodland Hills, California. With
23 employees and sales of less than $10 million, the company is relatively small. Management
feels that there is potential for growth in the upscale market for ceiling fans and lighting. They
are particularly optimistic about
Lion Corporation manufactures several types of accessories. For the year, the gloves and mittens
line had sales of $500,000, variable expenses of $375,000, and fixed expenses of
$150,000.Therefore, the gloves and mittens line had a net loss of $25,000. If Lion eliminates the
line, $40,000 of fixed costs will remain. Pr

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 decision. —Identify the problem and .....—Determine and evaluate assign
responsibility. .......possible cour

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Moran Company reports the following operating results for the month of August: Sales $350,000
(units 5,000); variable costs $210,000; and fixed costs $90,000. Management is considering the
following independent courses of action to increase net income. 1. Increase selling price by 10%
with no change in total variable c

How does the content of reports and the verification of reports differ between managerial and
financial accounting?

Your roommate, Matt Mikan, contends that accounting contributes to most of the steps in
management’s decision- making process. Is your roommate correct? Explain.

Corn Company incurs a cost of $35 per unit, of which $20 is variable, to make a product that
normally sells for $58. A foreign wholesaler offers to buy 6,000 units at $31 each. Corn will
incur additional costs of $2 per unit to imprint a logo and to pay for shipping. Compute the
increase or decrease in net income Corn

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Freese Company manufactures and sells three products. Relevant per unit data concerning each
product are given below. Instructions (a) Compute the contribution margin per unit of the
limited resource (machine hour) for each product. (b) Assuming 3,000 additional machine hours
are available, which product should be

The condensed income statement for the Terri and Jerri partnership for 2010 is as follows. A
cost behavior analysis indicates that 75% of the cost of goods sold are variable, 50% of the
selling expenses are variable, and 25% of the administrative expenses are variable. Instructions
(Round to nearest unit, dollar,

What new rules were enacted under the Sarbanes-Oxley Act to address unethical accounting
practices?

Ming Company is considering two alternatives. Alternative A will have sales of $150,000 and
costs of $100,000. Alternative B will have sales of $180,000 and costs of $120,000. Compare
Alternative A to Alternative B showing incremental revenues, costs, and net income. Which
alternative should you choose?

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Huber Company bottles and distributes No-FIZZ, a fruit drink. The beverage is sold for 50 cents
per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2010,
management estimates the following revenues and costs. Instructions (a) Prepare a CVP income
statement for 2010 based on mana

Horak Company accumulates the following data concerning a proposed capital investment: cash
cost $225,000, net annual cash flow $34,000, present value factor of cash inflows for 10 years
6.71 (rounded). Determine the net present value, and indicate whether the investment should be
made.

Campbell Soup Company is an international provider of soup products. Management is very

interested in continuing to grow the company in its core business, while “spinning off”
those businesses that are not part of its core operation. Address: www.campbellsoups.com, or go
to www.wiley.com/college/weygandt Steps 1.

Shannon Inc. has been manufacturing its own shades for its table lamps. The company is
currently operating at 100% of capacity. Variable manufacturing overhead is charged to
production at the rate of 50% of direct labor cost. The direct materials and direct labor cost per
unit to make the lamp shades are $4.00 and $6.0

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Gillaspie Company uses the internal rate of return method. What is the decision rule for this
method?

Karen Fritz is studying for the next accounting mid-term examination. Summarize for Karen
what she should know about management functions.

