CHAPTER 11
Capital Budgeting
11-A1 (15-25 min.) Answers are printed in the text at the end of the assignment material.
11-29 (10-15 min.)
1. The present value is $480,000 and the annual payments are an annuity, requiring
use of Table 2:
(a)$480,000 = annual payment × 11.2578
annual payment = $480,000 ÷ 11.2578 = $42,637
(b)$480,000 = annual payment × 9.4269
annual payment = $480,000 ÷ 9.4269 = $50,918
(c)$480,000 = annual payment × 8.0552
annual payment = $480,000 ÷ 8.0552 =$59,589
2. (a)$480,000 = annual payment × 8.5595
annual payment = $480,000 ÷ 8.5595 = $56,078
(b)$480,000 = annual payment × 7.6061
annual payment = $480,000 ÷ 7.6061 = $63,107
(c)$480,000 = annual payment × 6.8109
annual payment = $480,000 ÷ 6.8109 =$70,475
3. (a) Total payments= 30 × $50,918 = $1,527,540
Total interest paid= $1,527,540- $480,000 = $1,047,540
(b) Total payments= 15 × $63,107= $946,605
Total interest paid = $946,605 - $480,000 = $466,605
11-36 (10 min.)
Buy. The net present value is positive.
Initial outlay * $(21,000)
Present value of cash operating savings, from
12-year, 12% column of Table 2, 6.1944 × $5,000 30,972
Net present value $ 9,972
* The trade-in allowance really consists of a $5,000 adjustment of the selling
price and a bona fide $10,000 cash allowance for the old equipment. The
relevant amount is the incremental cash outlay, $21,000. The book value is
irrelevant.
11-39 (10-15 min.)
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1. NPV @ 10% = 10,000 × 3.7908 = $37,908 - $36,048 = $1,860 NPV @ 12% = 10,000 × 3.6048 = $36,048 - $36,048 = $0
NPV @ 14% = 10,000 × 3.4331 = $34,331 - $36,048 = $(1,717)
2.
The IRR is the interest rate at which NPV = $0; therefore, from requirement 1 we know that IRR = 12%.
3.
The NPV at the company’s cost of capital, 10%, is positive, so the project should be accepted.
4.
The IRR (12%) is greater than the company’s cost of capital (10%), so the project should be accepted. Note that the IRR and NPV models give the same decision.
11-46 (10-15 min.)
Annual addition to profit = 40% × $25,000 = $10,000.
1.
Payback period is $36,000 ÷ $10,000 = 3.6 years. It is not a good measure of profitability because it ignores returns beyond the payback period and it does not account for the time value of money.
2. NPV = $5,114. Accept the proposal because NPV is positive. Computation: NPV = ($10,000 × 4.1114) - $36,000
= $41,114 - $36,000 = $ 5,114
3. ARR = (Increase in average cash flow – Increase in depreciation) ÷ Initial
investment
= ($10,000 - $6,000) ÷ $36,000 = 11.1%
11-51 (30-35 min.)
1.
Annual Operating Cash Flows
Xerox
Cannon Difference Salaries $49,920(a) $41,600(b) $ 8,320 Overtime 1,728(c) -- 1,728 Repairs and maintenance 1,800 1,050 750
Toner, supplies, etc. 3,600
3,300 300 Total annual cash outflows $57,048 $45,950 $11,098
(a) ($ 8 × 40 hrs.) × 52 weeks × 3 employees = $320 × 52 × 3 = $49,920 (b) ($10 × 40 hrs.) × 52 weeks × 2 employees = $400 × 52 × 2 = $41,600 (c) ($12 × 4 hrs.) × 12 months × 3 machines = $ 48 × 12 × 3 = $ 1,728
Initial Cash Flows
Xerox
Cannon Difference Purchase of Cannon machines $ -- $50,000 $50,000
Sale of Xerox machines -- -3,000 -3,000 Training and remodeling -- 4,000 4,000 Total $ -- $51,000 $51,000
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EXHIBIT 11-50
All numbers are expressed in Mexican pesos.
2. 18% Total Sketch of Relevant Cash Flows
(in
thousands)
Present
PV
Factor Value 0 1 2 3 4 5
Cash operating savings:* .8475 83,902 99,000
108,900
78,212
.7182
72,904
119,790
.6086
67,966 131,769 .5158
.4371 63,356 144,946
Total
366,340
Income tax savings from
depreciation not changed
by inflation, see 1 3.1272 105,074 33,600 33,600 33,600 33,600 33,600
471,414
Total
Required outlay at time zero 1.0000 (420,000) (420,000)
Net present value 51,414
*Amounts are computed by multiplying (150,000 × .6) = 90,000 by 1.10, 1.10 2, 1.10 3, etc.
