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cost accounting

Cost Accounting A Managerial Emphasis 14th Edition Charles T. Horngren, Srikant M.Dater, George Foster, Madhav - Solutions

Choosing cost drivers, activity-based costing, activity-based management. Pumpkin Bags (PB) is a designer of high quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. The company uses these designs for a
ABC, health care. Uppervale Health Center runs two programs: drug addict rehabilitation and aftercare (counseling and support of patients after release from a mental hospital). The center's budget for 2010 follows: Muriel Clayton, the director of the center, is keen on determining the cost of
ABC, implementation, ethics. (CMA, adapted) Applewood Electronics, a division of Elgin Corporation, manufactures two large-screen television models: the Monarch, which has been produced since 2006 and sells for $900, and the Regal, a newer model introduced in early 2009 that sells for $1,140. Based
In 2011, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for $290 each and 16,400 lead tests for $240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related
Xerxes Manufacturing Company manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $2 per skein and 0.8 gallons of dye at a cost of $6 per gallon. All other materials are indirect. At the beginning of the year Xerxes has an
Family Supermarkets (FS) has a kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2011. Each successive month, the budgeted cost-driver rate decreases by 0.4% relative to the preceding month. So, for example, February’s budgeted cost-driver rate is
Consider each of the following independent situations for Anderson Forklifts. Anderson manufactures and sells forklifts. The company also contracts to service both its own and other brands of forklifts. Anderson has a manufacturing plant, a supply warehouse that supplies both the manufacturing
Game Guys is a retail store selling video games. Sales are uniform for most of the year, but pick up in June and December, both because new releases come out and because games are purchased in anticipation of summer or winter holidays. Game Guys also sells and repairs game systems. The forecast of
Logo Specialties manufactures, among other things, woolen blankets for the athletic teams of the two local high schools. The company sews the blankets from fabric and sews on a logo patch purchased from the licensed logo store site. The teams are as follows: Knights, with red blankets and the
DryPool T-Shirt Factory manufactures plain white and solid colored T-shirts. Inputs include the following: Additionally, the colored T-shirts require 3 ounces of dye per shirt at a cost of $0.20 per ounce. The shirts sell for $15 each for white and $20 each for colors. The company expects to sell
Barney Briggs owns a restaurant franchise that is part of a chain of “southern homestyle” restaurants. One of the chain’s popular breakfast items is biscuits and gravy. Central Warehouse makes and freezes the biscuit dough, which is then sold to the franchise stores; there, it is thawed and
Pet Luggage Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Pet Luggage accounts for direct materials using a
Refer to the information in Problem 6-33. Assume the following: Pet Luggage (PL) does not make any sales on credit. PL sells only to the public, and accepts cash and credit cards; 90% of its sales are to customers using credit cards, for which PL gets the cash right away less a 2% transaction fee.
On December 1, 2011, the Itami Wholesale Co. is attempting to project cash receipts and disbursements through January 31, 2012. On this latter date, a note will be payable in the amount of $100,000. This amount was borrowed in September to carry the company through the seasonal peak in November and
Follete Inc. operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not 1:1. Follette Inc. is planning its annual budget for fiscal year 2011. Information for 2011 follows: Input
Delma Company manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets, and usually provide information about input quantities for
Jag Meerkat owns three upscale hair salons: Hair Suite I, II, and III. Each of the salons has a manager and 10 stylists who rent space in the salons as independent contractors and who pay a fee of 10% of each week’s revenue to the salon as rent. In exchange they get to use the facility and
Borkenstick makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth covered wooden soles. Borkenstick is preparing its budget for June 2012, and has estimated sales based on past experience. Other
How can the sales-volume variance be decomposed further to obtain useful information?