DeVito Company operates in a state where corporate taxes and workmen’s compensation
insurance rates have recently doubled. DeVito’s president has assigned you the task of
preparing an economic analysis and making a recommendation about whether to move the
company’s entire operation to Missouri. The president is s

Shatner Company makes three models of phasers. Information on the three products is given
below. Fixed expenses consist of $300,000 of common costs allocated to the three products
based on relative sales, and additional fixed expenses of $30,000 (Stunner), $75,000 (Double-
Set), and $30,000 (Mega-Power). The common c

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The Coca-Cola Company hardly needs an introduction. A line taken from the cover of a recent
annual report says it all: If you measured time in servings of Coca-Cola, “a billion Coca-
Cola’s ago was yesterday morning.” On average, every U.S. citizen drinks 363 8-ounce
servings of Coca-Cola products each year. Coca

Cowell Corporation produces one product. Its cost includes direct materials ($10 per unit), direct
labor ($8 per unit), variable overhead ($6 per unit), fixed manufacturing ($250,000), and fixed
selling and administrative ($30,000). In October 2010, Cowell produced 25,000 units and sold
20,000 at $50 each. Instruction

Distinguish between managerial and financial accounting as to (a) Primary users of reports, (b)
Types and frequency of reports, and (c) Purpose of reports.

Morganstern Company is considering the purchase of a new machine. The invoice rice of the
machine is $170,000, freight charges are estimated to be $4,000, and installation costs are
expected to be $6,000. Salvage value of the new equipment is expected to be zero after a useful
life of 4 years. Existing equipment could

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Innova Company produces golf discs which it normally sells to retailers for $7 each. The cost of
manufacturing 20,000 golf discs is: Materials .....$ 10,000 Labor .......30,000 Variable
overhead ..20,000 Fixed overhead... 40,000 Total .......$100,000 Innova also incurs 5% sales
commission ($0.35) on each disc sold. Mud

Kenny Hampton is an accountant for Bartley Company. Early this year Kenny made a highly
favorable projection of sales and profits over the next 3 years for Bartley’s hot-selling
computer PLEX. As a result of the projections Kenny presented to senior management, they
decided to expand production in this area. This dec

Adler Company is considering purchasing new equipment for $300,000. It is expected that the
equipment will produce annual net income of $10,000 over its 10-year useful life. Annual
depreciation will be $30,000. Compute the cash payback period.

The management of Martinez Manufacturing Company has asked for your assistance in deciding
whether to continue manufacturing a part or to buy it from an outside supplier. The part, called
Tropica, is a component of Martinez’s finished product. An analysis of the accounting
records and the production data revealed th

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Identify the steps required in using the internal rate of return method.

Matt Reiss owns the Fredonia Barber Shop. He employs five barbers and pays each a base rate of
$1,000 per month. One of the barbers serves as the manager and receives an extra $500 per
month. In addition to the base rate, each barber also receives a commission of $5.50 per haircut.
Other costs are as follows. Advertis

Suzaki Manufacturing Company is considering three new projects, each requiring an equipment
investment of $22,000. Each project will last for 3 years and produce the following cash inflows.
The equipment’s salvage value is zero. Suzaki uses straight-line depreciation. Suzaki will not
accept any project with a payb

Lynn Company had $150,000 of net income in 2010 when the selling price per unit was $150,
the variable costs per unit were $90, and the fixed costs were $570,000. Management expects per
unit data and total fixed costs to remain the same in 2011. The president of Lynn Company is
under pressure from stockholders to incre

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The McCune Barber Shop employs four barbers. One barber, who also serves as the manager, is
paid a salary of $3,900 per month. The other barbers are paid $1,900 per month. In addition, each
barber is paid a commission of $2 per haircut. Other monthly costs are: store rent $700 plus 60
cents per haircut, depreciation on

Harry Company is considering two different, mutually exclusive capital expenditure proposals.
Project A will cost $395,000, has an expected useful life of 10 years, a salvage value of zero, and
is expected to increase net annual cash flows by $70,000. Project B will cost $270,000, has an
expected useful life of 10 year

Gagliano Company has decided to introduce a new product. The new product can be
manufactured by either a capital-intensive method or a labor-intensive method. The
manufacturing method will not affect the quality of the product. The estimated manufacturing
costs by the two methods are as follows. Gagliano’s market

In Nevitt Company, data concerning two products are: Contribution margin per unit—Product
A $11, Product B $12; machine hours required for one unit—Product A 2, Product B 2.5.
Compute the contribution margin per unit of limited resource for each product.

