Fundamentals of Cost Accounting
5th Edition
ISBN: 9781259565403
Author: William N. Lanen Professor, Shannon Anderson Associate Professor, Michael W Maher
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Question
Chapter 12, Problem 24CADQ
To determine
Define the reasons behind the high pay to the executives of the companies even if the company incurs the loss.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On November 14, Thorogood Enterprises announced that the public and acrimonious battle with its current CEO had been resolved.
Under the terms of the deal, the CEO would step down from his position immediately. In exchange, he was given a generous
severance package. Given the information below, calculate the cumulative abnormal return (CAR) around this announcement. Assume
the company has an expected return equal to the market return.
Note: A negative velue should be indicated by a minus sign. Leave no cells blank - be certain to enter "0" wherever required. Do
not round intermediate calculetions. Round your answers to 1 decimal place.
Market Return
Date
November 7
(K)
Company
Return (%)
1.3
0.9
November
1.1
0.9
November 9
-1.0
-0.4
November 10
-4.6
-0.6
November 11
2.1
1.0
November 14
4.3
2.6
November 15 0.1
0.1
November 16
1.5
November 17
0.4
November 18
November 21
-1.0
0.0
0.2
Days from
nouncement
7
2
3
Dailly Abnormal
Return
Cumulative Abnormal
Return
The managerial accountant at managerial funding resources reported in 2014 its earnings per share were $6.20 and the market price per share of its common stock is $75. in 2013, the managerial accountant reported $3.10 earnings per share and the market price was $40 per share.
(a) compute the price/earnings ratio at managerial funding resources.
(b) evaluate possible reasons behind the managerial accountant's interest in the price/earning ratio
If you give me wrong answer, I will give you UN helpful rate.
Chapter 12 Solutions
Fundamentals of Cost Accounting
Ch. 12 - What does decentralization mean in the context of...Ch. 12 - Why is performance measurement an important...Ch. 12 - Prob. 3RQCh. 12 - What does dysfunctional decision making refer to?Ch. 12 - Prob. 5RQCh. 12 - What are the five basic kinds of decentralized...Ch. 12 - What is goal congruence? How is it different from...Ch. 12 - Prob. 8RQCh. 12 - What is relative performance evaluation?Ch. 12 - Prob. 10RQ
Ch. 12 - Prob. 11RQCh. 12 - Prob. 12RQCh. 12 - The management control system collects information...Ch. 12 - Salespeople are often paid a commission based on...Ch. 12 - Prob. 15CADQCh. 12 - Prob. 16CADQCh. 12 - On December 30, a manager determines that income...Ch. 12 - Prob. 18CADQCh. 12 - Prob. 19CADQCh. 12 - The manager of an operating department just...Ch. 12 - In the previous chapters, we considered different...Ch. 12 - A company has a bonus plan that states that...Ch. 12 - Prob. 23CADQCh. 12 - Prob. 24CADQCh. 12 - Prob. 25CADQCh. 12 - Prob. 26CADQCh. 12 - Prob. 27CADQCh. 12 - Prob. 28CADQCh. 12 - Prob. 29ECh. 12 - Evaluating Management Control SystemsEthical...Ch. 12 - Prob. 31ECh. 12 - Management Control Systems and Incentives A...Ch. 12 - Alternative Allocation Bases: Service Bartolo...Ch. 12 - Single versus Dual Rates Required Refer to data...Ch. 12 - Single versus Dual Rates: Ethical Considerations A...Ch. 12 - Single versus Dual Rates Using the data for the...Ch. 12 - Alternative Allocation Bases Thompson Aeronautics...Ch. 12 - Tone at the Top, Ethics Once upon a time, a major...Ch. 12 - Prob. 39ECh. 12 - Prob. 40ECh. 12 - Internal Controls Commonly in many organizations,...Ch. 12 - Evaluating Management Control Systems SPG Company...Ch. 12 - Analyze Performance Report for Decentralized...Ch. 12 - Divisional Performance Measurement: Behavioral...Ch. 12 - Cost Allocations: Comparison of Dual and Single...Ch. 12 - Cost Allocation for Travel Reimbursement Your...Ch. 12 - Incentives, Illegal Activities, and Ethics An...
