Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 18, Problem 7CE
Iliff, Inc., produces and sells two types of countertop ovens—the toaster oven and the convection oven. Budgeted and actual data for the two models are shown below.
Budgeted Amounts:
Actual Amounts:
Required:
- 1. Calculate the budgeted average unit contribution margin.
- 2. Calculate the contribution margin variance.
- 3. What if actual units sold of the convection oven decreased? How would that affect the contribution margin variance? What if actual units sold of the convection oven increased? How would that affect the contribution margin variance?
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The Soda Shoppe manufactures and sells three soft drinks: Kola, Lima, and Oranga. Budgeted and actual results for 2022 are as follows:
(Click the icon to view the budgeted data.)
(Click the icon to view the actual data.)
Required
1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance. (Calculate all variances in terms of contribution margin.) Show results for each product in your computations.
2. What inferences can you draw from the variances computed in requirement 1?
Requirement 1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance. (Calculate all variances in terms of contribution margin.) Show results for each product in your computations.
Begin by computing the actual contribution margins (CM). Then, compute the budgeted contribution margins in dollars for each product and in total for 2022.
Actual CM
Kola
Lima
Oranga
Total
Budgeted data
Kola
Lima
Oranga
Budget for…
These are True/False questions.
____ 6. If the total unit cost of manufacturing Product Y is currently $36 and the total unit cost after modifying the style is estimated to be $48, the differential cost for this situation is $12.
____ 7. A process whereby the effect of fluctuations in level of activity is built into the budgeting system is referred to as flexible budgeting.
____ 8. In an investment center, the manager has the responsibility and the authority to make decisions that affect not only costs and revenues, but also the plant assets invested in the center.
____ 9. The capital expenditures budget summarizes future plans for acquisition of fixed assets.
____ 10. The process by which management plans, evaluates, and controls long-term investment decisions involving fixed assets is called capital investment analysis.
Lynx Corp. manufactures windows and doors. Lynx has been using a standard cost system that bases cost and efficiency standards on Lynx’s historical long-run average performance. Suppose Lynx’s controller has engaged your team of management consultants to advise him or her whether Lynx should use some basis other than historical performance for setting standards.
Requirements
List the types of variances you recommend that Lynx compute (for example, direct materials cost variance for glass). For each variance, what specific standards would Lynx need to develop? In addition to cost standards, do you recommend that Lynx develop any nonfinancial standards?
There are many approaches to setting standards other than simply using long-run average historical costs and quantities.
a. List three alternative approaches that Lynx could use to set standards, and explain how Lynx could implement each alternative.
b. Evaluate each alternative method of setting standards, including the pros and cons…
Chapter 18 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 18 - Define price elasticity of demand. Give an example...Ch. 18 - What are the features of a perfectly competitive...Ch. 18 - How do you calculate the markup on cost of goods...Ch. 18 - Prob. 4DQCh. 18 - Prob. 5DQCh. 18 - Prob. 6DQCh. 18 - What is price discrimination? Is it legal?Ch. 18 - Prob. 8DQCh. 18 - Prob. 9DQCh. 18 - Suppose that Alpha Company has four product lines,...
Ch. 18 - How does absorption costing differ from variable...Ch. 18 - What are some advantages and disadvantages of...Ch. 18 - Prob. 13DQCh. 18 - Prob. 14DQCh. 18 - Describe the product life cycle. How do unit-level...Ch. 18 - Ventana Window and Wall Treatments Company...Ch. 18 - Kaune Food Products Company manufactures canned...Ch. 18 - Pattison Products, Inc., began operations in...Ch. 18 - Refer to Cornerstone Exercise 18.3. Required: 1....Ch. 18 - Saginaw Company is a garden products wholesale...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Iliff, Inc., produces and sells two types of...Ch. 18 - Refer to Cornerstone Exercise 18.6. Required: 1....Ch. 18 - Budgeted unit sales for the entire countertop oven...Ch. 18 - Prob. 10ECh. 18 - Prob. 11ECh. 18 - Prob. 12ECh. 18 - Prob. 13ECh. 18 - Many different businesses employ markup on cost to...Ch. 18 - Flaherty, Inc., has just completed its first year...Ch. 18 - During its first year of operations, Snobegon,...Ch. 18 - Prob. 17ECh. 18 - Otero Fibers, Inc., specializes in the manufacture...Ch. 18 - Data for Torleson Company are as follows:...Ch. 18 - Eastman, Inc., manufactures and sells three...Ch. 18 - Prob. 21ECh. 18 - The following information pertains to three...Ch. 18 - Thebes Company had the following information: What...Ch. 18 - Banwood Company has the following information for...Ch. 18 - Jasmine Companys expected sales were 2,000 units...Ch. 18 - Prob. 26PCh. 18 - Snyder Company produced 90,000 units during its...Ch. 18 - The following information pertains to Vladamir,...Ch. 18 - Jellison Company had the following operating data...Ch. 18 - San Mateo Optics, Inc., specializes in...Ch. 18 - Haysbert Company provides management services for...Ch. 18 - Sulert, Inc., produces and sells gel-filled ice...Ch. 18 - Prob. 33PCh. 18 - Dana Baird was manager of a new Medical Supplies...Ch. 18 - Bill Fremont, division controller and CMA, was...Ch. 18 - Dantrell Palmer has just been appointed manager of...Ch. 18 - Prob. 37PCh. 18 - Porter Insurance Company has three lines of...Ch. 18 - Porter Insurance Company has three lines of...Ch. 18 - Olin Company manufactures and distributes...Ch. 18 - Shannon, Inc., has two divisions. One produces and...Ch. 18 - Prob. 42P
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