ProblemSetC

PROBLEM181C
This chapter discusses the purposes of managerial accounting in the context of the current
businessenvironment.Considervariouscatalogsyoumayhaveatyourhouseorapartment.Pay
specialattentiontohowmanyhavewebaddressesallowingcustomerstopurchasemerchandise
overtheinternetcomparedwithafewyearsago.
Required
Discussthepotentialcontributionsandresponsibilitiesofthemanagerialaccountingprofessional
inhelping retailers succeed inthe virtual marketplace. (Hint: Think aboutwhat studies and
estimatesamanagerialaccountantmightprovidenewentrantsintothismarket.)
PROBLEM182C
Sonymanufacturesplasmahighdefinitiontelevisionsetsandmustcompeteonlean
manufacturingconcepts.Matcheachofthefollowingactivitiesthatitengagesinwiththelean
manufacturingconceptsitstrivestoachieve.
a. Totalqualitymanagement(TQM)
b. Justintime(JIT)
c. ContinuousImprovement(CI)
_____1.Electroniccomponentsarereceiveddailybasedoncustomerorders.
_____2.Customersreceiveasatisfactionsurveywitheachtelevisionpurchased.
_____3.Themanufacturingprocessisstandardizedanddocumented.
_____4.Televisionsareproducedinsmalllots,andonlytocustomerorder.
_____5.Manufacturingfacilitiesarearrangedtoreducemovetimeandwaittime.
_____6.Sonyconductsfocusgroupstodeterminenewfeaturesthatcustomerswantinhigh
highdefinitiontelevisions.
_____7.Ordersreceivedarefilledwithintwobusinessdays.
_____8.Sonyworkswithsupplierstoreduceinspectiontimeofincomingmaterials.
_____9.Sonymonitorsthemarkettodeterminewhatfeaturesitscompetitorsareofferingon
highdefinitionplasmatelevisions.

_____10.Sonyasksproductionworkersforideastoimproveproduction.

PROBLEM183C
Listed herearethetotal costsassociated withtheproductionof10,000sportswaterbottles
manufacturedbyThirstQuenchersInc.Thewaterbottlessellfor$12each.
Costs

CostbyBehaviorCostbyFunction
Variable
Fixed Product
Period

Plasticforbottles$20,000
$20,000$20,000
Wagesofassemblyworkers$5,000
Rentonfactory$6,000
Officeworkerssalaries$36,000
Insurance$2,000peryear
Uppermanagementsalaries$100,000
Annualflatfeeformaintenance$15,000
Testing$1perbottle
Salescommissions$0.40perunit
Equipmentdepreciation$7,200
Required
1.Classifyeachcostanditsamountas(a)eitherfixedorvariableand(b)eitherproductor
period(thefirstcostiscompletedasanexample).
2.Computethemanufacturingcostpersportswaterbottle
AnalysisComponent
3.Assumethat12,000sportswaterbottlesareproducedinthenextmonth.Whatdoyoupredict
willbethetotalcostofplasticforthebottlesandtheperunitcostoftheplasticforthebottles.
Explain.
4.Assumethat12,000sportswaterbottlesareproducedinthenextmonth.Whatdoyoupredict
willbethetotalcostofinsuranceandthecostperunitofinsurance?Explain.

PROBLEM184C
Youmustmakeapresentationtothepurchasingstaffexplainingthedifferencebetweenproduct
andperiodcosts.Yoursupervisortells youthepurchasingstaffwouldalsolikeclarification
regardingprimeandconversioncostsandanexplanationofhowthesetermsfitwithproductand

period cost.Youaretold that manyonthe staffare unable toidentify these terms intheir
purchasingactivities.
Required
Prepare a onepage memorandum to your supervisor outlining your presentation to the
purchasingstaff.