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PV Present
of
Value
$1.00
of
Cash
Flows Annual Cash Flows
Discounted
at 12% 0 1 2 3 4 5
T OTAL P ROJECT A PPROACH:
Cannon:
Init. cash outflow 1.0000 $ (51,000)
Oper. cash flows 3.6048 (165,641) (45,950) (45,950) (45,950) (45,950) (45,950)
Total $(216,641)
Xerox:
Oper. cash flows 3.6048 $(205,647) (57,048) (57,048) (57,048) (57,048) (57,048)
Difference in favor of
retaining Xerox $ (10,994)
I NCREMENTAL A PPROACH:
Initial investment 1.0000 $(51,000)
Annual operating
cash savings 3.6048 40,006 11,098 11,098 11,098 11,098 11,098
Net present value
of purchase $(10,994)
2. The Xerox machines should not be replaced by the Cannon equipment.
Net savings = (Present value of expenditures to retain Xerox machines) less (Present value of expenditures to
convert to Cannon machines)
= $205,647 - $216,641 = $(10,994)
3. a. How flexible is the new machinery? Will it be useful only for the presently intended functions, or can it be easily
adapted for other tasks that may arise over the next 5 years?
b. What psychological effects will it have on various interested parties?
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11-71 (60-90 min.)
This is a complex problem because it requires comparing three alternatives. It reviews Chapter 6 as well as covering several of the topics of Chapter 11. The following answer uses the total project approach. The total net future cash outflows are shown for each alternative.
1. Alternative A: Continue to manufacture the parts with the current tools.
Annual cash outlays
Variable cost, $92 × 8,000 $(736,000)
Fixed cost, 1/3 × $45 × 8,000 × .6 (72,000)
Tax savings, .4 × ($736,000 + $72,000) 323,200
After-tax annual cost $(484,800)
Present value, 3.6048 × $484,800 $(1,747,607)
PV of remaining tax savings on MACRS:
11.52% × $2,000,000 × .4 × .8929 82,290
5.76% × $2,000,000 × .4 × .7972 36,735
Total present value of costs, Alternative A $(1,628,582)
Alternative B: Purchase from outside supplier
Annual cash outlays
Purchase cost, $110 × 8,000 $(880,000)
Tax savings, $880,000 × .4 352,000
After-tax annual cost $(528,000)
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Present value, $528,000 × 3.6048 $(1,903,334)
Sale of old equipment:
Sales price $ 400,000
Book value [(11.52% + 5.76%) × $2,000,000] 345,600
Gain $ 54,400
Taxes @ 40% (21,760)
Total after-tax effect ($400,000 - $21,760) 378,240
Total present value of costs, Alternative B $(1,525,094)
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Alternative C: Purchase new tools
Investment $(1,800,000) Annual cash outlays
Variable cost, $73 × 8,000 $(584,000)
Fixed cost (same as A) (72,000)
Tax savings, .4 × ($584,000 + $72,000) 262,400
After-tax annual cost $(393,600)
Present value, $393,600 × 3.6048 (1,418,849)
Tax savings on new equipment* 579,217
Effect of disposal of new equipment
Sales price $ 500,000
Book value 0
Gain $500,000
Taxes @ 40% 200,000
Total after-tax effect $ 300,000
Present value, $300,000 × .5674 170,220
Effect of disposal of old equipment (see Alternative B) 378,240
Total present value of costs, Alternative C $(2,091,172)
* Using the MACRS schedule for tax depreciation, the depreciation rate for each year of a 3-year asset's life is shown in
Exhibit 11-6:
Depreciation Tax PV Present
Year Rate Savings Factor Value
1 33.33% .3333 × $1,800,000 × .40 = $239,976 .8929 $214,275
2 44.45% .4445 × 1,800,000 × .40 = 320,040 .7972 255,136
3 14.81% .1481 × 1,800,000 × .40 = 106,632 .7118 75,901
4 7.41% .0741 × 1,800,000 × .40 = 53,352 .635
5 33,905
Total present value of tax savings $579,217
Using Exhibit 11-7, we get .8044 × $1,800,000 × .4 = $579,168, which differs from $579,217 by a $49 rounding error.
The alternative with the lowest present value of cost is Alternative B, purchasing from the outside supplier.
