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Question;107.;SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Determine;the amount of cost to be allocated to the Harborview Resort using revenue as an;allocation base.;A.;$1,050,000;B.;$1,950,000;C.;$1,500,000;D.;$420,000;E.;$1,680,000;108.;SeaScape Resorts owns and operates two resorts in a coastal town. Both resorts;are located on a barrier island that is connected to the;mainland;by a high bridge. One resort is located on the beach and is called the Crystal;Coast Resort. The other resort is located on the inland waterway which passes;between the town and the mainland, it is called the Harborview Resort. Some key;information about the two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;What is the;operating profit of the Crystal Coast Resort, using revenue as an allocation;base?;A.;$2,450,000;B.;$1,600,000;C.;$1,500,000;D.;$4,550,000;E.;$3,550,000;109.;SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Using;the information regarding the allocation of the $3 million to the four cost;drivers, determine the amount of cost to be allocated to the Harborview Resort.;A.;$1,050,000;B.;$1,950,000;C.;$1,500,000;D.;$715,000;E.;$1,680,000;110.SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Using the information regarding the;allocation of the $3 million to the four cost drivers, determine the operating;profit of the Crystal Coast Resort.;A.;$1,500,000;B.;$2,050,000;C.;$2,785,000;D.;$3,525,000;E.;$4,215,000;111. SeaScape;Resorts owns and operates two resorts in a coastal town. Both resorts are;located on a barrier island that is connected to the mainland by a high bridge.;One resort is located on the beach and is called the Crystal Coast Resort. The;other resort is located on the inland waterway which passes between the town;and the mainland, it is called the Harborview Resort. Some key information;about the two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;The Crystal;Coast resort is likely to be favored in terms of a lower cost allocation under;A.;Revenue-based allocation.;B.;Cost-driver based;allocation.;C.;Cannot be determined;from the information.;D.;Would be the same for;both allocation methods.;112. Tough-Built;Corporation produces specialized truck body components, specializing in;hydraulic lifts for dump trucks. Founded 35 years ago by George Halloway, the;firm now employs 150 workers and has annual sales of over $10 million. George;operates the firm in a highly centralized way, and retains control over all;changes in operations. He is a regular visitor to the production area, which;helps him "keep his finger on the pulse of the firm." Although George;Halloway is now 67 years old, he has no apparent management successor, and has;always hand-picked his department heads and staff personnel. He has been;generous to those who worked for him, paying substantial bonuses each year to;the employees based on his personal evaluation of each worker. Just six weeks;ago, a heart attack convinced George to consider retirement, and he decided to;sell the firm to his employees. You are assigned the task of recommending a set;of strategic performance measures for the firm, assuming that the new worker;management wants to operate as a decentralized firm. Required: What;major management problems do you foresee in the transition from sole owner to;employee ownership?;113. Harrison;Hartwell and Zenith is a successful law firm employing 26 professionals. There;is an internal controversy over allocation of the $104,000 purchase cost of a;highly sophisticated electronic law library. Each professional employee of the;firm has been assessed $4,000 as a charge against the profit distribution;account of each of the 26 members affected. In addition, it is expected to cost;about $2,600 per month to update information for the library system, resulting;in a monthly $100 assessment against each professional in the firm.;Required;(a) As a new junior member of the professional legal group of 26, why might you;not like the proposed electronic library costallocation? (b) Propose an;alternate allocation method for both the initial purchase cost and the updating;charge that is more equitable (fair).(c) Could one argue for no allocation at;all in this case? On what basis?;114.;McShane Inc. manufactures;hair brushes that sell at wholesale for $6.00 per unit. Budgeted production in;both 2009 and 2010 was 2,000 units and fixed overhead budgeted was $25,000 in;each year. There was no beginning inventory in 2009. The following data;summarized the 2009 and 2010 operations;Required;Determine;income under both full costing and variable costing and explain the difference.;115. The;Daniels Tool & Die Corporation has been in existence for a little over;three years, its sales have been increasing each year as it has built a;reputation. The company manufactures dies to its customers' specifications, as;a consequence, a job order cost system is employed. Factory overhead is applied;to the jobs based on direct labor hours. Actual variable overhead is the same;as applied variable overhead. Overapplied or underapplied overhead is treated;as an adjustment to cost of goods sold. The company's income statements for the;last two years are presented below. Daniels used the same predetermined;overhead rate in applying overhead to production orders in both 2010 and 2011.;The rate was based on the following estimates;In;2009 and 2010, actual direct labor hours expended were 20,000 and 23,000;respectively. Raw materials put into production were $292,000 in 2009 and;$370,000 in 2010. Actual fixed overhead was $37,400 for 2010 and $42,300 for;2009, and the planned direct labor rate was the direct labor rate achieved. For;both years, all of the reported administrative costs were fixed, while the;variable portion of the reported selling expenses result from a commission of;five percent of sales revenue. Required: (1) For the year December 31;2010, prepare a revised income statement for Daniels Tool & Die Corporation;utilizing the variable costing method. Be sure to include the contribution;margin on your statement. (2) Prepare a numerical reconciliation of the difference;in operating income between Daniels Tool & Die Corporation's costing and;the revised 2010 income statement prepared on the basis of variable costing.;(3) Describe both the advantages and disadvantages of using variable costing.;116. Red;Apple Industries manufactures institutional-use furniture. Dept. A is;responsible for welding the base of the desk to the chair assembly. The desks;are then placed on an automatic conveyer to Dept. B, where the desktop is;riveted to the chair. The desks continue on the conveyer to Dept. C for further;assembly. Wanda, the manager of Dept. A, is responsible for moving 800 welded;desks per hour to Dept. B. A faulty circuit in Dept. B causes a delay in;processing in the department and prompts Rosie, the Dept. B manager, to ask;Wanda to stop the conveyer. Wanda refuses, necessitating the removal of the;welded desks from the conveyer until the riveting can resume. Rosie bills;Wanda's department for the costs of this extra work. Wanda disputes the charge;citing her responsibility to convey 800 desks/hour to Dept. B.;Required;How