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
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Textbook Question
Chapter 13, Problem 41E
Bradshaw Company reported sales of $5,000,000 in 20X1. At the end of the fiscal year (June 30, 20X1), the following quality costs were reported:
Required:
- 1. Prepare a quality cost report.
- 2. Prepare a graph (pie chart or bar graph) that shows the relative distribution of quality costs, and comment on the distribution.
- 3. Assuming sales of $5,000,000, by how much would profits increase if quality improves so that quality costs are only 3% of sales?
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Meargia Plastics is evaluating its plastic bottles division. The accounting manager has come up with the following data for the year: contribution margin of $570,000, controllable fixed of $228,000, and noncontrollable fixed costs of $57,000.
Required:
1. What is the controllable margin?
Controllable Margin
2. What is the total contribution by profit center (CPC)?
Armer Company is accumulating data to use in preparing its annual profit plan for the coming year.
The cost behavior pattern of the maintenance costs must be determined. The accounting staff has
suggested the use of linear regression to derive an equation for maintenance hours and costs.
Data regarding the maintenance hours and costs for the last year and the results of the regression
analysis follow:
Maintenance
Machine
Month
Cost
Hours
$ 4,200
Jan.
480
Feb.
3,000
320
Mar.
3,600
400
Apr.
2,820
300
May
4,350
500
June
2,960
310
July
3,030
320
Aug.
4,470
520
Sept.
4,260
490
Oct.
4,050
470
Nov.
3,300
350
Dec.
3,160
340
Sum
$43, 200
4,800
$ 3,600
$
$
$ 684.65
Average
400
Average cost per hour
a (intercept)
b (coefficient)
9.00
7.2884
Standard error of the estimate
34.469
R-squared
0.99724
t-value for b
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At 400 hours of activity, Armer management can be approximately two-thirds confident that the
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Gagnon Company reported the following sales and quality costs for the past four years. Assume
that all quality costs are variable and that all changes in the quality cost ratios are due to a qual-
ity improvement program.
Quality Costs as a
Percent of Revenues
Year
Sales Revenues
1
S20,000,000
25%
22,000,000
22,000,000
22
3
18
4
24,000,000
14
Required:
1. Compute the quality costs for all four years. By how much did net income increase from Year
1 to Year 2 because of quality improvements? From Year 2 to Year 3? From Year 3 to Year 4?
2. The management of Gagnon Company believes it is possible to reduce quality costs to
2.5 percent of sales. Assuming sales will continue at the Year 4 level, calculate the additional
profit potential facing Gagnon. Is the expectation of improving quality and reducing costs
to 2.5 percent of sales realistic? Explain.
3. Assume that Gagnon produces one type of product, which is sold on a bid basis. In Years 1
and 2, the average bid was $400. In Year 1,…
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,...
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