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2. Among the major factors are (1) the range of expected volume (both large increases and decreases in volume make the
purchase of the parts relatively less desirable), (2) the reliability of the outside supplier, (3) possible changes in
material, labor, and overhead prices, (4) the possibility that the outside supplier can raise prices before the end of five years, (5) obsolescence of the products and equipment, and (6) alternate uses of available capacity (alternative uses make Alternative B relatively more desirable).
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CHAPTER 12 Cost Allocation
12-30 (10-15 min.) 1. Rate = [$2,500 + ($.05 × 100,000)] ÷ 100,000 = $.075 per copy Cost allocated to City Planning in August = $.075 × 42,000 = $3,150. 2. Fixed cost pool allocated as a lump sum depending on predicted usage:
To City Planning: (36,000 ÷ 100,000) × $2,500 = $900 per month
Variable cost pool allocated on the basis of actual usage: $.05 × number of copies Cost allocated to City Planning in August: $900 + ($.05 × 42,000) = $3,000. 3. The second method, the one that allocated fixed- and variable-cost pools separately, is preferable. It better recognizes
the causes of the costs. The fixed cost depends on the size of the photocopy machine, which is based on predicted usage and is independent of actual usage. Variable costs, in contrast are caused by actual usage.
Exhibit 12-34
Customer Type 1
Customer Type 2 Customer Type 3 Sales Gross price profit per margin Gross Gross Gross Product unit per unit Units Revenue profit Units Revenue profit Units Revenue profit
A $11.03
1
$ 4.14 200 $ 2,206 $ 828 2,200 $ 24,266 $ 9,108 500 $ 5,515 $ 2,070 B 20.47 4.09 100 2,047 409 1,200 24,564 4,908 3,000 61,410 12,270 C 51.38 10.28 50 2,569 514 400 20,552 4,112 5,000 256,900 51,400
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D 90.00 39.38 400 36,000 15,752 800 72,000 31,504 400 36,000 15,752
Total 750 $42,822 17,503
4,600 $141,382 49,632 8,900 $359,825 81,492 Cost to serve 7,368
45,193 87,439 Operating income $10,135 $
4,439 ($5,947) Customer gross margin percentage 40.9% 35.1% 22.6% Cost to serve percentage 17.2% 32.0% 24.3%
Customer operating income percentage 23.7%
3.1% (1.7%)
1
$32,000 ÷ 2,900 units; etc. The rounded numbers from the first two columns are used in subsequent calculations.
5. The chart below shows customer profitability for the three customer types and suggested strategies for profit improvement.
Grow business with this customer type by
focused sales efforts and quantity discounts.
Work with customers to lower
the cost to serve. Seek internal
process improvements to lower
those elements of the cost to
serve controllable by the
company.
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12-35 (15-20 min.)
of
1. Allocation
Costs
Gallons Weighting Joint
$300,000 $180,000
×
A 9,000 9/15
Solvent
Solvent B 6,000 6/15 × $300,000 120,000
15,000 $300,000
2. Relative Sales Allocation of
Costs
Value at Split-off* Weighting Joint
Solvent A $270,000 27/54 × $300,000 $150,000
Solvent B 270,000 27/54 × $300,000 150,000
$540,000 $300,000 * $30 × 9,000 and $45 × 6,000
12-42 (25-30 min.)
There a several ways to organize an analysis that provides product costs. We like to focus first on determining total activity-cost pools and activity cost per driver unit. Then, an analysis similar to the one shown in Exhibit 12-8 can be used.
Schedule a: Activity center cost pools
Resources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 2% $ 1,800 Assembly machines $247,000 × (400 ÷ 1,900) 52,000 Facilities management $95,000 × (400 ÷ 1,900) 20,000 Power $54,000 × (10 ÷ 90) 6,000
Total assigned cost $79,800
Cost per driver unit (setup) $79,800 ÷ 40 $ 1,995 Resources Supporting the Allocated Setup/Maintenance Activity Center Allocation Calculation Cost Assembly supervisors $90,000 × 98% $ 88,200 Assembly machines $247,000 × (1,500 ÷ 1,900) 195,000 Facilities management $95,000 × (1,500 ÷ 1,900) 75,000 Power $54,000 × (80 ÷ 90) 48,000
Total assigned cost $406,200
Cost per driver unit (machine hour) $406,200 ÷ 1,500 $ 270.80
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Exhibit 12-42 Contribution to cover other value-chain costs by product
Standard
Deluxe Custom Cost per Driver unit Driver Driver Driver Activity/Resource (Schedule a) Units Cost Units Cost Units Cost Setup/Maintenance $1,995 20 $ 39,900 12 $ 23,940 8 $ 15,960 Assembly $270.80 1,000 270,800 400 108,320 100 27,080 Parts 1,003,800 115,080 15,980
Direct labor 298,000
72,000 68,000 Total $1,612,500
$319,340 $127,020 Units 100,000 10,000 1,000 Cost per display $16.125 $31.934 $127.02
Selling price 20.000
50.000 250.00 Unit gross profit $ 3.875
$18.066 $122.98 Total gross profit $387,500
$180,660 $122,980
The total contribution of these products is $387,500 + $180,660 + $122,980 = $691,140.