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Jane Greinke is the advertising manager for Payless Shoe Store. She is currently working on a
major promotional campaign. Her ideas include the installation of a new lighting system and
increased display space that will add $24,000 in fixed costs to the $210,000 currently spent. In
addition, Jane is proposing that a 62

Define the term “opportunity cost.” How may this cost be relevant in a make-or-buy
decision?
Alice Shoemaker is the advertising manager for Value Shoe Store. She is currently working on a
major promotional campaign. Her ideas include the installation of a new lighting system and
increased display space that will add $34,000 in fixed costs to the $270,000 currently spent. In
addition, Alice is proposing that a

Crone Enterprises uses a word processing computer to handle its sales invoices. Lately, business
has been so good that it takes an extra 3 hours per night, plus every third Saturday, to keep up
with the volume of sales invoices. Management is considering updating its computer with a
faster model that would eliminate al

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Stan Kaiser is studying for his next accounting examination. Explain to Stan what he should
know about the differences between the income statements for a manufacturing and for a
merchandising company.

Titus Equipment Company manufactures and distributes industrial air compressors. The
following costs are available for the year ended December 31, 2010.The company has no
beginning inventory. In 2010, 1,500 units were produced, but only 1,300 units were sold. The
unit selling price was $4,500. Costs and expenses were:

Keppel Manufacturing had a bad year in 2010. For the first time in its history it operated at a
loss.The company’s income statement showed the following results from selling 60,000 units
of product: Net sales $1,500,000; total costs and expenses $1,890,000; and net loss $390,000.
Costs and expenses consisted of the a

Blanco Metal Company produces the steel wire that goes into the production of paper clips. In
2010, the first year of operations, Blanco produced 50,000 miles of wire and sold 45,000 miles.
In 2011, the production and sales results were exactly reversed. In each year, selling price per
mile was $60, variable manufactur

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NIU Company has the following information available for September 2010. Unit selling price of
video game consoles ........$ 400 Unit variable costs ..................$ 270 Total fixed
costs ..................$52,000 Units sold .....................620 Instructions (a) Prepare a CVP income
statement that shows both to

What steps are frequently involved in management’s decision-making process?

Your roommate asks your help on the following questions about CVP analysis formulas. (a)
How can the mathematical equation for break-even sales show both sales units and sales dollars?
(b) How do the formulas differ for contribution margin per unit and contribution margin ratio?
(c) How can contribution margin be used
Grissom Company estimates that variable costs will be 60% of sales, and fixed costs will total
$800,000.The selling price of the product is $4. Instructions (a) Prepare a CVP graph, assuming
maximum sales of $3,200,000. (Note: Use $400,000 increments for sales and costs and 100,000
increments for units.) (b) Compute t

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In Karnes Company it costs $30 per unit ($20 variable and $10 fixed) to make a product that
normally sells for $45. A foreign wholesaler offers to buy 4,000 units at $23 each. Karnes will
incur special shipping costs of $1 per unit. Assuming that Karnes has excess operating capacity,
prepare an incremental analysis tha

Aqua Tech Testing is considering investing in a new testing device. It has two options: Option A
would have an initial lower cost but would require a significant expenditure for rebuilding after 5
years. Option B would require no rebuilding expenditure, but its maintenance costs would be
higher. Since the option B mach

Pete Hetzel claims the formula for the cash payback technique is the same as the formula for the
annual rate of return technique. Is Pete correct? What is the formula for the cash payback
technique?

