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12.As the staff accountant for Investment Center 713, calculate the October 20xx ROI, using the following information: October 20xx profit margin38% October 20xx sales$2,000,000 Assets at September 30, 20xx1,850,000 Assets at October 31, 20xx1,855,000 13.As the staff accountant for Investment Centers Beta and Gamma, compute the residual income for each investment center, using the following.
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31.Avoidable costs are the direct variable costs and direct fixed costs traceable to the segments. 32.It is not possible for a company to provide the full variety of products or services which the customer demands within a given time. 33.There is no limit on the availability of resources such as machine time,.
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11.The idea behind incremental analysis is to review decision data that differ between alternatives; information that is the same for all alternatives is considered irrelevant to the decision process. 12.A cost that does not change between the alternatives is known as a differential cost. 13.The first step in the incremental analysis is.
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21.Products Uno, Dos, Tres, and Quatro have contribution margins of $2, $3, $4, and $5, respectively, and require 1.5, 2, 2.5, and 3 machine hours per unit, respectively. Assuming that all units produced could be sold and that total machine hours per month are limited, on which product should the.
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21.Depreciation is a unique expense because it a.does not require a cash outlay. b.does not affect income taxes. c.is the same amount every accounting period. d.has to be calculated. 22.Cost analysis for capital investment decisions is best accomplished by techniques that a.discount cash flows over a project's life. b.emphasize the liquidity of invested costs. c.clearly distinguish different cost.
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  1.Discuss the qualitative factors that should be considered in short-run decision making. 2.“Variable costs are relevant and fixed costs are irrelevant.” Explain why you agree or disagree with this statement. 3.What two criteria must be met for information to be considered relevant to decision making? 4.Why is the book value of equipment irrelevant.
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  MULTIPLE CHOICE 1.Various parts of the organization that are involved in capital investment analysis include all of the following except a.financial analysts b.marketing specialists c.creditors d.managers 2.Qualitative factors that are considered by decision makers include all of the following except a.impact on other company operations b.revenue from fees c.anticipated future technological improvements d.competition. 3.The key steps followed by the managers in.
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  1.What is the business purpose of the balanced scorecard, and how does it benefit an organization? 2.Why are managers more likely to achieve their objectives in both the short term and the long term when they utilize a tool such as the balanced scorecard? 3.Provide three examples of something that an organization.
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8.During April 20xx, production is expected to be 30,000 units with the following costs: direct materials, $195,000; direct labor, $300,000; variable overhead, $120,000; and fixed overhead, $150,000. Prepare a flexible budget for 25,000 and 35,000 units. 9.The C.M. Landscaping Co. uses chicken manure to fortify the soil around trees bearing rare.
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11.Which of the following typically would be considered an incremental cost? a.Conversion cost b.Direct product cost c.Period cost d.Factory overhead cost 12.In a proposal to increase the production of clock radios, the sales managers of Rinaldo Electronics reported the total additional cost required to meet the increased production level. The increase in total cost is.
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4.Identify and describe the five different responsibility centers, and provide one example of each. 5.Why is it important that a manager's evaluation be based only on those revenues and costs that he or she can control? 6.Identify the following and show the formula for calculating each: a. ROI b. RI c. EVA .
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21.Ewing Corporation's controller has developed the cost and usage data listed below in preparation of standard unit cost information for the coming year. Direct materials quantity standard3 pounds per product Direct labor time standard5 hours per product Direct materials price standard$10 per pound Direct labor rate standard$ 9 per hour Standard variable overhead rate$ 5.
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11.A(n) ________ cost is synonymous with the product cost calculated in a conventional standard cost accounting system. a.fixed b.direct c.joint d.expected 12.An expression of the hourly labor pay cost per function or job classification that is expected to exist during the next accounting period is the definition of a a.direct labor time standard. b.direct materials quantity standard. c.direct.
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21.The final step in variance analysis is determining the cause of the variance. 22.The flexible budget formula is an equation that determines unexpected costs at any level of output. 23.The “flex” in the flexible budget formula occurs in the variable cost segment. 24.Another name for a flexible budget is a variable budget. 25.The direct.
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31.The static budget can be adjusted automatically for changes in the level of output. 32.The total overhead variance is the difference between standard variable overhead costs and standard fixed overhead costs. 33.The variable overhead spending variance is also called the variable overhead efficiency variance. 34.The variable overhead efficiency variance is the difference between.