12-43 (25-30 min.) See solution to problem 12-42.
12-55 (100 – 200 min.)
1. Exhibits 12-55A and 12-55B show the calculation of customer gross margin percentage and customer cost-to-serve percentage for the 4 customer types. Exhibit 12-55C shows a plot of customer gross margin percentage versus customer cost-to-serve percentage for the 4 customer types.
2. Suggested strategies for profit improvement for the 4 customer types follow.
?Customer type 1 - Mega stores. These stores have the lowest cost-to-serve.
Profitability can be improved by focusing on a better product mix. A quarter of
the sales (cases) to these stores are from bulk and singles products – both of
which have a negative gross margin. A shift in mix towards more regular and
fragile product types would improve profitability.
?Customer type 2 – Local small stores. These stores have a product mix that contains a substantial amount (32%) of the negative gross margin products. The
same change in sales focus that applies to mega stores can be applied to local
small stores.
But unlike mega stores, small stores are very costly to serve. From Exhibit 12-55 B, the largest single cost to serve local small stores is truck deliveries. The
average number of cases per order (the same as per truck delivery) is 6,000,000 ÷ 80,000 = 75. Compare this to mega stores that average 7,680,000 ÷ 32,000 = 240 cases per order (delivery). This is a significant factor causing the high cost-to-
serve.
For example, suppose that the average order size could be increased from 75,000 to 150,000 cases. If the total annual cases sold is unchanged (6,000,000), a total
of 40 orders, a 50% reduction, would be made. An estimate of the cost savings
and the impact on the cost-to-serve percentage can be made as follows:
Cost per Driver Unit Reduction in Driver Cost Savings
(Exhibit 12-55B) Units of 50% (000) Truck delivery $167.55 34,000 $5,696.70 Order processing 27.49 40,000 1,099.60 Regular scheduling 5.83 36,000 209.88 Expedited scheduling 19.44 4,000 77.76 Total cost savings (000) $7,083.94 Cost savings as a percent of revenue 24.9%
New cost-to-serve as a percent of revenue 60.1%
In addition to the above savings, other activities would also be impacted by the
reduction in orders such as customer service. So while the total impact of
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focusing on increasing order size can only be estimated, it is reasonable to expect dramatic cost savings from the current 85% of revenue.
Other factors that should be investigated include the high level of corporate
support and customer service.
?Customer type 3 – Local large stores. Local large stores generate $68,400 ÷ $136,230 = 50% of DSI’s total revenue and with a net margin of 58% - 47% = 11%. The key to local large store profitability is sales of a large percentage (80%) of regular product. The cost-to-serve percentage is 47%. This could be reduced as for customer type 2 by increasing the order size from the current level of
14,400,000 ÷ 120,000 = 120 cases per order. But a dramatic improvement
should not be expected. In general, local large stores are sustaining DSI’s
business and their loyalty should be cultivated.
?Customer type 4 – Specialty stores. Specialty stores have a low gross margin of 22% coupled with a very large cost-to-serve percent of 106%! Although these
stores do not account for a significant portion of DSI’s revenue the company
should rationalize their business. Several actions could be suggested. One is to charge a premium for all high-security products. The vast majority of these
products are sold to specialty stores with only marginal sales to mega and local small stores. Another action is to adopt a customer loyalty program based on
volume of sales. The list price of $7.25 per case would apply to customers with sales volumes less than a specified level. Most of DSI’s customers would qualify for discounts (similar to those currently existing) so prices would not be
significantly different. For specialty stores, prices would increase dramatically.
This may result in losing specialty-store business so DSI needs to decide is this is
a direction they wish to consider.
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Exhibit 12-55A (Units and dollars are in thousands.)
