Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN: 9781337115773
Author: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 36E
Crazy Fan Guard Company provides security services to popular live sporting event venues. Crazy Fan management has identified one of its top risks as the possibility that restrictions on premium close seating options will severely decrease its sales revenue by lessening the demand for its security services. The table below displays a description of this top risk, an inherent risk assessment, three risk response alternatives, and finally, a residual risk assessment.
Crazy Fan Guard’s
Required:
- 1. Calculate the benefit of each risk response alternative A through C.
- 2. Calculate the net benefit of each risk alternative A through C.
- 3. CONCEPTUAL CONNECTION Using net benefit as the criterion, explain the best risk response alternative that Crazy Fan Guard Company management should implement.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Based on a cost-benefit analysis, management at First CommunityBank decided to contract with Technology Solutions, a local data center operator, tohost all of the bank’s financial reporting applications. To avoid the significant costsof developing and maintaining its own data center, First Community contracts withTechnology Solutions to provide IT server access in a highly secure, environmentallycontrolled data center facility owned by Technology Solutions. Similar to First Community,other businesses also contract with Technology Solutions to host applications at the samedata center.The bank is directly linked through highly secure telecommunication lines to the datacenter, which allows bank personnel to transmit data to and from the data center as if thedata center was owned by First Community. For a monthly fee, Technology Solutionssupports the server hardware in an environment with numerous backup controls in theevent power is lost or other hardware failures occur. Bank personnel…
A manufacturing firm identified that it would have difficulty sourcing raw materials locally, so it decided to relocate its production facilities. According to COSO, this decision represents which of the following responses to the risk?
A.
Risk reduction.
B.
Prospect theory.
C.
Risk sharing.
D.
Risk acceptance.
Industry analysts have predicted a sharp decline in housing demand in the months ahead. After learning of this prediction, Nest Home
Builders opts to convert as many of its variable costs to fixed costs as possible. This decision
O is a wise one, because it will decrease the firm's degree of operating leverage and thus reduce the firm's degree of risk.
O is a poor one, because it will increase the firm's degree of operating leverage and thus increase the firm's degree of risk.
O is a poor one, because it will decrease the firm's degree of operating leverage and thus increase the firm's degree of risk.
O is a wise one, because it will increase the firm's degree of operating leverage and thus reduce the firm's degree of risk.
Save for Later
Submit Answer
Chapter 13 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 13 - Prob. 1DQCh. 13 - Prob. 2DQCh. 13 - Why should the incremental cost of a risk response...Ch. 13 - Prob. 4DQCh. 13 - Explain how performance measurement can help...Ch. 13 - Identify and discuss the four kinds of quality...Ch. 13 - Discuss the benefits of quality cost reports that...Ch. 13 - Prob. 8DQCh. 13 - Prob. 9DQCh. 13 - When will the average unit cost be used for value...