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51.Sweet Dreams manufactures candy. Its records revealed the following data: Number of units produced4,000 Standard direct labor hours per unit2 Standard variable overhead rate$2.50 per hour Standard fixed overhead rate$5.00 per hour Budgeted fixed overhead costs$40,800 Actual variable overhead costs$16,800 Actual fixed overhead costs$40,400 Actual labor hours8,000 direct labor hours Total actual overhead$57,200 The total fixed overhead variance is a.$800 (F). b.$800.
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  1.Discuss standard costing. As part of your discussion, define a standard cost. In addition, compare and contrast standard costs and predetermined overhead costs. Include in your discussion at least three reasons why standard costs are introduced into a standard cost accounting system. How is a standard cost accounting system useful.
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TRUE/FALSE 1.Standard costs are based solely on expected future costs and conditions. 2.A variance is the difference between a standard cost and a budgeted cost. 3.Service organizations use direct materials, direct labor, and overhead standard costs. 4.The importance of direct labor standards and variances has been reduced. 5.When a manufacturing company employs standard costs, all.
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11.Automating the existing production process does not come under the purview of capital investment analysis. 12.An organization with several branches and a highly developed system for capital investment analysis requires that all proposals should go through preliminary screening. 13.The proposals that will either meet company strategic goals or produce the minimum rate.
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13.The Dropinsky Company's management wants to determine if Division Y should be eliminated. The following data are available (in thousands). Segmented Income Statement Division XDivision YDivision ZTotal Sales$200$300$400$900 Less variable costs80    150   160   390 Contribution margin$120$150$240$510 Less direct fixed costs70    170   120   360 Segment margin$ 50  ($ 20)$120  $150 Less common fixed costs90 Operating income$ 60 a. Assuming all direct fixed costs of Division Y are avoidable, what.
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TRUE/FALSE 1.Capital investment analysis can be applied in case of expensive and long-term projects. 2.Capital investment analysis ensures that the resources are used wisely. 3.The net present value method and other methods of capital investment analysis can be used for taking short-term decisions. 4.Capital facilities and projects are not expensive. 5.Capital investment analysis is also.
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7.What are some of the limitations of utilizing ROI, residual income, and EVA to measure the performance of investment centers? 8.What are some items that can affect an investment center's EVA calculation, and how can EVA be improved? 9.The CEO of Buckstars is interested in reviewing the May 20xx performance report for.
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11.The direct materials price standard is a carefully derived estimate or projected amount of what a particular type of direct material will cost when purchased during the next accounting period. 12.Direct labor time standards express the hourly labor cost per function or job classification that exists during the current accounting period. 13.The.
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11.Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent. The overall cost of capital is a.2.4% b.4.8% c..8% d.9.8% 12.Smile Industries capital structure consists of $1,000,000 of debt at 6 percent interest and 1,500,000 of stockholders equity at 2 percent. The proportion of Debt in.
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15.Earth, Inc., is developing flexible budgets for each department as part of its plan to use standard costs. Normal monthly volume in the Sifting Department is 50,000 direct labor hours. At normal volume, department fixed costs include $70,000 for power and $40,000 for maintenance, and salaries of $70,000 per month..
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  SHORT ANSWER 1.Discuss the qualitative factors that should be considered in the evaluation of proposals in addition to the quantitative factors. 2.What criteria must be met for accepting any capital expenditure proposal with respect to minimum rate of return on investment? 3.Why is the book value of equipment irrelevant when considering the replacement.
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41.Determine the April 20xx residual income for an investment center with the following information: Operating income for the month ended April 30, 20xx$14,900,000 Assets at March 31, 20xx10,200,000 Assets at April 30, 20xx13,150,000 Desired ROI49% Actual ROI60% a.$8,456,500 b.$8,780,000 c.$9,179,250 d.$8,945,750 42.For purposes of computing EVA, the minimum desired rate or return on an investment is known as a.ROI. b.cost of capital. c.residual.
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15.Complete the following calculations for the three investment centers shown (round to two decimal places): Investment Center 1 Operating income$3,000,000 Assets investeda Performance indicator25% Investment Center 2 Operating income$3,500,000 Desired ROIb Assets invested4,000,000 Performance indicator20,000 Investment Center 3 After-tax operating incomec Cost of capital38% Total assets$500,000 Current liabilities150,000 Performance indicator15,000 2) For each Investment Center, identify which performance indicator is used. 16.Calculate ROI, residual income, and EVA.
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21.Outsourcing production or operating activities will help in improving the cash flow by reducing investment in physical assets. 22.In manufacturing companies, a common decision facing managers is whether to make or buy some or all of the parts used in product assembly. 23.Fixed costs are irrelevant in make-or-buy decisions. 24.Special orders should only.