PROBLEM185C
Refer to Decision Maker, Purchase Manager, in this chapter. Assume that you are the
motorcycle manufacturers managerial accountant. The purchasing manager asks you about
preparinganestimateoftherelatedcostsforbuyingmotorcycleseatsfromsupplier(B).Shetells
youthisestimateisneededbecauseunlessdollarestimatesareattachedtononfinancialfactors,
such as lost production time, her supervisor will not give it full attention. The purchasing
manageralsoshowsyouthisinformation:
Productionoutputis1,200motorcyclesperyearbasedon275productiondaysayear.
Productiontimeperdayis8hoursatacostof$3,000perhourtoruntheproductionline.
Lostproductiontimeduetopoorqualityis2.5%.
Satisfiedcustomerspurchase,onaverage,fourmotorcyclesduringalifetime.
Satisfiedcustomersrecommendtheproduct,onaverage,tofourotherpeople.
Marketingestimatesthatusingseat(B)willresultinsixlostcustomersperyearfromrepeat
businessandreferrals.
Averagecontributionmarginpermotorcycleis$2,500.
Required
Estimatethecosts(includingopportunitycosts)ofbuyingmotorcycleseatsfromsupplier(B).
Thisproblemrequires youtothinkcreativelyandmakereasonableestimates and,therefore,
therecouldbemorethanonecorrectanswer.[Hint:RereadtheanswertoDecisionMakerand
comparethecostsavingsforbuyingfromsupplier(B)tothesumoflostcustomerrevenuefrom
repeatbusinessandreferralsandthecostoflostproductiontime.]
PROBLEM186C
BlueNoteRecordsmanufacturescompactdiscsforrecordingartists.OnDecember31,2007,
thecompanyhas10,000compactdiscs(alreadyputintotheplasticcases)inendinginventory
and5,000plasticcasesvaluedat$1.50each.During2007,thecompanypurchased300,0000
plasticcasesat$1.50eachandmanufacturedandpackaged250,000compactdisks.
Required
PreparationComponent
1.DeterminetheunitanddollaramountsoftheplasticcasesinventoryatDecember31,2008.
AnalysisComponent

2.Writeaonehalfpagememorandumtotheproductionmanagerexplainingwhyajustintime
inventorysystemforplasticcasesshouldbeconsidered.Includetheamountofworkingcapital
thatcanbereducedatDecember31,2008,iftheendingplasticcasesinventoryiscutinhalf.

PROBLEM187C
Shown here are the annual financial data at December 31, 2008, taken from two different
companies.
MountainTopShopPowderSnowBoards
RetailManufacturing
Beginninginventory
Merchandise
$120,000
Finishedgoods
$107,500
Costofpurchases
187,500
Costofgoodsmanufactured139,000
Endinginventory
Merchandise
42,500
Finishedgoods
73,500
Required
1.ComputethecostofgoodssoldsectionoftheincomestatementatDecember31,2008,for
eachcompany.Includepropertitleandformatinthesolution.
2.Writeahalfpagememorandumtoyourinstructor(a)identifyingtheinventoryaccountsand
(b) describing where each is reported on the income statement and balance sheet for both
companies.

PROBLEM188C
ThefollowinginformationistakenfromtheDecember31,2008,adjustedtrialbalanceandother
recordsofOTWCompanybeforethecalendaryearendclosingentriesarerecorded:
Advertisingexpense
$24,000 Directlabor
703,250

DepreciationexpenseOfficeequipment
222,000
DepreciationexpenseSellingequipment
65,070
DepreciationexpenseFactoryequipmen
6,125
Factorysupervision
53,000
Factorysuppliesused
875,000
Factoryutilities
18,000
Inventories
33,800
Rawmaterials,December31,2007
56,790
Rawmaterials,December31,2008
34,500
Goodsinprocess,December31,2007
3,879,000
Goodsinprocess,December31,2008
32,500
Finishedgoods,December31,2007
282,160
Finishedgoods,December31,2008

6,100

Incometaxesexpense

7,560

Indirectlabor

42,420

Miscellaneousproductioncosts

99,100

Officesalariesexpense

8,400
29,000

Rawmaterialspurchases
RentexpenseOfficespace
RentexpenseSellingspace

122,350

RentexpenseFactorybuilding

242,000

MaintenanceFactoryequipment

18,300

Sales

17,080

Salesdiscounts

142,500

Salessalariesexpense

166,000

Required
1.Preparethe2008manufacturingstatementforthecompany.
2.Preparethe2008incomestatementforthecompanythatreportsseparatecategoriesfor(a)
sellingexpensesand(b)generalandadministrativeexpenses.
AnalysisComponent
3.Computethe(a)inventoryturnoverand(b)dayssalesininventoryforbothitsrawmaterials
inventoryanditsfinishedgoodsinventory(seeChapter6).Discusssomepossiblereasonsfor
differencesbetweentheseratiosforthetwotypesofinventories.
PROBLEM189C
CompactElectronicGamesproduceshandheldvideogames.Theyreceivedanorderfor2,000
gameunitsfromacustomer.Thefollowinginformationisavailableforthisorder.
Processtime..32.0hours
Inspectiontime..7.0hours
Movetime18hours

Waittime42.5hours

Required
1. Computethecompanysmanufacturingcycletime.
2. Computethecompanysmanufacturingcycleefficiency.Interpretyouranswer.
AnalysisComponent
3. Assume that Compact Electronic Games wishes to increase its manufacturing cycle
efficiencyto0.80.Whataresomewaysthatmanagemantcanaccomplishthis?