EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
expand_more
expand_more
format_list_bulleted
Question
Chapter 23, Problem 23.41P
1.
To determine
Residual Income:
Residual income is the leftover amount of total income of an individual after the payment for periodical expenses are made. It reflects the ability of an individual to earn over and above the required expenses.
To explain: The action of the controller.
2.
To determine
To explain: The lever of control emphasized by the Company Z and the changes made.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Zuzu is a large manufacturer of snack cakes. The company operates distribution centers in Chicago. The distribution center bakes and packages the snack cakes and ships them to grocery warehouses throughout the country. Because of the high standards set for both quality and appearance, there is a reasonable number of “seconds” that do not meet standards and are sold to company outlets for sale at reduced prices. In recent years, the company’s average yield has been 90% of first-quality products for sale to grocery warehouses. The remaining 10% is sent to the outlet store. Zuzu’s performance-evaluation system pays its distribution center managers substantial bonuses if the company achieves annual budgeted profit numbers. In the last quarter of 2017, Noah Spalding, Zuzu’s controller, noted a significant increase in yield percentage of the Chicago distribution center, from 90% to 98%. This increase resulted in a 10% increase in the center’s profits. During a recent trip to the Chicago…
Supermart Food Stores (SFS) has experienced net operating losses in its frozen food products line in the last few periods.
Management believes that the store can improve its profitability if SFS discontinues frozen foods. The operating results from the most
recent period are:
Order processing
Receiving
Shelf-stocking
Customer support
Sales
Cost of goods sold
SFS estimates that store support expenses, in total, are approximately 20% of revenues.
The controller says that not every sales dollar requires or uses the same amount of store support activities. A preliminary analysis
reveals store support activities for these three product lines are:
Frozen Foods
$ 120,000
185,000
Activity (cost driver)
Order processing (number of purchase orders)
Receiving (number of deliveries)
Shelf-stocking (number of hours per delivery)
Customer support (total units sold)
The controller estimates activity-cost rates for each activity as follows:
$ 88 per purchase order
110
per delivery
per hour
per item…
Fruity Co is a distributors of fresh good and vegetables. It currently has 15 warehouses in the US from which it supplies produce to grocery stores. Each warehouse has an average inventory level of 3.88 million $. Due to advances in transportation services and infrastructure, management believes that if they reduce the number of warehouses to 10, they would still be able to provide timely replenishment to the grocery stores.
What would be the total inventory in the system in millions of dollars, if inventory was consolidated from the 15 warehouses to only 10 warehouses? (Enter your answer in millions of dollars. E.g. if you get 30.24 million $ simply enter 30.24 without the million$ sign. Round your answer to 2 decimal places.)
Chapter 23 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 23 - Prob. 23.1QCh. 23 - Prob. 23.2QCh. 23 - What factors affecting ROI does the DuPont method...Ch. 23 - RI is not identical to ROI, although both measures...Ch. 23 - Describe EVA.Ch. 23 - Give three definitions of investment used in...Ch. 23 - Distinguish between measuring assets based on...Ch. 23 - Prob. 23.8QCh. 23 - Why is it important to distinguish between the...Ch. 23 - Prob. 23.10Q
Ch. 23 - Managers should be rewarded only on the basis of...Ch. 23 - Explain the role of benchmarking in evaluating...Ch. 23 - Explain the incentive problems that can arise when...Ch. 23 - Prob. 23.14QCh. 23 - Prob. 23.15QCh. 23 - During the current year, a strategic business unit...Ch. 23 - Assuming an increase in price levels over time,...Ch. 23 - If ROI Is used to evaluate a managers performance...Ch. 23 - The Long Haul Trucking Company is developing...Ch. 23 - ABC Inc. desires to maintain a capital structure...Ch. 23 - ROI, comparisons of three companies. (CMA,...Ch. 23 - Prob. 23.22ECh. 23 - ROI and RI. (D. Kleespie, adapted) The Sports...Ch. 23 - ROI and RI with manufacturing costs. Excellent...Ch. 23 - ROI, RI, EVA. Hamilton Corp. is a reinsurance and...Ch. 23 - Goal incongruence and ROI. Comfy Corporation...Ch. 23 - ROI, RI, EVA. Performance Auto Company operates a...Ch. 23 - Capital budgeting, RI. Ryan Alcoa, a new associate...Ch. 23 - Prob. 23.29ECh. 23 - ROI, RI, EVA, and performance evaluation. Cora...Ch. 23 - Prob. 23.31ECh. 23 - Prob. 23.32ECh. 23 - ROI performance measures based on historical cost...Ch. 23 - ROI, measurement alternatives for performance...Ch. 23 - Multinational firms, differing risk, comparison of...Ch. 23 - ROI, Rl, DuPont method, investment decisions,...Ch. 23 - Division managers compensation, levers of control...Ch. 23 - Executive compensation, balanced scorecard. Acme...Ch. 23 - Financial and nonfinancial performance measures,...Ch. 23 - Prob. 23.40PCh. 23 - Prob. 23.41PCh. 23 - RI, EVA, measurement alternatives, goal...