should the managers' dispute be resolved? How could it have been avoided?;117.Betty Jones and Penny;White are associates at the same law firm in Atlanta. They traveled to New York;City together recently to visit;their;respective clients. From the airport, they shared a cab ride to their hotel.;The cab ride for Betty alone would have cost $18.00, but for two passengers the;cost was $22.00. Had Betty not offered to share the cab ride, Penny (in;deference to her client's frugality) would have taken the bus to Grand Central;Station, which is six blocks from the hotel, at a cost of $10.00.;Required;How should the $22.00 cost of the cab ride be allocated to the two clients?;118. Divisional;managers of SIU Incorporated have been expressing growing dissatisfaction with;the current methods used to measure divisional performance. Divisional;operations are evaluated every quarter by comparison with the static budget;prepared during the prior year. Divisional managers claim that many factors are;completely out of their control but are included in this comparison. This;results in an unfair and misleading performance evaluation. The managers have;been particularly critical of the process used to establish standards and;budgets. The annual budget, stated by quarters, is prepared six months prior to;the beginning of the operating year. Pressure by top management to reflect;increased earnings has often caused divisional managers to overstate revenues;and/or understate expenses. In addition, once the budget had been established;divisions were required to "live with the budget." Frequently;external factors such as the state of the economy, changes in consumer;preferences, and actions of competitors have not been adequately recognized in;the budget parameters that top management supplied to the divisions. The;credibility of the performance review is curtailed when the budget can not be;adjusted to incorporate these changes. Top management, recognizing the current;problems, has agreed to establish a committee to review the situation and to;make recommendations for a new performance evaluation system. The committee;consists of each division manager, the Corporate Controller, and the Executive;Vice President who serves as the chairman. At the first meeting one division;manager outlined an Achievement of Objectives System (AOS). In this performance;evaluation system, divisional managers would beevaluated;according to three criteria:? Doing better than last year-;Various measures would be compared to the same measures of the;prior year.? Planning realistically-;Actual performance for the current year would be compared to realistic plans;and/or goals.?;Managing;current assets - Various measures would be used to evaluate the divisional;management's achievements and reactions to changing business and economic;conditions. A division manager believed this system would overcome many of the;inconsistencies of the current system because divisions could be evaluated from;three different viewpoints. In addition, managers would have the opportunity to;show how they would react and account for changes in uncontrollable external;factorA second division manager was also in favor of the proposed AOS. However;he cautioned that the success of a new performance evaluation system would be;limited unless it had the complete support of top management. Further, this;support should be visible within all divisions. He believed that the committee;should recommend some procedures which would enhance the motivational and;competitive spirit of the divisions. Required: (1) Explain whether or;not the proposed AOS would be an improvement over the measure of divisional;performance nowused by SIU Incorporated. (2) Develop specific;performance measures for each of the three criteria in the proposed AOS which;could be used to evaluate divisional managers. (3) Discuss the motivational and;behavioral aspects of the proposed performance system. Also, recommend specific;programs which could be instituted to promote morale and give incentives to;divisional management.;119. Chadd;Fisher was recently appointed vice president of operations for Cary;Corporation. He has a manufacturing background and previously served as;operations manager of Cary's building products division. The business units of;Cary Corporation include divisions that manufacture building products, process;food, and provide financial services. In a recent conversation with Drew;Williams, Cary's chief financial officer, Chadd suggested evaluating unit;managers on the basis of the business unit data in Cary's annual financial;report. This report presents revenues, earnings, identifiable assets, and;depreciation for each business unit for a five-year period. He believes that;evaluating business unit managers by criteria similar to that used to evaluate;the company's top management is appropriate. Drew has reservations about using;information from the annual financial report for this purpose and suggested;that Chadd consider other criteria to use in the evaluation.;Required;1. Explain why the business unit information prepared for public reporting;purposes might not be appropriate for theevaluation of unit managers;performance. 2. Describe the possible motivational impact on Cary Corporation's;unit managers if Chadd's proposal for their evaluation is accepted. 3. Identify;and describe several types of financial information that would be more;appropriate for Chadd Fisher to use when evaluating the performance of unit;managers.;120. Tyler;Company had the following manufacturing information for the current year.;Required:Determine;operating income under both full costing and variable costing and explain the;difference.;121. Greg;Peterson was recently appointed vice president of operations for Webster;Corporation. He has a manufacturing background and previously served as;operations manager of Webster's tractor division. The business units of Webster;Corporation include divisions that manufacture heavy equipment, process food;and provide financial services. In a recent conversation with Carol Andrews;Webster's chief financial officer, Greg suggested evaluating unit managers on;the basis of the business unit data in Webster's annual financial report. This;report presents revenues, earnings, identifiable assets, and depreciation for;each business unit for a five-year period. He believes that evaluating business;unit managers by criteria similar to that used to evaluate the company's top;management is appropriate. Carol has reservations about using information from;the annual financial report for this purpose and suggested that Greg consider;other criteria to use in the evaluation.;Required;1. Explain why the business unit information prepared for public reporting;purposes might not be appropriate for the evaluation of unit managers;performance. 2. Describe the possible motivational impact on Webster Corporation's;unit managers if Greg's proposal for their evaluation is accepted. 3. Identify;and describe several types of information that would be appropriate for Greg;Peterson to use when evaluating the performance of unit managers.;(CMA Adapted)

 

Paper#45046 | Written in 18-Jul-2015

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