Flexible-budget and sales volume variances, market-share and market-size variances. Marron, Inc., produces the basic fillings used in many popular frozen desserts and treats'vanilla and chocolate ice creams, puddings, meringues, and fudge. Marron uses standard costing and carries over no inventory
The Monroe Corporation sets monthly standard costs using a continuous-improvement approach. In January 2012, the standard direct material cost is $45 per unit and the standard direct manufacturing labor cost is $15 per unit. Due to more efficient operations, the standard quantities for February
Rhaden Company produces sweat-resistant headbands for joggers. Information pertaining to Rhaden's operations for May 2011 follows:br> Required1. Compute the sales volume variance for May 2011.2. Compute the market-share and market-size variances for May 2011.3. Comment on possible reasons for
Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size. Each unit requires the same amount of resources. The following information is from the static budget for 2011: Expected production and sales 6,000 units Direct materials 72,000 pounds Direct
Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static budget and actual results for June 2011 are provided next. Stevie has one employee who has been with him for all 10 years that he has been in business. In addition, at any given time he also employs two other less
Possible causes for price and efficiency variances You are a student preparing for a job interview with a Fortune 100 consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who
Katharine Stanley is the owner of Better Bikes, a company that produces high quality cross-country bicycles. Better Bikes participates in a supply chain that consists of suppliers, manufacturers, distributors, and elite bicycle shops. For several years Better Bikes has purchased titanium from
Morro Bay Surfboards manufactures fiberglass surfboards. The standard cost of direct materials and direct manufacturing labor is $225 per board. This includes 30 pounds of direct materials, at the budgeted price of $3 per pound, and 9 hours of direct manufacturing labor, at the budgeted rate of $15
On May 1, 2012, Bovar Company began the manufacture of a new paging machine known as Dandy. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Dandy follow: Direct materials (3 lb. at $5 per lb) $15.00 Direct manufacturing labor (1/2
Shayna’s Smart Shawls, Inc., is a small business that Shayna developed while in college. She began hand-knitting shawls for her dorm friends to wear while studying. As demand grew, she hired some workers and began to manage the operation. Shayna’s shawls require wool and labor. She experiments
You are a new junior accountant at Clearview Corporation, maker of lenses for eyeglasses. Your company sells generic-quality lenses for a moderate price. Your boss, the Controller, has given you the latest month's report for the lens trade association. This report includes information related to
Sonnet, Inc., has the following budgeted standards for the month of March 2011:Average selling price per diskette $ 6.00Total direct material cost per diskette $ 1.50Direct manufacturing laborDirect manufacturing labor cost per hour $ 12.00Average labor productivity rate (diskettes per hour)
Iceland, Inc., is a fast-growing ice-cream maker. The company's new ice-cream flavor, Cherry Star, sells for $9 per pound. The standard monthly production level is 300,000 pounds, and the standard inputs and costs are as follows: Molly Cates, the CFO, is disappointed with the results for May
Stuckey, Inc., manufactures industrial 55 gallon drums for storing chemicals used in the mining industry. The body of the drums is made from aluminum and the lid is made of chemical resistant plastic. Andy Jorgenson, the controller, is becoming increasingly disenchanted with Stuckey's standard
The Solutions Corporation is a manufacturer of centrifuges. Fixed and variable manufacturing overheads are allocated to each centrifuge using budgeted assembly-hours. Budgeted assembly time is two hours per unit. The following table shows the budgeted amounts and actual results related to overhead
Rozema, Inc., produces chemicals for large biotech companies. It has the following data for manufacturing overhead costs during August 2013: Use F for favorable and U forunfavorable:
The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine-hours of variable manufacturing overhead at $8 per hour and 6 machine-hours of fixed
The Singapore division of a Canadian telecommunications company uses standard costing for its machine-paced production of telephone equipment. Data regarding production during June are as follows: Required1. Prepare an analysis of all manufacturing overhead variances. Use the 4-variance analysis
Furniture, Inc., specializes in the production of futons. It uses standard costing and flexible budgets to account for the production of a new line of futons. For 2011, budgeted variable overhead at a level of 3,600 standard monthly direct labor-hours was $43,200; budgeted total overhead at 4,000
David James is a cost accountant and business analyst for Doorknob Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct cost categories: direct materials and direct manufacturing labor. James feels that manufacturing overhead is most closely related to material
Journal entries (continuation of 8-29)Required1. Prepare journal entries for variable and fixed manufacturing overhead (you will need to calculate the various variances to accomplish this).2. Overhead variances are written off to the Cost of Goods Sold (COGS) account at the end of the fiscal year.
Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2012, budgeted fixed manufacturing overhead cost was $17,000,000. Budgeted variable manufacturing overhead
Consider the following two situations'cases A and B' independently. Data refer to operations for April 2012. For each situation, assume standard costing. Also assume the use of a flexible budget for control of variable and fixed manufacturing overhead based on machine-hours. Fill in the blanks
Sarah Beth's Art Supply Company produces various types of paints. Actual direct manufacturing labor hours in the factory that produces paint have been higher than budgeted hours for the last few months and the owner, Sarah B. Jones, is concerned about the effect this has had on the company's cost
Pointe's Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable direct batch-level costs and fixed batch level overhead costs. The following
Jo Nathan Publishing Company specializes in printing specialty textbooks for a small but profitable college market. Due to the high setup costs for each batch printed, Jo Nathan holds the book requests until demand for a book is approximately 500. At that point Jo Nathan will schedule the setup and
Supreme Canine Products produces high quality dog food distributed only through veterinary offices. To ensure that the food is of the highest quality and has taste appeal, Supreme has a rigorous inspection process. For quality control purposes, Supreme has a standard based on the pounds of food
Eco-Green Company manufactures cloth shopping bags that it plans to sell for $5 each. Budgeted production and sales for these bags for 2011 is 800,000 bags, with a standard of 400,000 machine hours for the whole year. Budgeted fixed overhead costs are $470,000, and variable overhead cost is $1.60
Zeller Company uses standard costing. The company has two manufacturing plants, one in Nevada and the other in Ohio. For the Nevada plant, Zeller has budgeted annual output of 4,000,000 units. Standard labor hours per unit are 0.25, and the variable overhead rate for the Nevada plant is $3.25 per
Variable versus absorption costing The Zwatch Company manufactures trendy, high-quality moderately priced watches. As Zwatch’s senior financial analyst, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare Zwatch’s 2012 income statement. The
Absorption versus variable costing Grunewald Company manufacturers a professional grade vacuum cleaner and began operations in 2011. For 2011, Grunewald budgeted to produce and sell 20,000 units. The company had no price, spending, or efficiency variances, and writes off production-volume variance
Variable and absorption costing, sales, and operating-income changes Helmetsmart, a three year-old company, has been producing and selling a single type of bicycle helmet. Helmetsmart uses standard costing. After reviewing the income statements for the first three years, Stuart Weil, president of
Denominator-level problem Thunder Bolt, Inc., is a manufacturer of the very popular G36 motorcycles. The management at Thunder Bolt has recently adopted absorption costing and is debating which denominator-level concept to use. The G36 motorcycles sell for an average price of $8,200. Budgeted fixed
Variable and absorption costing and breakeven points Mega-Air, Inc., manufactures a specialized snowboard made for the advanced snowboarder. Mega-Air began 2011 with an inventory of 240 snowboards. During the year, it produced 900 boards and sold 995 for $750 each. Fixed production costs were
Variable costing versus absorption costing The Mavis Company uses an absorption-costing system based on standard costs. Total variable manufacturing cost, including direct material cost, is $3 per unit; the standard production rate is 10 units per machine-hour. Total budgeted and actual fixed
Variable costing and absorption costing, the All-Fixed Company (R. Marple, adapted) It is the end of 2011. The All-Fixed Company began operations in January 2010. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output. The All-Fixed Company
Effects of differing production levels on absorption costing income: University Press produces textbooks for college courses. The company recently hired a new editor, Leslie White, to handle production and sales of books for an introduction to accounting course. Leslie’s compensation depends on
Denominator-level choices, changes in inventory levels, effect on operating income. Koshu Corporation is a manufacturer of computer accessories. It uses absorption costing based on standard costs and reports the following data for 2011: There are no price, spending, or efficiency variances.
Effects of denominator-level choice. Carlisle Company is a manufacturer of precision surgical tools. It initiated standard costing and a flexible budget on January 1, 2011. The company president, Monica Carlisle, has been pondering how fixed manufacturing overhead should be allocated to products.
