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Managerial Accounting

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1) After its facilities were automated, Flame Metal Works was able to reduce labor hours for Product A by 3,000 hours. Before automation, Product A consumed 8,000 labor hours. Product B was not affected by the automation and continued to consume 7,000 labor hours. Automation increased total overhead from $30,000 $36,000.

Which of the following choices would be true about the amount of overhead allocation if labor hours were used as the company-wide allocation base?

Product Before Automation After Automation
________________________________________
a. A $24,000 $15,000
b. B $14,000 $14,000
c. B $21,000 $14,000
d. A $16,000 $15,000

a. Insert Table

b. insert table

c. insert table

d. Insert table

2) Which are the following statements is true concerning the amount of overhead allocation if the company continues to use direct labor hours as cost driver?

a. After automation, Product A is under costed.

b. After automation, Product A is over costed.

c. After automation, Product B is over costed.

d. Both a and c.

3) ABC Company budgeted the following transactions from May 2003:
Sales (60% collected in month of sale) $180,000
Cash Operating Expenses $105,000
Cash Purchases of Capital Investments $50,000
Cash Repayment on Note Payable $40,000
Depreciation on Equipment $25,000

There was a $35,000 beginning cash balance. Sales for April were $75,000 and 40% expected to be collected in the month following the sales. The company desires to have a $20,000 and the cash balance. Determine the amount of cash overage or shortage.

a. $42,000 shortage.

b. $23,000 overage.

c. $22,000 shortage.

d. $43,000 overage.

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1) After its facilities were automated, Flame Metal Works was able to reduce labor hours for Product A by 3,000 hours. Before automation, Product A consumed 8,000 labor hours. Product B was not affected by the automation and continued to consume 7,000 labor hours. Automation increased total overhead from $30,000 $36,000.

Which of the following choices would be true about the amount of overhead allocation if labor hours were used as the company-wide allocation base?

Product Before Automation After Automation
________________________________________
a. A $24,000 $15,000
b. B $14,000 $14,000
c. B $21,000 $14,000
d. A $16,000 $15,000 ...

Solution Summary

The solution has questions in managerial accounting relating to overhead allocation and budgeting.

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See Also This Related BrainMass Solution

Managerial Accounting - JIT, TQM, CI, CO

Following are three separate events affecting the managerial accounting systems for different companies.
Match the management concept(s) that the company is likely to adopt for the event identified.
There is some overlap in the meaning of customer orientation and total quality management and, therefore, some responses can include more than one concept.

Event
_______ 1. The company starts measuring inventory a. Total quality management (TQM)
turnover and discontinues elaborate
inventory records. Its new focus is b. Just-in-time (JIT) system
to pull inventory through the system.
_______ 2. The company starts reporting measures c. Continuous improvement (CI)
on customer complaints and product
returns from customers. d. Customer orientation (CO)
_______ 3. The company starts reporting measures
such as the percent of defective products
and the number of units scrapped.

a. Total quality management (TQM)
b. Just-in-time (JIT) system
c. Continuous improvement (CI)
d. Customer orientation (CO)
------------------------------------------------------------------------

The following calendar year-end information is taken from the December 31, 2005, adjusted trial balance
and other records of Plaza Company.

Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . $ 30,750
Depreciation expense?Office equipment . . . . . . . . . 9,250
Depreciation expense?Selling equipment . . . . . . . . . 10,600
Depreciation expense?Factory equipment . . . . . . . . 35,550
Factory supervision . . . . . . . . . . . . . . . . . . . . . . . . . 104,600
Factory supplies used . . . . . . . . . . . . . . . . . . . . . . . 9,350
Factory utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,000
Inventories
Raw materials, December 31, 2004 . . . . . . . . . . . . 168,850
Raw materials, December 31, 2005 . . . . . . . . . . . . 184,000
Goods in process, December 31, 2004 . . . . . . . . . 17,700
Goods in process, December 31, 2005 . . . . . . . . . 21,380
Finished goods, December 31, 2004 . . . . . . . . . . . 169,350
Finished goods, December 31, 2005 . . . . . . . . . . . 138,490
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677,480
Income taxes expense . . . . . . . . . . . . . . . . . . . . . . . 235,725
Indirect labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,875
Miscellaneous production costs . . . . . . . . . . . . . . . . 10,425
Office salaries expense . . . . . . . . . . . . . . . . . . . . . . 65,000
Raw materials purchases . . . . . . . . . . . . . . . . . . . . . 927,000
Rent expense?Office space . . . . . . . . . . . . . . . . . . 24,000
Rent expense?Selling space . . . . . . . . . . . . . . . . . . 28,100
Rent expense?Factory building . . . . . . . . . . . . . . . 78,800
Maintenance expense?Factory equipment . . . . . . . . 37,400
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,527,000
Sales discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,500
Sales salaries expense . . . . . . . . . . . . . . . . . . . . . . . 394,560
Check (1) Cost of goods
manufactured, $1,955,650
Problem 18-9A
Sales and costs estimation;
contribution margin analysis
C3 A1
King grocery chain, a market leader, wants to increase sales to its existing customers by creating a
customer orientation to better meet buyer needs and wants. Assume that King hires you as a consultant
to analyze its operations and suggest improvements. King's goal is to increase its contribution
margin by $40,000.
Required
1. To increase King's sales and contribution margin from existing customers, offer three improvements
that you have observed in other stores and believe would be successful here.
2. What level of increase in sales is necessary for King to increase contribution margin by $40,000?
(Hint: With each suggestion in part [1], identify the expected sales dollars and the contribution
margin ratio to meet the $40,000 increase in contribution margin.)
PROBLEM SET B
Problem 18-1B
Managerial accountant's role
C1 C3
This chapter discusses the purposes of managerial accounting and the current business environment.
You are to look through the home electronics section of your local newspaper; the Sunday paper is
often best. Review advertisements of home electronics and note how many manufacturers offer these
products and the factors on which they compete.
Required
Discuss the potential contributions and responsibilities of the managerial accounting professional in
helping a home electronics manufacturer succeed. (Hint: Think about information and estimates that
a managerial accountant might provide new entrants into the home electronics market.)

1. Prepare the company's 2005 manufacturing statement.
2. Prepare the company's 2005 income statement that reports separate categories for (a) selling
expenses and (b) general and administrative expenses.
--------------------------------------------------------------
Resources: Fundamental Accounting Principles, pp. 739 and 745

? Complete Exercise 18-5 on p. 739 and questions 1 and 2 of Problem 18-8A on p. 745.
? Post your answers as an attachment.

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