Knowledge Booster
Similar questions
- Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firms controller. Leonard: Chuck, as you know, our firm has been losing market share over the past 3 years. We have been losing more and more bids, and I dont understand why. At first, I thought that other firms were undercutting simply to gain business, but after examining some of the public financial reports, I believe that they are making a reasonable rate of return. I am beginning to believe that our costs and costing methods are at fault. Chuck: I cant agree with that. We have good control over our costs. Like most firms in our industry, we use a normal job-costing system. I really dont see any significant waste in the plant. Leonard: After talking with some other managers at a recent industrial convention, Im not so sure that waste by itself is the issue. They talked about activity-based management, activity-based costing, and continuous improvement. They mentioned the use of something called activity drivers to assign overhead. They claimed that these new procedures can help to produce more efficiency in manufacturing, better control of overhead, and more accurate product costing. A big deal was made of eliminating activities that added no value. Maybe our bids are too high because these other firms have found ways to decrease their overhead costs and to increase the accuracy of their product costing. Chuck: I doubt it. For one thing, I dont see how we can increase product-costing accuracy. So many of our costs are indirect costs. Furthermore, everyone uses some measure of production activity to assign overhead costs. I imagine that what they are calling activity drivers is just some new buzzword for measures of production volume. Fads in costing come and go. I wouldnt worry about it. Ill bet that our problems with decreasing sales are temporary. You might recall that we experienced a similar problem about 12 years agoit was 2 years before it straightened out. Required: 1. Do you agree or disagree with Chuck Davis and the advice that he gave Leonard Bryner? Explain. 2. Was there anything wrong or unethical in the behavior that Chuck Davis displayed? Explain your reasoning. 3. Do you think that Chuck was well informedthat he was aware of the accounting implications of ABC and that he knew what was meant by cost drivers? Should he have been well informed? Review (in Chapter 1) the first category of the Statement of Ethical Professional Practice for management accountants. Do any of these standards apply in Chucks case?arrow_forwardGRB Ltd has several product lines with a manager in charge of each product line. The managers are paid a bonus based on the net income generated by their product line. Rubica (the CEO of GRB Ltd) was going through the financial reports of the 2nd quarter of 2021 to analyse the performance of the product lines. For 'Sweets' one of the largest product lines of GRB Ltd, Rubica noted that while the sales declined from $800,000 in quarter 1 to $600,000 in quarter 2, the product line manager of Sweets received a bonus larger than the 1st quarter. The manager of Sweets division was eligible for a higher bonus due to an operating profit increase from $90,000 in the 1st quarter to $120,000 in the 2nd quarter. Rubica wondered how the product line manager was entitled to a higher bonus with a decline in sales. Rubica also wants to know how net income increased with a decline in sales. Rubica found the following data from the financial reports of 'Sweets': Particulars Quarter 2 Quarter 1 Units…arrow_forwardAccording to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2016. Required: ts 1. Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. 2-a. Conduct a vertical analysis by expressing each line as a percentage of total revenues. 2-b. Excluding income tax, interest, and operating expenses, did Computer Tycoon earn more profit per dollar of sales in 2016 compared to 2015? еВook Hint Print Complete this question by entering your answers in the tabs below. eferences Req 1 Reg 2A Reg 2B Conduct a horizontal analysis by calculating the year-over-year changes in each line item, expressed in dollars and in percentages for the income statement of Computer Tycoon Inc. for the year ended December 31, 2016. (Decreases…arrow_forward
- Assume that you are a consultant to Broske Inc., and you have been provided with the following data: The company pays a fixed annual dividend of $4.8 per share and its current stock price is $50. The company is operating in a mature industry and not expected to grow at all. What is the cost of equity for the company?arrow_forwardsuppose you are an auditor of a large multinational company. You notice that there have been large fluctuations in this company's PPE for the past five years, as follows: 2016: PPE is $150 million 2017: PPE is $320 million 2018: PPE is $175 million 2019: PPE is $100 million 2020: PPE is $250 million Please describe some concerns that you might have for the company. In a response post, now pretend you are the CEO of the multinational company. Please address the concerns raised in another student's initial post, and provide some reasons for the large fluctuations in PPE that would not alarm your auditor and investors.arrow_forwardAssume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling?arrow_forward
- You are the assistant controller for a public company. Wall Street stock analysts are projecting anearnings per share figure of $0.25 for your company. On December 29, a large customer returns avery large shipment of your goods that were defective. You tell the controller about the customerreturn and that the debit to sales returns and allowances will have the effect of reducing earningsper share from $0.25 to $0.24. The controller indicates that failing to meet the consensus earnings expectations of the analyst community will result in a large stock price decline. The controller sug-gests waiting until January 2 (your company operates on a calendar year-end basis) to record the customer return. What should you do?arrow_forwardOn the same day, five fortune 500 companies all report lower sales and earnings than expected. All market indexes close down that day. Is this result an example of externalities? Explain.arrow_forwardYou have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwardsarrow_forward
- Dev Events announced at Time t that it had fired its CEO. There were no other annoucements affecting the firm. The stock had daily returns of .1, +.2, -.8, -.3, +.5 for Time t-2 to Time t+2, respectively. The daily returns on the market were .1, +.2, -.4, -.2, and +.2 for Time t-2 to Time t+2, respectively. What is the culmative abnormal return for these five days? MC: -.1 .1 -.3 .3 -.2arrow_forwardJarrett Baker is the founder of anenterprise software company located inChevy Chase, Maryland. By looking atthe income statements for Jarrett’s businessover the past three years, you seethat its working capital has declined from$42,400 in 2012 to $17,900 in 2013 to$3,100 in 2014. If this trend continues,in what ways could it jeopardize the futureof Jarrett’s business?arrow_forwardAssume that you are the president of your company and paid a year-end bonus according to the amount of net income earned during the year. When prices are rising, would you choose a FIFO or weighted average cost flow assumption? Explain, using an example to support your answer. Would your choice be the same if prices were falling? I need an example with net income for weighted averagearrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Financial Reporting, Financial Statement Analysis...
Finance
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:Cengage Learning
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning