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cost accounting
Questions and Answers of
Cost Accounting
Refer to the data in PE 18-7. Using the following additional information, compute the cost of materials to be used in the coming period. (Assume no beginning or ending direct materials
Refer to the data in PE 18-7. Using the following additional information, compute the direct labor cost.Direct labor hours per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Using the following information, compute total manufacturingoverhead.
Using the following information, compute the dollar amount of total purchases to be made in the coming period.Beginning inventory (in units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Which one of the following budgets do manufacturing firms and service firms have in common?a. Direct labor budgetb. Supplies budgetc. Production budgetd. Sales budgete. Direct materials budget
Diviney Auto Repair performs tune-ups on standard diesel engines. Using the following information, compute the budgeted gross revenue for the period.Gross revenue per tune-up . . . . . . . . . . . .
Jennifer Swartz works as an interior decorator for Modern Fashion Corporation. Her annual salary is $36,500. Of that amount, 20% is withheld for federal income taxes, 7.15% for state taxes, 7.65% for
George Marcus, a recent college graduate, has been hired by Taylor Corporation at a salary of $54,000 per year. In anticipation of his salary, George purchased a $20,000 new ski boat and will pay for
Fred’s Frames mass-produces and wholesales wooden picture frames at an average price of $5 per frame. Expected sales volumes over the first six months of 2010 are forecasted as follows:January . .
Eugene Electric makes and sells two kinds of portable music players'a CD player and an MP3 player. The sales forecasts for these players for the next four quarters are as follows:At the beginning of
Seagal Monitor Company manufactures three types of fl at panel LCD computer monitors: 15-inch, 17-inch, and 19-inch. The sales projections (in units) for 2010 and the first quarter of 2011
Shaver Bicycle Shop assembles and sells tricycles and bicycles. The frames are purchased from one supplier and the wheels from another. The following materials are required:Bicycles
Shanahan Corporation produces three types of media: CDs, DVDs, and double-layer DVDs. Shanahan purchases cases for the media from a firm in Mexico and purchases the labels from another supplier in
Annecy Chocolate Company makes and sells two kinds of candy: chocolate peanut bars and caramel bars. The production budget for the next three months for each of the bars is as follows:From
Sanford Shoe Company makes three shoe styles: loafers, work boots, and tennis shoes. The production budget for the next three months for each type of shoe is:From experience, Sanford's management
Linden Nursery grows and sells potted perennial plants, as well as ornamental and fruit trees. The owner of Linden Nursery has determined that variable overhead costs are largely a function of direct
Home Run Bat Company makes two types of baseball bats: aluminum and wood. During the past several years, management has kept accurate records of costs and resource requirements and has determined
Dr. Dawn Gifford is a new dentist specializing in treating children. Dr. Gifford has two primary sources of revenues:(1) Fees from regular dental work (checkups, cleanings, fillings, etc.) and(2)
Ian Fleming has just received a job offer of $55,000 salary per year plus overtime pay, which will amount to 10% of his salary. Ian estimates his living costs as follows:Required:1. Prepare a budget
Kathy Bourne is an advertising specialist for Success Advertising, Inc. Her annual salary is $42,000, of which 20% is withheld for federal income taxes, 7% for state income taxes, 7.65% for FICA
Six-Peak Pools in Montana is open May through September. It has the capability of serving approximately 600 patrons each day. With kids being in school, May and September are its slowest months and
Rocky Peak Company plans on the following collection pattern on its sales:Collected in month of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bannister Company makes and sells two products: leather and vinyl briefcases. The sales forecasts for these briefcases for the next four quarters are as follows:On January 1, Bannister has a stock of
Chandler Manufacturing Company makes two products: widgets and gidgets. The following information is available on May 1:a. Direct materials needed to make a widget: six units of X, three units of Y.
WorldWide Gym, Inc., makes weight-lifting equipment. It designs and manufactures its own weight plates, as well as home gym sets like workout towers, strength cages, and universal stations. Its
PRJ Candy Company makes and sells two kinds of candy bars: chocolate almond and coconut. During the past several years, the company has kept accurate records of costs and resource requirements and
The following information is available for Laurel Company, a wholesale company:Expected sales volume:October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
San Antonio Furniture Company makes two products: bookshelves and rocking chairs. The following information is available for September:a. Production requirements:b. Levels of inventories:Required:1.
The following information is available for Raleigh Company:Expected sales volume:Additional information:a. Each month 70% of sales are collected by month-end; the remaining 30% are collected in the
Lakeside Country Club has 425 members at the end of 2009 (including 20 new members who joined during the year). Each member has paid a $10,000 initiation fee and pays $100 a month in dues to remain
West Mountain Canning Company produces several food items, including certain tomato-based products. For about nine months during the year, the company is able to purchase tomatoes from various parts
Tip Top Company recently hired a new hot-shot CEO. Traditionally, the budgeting process at Tip Top has been pretty relaxed, with the executive vice president for sales providing “best-guess”
Is budgeting a necessary tool to help a fast-growing company plan and prepare for the future, or is budgeting too complicated and subjective for a growing company? A budget is a good tool for a
Participative Living, Inc. (a fictitious name), is a charitable organization in a medium-size community in Canada. It was organized by parents of disabled adults to provide accommodation and training
The late 1980s and early 1990s were a significant time for Eastern Europe. Several national boundaries and political ideologies, as well as the names of a few countries, changed during this period.
You are the management accountant for Skipper Enterprises, a manufacturer of screen doors. Recently, one of the commissioned salespersons (your close personal friend) confided in you that a problem
Describe the three sections of a cash budget.
How does a cash budget differ from a pro-forma income statement?
How are flexible budgets useful in controlling costs?
Using the following manufacturing costs per unit, prepare a flexible budget for the company at levels of production of 500, 600, and 700 units.Direct materials . . . . . . . . . . . . . . . . . . . .
Using the flexible budget created in PE 18-47 and the following actual data, prepare a flexible budget performance report.Actual number of units produced . . . . . . . . . . . . . . . . . . . . . . .
Using the following information, determine how much external funding will be necessary during the coming period (ifany).
Which one of the following statements regarding pro-forma financial statements is false?a. Pro-forma financial statements include an income statement, a balance sheet, and a statement of cash
Flannery Muffler Shop has budgeted to repair 10,000 mufflers during 2010. Each repair job takes 11⁄2 hours, and employees are paid $12 per hour. During 2010, Flannery actually repaired 9,425
Outdoors Unlimited operates a fishing lodge in northern Canada. The following cost information has been developed by the company’s accountant:Fixed costs:Salaries . . . . . . . . . . . . . . . . .
The management of Cook Memorial Hospital needs to prepare a cash budget for July 2010. The following information is available:a. The cash balance on July 1, 2010, is $300,000.b. Actual services
Medical Supplies, Inc., purchases first-aid items from large wholesalers. Medical Supplies then assembles and sells first-aid kits to businesses and contracts to maintain the first-aid kits. Using
Whitlock, Inc., buys hardware parts from various manufacturers and sells them to retail stores. Management is currently trying to prepare a cash budget for August and has the following information
Lily Craft, Inc., is a manufacturer of electric pencil sharpeners. The following is information regarding Lily Craft for the fiscal year-end, May 31, 2010:Assume a tax rate of 25%. Prepare a
The following information is available for Silbermond Company:Assume a tax rate of 30%. Prepare a pro-forma income statement for the coming year forSilbermond.
In getting ready to prepare the pro-forma statement of cash flows for May, the accountants at Karl’s Fish Hatchery have the following information available:Cash balance, April 30 . . . . . . . . .
Bel-Air, Inc., is a small engineering corporation that surveys land for development. The company has grown rapidly over the past few years, and management has to decide whether to hire new engineers
Wasatch Medical Clinic has three doctors on staff. The clinic's budget for 2010 is as follows:Required:1. Is this a static or flexible budget?2. Prepare a flexible budget showing expected income per
Peterson Management, Inc., is a small firm that sponsors time-management seminars in hotels throughout the country. It sponsors 20 two-day seminars during the year for a tuition fee of $250 per
Hare Manufacturing Company makes wax for automobiles. As part of overall planning, a cash budget is prepared quarterly each year. You have been asked to assist in preparing the cash budget for the
Jim Henry, owner of Henry’s Retail, is negotiating a $100,000, 15%, four-month loan from the Garfield County Bank, effective October 1, 2010. The bank loan officer has requested that Henry’s
Athletic World is a sporting goods store. The following data are for use in preparing its forecast of cash needs for June:a. Current assets (May 31):Cash . . . . . . . . . . . . . . . . . . . . . . .
Pun Corporation makes construction cranes. During the past few days, the company's accountants have been preparing the master budget for 2010. To date, they have gathered the following projected
The accountants at Eternity Department Store are preparing the pro-forma statement of cash flows for 2010. The following information is available:Actual cash balance, December 31, 2009 . . . . . . .
Unlike most financial statements filed with the SEC, pro-forma financial statements are often not prepared in accordance with generally accepted accounting principles. Many of the numbers included
Auditors are extremely reluctant to publish any projections of future financial performance for the companies they are auditing. Ernst & Young LLP obviously has made no such predictions in its audit
Many accounting systems are designed to collect financial information for the purpose of preparing financial statements. What problem does this create for an accountant who is asked to compile
What is a differential cost? Give an example of how differential costs are used by managers making product and process decisions.