Downward demand spiral Spirelli Company is about to enter the highly competitive personal electronics market with a new optical reader. In anticipation of future growth, the company has leased a large manufacturing facility, and has purchased several expensive pieces of equipment. In 2011, the
Absorption costing and production volume variance -- alternative capacity bases Earth’s Best Light (EBL), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, EBL has decided to evaluate
Operating income effects of denominator-level choice and disposal of production-volume variance (continuation of 9-37)Required1. If EBL sells all 250,000 bulbs produced, what would be the effect on operating income of using each type of capacity as a basis for calculating manufacturing cost per
Cost allocation, downward demand spiral. Cayzer Associates operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,300,000 meals a year. In 2012, based on estimates
Cost allocation, responsibility accounting, ethics (continuation of 9-39). In 2013, only 760,500 Mealman meals were produced and sold to the hospitals. Smith suspects that hospital controllers had systematically inflated their 2013 meal estimates.Required1. Recall that Mealman uses the
Mile-High Foods, Inc., was formed in March 2011 to provide prepackaged snack boxes for a new low cost regional airline beginning on April 1. The company has just leased warehouse space central to the two airports to store materials. To move packaged materials from the warehouses to the airports,
Capital budget methods, no income taxes Riverbend Company runs hardware stores in a tristate area. Riverbend’s management estimates that if it invests $250,000 in a new computer system, it can save $67,000 in annual cash operating costs. The system has an expected useful life of eight years and
Comparison of projects, no income taxes (CMA, adapted) New Bio Corporation is a rapidly growing biotech company that has a required rate of return of 10%. It plans to build a new facility in Santa Clara County. The building will take two years to complete. The building contractor offered New Bio a
New equipment purchase, income taxes Innovation, Inc., is considering the purchase of a new industrial electric motor to improve efficiency at its Fremont plant. The motor has an estimated useful life of five years. The estimated pretax cash flows for the motor are shown in the table that follows,
Selling a plant, income taxes (CMA, adapted) The Crossroad Company is an international clothing manufacturer. Its Santa Monica plant will become idle on December 31, 2011. Peter Laney, the corporate controller, has been asked to look at three options regarding the plant.Option 1: The plant, which
DCF, sensitivity analysis, no income taxes. (CMA, adapted) Whimsical Corporation is an international manufacturer of fragrances for women. Management at Whimsical is considering expanding the product line to men’s fragrances. From the best estimates of the marketing and production managers,
NPV, IRR, and sensitivity analysis Crumbly Cookie Company is considering expanding by buying a new (additional) machine that costs $62,000, has zero terminal disposal value, and has a 10-year useful life. It expects the annual increase in cash revenues from the expansion to be $28,000 per year. It
Payback methods, even and uneven cash flows You have the opportunity to expand your business by purchasing new equipment for $159,000. The equipment has a useful life of nine years. You expect to incur cash fixed costs of $96,000 per year to use this new equipment, and you expect to incur cash
Replacement of a machine, income taxes, sensitivity. (CMA, adapted) The Smacker Company is a family-owned business that produces fruit jam. The company has a grinding machine that has been in use for three years. On January 1, 2011, Smacker is considering the purchase of a new grinding machine.
NPV and AARR, goal-congruence issues Jack Garrett, a manager of the plate division for the Marble Top Manufacturing Company, has the opportunity to expand the division by investing in additional machinery costing $420,000. He would depreciate the equipment using the straight-line method, and
Recognizing cash flows for capital investment projects, NPV Unbreakable Manufacturing manufactures over 20,000 different products made from metal, including building materials, tools, and furniture parts. The manager of the furniture parts division has proposed that his division expand into bicycle
NPV, inflation and taxes Best-Cost Foods is considering replacing all 10 of its old cash registers with new ones. The old registers are fully depreciated and have no disposal value. The new registers cost $749,700 (in total). Because the new registers are more efficient than the old registers,
Net present value, Internal Rate of Return, Sensitivity Analysis Sally wants to purchase a Burgers-N-Fries franchise. She can buy one for $500,000. Burgers-N-Fries headquarters provides the following information:Estimated annual cash revenues$280,000Typical annual cash operating expenses
NPV, Relevant costs, Income taxes Phish Corporation is the largest manufacturer and distributor of novelty ice creams across the East Coast. The company’s products, because of their perishable nature, require careful packaging and transportation. Phish uses a special material called ICI that
Evaluating management control systems, balanced scorecard Adventure Parks Inc. (API) operates ten theme parks throughout the United States. The company’s slogan is “Name Your Adventure,” and its mission is to offer an exciting theme park experience to visitors of all ages. API’s corporate
Benefits and costs of decentralization Jackson Markets, a chain of traditional supermarkets, is interested in gaining access to the organic and health food retail market by acquiring a regional company in that sector. Jackson intends to operate the newly-acquired stores independently from its