C u s t o m e r T y p e
Product
Regular Short Fragile Bulk High
Security Singles Total Gross Profit Percentage
Product mix percentage 60% 5% 5% 20% 5% 5% 100% Cases sold 4,608 384 384 1,536 384 384
7,680
Total Revenue
$ 21,888 $ 1,824
$ 1,824
$7,296
$ 1,824 $ 1,824 $36,480
Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $(1.44)
$ 0.54 $ (5.30)
1
Total Gross Profit
$ 15,114 $ 607 $ 1,052 $(2,212)$ 207 $(2,035)$12,733 35%
Product mix percentage 50% 5% 5% 30% 8% 2% 100% Cases sold
3,000 300 300 1,800 480 120 6,000 Total Revenue @ 4.75/case $ 14,250 $ 1,425 $ 1,425 $ 8,550 $ 2,280 $ 570 $28,500 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)
2
Total Gross Profit
$ 9,840 $ 474 $ 822 $(2,592) $ 259 $ (636)$ 8,167 29%
Product mix percentage 80% 0% 10% 10% 0% 0% 100%
Cases sold 11,520 -
1,440
1,440
-
-
14,400
Total Revenue @ 4.75/case $ 54,720 $ - $ 6,840 $ 6,840 $ - $ - $68,400
Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44) $ 0.54 $ (5.30)
3
Total Gross Profit
$ 37,786 $ - $ 3,946 $(2,074) $ - $ - $39,658 58%
Product mix percentage 10% 20% 0% 0% 70% 0% 100% Cases sold 60 120 - - 420
-
600
Total Revenue @ 4.75/case $ 285 $ 570 $ - $ - $ 1,995 $ - $ 2,850 Gross Profit per Case $ 3.28 $ 1.58 $ 2.74 $ (1.44)
$ 0.54 $ (5.30)4
Total Gross Profit $ 197
$ 190
$ -
$ -
$ 227
$ - $ 613
22%
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Exhibit 12-55B (Units and dollars are in thousands.)
Activity
O r d e r P r o c e s s i n g
C u s t o m e r S e r v i c e
O r d e r C h a n g e s
C o r p o r a t e S u p p o r t
R e g u l a r S c h e d u l i n g
E x p e d i t e d S c h e d u l i n g
S h i p p i n g
T r u c k D e l i v e r y
P a r c e l D e l i v e r y Cost Driver
O r d e r s
L a b o r H o u r s
N u m b e r o f C h a n g e s
L a b o r H o u r s
O r d e r s
O r d e r s
P a l l e t s
D e l i v e r i e s
D e l i v e r i e s
C u s t o m e r T y p e
Cost/Driver
Unit $27.49 $43.34$32.63$51.66$5.83 $19.44 $6.60 $167.55 $23.89Total Driver Units
32
18.7
3.2 - 29 3 416
25.6 1.6 Cost to Serve $879.68 $810.46
$104.42
-
$169.07
$58.32
$2,745.
6
$4,289.28
$38.22
$9,095.05Revenue (See Exhibit 12-55A) $36,480.0
01 Cost-to-Serve Percentage
24.9%
Driver Units 80 100 8 20 72 8 640 68 8
Cost to Serve $2,199.2 $4,334$261.04$1,033.2 $419.76$155.52$4,224$11,393.4$191.12$24,211.2
4Revenue (See Exhibit 12-55A) $28,500.0
2
Cost-to-Serve Percentage
85.0%
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Exhibit 12-55B (continued)
Activity
O r d e r P r o c e s s i n g
C u s t o m e r S e r v i c e
O r d e r C h a n g e s
C o r p o r a t e S u p p o r t
R e g u l a r S c h e d u l i n g
E x p e d i t e d S c h e d u l i n g
S h i p p i n g
T r u c k D e l i v e r y P a r c e l D e l i v e r y Cost Driver
O r d e r s
L a b o r H o u r s
N u m b e r o f C h a n g e s
L a b o r H o u r s
O r d e r s
O r d e r s
P a l l e t s
D e l i v e r i e s
D e l i v e r i e s
C u s t o m e r T y p e
Cost/Driver
Unit $27.49 $43.34$32.63
$51.66$5.83 $19.44 $6.60 $167.55 $23.89
Total
Driver Units 120 70 2.4 80 108 12 840 90 6
Cost to Serve
$3,298.8 $3,033.8 $78.31$4,132.8 $629.64 $233.28 $5,544$15,079.5$143.34$32,173.47Revenue (See Exhibit 12-55A) $68,400.0
3 Cost-to-Serve Percentage
47.0%
Driver Units 12 30 1.2 0 10 2 60 4.8 2.4
Cost to Serve $329.88
$1,300.
2 $39.16- $58.