Knowledge Booster
Similar questions
- Quality Chairs Incorporated (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.Cost data based on sales of 10,000 chairs: Budgeted Quantity Actual Quantity Actual Cost Direct materials (board feet) 88,000 79,500 $ 1,250,000 Direct labor (hours) 71,350 73,775 875,000 Machine hours (hours) 11,400 11,250 250,000 Finishing and packing (hours) 6,500 6,400 125,000 The current profit per unit is: Multiple Choice $250. $300. $400. $450. $475.arrow_forwardQuality Chairs Incorporated (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $580 whereas the competition's comparable chair was selling for $525. Winters determined that a price drop to $525 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs. Cost data based on sales of 10,000 chairs: Budgeted Quantity Actual Quantity Actual Cost Direct materials (board feet) 90,100 81,300 $ 1,280,000 Direct labor (hours) 73,800 76,300 905,000 Machine hours (hours) 12,800 12,600 280,000 Finishing and packing (hours) 8,100 7,900 155,000 The current cost per unit is: Multiple Choice $262.00. $312.00. $412.00. $462.00. $487.00.arrow_forwardQuality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.Cost data based on sales of 10,000 chairs: Budgeted Quantity Actual Quantity Actual Cost Direct materials (board feet) 88,000 79,500 $ 1,250,000 Direct labor (hours) 71,350 73,775 875,000 Machine hours (hours) 11,400 11,250 250,000 Finishing and packing (hours) 6,500 6,400 125,000 In order to reduce costs so as to reach the desired target cost, Quality Chairs should also focus on reducing the cost of: Multiple Choice Mechanical…arrow_forward
- Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.Cost data based on sales of 10,000 chairs: Budgeted Quantity Actual Quantity Actual Cost Direct materials (board feet) 88,000 79,500 $ 1,250,000 Direct labor (hours) 71,350 73,775 875,000 Machine hours (hours) 11,400 11,250 250,000 Finishing and packing (hours) 6,500 6,400 125,000 In order to reduce costs so as to reach the desired target cost, Quality Chairs should also focus on reducing the cost of:arrow_forwardThe Chromosome Manufacturing Company produces two products, X and Y. The company president, Gene Mutation, is concerned about the fierce competition in the market for product X. He notes that competitors are selling X for a price well below Chromosome's price of P12.70. At the same time, he notes that competitors are pricing product Y almost twice as high as Chromosome's price of P12.50. Mr.Mutation has obtained the following data for a recent time period: Product X Product Y Number of units 11,000 3,000 Direct Materials cost per unit P3.23 P3.09 Direct Labor cost per unit P2.22 P2.10 Direct Labor hours 10,000 2,500 Machine hours 2,100 2,800 Inspection hours 80 100 Purchase orders 10 10 Mr. Mutation has learned that overhead costs are assigned to products on the basis of direct labor hours. The overhead costs for his time period consisted of the following items: Overhead Cost item Amount Inspection Costs P16,200 Purchasing Costs 8,000 Machine Cost…arrow_forwardThe Chromosome Manufacturing Company produces two products, X and Y. The company president, Gene Mutation, is concerned about the fierce competition in the market for product X. He notes that competitors are selling X for a price well below Chromosome's price of P12.70. At the same time, he notes that competitors are pricing product Y almost twice as high as Chromosome's price of P12.50. Mr. Mutation has obtained the following data for a recent time period: PRODUCT X PRODUCT Y Number of Units 11,000 3,000 Direct Materials Cost Per Unit 3.23 3.09 Direct Labor Cost Per Unit 2.22 2.10 Direct Labor Hours 10,000 2,500 Machine Hours 2,100 2,800 Inspection Hours 80 100 Purchase Orders 10 10 Mr. Mutation has learned that overhead costs are assigned to products on the basis of direct labor hours. The overhead costs for his time period consisted of the following items: Overhead Cost Item Amount Inspecting Costs…arrow_forward
- Mercury, Incorporated, produces cell phones at its plant in Texas. In recent years, the company's market share has been eroded by stiff competition from overseas. Price and product quality are the two key areas in which companies compete in this market. A year ago, the company's cell phones had been ranked low in product quality in a consumer survey. Shocked by this result, Jorge Gomez, Mercury's president, initiated an intense effort to improve product quality. Gomez set up a task force to implement a formal quality improvement program. Included on this task force were representatives from the Engineering, Marketing, Customer Service, Production, and Accounting departments. The broad representation was needed because Gomez believed that this was a companywide program and that all employees should share the responsibility for its success. After the first meeting of the task force, Holly Elsoe, manager of the Marketing Department, asked John Tran, production manager, what he thought of…arrow_forwardWheelco, Inc., manufactures automobile