Multinational transfer pricing, effect of alternative transfer-pricing methods, global income tax minimization. Tech Friendly Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. Tech Friendly has three divisions, each of which is located in a different
Multinational transfer pricing, global tax minimization The Mornay Company manufactures telecommunications equipment at its plant in Toledo, Ohio. The company has marketing divisions throughout the world. A Mornay marketing division in Vienna, Austria, imports 10,000 units of Product 4A36 from the
Multinational transfer pricing, goal congruence (continuation of 22-23) Suppose that the U.S. division could sell as many units of Product 4A36 as it makes at $900 per unit in the U.S. market, net of all marketing and distribution costs.Required1. From the viewpoint of the Mornay Company as a
General guideline, transfer pricing The Slate Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $65 per
Multinational transfer pricing, global tax minimization. Industrial Diamonds, Inc., based in Los Angeles, has two divisions: South African mining division, which mines a rich diamond vein in South Africa U.S. processing division, which polishes raw diamonds for use in industrial cutting tools The
International transfer pricing, taxes, goal congruence. Argone division of Gemini Corporation is located in the United States. Its effective income tax rate is 30%. Another division of Gemini, Calcia, is located in Canada, where the income tax rate is 42%. Calcia manufactures, among other things,
Transfer pricing, goal congruence. The Bosh Corporation makes and sells 20,000 multisystem music players each year. Its assembly division purchases components from other divisions of Bosh or from external suppliers and assembles the multisystem music players. In particular, the assembly division
Transfer pricing, goal congruence, ethics. Jeremiah Industries manufactures high-grade aluminum luggage made from recycled metal. The company operates two divisions: metal recycling and luggage fabrication. Each division operates as a decentralized entity. The metal recycling division is free to
Transfer pricing, utilization of capacity. (J. Patell, adapted) The California Instrument Company (CIC) consists of the semiconductor division and the process-control division, each of which operates as an independent profit center. The semiconductor division employs craftsmen who produce two
What are the three steps in designing accounting-based performance measures?
Analysis of return on invested assets, comparison of two divisions, DuPont method. Global Data, Inc., has two divisions: Test Preparation and Language Arts. Results (in millions) for the past three years are partially displayed here 1. Complete the table by filling in the blanks. Required2. Use
Multinational performance measurement, ROI, RI. The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2012; ROI is calculated as operating income
Residual Income and EVA; timing issues Doorchime Company makes doorbells. It has a weighted average cost of capital of 9%, and total assets of $5,550,000. Doorchime has current liabilities of $800,000. Its operating income for the year was $630,000. Doorchime does not have to pay any income
ROI, measurement alternatives for performance measures P. F. Skidaddle's operates casual dining restaurants in three regions: Denver, Seattle, and Sacramento. Each geographic market is considered a separate division. The Denver division is made up of four restaurants, each built in early 2002. The
ROI, RI, and Multinational Firms Konekopf Corporation has a division in the United States, and another in France. The investment in the French assets was made when the exchange rate was $1.30 per euro. The average exchange rate for the year was $1.40 per euro. The exchange rate at the end of the
Multinational firms, differing risk, comparison of profit, ROI and RI Zynga Multinational, Inc., has divisions in the United States, Germany, and New Zealand. The U.S. division is the oldest and most established of the three, and has a cost of capital of 8%. The German division was started three
ROI, RI, DuPont method, investment decisions, balanced scorecard. Global Event Group has two major divisions: print and Internet. Summary financial data (in millions) for 2011 and 2012 are as follows: The two division managers' annual bonuses are based on division ROI (defined as operating income
Chris Moreno seeks your advice on revising the existing bonus plan for division managers of Global Event Group. Assume division managers do not like bearing risk. Moreno is considering three ideas:Make each division manager’s compensation depend on division RI.Make each division manager’s
Executive compensation, balanced scorecard Community Bank recently introduced a new bonus plan for its business unit executives. The company believes that current profitability and customer satisfaction levels are equally important to the bank's long-term success. As a result, the new plan awards a
Ethics, manager’s performance evaluation. (A. Spero, adapted) Hamilton Semiconductors manufactures specialized chips that sell for $25 each. Hamilton’s manufacturing costs consist of variable cost of $3 per chip and fixed costs of $8,000,000. Hamilton also incurs $900,000 in fixed marketing
Ethics, levers of control. Monroe Moulding is a large manufacturer of wood picture frame moulding. The company operates distribution centers in Dallas and Philadelphia. The distribution centers cut frames to size (called “chops”) and ship them to custom picture framers. Because of the exacting

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