Managerial Accounting, Binder Ready Version: Tools for Business Decision Making
7th Edition
ISBN: 9781118338421
Author: Weygandt, Jerry J.; Kimmel, Paul D.; Kieso, Donald E.
Publisher: WILEY
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Textbook Question
Chapter 6, Problem 6.7BYP
Ethics Case
Brett Stem was hired during January 2017 to manage the home products division of Hi-Tech Products. As part of his employment contract, he was told that he would get $5,000 of additional bonus for every 1% increase that the division's profits exceeded those of the previous year.
Soon after coming on board. Brett met with his plant managers and explained that he wanted the plants to be run at full capacity. Previously, the plant had employed just-in-time inventory practices and had consequently produced units only as they were needed. Brett stated that under previous management the company had missed out on too many sales opportunities because it didn't have enough inventory on hand. Because previous management had employed just-in-time inventory practices, when Brett came on board there was virtually no beginning inventory. The selling price and variable costs per unit remained the same from 2016 to 2017. Additional information is provided below.
| 2016 | 2017 | |
| Net income | $ 300.000 | $ 525,000 |
| Units produced | 25.000 | 30,000 |
| Units sold | 25.000 | 25.000 |
| Fixed |
$1,350,000 | $1,350,000 |
| Fixed manufacturing overhead costs per unit | $ 54 | $ 45 |
Instructions
(a) Calculate Brett’s bonus based upon the net income shown above.
(b) Recompute the 2016 and 2017 results using variable costing.
(c) Recompute Brett’s 2017 bonus under variable costing.
(d) Were Brett s actions unethical? Do you think any actions need to be taken by the company?
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Case Study:
Elite Manufacturing Company
The company uses a job order cost system to cost its products. It recently signed a new contract with the union that calls for time-and-a-half for all work over 40 hours a week and double-time for Saturday and Sunday. Also, a bonus of 1% of the employees’ earnings for the year is to be paid to the employees at the end of the fiscal year. The controller, the plant manager, and the sales manager disagree as to how the overtime pay and the bonus should be allocated.
An examination of the first month’s payroll under the new union contract provisions shows the following:
Direct labor:
Regular—40,200 hours@$10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $402,000
Overtime:
Weekdays—1,700 hours@$15 . . . . . . . . . . . . . . . . . . . . $25,500
Saturdays—400 hours@$20 . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Sundays—300 hours@$20 . . . . . . . . . . . . . . . . . . . . . . . . . 6,000
Total…
>
Mary Tan is the controller for Duck Associates, a property management company in
Portland, Oregon. Each year, Tan and payroll clerk Toby Stock meet with the external
auditors about payroll accounting. This year, the auditors suggest that Tan consider
outsourcing Duck Associates's payroll accounting to a company specializing in payroll
processing services. This would allow Tan and her staff to focus on their primary
responsibility: accounting for the properties under management. At present, payroll
requires 1.5 employee positions-payroll clerk Toby Stock and a bookkeeper who
spends half her time entering payroll data in the system.
meniups/l
Tan considers this suggestion, and she lists the following items relating to out-
sourcing payroll accounting:
a. The current payroll software that was purchased for $4,000 three years ago would
not be needed if payroll processing were outsourced.
b.
uck Associates's bookkeeper would spend half her time preparing the weekly
payroll input form that…
Chapter 6 Solutions
Managerial Accounting, Binder Ready Version: Tools for Business Decision Making
Ch. 6 - What is meant by CVP analysis?Ch. 6 - Provide three examples of management decisions...Ch. 6 - Prob. 3QCh. 6 - Describe the features of a CVP income statement...Ch. 6 - The traditional income statement for Wheat Company...Ch. 6 - Prob. 6QCh. 6 - What is meant by the term sales mix? How does...Ch. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - What is the theory of constraints? Provide some...Ch. 6 - What is meant by "cost structure? Explain how a...Ch. 6 - What is operating leverage? How does a company...Ch. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Distinguish between absorption costing and...Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - Prob. 22QCh. 6 - Determine missing amounts for contribution margin....Ch. 6 - Hamby Inc. has sales of 2,000,000 for the first...Ch. 6 - Prob. 6.3BECh. 6 - Prob. 6.4BECh. 6 - Prob. 6.5BECh. 6 - Prob. 6.6BECh. 6 - NoFly Corporation sells three different models of...Ch. 6 - Information for NoFly Corporation is given in...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - In Marshall Company, data concerning two products...Ch. 6 - Prob. 6.12BECh. 6 - Prob. 6.13BECh. 6 - Prob. 6.14BECh. 6 - Prob. 6.15BECh. 6 - Compute product costs under variable costing. (LO...Ch. 6 - Compute product costs under absorption costing....Ch. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Victoria Company reports the following operating...Ch. 6 - Prob. 6.2DICh. 6 - Zoom Corporation manufactures and sells three...Ch. 6 - Prob. 6.4DICh. 6 - Prob. 6.1ECh. 6 - In the month of June, Jose Heberts Beauty Salon...Ch. 6 - Compute net income under different alternatives....Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.5ECh. 6 - Yard Tools manufactures lawnmowers, weed-trimmers,...Ch. 6 - PDQ Repaint has 200 auto-maintenance service...Ch. 6 - Express Delivery is a rapidly growing delivery...Ch. 6 - Prob. 6.9ECh. 6 - Determine break-even point in dollars for two...Ch. 6 - Mars Company manufactures and sells three...Ch. 6 - Compute contribution margin and determine the...Ch. 6 - Helena Company manufactures and sells two...Ch. 6 - The CVP income statements shown below are...Ch. 6 - Casas Modernas of Juarez, Mexico, is contemplating...Ch. 6 - Prob. 6.16ECh. 6 - Compute product cost and prepare an income...Ch. 6 - Prob. 6.18ECh. 6 - Crate Express Co. produces wooden crates used for...Ch. 6 - Midlands Inc. had a bad year in 2016. For the...Ch. 6 - Lorge Corporation has collected the following...Ch. 6 - Determine break-even sales under alternative sales...Ch. 6 - Prob. 6.4APCh. 6 - The following CVP income statements are available...Ch. 6 - Bonita Beauty Corporation manufactures cosmetic...Ch. 6 - Prepare income statements under absorption costing...Ch. 6 - Dilithium Batteries is a division of Enterprise...Ch. 6 - CURRENT DESIGNS Current Designs manufactures two...Ch. 6 - Prob. 6.1BYPCh. 6 - Managerial Analysis For nearly 20 years,...Ch. 6 - Real-World Focus In a recent report, the Del Monte...Ch. 6 - The June 8, 2009, edition of the Wall Street...Ch. 6 - Prob. 6.6BYPCh. 6 - Ethics Case Brett Stem was hired during January...Ch. 6 - Prob. 6.9BYP
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