3 $38.88 $396 $804.2
4 $57.34$3,023.99Revenue (See Exhibit 12-55A) $2,850.004 Cost-to-Serve Percentage
106.1%
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CUSTOMER PROFITABILITY
CT3, 47%, 58%
0%
10%
20%30%40%50%60%70%80%90%100%0%10%20%30%40%50%60%70%80%90%100%110%120
%
COST-TO-SERVE PERCENTAGE
G R O S S P R O F I T P E R C E N T A G E
Exhibit 12-55C
CHAPTER 7 COVERAGE OF LEARNING OBJECTIVES
Introduction to Budgets and Preparing the Master Budget 7-A1 (60-90 min.) 1. Exhibit I RAPIDBUY ELECTRONICS, INC. Mall of America Store Budgeted Income Statement For the Three Months Ending August 31, 20X8 Sales $300,000 Cost of goods sold (.62 × $300,000) 186,000 Gross profit $114,000 Operating expenses: Salaries, wages, commissions $60,000 Other expenses 12,000 Depreciation 1,500 Rent, taxes and other fixed expenses 33,000 106,500 Income from operations. $ 7,500 Interest expense* 1,338 Net income $ 6,162 * See schedule g for calculation of interest.
RAPIDBUY ELECTRONICS, INC. Mall of America Store Cash Budget For the Three Months Ending August 31, 20X8 June July August Beginning cash balance $ 5,800 $ 5,600 $ 5,079 Minimum cash balance desired 5,000 5,000 5,000 (a) Available cash balance $ 800 $ 600 $ 79 Cash receipts & disbursements: Collections from customers (schedule b) $ 75,200 $121,400 $ 90,800 Payments for merchandise (schedule d) (86,800) (49,600) (49,600) Fixtures (purchased in May) (11,000) - - Payments for operating expenses (schedule f) (44,600) (30,200) (30,200) (b) Net cash receipts & disbursements $(67,200) $ 41,600 $ 11,000 Excess (deficiency) of cash before financing (a + b) (66,400) 42,200 11,079 Financing: Borrowing, at beginning of period $ 67,000$ - $ - Repayment, at end of period - (41,000) (10,000) Interest, 10% per annum - (1,121)* (217)* (c) Total cash increase (decrease) from financing $ 67,000 $(42,121) $(10,217) (d) Ending cash balance (beginning balance + b + c) $ 5,600 $ 5,079 $ 5,862 * See schedule g
CHAPTER 4 COVERAGE OF LEARNING OBJECTIVES
CHAPTER 4 Cost Management Systems and Activity-Based Costing 4-A1 (20-30 min.) See Table 4-A1 on the following page. 4-A2 (25-30 min.) 1. Merchandise Inventories, 1,000 devices @ $97 $97,000 2. Direct materials inventory $ 40,000 Work-in-process inventory 0 Finished goods inventory 97,000 Total inventories $137,000 3. NILE ELECTRONICS PRODUCTS Statement of Operating Income For the Year Ended December 31, 20X9 Sales (9,000 units at $170) $1,530,000 Cost of goods sold: Beginning inventory $ 0 Purchases 970,000 Cost of goods available for sale $ 970,000 Less ending inventory 97,000 Cost of goods sold (an expense) 873,000
Gross margin or gross profit $ 657,000 Less other expenses: selling & administrative costs 185,000 Operating income (also income before taxes in this example) $ 472,000
CHAPTER 5 COVERAGE OF LEARNING OBJECTIVES
CHAPTER 5 Relevant Information for Decision Making with a Focus on Pricing Decisions 5-A1 (40-50 min.) 1. INDEPENDENCE COMPANY Contribution Income Statement For the Year Ended December 31, 2009 (in thousands of dollars) Sales $2,200 Less variable expenses Direct material $400 Direct labor 330 Variable manufacturing overhead (Schedule 1) 150 Total variable manufacturing cost of goods sold $880 Variable selling expenses 80 Variable administrative expenses 25 Total variable expenses 985 Contribution margin $ 1,215 Less fixed expenses: Fixed manufacturing overhead (Schedule 2) $345 Selling expenses 220 Administrative expenses 119 Total fixed expenses 684 Operating income $ 531
亨格瑞管理会计英文第15版练习答案07 CHAPTER 7 COVERAGE OF LEARNING OBJECTIVES CRITICAL CASES, FUNDA- THINKING EXCEL, MENTAL EXERCISES COLLAB. & ASSIGNMENT AND INTERNET LEARNING OBJECTIVE MATERIAL EXERCISES PROBLEMS EXERCISES LO1: Explain how budgets A1,B1 facilitate planning and coordination. LO2: Anticipate possible 25 40 human relations problems caused by budgets. LO3: Explain potentially 22 39, 40 dysfunctional incentives in the budget process. LO4: Explain the difficulties 23 42 49 of sales forecasting. LO5: Explain the major A1,B1 24,26 39 features and advantages of a master budget. LO6: Follow the principal A1,B1 29 40 43,45 steps in preparing a master budget. LO7: Prepare the operating A1,B1 28,29,30,31 40 43,45,46,48 budget and the supporting schedules.