Distinguish between variable costs and differential costs. Why is the distinction important?
Can a fixed cost be relevant to a decision? Explain.
What is a sunk cost? Why are sunk costs irrelevant in product and process decision making?
In deciding whether to replace an old asset with a new one, which of the following are differential revenues and costs?a. Cost of the new equipmentb. Resale value of the old equipmentc. Resale value
Why must business decisions be based on qualitative as well as quantitative information? Explain.
Explain what costs are generally relevant to make-or-buy decisions.
Explain why opportunity costs are not included in the accounting records.
What is the significance of idle capacity in determining the price of a special order?
If total manufacturing costs, including fixed manufacturing overhead, are larger than the price offered by a purchaser for a special order, the order should not be accepted because the profits of the
In deciding whether to exit or enter a market, what factors should be considered?
When should a segment (product, product line, division, etc.) be dropped? When should a segment be added?
Why is the contribution margin per unit of a critical resource more important than the contribution margin per unit of product in deciding which products to produce and sell?
What determines whether a product should be sold at the point of separation from a joint process or after further processing? (Assume that a decision is to be based solely on quantitative
“In setting normal selling prices, the price must be just high enough to cover variable costs and incremental fixed costs.” Do you agree? Explain.
Which one of the following statements is false?a. A sunk cost is one that has already been incurred.b. Differential costs can be eliminated in whole or in part by choosing one alternative over
Which one of the following would be considered a sunk cost?a. Variable cost of materials to build a new productb. Additional insurance for a new product linec. The total amount paid to purchase
St. Mary Mills, Inc. (SMM) uses high-quality looms to manufacture its textile products. SMM has decided to replace one of its looms and has researched the following cost data on replacement looms.
Casper Company is deciding whether to accept a special order. The company’s costs for the most recent year were as follows:Total variable costs . . . . . . . . . . . . . . . . . . . . . . . . . . .
At the end of a very mild winter, Alaska Apparel, Inc., has enough raw materials to produce 1,000 coats, and the materials can be used only for coats. The material is very sensitive and will not be
Kim Company currently makes a part used in the production of its best-selling product. Kim has the option to buy this same part from a supplier for $50 per part. Kim uses 800 of these parts each
Using the following information, decide whether Marks Video Games should close any of itsstores:
Refer to the data in PE 22-7. Mark’s Video Games’ main customer is considering whether to merge with the company (and its three stores). If the merger takes place, the efficiencies associated
Panaca Pork Products produces and sells ham, bacon, and sausage. For years, Panaca has sold only one version of its three products. However, Panaca is now considering selling
Using the following information, compute the contribution margin percentage for eachproduct.
Refer to the data in PE 22-10. Product A requires two units of the company’s critical resource, while Product B requires three units. Compute the contribution margin per unit of critical resource
Brett’s Guitars prices its products using a 40% markup on total variable cost to cover fixed costs and to provide a reasonable return on investment. Using the following data and the contribution
Refer to PE 22-12. Assume that Brett’s Guitars prices its products using a 30% markup on total manufacturing cost to cover selling and administrative expenses and to provide a reasonable return on
Gilliland Company provides maid services for local hotels. Last year, the firm acquired a cleaning machine for $50,000. The firm expected to use the machine for five years. However, this year a new,
Sturdy Chair Company manufactures wooden chairs. In producing the chairs, a great deal of scrap wood is created, which is currently used as fuel in a factory furnace. However, the company has the
You are the controller for Tippets Watch Company, a manufacturer of high-quality watches. The company has excess watches, which it has not been able to market through its own distribution outlets.To
Nelson Car Audio needs 500 amplifiers to complete this month’s car stereo shipment. If Nelson buys rather than makes the amplifiers, some of the facilities still cannot be used in another
Miller Manufacturing builds and markets personal computers for home and small business use. The company has been approached by an outside supplier offering to provide LCD monitors to the company for
Tricia Company has been manufacturing 9,000 units of part Y for its products. The unit cost for the part is as follows:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dr. Anderson, a local dentist, is considering reducing his office staff and outsourcing the management of his accounts receivable. Currently, he has an office manager and two part-time workers on
Pure Paint Company has been known for years for its two excellent interior wall paints: Nice & Smooth and Rich & Thick. The company has discovered that by processing Rich & Thick further it could
Colorado Steak Company (CSC) uses a joint process to manufacture three types of beef: roasts, steaks, and ground beef. Each product can be sold at the point of separation, or it can be processed
Swanton Company currently sells three products: desk calendars, pen sets, and paper-clip holders. The company is thinking of discontinuing the production and sale of paper-clip holders. However,
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