Ch. 13 - How do international issues affect the role of the...Ch. 13 - What it a foreign trade zone, and what advantages...Ch. 13 - Prob. 13DQCh. 13 - Prob. 14DQCh. 13 - Prob. 15DQCh. 13 - A fire insurance policy on a manufacturing plant...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Which of the following risk response items would...Ch. 13 - Beginning with strategy, which of the following...Ch. 13 - In which areas of an organizations value chain can...Ch. 13 - Prob. 7MCQCh. 13 - Which of the following items (correctly describes...Ch. 13 - Which of the following is a prevention cost? a....Ch. 13 - Prob. 10MCQCh. 13 - Prob. 11MCQCh. 13 - Prob. 12MCQCh. 13 - Prob. 13MCQCh. 13 - A manufacturing cell within a value stream has...Ch. 13 - Prob. 15MCQCh. 13 - Prob. 16MCQCh. 13 - Prob. 17MCQCh. 13 - Prob. 18MCQCh. 13 - Prob. 19MCQCh. 13 - Prob. 20BEACh. 13 - Quality Cost Report Whitley Company had total...Ch. 13 - Andresen Company had the following quality costs...Ch. 13 - Norris Company implemented a quality improvement...Ch. 13 - Mabbut Company has the following departmental...Ch. 13 - During the week of May 10, Hyrum Manufacturing...Ch. 13 - Prob. 26BEACh. 13 - Prob. 27BEBCh. 13 - Quality Cost Report Loring Company had total sales...Ch. 13 - Cassara, Inc., had the following quality costs for...Ch. 13 - Pintura Company implemented a quality improvement...Ch. 13 - Gumbrecht Company has the following departmental...Ch. 13 - During the week of August 21, Parley Manufacturing...Ch. 13 - Prob. 33BEBCh. 13 - Prob. 34ECh. 13 - Prob. 35ECh. 13 - Crazy Fan Guard Company provides security services...Ch. 13 - Jacks Apps Company researches, develops, and sells...Ch. 13 - Prob. 38ECh. 13 - Prob. 39ECh. 13 - Classify the following quality costs as prevention...Ch. 13 - Bradshaw Company reported sales of 5,000,000 in...Ch. 13 - The controller of Emery, Inc. has computed quality...Ch. 13 - Erba Inc. has the following departmental layout...Ch. 13 - A value stream has three activities and two...Ch. 13 - A Box Scorecard was prepared for a value stream:...Ch. 13 - Match each term in Column A with its related...Ch. 13 - Match each term in Column A with its related...Ch. 13 - Prob. 48ECh. 13 - Refer to Exercise 13-48. Suppose that Kamber is...Ch. 13 - Prob. 50ECh. 13 - Prob. 51PCh. 13 - Prob. 52PCh. 13 - Dorsey Scott MU Company manufactures and bottles a...Ch. 13 - Danna Wise, president of Tidwell Company, recently...Ch. 13 - Prob. 55PCh. 13 - In 20X1, Don Blackburn, president of Price...Ch. 13 - Brasher Company is transitioning to a lean...Ch. 13 - Merkley Company, a manufacturer of machine parts,...Ch. 13 - Paladin Company manufactures plain paper fax...Ch. 13 - Custom Shutters. Inc., manufactures plantation...Ch. 13 - Prob. 61PCh. 13 - Corporate sustainability reports vary greatly...Ch. 13 - Luna Company is a printing company and a...Ch. 13 - Lindell Manufacturing embarked on an ambitious...Ch. 13 - Paterson Company, a U.S.-based company,...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Carizick Co manufactures gaming products. It has created a new games console called the QpBox which is about to be launched. Demand for the QpBox is anticipated to be high. The product life cycle of the QpBox is expected to be three years with 300,000 units forecast to be sold during its first year. Sales volumes are expected to decrease by 75,000 units in each subsequent year. Production volumes will be based on expected demand levels. The following costs for the QpBox have been determined: Design and development Pre-launch advertising Advertising in Year 2 Packaging Manufacturing cost $120m $0.5m $0.4m $3 per unit $80 per unit At a recent board meeting, the finance director said that Carizick Co should look to maximise the profitability of the QpBox over its life cycle. The marketing director made the comment that Carizick Co should focus on extending the maturity phase of the life cycle only as this stage is where the QpBox is most profitable. Contract with Zone Co Carizick Co has…arrow_forwardA pharmaceutical company is considering investing in the development of a new drug. The company stands to make a lot of profit if the drug is successful. However, there is some risk that the drug will not be approved by government regulators. If this happens, the company will lose its entire investment. Advise the company how to take this risk into account as managers evaluate whether to investarrow_forwardA corporation has an excess input VAT due to its excessive local purchases of goods and services. This excess input VAT is accumulating every month and reached a significant value. The management is considering to deal with the excess input VAT. Assume that the excess input VAT is directly attributable to its Zero-rated VAT Sales, explain the options that could possibly be considered by the management.arrow_forward