Derby, Inc. manufactures golf clubs in three models. For the year, the Eagle line has a net loss of
$20,000 from sales $200,000, variable expenses $180,000, and fixed expenses $40,000. If the
Eagle line is eliminated, $34,000 of fixed costs will remain. Prepare an analysis showing whether
the Eagle line should be elimi

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Korte Company is currently producing 16,000 units per month, which is 80% of its production
capacity. Variable manufacturing costs are currently $8.00 per unit. Fixed manufacturing costs
are $56,000 per month. Korte pays a 9% sales commission to its sales people, has $30,000 in
fixed administrative expenses per month,

Frost Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the
manufacture of a new product. The machine will cost $170,000, has an estimated useful life of 7
years, a salvage value of zero, and will increase net annual cash flows by $33,740.What is its
approximate internal rate of return?

Mortonsen Corporation has collected the following information after its first year of sales. Net
sales were $2,000,000 on 100,000 units; selling expenses $400,000 (30% variable and 70%
fixed); direct materials $600,000; direct labor $340,000; administrative expenses $500,000 (30%
variable and 70% fixed); manufacturing
Managerial accounting techniques can be used in a wide variety of settings. As we have
frequently pointed out, you can use them in many personal situations. They also can be useful in
trying to find solutions for societal issues that appear to be hard to solve. Instructions Read the
Fortune article “The Toughest Cus

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Poole Corporation has collected the following information after its first year of sales. Net sales
were $1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed);
direct materials $511,000; direct labor $285,000; administrative expenses $280,000 (20%
variable and 80% fixed); manufacturing over

Donkey Bikes could sell its bicycles to retailers either assembled or unassembled. The cost of an
unassembled bike is as follows. Direct materials ............$150 Direct labor ..............70 Variable
overhead (70% of direct labor)....49 Fixed overhead (30% of direct labor) .....21 Manufacturing
cost per unit .......

(a) “Managerial accounting is a field of accounting that provides economic information for all
interested parties.” Do you agree? Explain. (b) Mary Barett believes that managerial
accounting serves only manufacturing firms. Is Mary correct? Explain.

Barney Company must decide whether to make or buy some of its components. The costs of
producing 60,000 switches for its generators are as follows. Direct materials $30,000 Variable
overhead $45,000 Direct labor $42,000 Fixed overhead $60,000 Instead of making the switches
at an average cost of $2.95 ($177,000

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TLR produces plastic that is used for injection molding applications such as gears for small
motors. In 2010, the first year of operations, TLR produced 6,000 tons of plastic and sold 5,000
tons. In 2011, the production and sales results were exactly reversed. In each year, selling price
per ton was $1,000, variable ma

What are the advantages and disadvantages of the cash payback technique?

Haslett Inc. manufactures basketballs for the National Basketball Association (NBA). For the
first 6 months of 2011, the company reported the following operating results while operating at
90% of plant capacity. Fixed costs for the period were: Cost of goods sold $900,000, and selling
and administrative expenses $13

Pender has prepared the following list of statements about decision making and incremental
analysis. 1. The first step in management’s decision-making process is, “Determine and
evaluate possible courses of action.” 2. The final step in management’s decision-making
process is to actually make the decision. 3. A
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Wyco Company manufactures toasters. For the first 8 months of 2011, the company reported the
following operating results while operating at 75% of plant capacity. Sales (400,000 units) ... .
$4,000,000 Cost of goods sold .....2,400,000 Gross profit ........1,600,000 Operating expenses ......
900,000 Net income ........

Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents
per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2010,
management estimates the following revenues and costs. Instructions (a) Prepare a CVP income
statement for 2010 based on ma

Bartley Manufacturing incurs unit costs of $8 ($5 variable and $3 fixed) in making a sub-
assembly part for its finished product. A supplier offers to make 10,000 of the part at $5.30 per
unit. If the offer is accepted, Bartley will save all variable costs but no fixed costs. Prepare an
analysis showing the total cost s

Oklahoma Clinic is considering investing in new heart-monitoring equipment. It has two options:
Option A would have an initial lower cost but would require a significant expenditure for
rebuilding after 4 years. Option B would require no rebuilding expenditure, but its maintenance
costs would be higher. Since the optio

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Jerry Karr asks your help concerning the relevance of variable and fixed costs in incremental
analysis. Help Jerry with his problem.