and truck wheels. The company produces four basic, high-volume wheels used by each of the large automobile and pickup truck manufacturers. Wheelco also has two specialty wheel lines. These are fancy, complicated wheels used inexpensive sports cars. Lately, Wheelco's profits have been declining. Foreign competitors have been undercutting Wheelco's prices in three of its bread-and-butter product lines, and Wheelco's sales volume and market share have declined. In contrast, Wheelco's specialty wheels have been selling steadily, although in relatively small numbers, in spite of three recent price increases. At a recent staff meeting, Wheelco's president made the following remarks: "Our profits are going down the tubes, folks. It costs us 29 dollars to manufacture our A22 wheel. That's our best-seller, with a volume last year of 17,000 units. But our chief competitor is selling basically the same wheel for 27 bucks. I don't see how they can…arrow_forwardFast Foods Giant (FFG) is a fast food chain and purchases 100,000 pounds of soybean oil per month to fry French fries. FFG typically purchases soybean oil on the local spot market and the company has not entered into any forward purchase contracts for its soybean oil. FFG’s management team has prepared a business plan for the year which assumes $30.00 per pound soybean oil prices. Margins in the fast food business are fairly slim, though, so management is concerned that a significant increase in the price of oil could cause the company to miss its earnings projections. Spot soybean oil prices have been acceptable over the first six months of the year, but management is now concerned about December oil prices. On July 1, management decides it wants to use soybean oil futures contracts to manage its price risk for purchases of soybean oil in December. Assume that FFG’s management has properly documented a cash flow hedge accounting program associated with this risk management activity,…arrow_forward
- Swain Athletic Gear (SAG) operates six retall outlets in a large Midwest city. One is in the center of the city on Cornwall Street and the others are scattered around the perimeter of the city. Management at SAG is concerned about declining sales and profitability of the Cornwall store and believes that outlet has been a drag on profits in recent years. The most recent Income statement for the Cornwall store follows. SWAIN ATHLETIC GEAR Cornwall Street Store Income Statement For the Year Ending February 28 Sales revenue Costs Cost of goods sold Advertising Store administrative salaries Sales commissions Leases and utilities Allocated corporate support Total costs Net loss before tax benefit Tax benefit at 25% Net loss The CFO at SAG has asked for your advice on closing the Cornwall Street store. If the Cornwall Street store is closed, neither total corporate support costs nor operations or costs of the other stores are expected to change. Required: a. Using the worksheet below,…arrow_forwardSnackums, Incorporated, purchases wheat for use in its food manufacturing process. Snackums operates in a highly competitive industry and is rarely able to increase its sales price. • On January 1, 2024, Snackums estimates that it only has enough wheat inventory to meet its manufacturing needs for the first half of 2024, and forecasts the purchase of 20,000 bushels of wheat on June 30, 2024, from its supplier, Trigo Farms. ⚫ Because Snackums is concerned that the price of wheat will increase during the coming months it enters into four June wheat futures contracts on January 1, 2024, to purchase wheat. • Each futures contract is based on the purchase of 5,000 bushels of wheat at $6.73 per bushel on June 30, 2024, and will settle in cash at maturity. (For purposes of this problem, the daily margin accounts with the clearinghouse are ignored.) • The company must report changes in the fair value of its hedging instruments each quarter. The fair value of the futures contract at inception…arrow_forwardBubba's Western Cover is a western hat retailer in El Paso, Texas. Although Bubba's carries numerous styles of western hats, each hat has approximately the same price and invoice (purchase) cost, as shown in the following table. Sales personnel receive a commission to encourage them to be more aggressive in their sales efforts. Currently, the El Paso economy is really humming, and sales growth at Bubba's has been great. The business is very competitive, however, and Bubba, the owner, has relied on his knowledgeable and courteous staff to attract and retain customers who otherwise might go to other western hat stores. Because of the rapid growth in sales, Bubba is also finding the management of certain aspects of the business more difficult, such as restocking inventory and hiring and training new salespeople. Sales price Per unit variable expenses 24 80.00 Purchase cost 34.50 Sales commissions 20.50 Total per unit variable costs $ 55.00 Total annual fixed expenses Advertising $187, 500…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education