- Hudson Corporation is considering three options for managing its data warehouse: continuing with its own staff, hiring an outside vendor to do the managing, or using a combination of its own staff and an outside vendor. The cost of the operation depends on future demand. The annual cost of each option (in thousands of dollars) depends on demand as follows: If the demand probabilities are 0.2, 0.5, and 0.3, which decision alternative will minimize the expected cost of the data warehouse? What is the expected annual cost associated with that recommendation? Construct a risk profile for the optimal decision in part (a). What is the probability of the cost exceeding $700,000?arrow_forwardIn a strategy meeting, the computer manufacturing company's president said, "If we raised the price of our product, the company's break-even point will be lower." The financial vice president responded by saying, "The company will also be less likely to incur a loss." As a management accountant would you agree or disagree with these statements and why?arrow_forwardA large brokerage company is assessing the introduction of a new computer system to improve routing and execution of customer orders. The managing director wants to install a new Smart Routing system, whereas another director prefers the Direct Routing system. Each machine provides the same order-execution ability and can satisfy the broker’s obligation to give investors the best possible order execution. The initial cost of each system is $170,000, but because of differing software, maintenance, and processing requirements, estimates of the after-tax costs of operation differ. These are as follows: Period Smart Routing Direct Routing 1 39,000 56,000 2 48,000 61,000 3 48,000 61,000 4…arrow_forward
- For each situation listed below, select the appropriate inherent risk factor that is demonstrated. Each inherent risk factor can be used once, more than once, or not at all. a. A client is estimating an amount that may be owed pending the outcome of a lawsuit that may take several years to resolve. Estimation uncertainty b. Management hires a specialist to assist with determining the value of an inventory of precious gemstones. Complexity C. Due to a global pandemic, the airline industry is experiencing unprecedented disruption of normal business operations. Subjectivity d. Management is estimating the fair value for a derivative financial instrument that is not traded on a public market. e A client must derive a future interest rate by using interpolation techniques from forward interest rates. Barrow_forwardJon Jackson Manufacturing is searching for suppliers for its new line of equipment. Jon has narrowed his choices to two sets ofsuppliers. Believing in diversification of risk, Jon would select two suppliers under each choice. However, he is still concernedabout the risk of both suppliers failing at the same time. The “San Francisco option” uses both suppliers in San Francisco. Bothare stable, reliable, and profitable firms, so Jon calculates the “unique-event” risk for either of them to be 0.5%. However, becauseSan Francisco is in an earthquake zone, he estimates the probability of an event that would knock out both suppliers to be 2%.The “North American option” uses one supplier in Canada and another in Mexico. These are upstart firms; John calculates the“unique-event” risk for either of them to be 10%. But he estimates the “super-event” probability that would knock out both of thesesuppliers to be only 0.1%. Purchasing costs would be $500,000 per year using the San Francisco option…arrow_forwardA company uses the systems development life cycle to develop the capability to analyze what type of pastries sell best with different beverages honey Bun Limited and other food manufacturers have been using GAAP in preparing their financial statements. Recently, the JSE mandated that all companies should implement the IFRS system in addition to GAAP. Because Honey Bun Limited current system cannot handle the IFRS requirements, the financial reporting system must be modified. Some members of the project management team of Honey Bun Limited believe that there needs to be a change of scope for the implementation of the IFRS phase, when should the project manager and project sponsor approve scope changes? When should they deny scope changes?arrow_forward
- Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…arrow_forwardGalveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…arrow_forwardGalveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time deliveries and high-quality inputs. The company’s operations manager, Frank Griswold, is opposed to the idea of a new JIT system because he is concerned that the new system (a) will be too costly to manage; (b) will result in too many stockouts; and (c) will lead to the layoff of his employees, several of whom are currently managing inventory. He believes that these layoffs will affect the morale of his entire production department. The management accountant, Bonnie Barrett, is in favor of the new system because of its likely cost savings. Frank wants Bonnie to rework the numbers because he is concerned that top management will give more weight to financial factors and not give due consideration to nonfinancial factors such as employee…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Fixed Asset Replacement Decision 1235; Author: Accounting Instruction, Help, & How To;https://www.youtube.com/watch?v=LJRzn9K8Nwk;License: Standard Youtube License