Beacon Company is considering purchasing new equipment for $350,000.The equipment has a
5-year useful life, and depreciation would be $70,000 (assuming straight-line depreciation and
zero salvage value).The purchase of the equipment should increase net income by $40,000 each
year for 5 years. (a) Compute the annual ra

Tryon Manufacturing Company has four operating divisions. During the first quarter of 2011, the
company reported aggregate income from operations of $135,000 and the divisional results
shown on the next page. Analysis reveals the following percentages of variable costs in each
division. Discontinuance of any divi

Judy Herzog, a recent graduate of Rolling’s accounting program, evaluated the operating
performance of Klumpe Company’s six divisions. Judy made the following presentation to
the Klumpe board of directors and suggested the Ketchum Division be eliminated. “If the
Ketchum Division is eliminated,” she said, “our

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Vasquez Corporation is considering investing in two different projects. It could invest in both,
neither, or just one of the projects. The forecasts for the projects are as follows. The minimum
rate of return acceptable to Vasquez is 10%. Instructions (a) Compute the net present value of the
two projects. (b) What

How is the contribution margin per unit of limited resources computed?

Bensen Corporation is considering three long-term capital investment proposals. Each

investment has a useful life of 5 years. Relevant data on each project are as follows.
Depreciation is computed by the straight-line method with no salvage value. The company’s
cost of capital is 15%. Instructions (a) Compute the

The management of Finnigan Manufacturing Company is trying to decide whether to continue

manufacturing a part or to buy it from an outside supplier. The part, called BIZBE, is a
component of the company’s finished product. The following information was collected
from the accounting records and production data for the

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Felton Company has a factory machine with a book value of $90,000 and a remaining useful life
of 4 years. A new machine is available at a cost of $200,000. This machine will have a 4-year
useful life with no salvage value. The new machine will lower annual variable manufacturing
costs from $600,000 to $440,000. Prepare

Omega Company is considering three capital expenditure projects. Relevant data for the projects
are as follows. Annual income is constant over the life of the project. Each project is expected to
have zero salvage value at the end of the project. Omega Company uses the straight-line method
of depreciation. Instruct

Stacy McGuire recently opened her own basketweaving studio. She sells finished baskets in
addition to the raw materials needed by customers to weave baskets of their own. Stacy has put
together a variety of raw material kits, each including materials at various stages of completion.
Unfortunately, owing to space limita

Rondello Company is considering a capital investment of $150,000 in additional productive

facilities. The new machinery is expected to have a useful life of 5 years with no salvage value.
Depreciation is by the straight-line method. During the life of the investment, annual net income
and cash inflows are expected to b

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Ganong Bros. Ltd., located in St. Stephen, New Brunswick, is Canada’s oldest independent
candy company. Its products are distributed worldwide. In 1885, Ganong invented the popular
“chicken bone,” a cinnamon flavored, pink, hard candy jacket over a chocolate center. The
home page of Ganong, listed below, includes

In the All About You feature in this chapter, you learned that cost-volumeprofit analysis can be
used in making personal financial decisions. The purchase of a new car is one of your biggest
personal expenditures. It is important that you carefully analyze your options. Suppose that you
are considering the purchase of

Refer back to E26-11 to address the following. Instructions Prepare a memo to Angie Baden,
your supervisor. Show your calculations from E26-11, parts (a) And (b). In one or two
paragraphs, discuss important nonfinancial considerations. Make any assumptions you believe to
be necessary. Make a recommendation, based on y

Gorham Manufacturing’s sales slumped badly in 2010. For the first time in its history, it
operated at a loss. The company’s income statement showed the following results from
selling 600,000 units of product: Net sales $2,400,000; total costs and expenses 2,540,000; and
net loss $140,000. Costs and expenses consist

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Stanton Inc. makes unfinished bookcases that it sells for $60. Production costs are $30 variable
and $10 fixed. Because it has unused capacity, Stanton is considering finishing the bookcases
and selling them for $72.Variable finishing costs are expected to be $8 per unit with no increase
in fixed costs. Prepare an anal

Describe the process a company may use in screening and approving the capital expenditure
budget.