CHAPTER 11 Capital Budgeting 11-A1 (15-25 min.) Answers are printed in the text at the end of the assignment material. 11-29 (10-15 min.) 1. The present value is $480,000 and the annual payments are an annuity, requiring use of Table 2: (a)$480,000 = annual payment × 11.2578 annual payment = $480,000 ÷ 11.2578 = $42,637 (b)$480,000 = annual payment × 9.4269 annual payment = $480,000 ÷ 9.4269 = $50,918 (c)$480,000 = annual payment × 8.0552 annual payment = $480,000 ÷ 8.0552 =$59,589 2. (a)$480,000 = annual payment × 8.5595 annual payment = $480,000 ÷ 8.5595 = $56,078 (b)$480,000 = annual payment × 7.6061 annual payment = $480,000 ÷ 7.6061 = $63,107 (c)$480,000 = annual payment × 6.8109 annual payment = $480,000 ÷ 6.8109 =$70,475 3. (a) Total payments= 30 × $50,918 = $1,527,540 Total interest paid= $1,527,540- $480,000 = $1,047,540 (b) Total payments= 15 × $63,107= $946,605 Total interest paid = $946,605 - $480,000 = $466,605 11-36 (10 min.) Buy. The net present value is positive. Initial outlay * $(21,000) Present value of cash operating savings, from 12-year, 12% column of Table 2, 6.1944 × $5,000 30,972 Net present value $ 9,972 * The trade-in allowance really consists of a $5,000 adjustment of the selling price and a bona fide $10,000 cash allowance for the old equipment. The relevant amount is the incremental cash outlay, $21,000. The book value is irrelevant. 11-39 (10-15 min.) Copyright ?2011 Pearson Education 1
CHAPTER 6 COVERAGE OF LEARNING OBJECTIVES
LO6: Decide A4,B5 40 57,59 whether to keep or replace equipment. 26,39,41 52,58,64 71 LO7: Identify irrelevant and misspecified costs. B6 43 60 LO8: Discuss how performance measures can affect decision making. CHAPTER 6 Relevant Information and Decision Making With a Focus on Operational Decisions 6-A1 (20 min) 1. The key to this question is what will happen to the fixed overhead costs if production of the boxes is discontinued. Assume that all $60,000 of fixed costs will continue. Then, Sunshine State will lose $20,000 by purchasing the boxes from Weyerhaeuser: Payment to Weyerhaeuser, 80,000 × $2.10$168,000 Costs saved, variable costs 148,000 Additional costs $ 20,000 2. Some subjective factors are: Might Weyerhaeuser raise prices if Sunshine State closed down its box-making facility? Will sub-contracting the box production affect the quality of the boxes? Is a timely supply of boxes assured, even if the number needed changes? Does Sunshine State sacrifice proprietary information when disclosing the box specifications to Weyerhaeuser? 3. In this case the fixed costs are relevant. However, it is not the depreciation on the old equipment that is relevant. It is
CHAPTER 7 COVERAGE OF LEARNING OBJECTIVES CHAPTER 7 Introduction to Budgets and Preparing the Master Budget 7-A1 (60-90 min.)