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51.Compute the residual income for the Hi Ho investment center as shown below. Hi Ho Subsidiary Total sales$20,000 Operating income$4,300 Beginning assets invested$14,000 Ending assets invested$16,000 Average assets invested$? Desired ROI25% Residual income$? a.$550 b.$3,050 c.$4,300 d.$1,800 52.Compute the average assets invested for the Hi Ho investment center as shown below. Hi Ho Subsidiary Total sales$20,000 Operating income$5,000 Beginning assets invested$14,000 Ending assets invested$14,600 Average assets invested$? Desired ROI25% Residual income$? a.$14,400 b.$14,450 c.$14,350 d.$14,300 53.Compute.
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10.Using the following information, prepare a traditional income statement and a variable costing income statement: Sales$4,000,000 Variable cost of goods sold1,800,000 Variable selling expenses900,000 Fixed selling expenses100,000 Fixed manufacturing costs600,000 11.Using the following information, prepare a single report setting forth the variable costing income statement as well as a performance report for Profit Center West. Budgeted sales$20,000 Budgeted.
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3.Fantastic Lips, Inc., specializes in manufacturing lipstick. Racy Red, one of more than 75 shades produced by the company, is made from castor oil, beeswax, aloe vera, and a base compound. For the next 12 months, the company's purchasing agent believes that the cost of ingredients will be as follows: Castor.
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5.Sport Runner, Inc., produces a complete line of men's running apparel. The nylon short set is a very popular item in the southern states. During June, the company's records revealed the following information about the production of the nylon shorts set: Standards:Direct materials4 yards @ $2.50 per yard Direct labor1.5 hour @.
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21.Availability of funds is not the criteria for deciding on the capital investment proposals. 22.The proposals with the highest rank are funded first in the capital investment decisions. 23.The acceptable proposals are ranked in order of net present value, payback period or rate of return in capital investment decisions. 24.Any proposal that fails.
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TRUE/FALSE 1.Managers rely strictly on financial information when faced with decisions. 2.Competition, social issues, and timeliness are examples of qualitative factors. 3.Many management decisions are unique and hence incompatible with strict rules, steps, or timetables. 4.Qualitative data as well as quantitative data are useful in the decision process. 5.Facts that are the same for each.
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31.Use the following performance report for a cost center of the Dry Cat Food Division for the month ended December 31 to answer the question below. Actual Results VarianceFlexible Budget VarianceMaster Budget Units produced700?30 (U)100 Center costs Direct materials$   84$        ?$  70$          ?$100 Direct labor150??60 (F)200 Variable overhead?20 (U)210?300 Fixed overhead280   ?     250   ?     250 Total cost$     ? $74 (U)$    ?  $255 (F)     $850 Performance measures Defect-free units to total produced80%?N/AN/A90% Average throughput time.
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31.The direct materials price variance is best measured and reported to appropriate management personnel at the time a.purchased quantities exceed standard order size. b.quarterly financial statements are prepared. c.shipments are received and recorded as purchases. d.direct materials are issued to production areas. 32.Using the standard costs of $5 per pound for a 10 pound bag.
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  MULTIPLE CHOICE 1.In a standard costing system, standard costs eventually flow into the a.Cost of Goods Sold account. b.Standard Cost account. c.Selling and Administrative Expenses account. d.Sales account. 2.Service organizations do not develop standards for a.any service costs. b.overhead. c.direct materials. d.labor. 3.A standard costing system a.is not typically used by management for cost planning and cost control purposes. b.is a system in.
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51.The accounting rate-of-return method implements the effects of the time value of money. 52.The purpose of establishing a desired rate of return on investment is to set a point below which the best alternative will be considered acceptable. 53.Supporting poor-return proposals that fall below the minimum rate of return eventually lowers the.
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  MULTIPLE CHOICE 1.Cost information for short-run decision making focuses on a.what happened. b.what is happening. c.what will happen. d.why it happened. 2.Qualitative factors used by decision makers include all of the following except a.social issues. b.revenue from fees. c.timeliness. d.competition. 3.Irrelevant costs are costs that are a.different among alternatives. b.avoidable costs. c.opportunity costs. d.sunk costs. 4.Estimated future costs that differ between alternative courses of action are.
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17.Powerhorse, Inc., manufactures steel hitches for horse trailers. The company's direct labor rates have been set by the terms of the current labor contract. Direct labor rate standards have been assigned for each job classification. In July 20xx, a young apprentice was being trained during regular working hours to become.
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12.Discuss the keys to preparing a performance report based on standard costs and related variances. 13.Golf Pro, Inc., makes wood drivers for the professional golfer. Because of the clientele of users, only the finest materials can be used, and the quality of craftsmanship must be high. The following cost, quantity, and.
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