Morales Company’s manufacturing overhead budget shows total variable costs of $198,000
and total fixed costs of $162,000. Total production in units is expected to be 160,000. It takes 15
minutes to make one unit, and the direct labor rate is $15 per hour. Express the manufacturing
overhead rate as (a) A percentage o

The Sarbanes Oxley Act of 2002 (SOX) has important implications for the financial community.
Explain two implications of SOX.

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On January 1, 2011 the Batista Company budget committee has reached agreement on the
following data for the 6 months ending June 30, 2011. The ending raw materials and finished
goods inventories at December 31, 2010, follow the same percentage relationships to production
and sales that occur in 2011.Three pounds of

Engles Oil Company is considering investing in a new oil well. It is expected that the oil well
will increase annual revenues by $130,000 and will increase annual expenses by $80,000
including depreciation. The oil well will cost $490,000 and will have a $10,000 salvage value at
the end of its 10-year useful life. Calc

Carleton Service Center just purchased an automobile hoist for $15,000.The hoist has a 5-year
life and an estimated salvage value of $1,080. Installation costs were $2,900, and freight charges
were $820. Carleton uses straight-line depreciation. The new hoist will be used to replace
mufflers and tires on automobiles. C

Using the data in Q16, what are (a) The total cost of work in process and (b) The cost of goods
manufactured?

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Noble Manufacturing Company uses the following budgets: Balance Sheet, Capital Expenditure,
Cash, Direct Labor, Direct Materials, Income Statement, Manufacturing Overhead, Production,
Sales, and Selling and Administrative. Prepare a diagram of the interrelationships of the budgets
in the master budget. Indicate whether

Caroline Company reports the following costs and expenses in May. Instructions From the
information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c)
Periodcosts.

Black Rose Company has always done some planning for the future, but the company has never
prepared a formal budget. Now that the company is growing larger, it is considering preparing a
budget. Instructions Write a memo to Jack Bruno, the president of Black Rose Company, in
which you define budgeting, identify the bu

Refer to Problem 19–5A and add the following requirement. Prepare a letter to the president of
the company, Sue Tombert, describing the changes you made. Explain clearly why net income is
different after the changes. Keep the following points in mind as you compose your letter. 1.
This is a letter to the president of

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Identify whether each of the following costs should be classified as product costs or period costs.
(a) ____Manufacturing overhead. . (b) ____Selling expenses. (c) ____Administrative expenses.
(d) ____Advertising expenses. (e) ____Direct labor. (f) ____Direct material.

Listed below are the three functions of the management of an organization. 1. Planning 2.
Directing 3. Controlling Identify which of the following statements best describes each of the
above functions. (a) ____ require(s) management to look ahead and to establish objectives. A
key objective of management is to add v

Perine Company has completed all of its operating budgets. The sales budget for the year shows
50,000 units and total sales of $2,000,000.The total unit cost of making one unit of sales is $22.
Selling and administrative expenses are expected to be $300,000. Income taxes are estimated to
be $150,000. Prepare a budgeted

Tina Haworth asks your help in understanding the essentials of effective budgeting. Identify the
essentials for Tina.