1. Exhibit I RAPIDBUY ELECTRONICS, INC. Mall of America Store Budgeted Income Statement For the Three Months Ending August 31, 20X8 Sales $300,000 Cost of goods sold (.62 × $300,000) 186,000 Gross profit $114,000 Operating expenses: Salaries, wages, commissions $60,000 Other expenses 12,000 Depreciation 1,500 Rent, taxes and other fixed expenses 33,000 106,500 Income from operations. $ 7,500 Interest expense* 1,338 Net income $ 6,162 * See schedule g for calculation of interest. Exhibit II RAPIDBUY ELECTRONICS, INC. Mall of America Store Cash Budget For the Three Months Ending August 31, 20X8 JuneJulyAugust Beginning cash balance $ 5,800 $ 5,600 $ 5,079 Minimum cash balance desired 5,000 5,000 5,000 (a) Available cash balance $ 800$ 600$ 79 Cash receipts & disbursements: Collections from customers (schedule b) $ 75,200 $121,400 $ 90,800 Payments for merchandise (schedule d) (86,800) (49,600) (49,600) Fixtures (purchased in May) (11,000) - - Payments for operating expenses (schedule f) (44,600) (30,200) (30,200) (b) Net cash receipts & disbursements $(67,200) $ 41,600 $ 11,000 Excess (deficiency) of cash before financing (a + b) (66,400) 42,200 11,079 Financing: Borrowing, at beginning of period $ 67,000 $ - $ - Repayment, at end of period - (41,000) (10,000) Interest, 10% per annum - (1,121)* (217)*
管理会计key terms Chapter1 1、activity-based management 作业管理 2、certified internal auditor（CIA）注册内部审计师 3、Certified management accountant（CMA）注册管理会计师 4、certified public accountant（CPA）注册会计师 5、continuous improvement 持续改进 6、controller 管理员 7、controlling 控制 8、customer value 客户价值 9、decision making决策 10、electronic business（e-business）电子商务 11、electronic commerce（e-commerce）电子商务 12、employee empowerment 员工激励 13、ethical behavior 道德行为 14、external linkages 外部联系 15、feedback反馈 16、financial accounting information system 财务会计信息系统 17、industrial value chain 产业价值链 18、internal linkages外部联系 19、internal value chain内部价值链 20、line position 直接职能 21、management accounting information system管理会计信息系统 22、performance reports 业绩报告 23、planning计划 24、postpurchase costs 售后服务成本 25、staff positon间接职能 26、strategic cost management 战略成本管理 27、strategic decision making 战略决策 28、supply chain management 供应链管理 29、total product 总产量 30、total quality management 全面质量管理 31、treasurer 财务主管 Chapter2 1、absorption-costing（full-costing）income完全成本法收益 2、activity 作业 3、activity-based costing（ABC）作业成本法 4、activity-based management（ABM）作业成本管理 5、activity-based management（ABM）accounting systerms作业成本管理会计系统
CHAPTER 3 COVERAGE OF LEARNING OBJECTIVES
CHAPTER 3 Measurement of Cost Behavior 3-A1 (20-25 min.) Some of these answers are controversial, and reasonable cases can be built for alternative classifications. Class discussion of these answers should lead to worthwhile disagreements about anticipated cost behavior with regard to alternative cost drivers. 1. (b) Discretionary fixed cost. 2. (e) Step cost. 3. (a) Purely variable cost with respect to revenue. 4. (a) Purely variable cost with respect to miles flown. 5. (d) Mixed cost with respect to miles driven. 6. (c) Committed fixed cost. 7. (b) Discretionary fixed cost. 8. (c) Committed fixed cost. 9. (a) Purely variable cost with respect to cases of 7-Up. 10. (b) Discretionary fixed cost. 11. (b) Discretionary fixed cost. 3-A2 (25-30 min.) 1. Support costs based on 60% of the cost of materials: Sign A Sign B Direct materials cost $400 $200 Support cost (60% of materials cost) $240 $120 Support costs based on $50 per power tool operation: Sign A Sign B Power tool operations 3 6 Support cost $150 $300 2. If the activity analysis is reliable, by using the current method, Evergreen Signs is predicting too much cost for signs that use few power tool operations and is predicting too little cost for signs that use many power tool operations. As a result the company could be losing jobs that require few power tool operations because its bids are too high -- it could afford to bid less on these jobs. Conversely, the company could be getting too many jobs that require many power tool operations, because its bids are too low -- given what the "true" costs will be, the company cannot afford these jobs at those prices. Either way, the sign business could be more profitable if the owner better understood and used activity analysis. Evergreen Signs would be advised to adopt the activity- analysis recommendation, but also to closely monitor costs to see if the activity- analysis predictions of support costs are accurate.
CHAPTER 3 COVERAGE OF LEARNING OBJECTIVES
CHAPTER 3 Measurement of Cost Behavior 3-A1 (20-25 min.) Some of these answers are controversial, and reasonable cases can be built for alternative classifications. Class discussion of these answers should lead to worthwhile disagreements about anticipated cost behavior with regard to alternative cost drivers. 1. (b) Discretionary fixed cost. 2. (e) Step cost. 3. (a) Purely variable cost with respect to revenue. 4. (a) Purely variable cost with respect to miles flown. 5. (d) Mixed cost with respect to miles driven. 6. (c) Committed fixed cost. 7. (b) Discretionary fixed cost. 8. (c) Committed fixed cost. 9. (a) Purely variable cost with respect to cases of 7-Up. 10. (b) Discretionary fixed cost. 11. (b) Discretionary fixed cost. 3-A2 (25-30 min.) 1. Support costs based on 60% of the cost of materials: Sign A Sign B Direct materials cost $400 $200 Support cost (60% of materials cost) $240 $120 Support costs based on $50 per power tool operation: Sign A Sign B