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Incomplete manufacturing costs, expenses, and selling data for two different cases are as follows.
Instructions (a) Indicate the missing amount for each letter. (b) Prepare a condensed cost of
goods manufactured schedule for Case A. (c) Prepare an income statement and the current assets
section of the balance sheet

An analysis of the accounts of Chamberlin Manufacturing reveals the following manufacturing

cost data for the month ended June 30, 2010. Costs incurred: Raw materials purchases $54,000,
direct labor $57,000, manufacturing overhead $19,900. The specific overhead costs were:
indirect labor $5,500, factory insurance $4

Roche and Young, CPAs, are preparing their service revenue (sales) budget for the coming year
(2010).The practice is divided into three departments: auditing, tax, and consulting. Billable
hours for each department, by quarter, are provided below. Average hourly billing rates are:
auditing $80, tax $90, and consulti

Sara Collier, the bookkeeper for Danner, Cheney, and Howe, a political consulting firm, has
recently completed an accounting course at her local college. One of the topics covered in the
course was the cost of goods manufactured schedule. Sara wondered if such a schedule could be
prepared for her firm. She realized tha

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Ortiz Company has 1,600 pounds of raw materials in its December 31, 2010, ending inventory.
Required production for January and February of 2011 are 4,000 and 5,500 units, respectively.
Two pounds of raw materials are needed for each unit, and the estimated cost per pound is $6.
Management desires an ending inventory e

The determination of the cost of goods manufactured involves the following factors: (A)
Beginning work in process inventory, (B) Total manufacturing costs, and (C) Ending work in
process inventory. Identify the meaning of x in the following formulas: (a) A + B = x (b) A + B
– C = x

The following data were taken from the records of Dosey Manufacturing Company for the year
ended December 31, 2010. Instructions (a) Prepare a cost of goods manufactured schedule.
(Assume all raw materials used were direct materials.) (b) Prepare an income statement through
gross profit. (c) Prepare the current ass
Neff Manufacturing Inc. has beginning work in process $26,000, direct materials used $240,000,
direct labor $200,000, total manufacturing overhead $180,000, and ending work in process
$32,000.What are total manufacturing costs?

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What budget is the starting point in preparing the master budget? What may result if this budget
is inaccurate?

The following information is available for Sassafras Company. Instructions (a) Compute cost of
goods manufactured. (b) Prepare an income statement through gross profit. (c) Show the
presentation of the ending inventories on the December 31, 2010, balance sheet. (d) How would
the income statement and balance sheet o

(a) “Accounting plays a relatively unimportant role in budgeting.” Do you agree? Explain.
(b) What responsibilities does management have in budgeting?

Coldplay Corporation incurred the following costs while manufacturing its product. Instructions
(a) Identify each of the costs as direct materials, direct labor, manufacturing overhead, or period
costs. (b) Explain the basic difference in accounting for product costs and periodcosts.

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Tombert Company is a manufacturer of computers. Its controller resigned in October 2010. An

inexperienced assistant accountant has prepared the following income statement for the month of
October 2010. Prior to October 2010 the company had been profitable every month. The
company’s president is concerned about the

How may expected revenues in a service enterprise be computed?

The primary purpose of managerial accounting is to provide information useful for management
decisions. Many of the managerial accounting techniques that you learn in this course will be
useful for decisions you make in your everyday life. Instructions For each of the following
managerial accounting techniques, read t

Aikman Corporation has the following cost records for June 2010. Instructions (a) Prepare a cost
of goods manufactured schedule for June 2010. (b) Prepare an income statement through gross
profit for June 2010 assuming net sales are$87,100.

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Megan Pedigo maintains that the only difference between budgeting and long-range planning is
time. Do you agree? Why or why not?
Oak Creek Company is preparing its budgeted income statement for 2010. Relevant data
pertaining to its sales, production, and direct materials budgets can be found in Do It! exercise
23-2 on page 1044. In addition, Oak Creek budgets 0.3 hours of direct labor per unit, labor costs
at $14 per hour, and manufacturing over

Rapid Delivery Service reports the following costs and expenses in June 2010. Instructions
Determine the total amount of (a) delivery service (product) costs and (b) periodcosts.

Corbin Manufacturing Company produces blankets. From its accounting records it prepares the
following schedule and financial statements on a yearly basis. (a) Cost