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cost accounting

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

RI, EVA, Measurement alternatives, Goal congruence. Renewal Resorts, Inc., operates health spas in Ft. Meyers, Florida, Scottsdale, Arizona, and Monterey, California. The Ft. Meyers spa was the company's first, opened in 1986. The Scottsdale spa opened in 1999, and the Monterey spa opened in 2008.
Estimating a cost function The controller of the Ijiri Company wants you to estimate a cost function from the following two observations in a general ledger account called Maintenance: Required1. Estimate the cost function for maintenance.2. Can the constant in the cost function be used as an
Identifying variable-, fixed-, and mixed-cost functions The Pacific Corporation operates car rental agencies at more than 20 airports. Customers can choose from one of three contracts for car rentals of one day or less:Contract 1: $50 for the dayContract 2: $30 for the day plus $0.20 per mile
Various cost-behavior patterns Select the graph that matches the numbered manufacturing cost data (requirements 1??9). Indicate by letter which graph best fits the situation or item described. The vertical axes of the graphs represent total cost, and the horizontal axes represent units produced
Account analysis Java Joe Coffees wants to find an equation to estimate monthly utility costs. Java Joe’s has been in business for one year and has collected the following cost data for utilities:Required1. Which of the preceding costs is variable? Fixed? Mixed? Explain.2. Using the high-low
Terry Lawler, managing director of the Chicago Reviewers Group, is examining how overhead costs behave with changes in monthly professional labor-hours billed to clients. Assume the following historical data:Total Overhead Costs Professional Labor-Hours Billed to Clients$335,000 2,000400,000
Cost-volume-profit and regression analysis Goldstein Corporation manufactures a children’s bicycle, model CT8. Goldstein currently manufactures the bicycle frame. During 2012, Goldstein made 32,000 frames at a total cost of $1,056,000. Ryan Corporation has offered to supply as many frames as
Melissa Crupp is the new manager of the materials storeroom for Canton Manufacturing. Melissa has been asked to estimate future monthly purchase costs for part #4599, used in two of Canton's products. Melissa has purchase cost and quantity data for the past nine months as follows: Estimated
Learning curve, cumulative average-time learning model Global Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow: Required:Calculate the total variable costs of producing 2, 4, and 8units.
High-low method Ken Howard, financial analyst at KMW Corporation, is examining the behavior of quarterly maintenance costs for budgeting purposes. Howard collects the following data on machine-hours worked and maintenance costs for the past 12 quarters: Required1. Estimate the cost function for
High-low method and regression analysis Local Harvest, a cooperative of organic familyowned farms outside of Columbus, Ohio, has recently started a fresh produce club to provide support to the group's member farms, and to promote the benefits of eating organic, locally-produced food to the nearby
Regression, activity-based costing, choosing cost drivers Fitzgerald Manufacturing has been using activity-based costing to determine the cost of product X-678. One of the activities, "Inspection," occurs just before the product is finished. Fitzgerald inspects every 10th unit, and has been using
Interpreting regression results, matching time periods Brickman Apparel produces equipment for the extreme-sports market. It has four peak periods, each lasting two months, for manufacturing the merchandise suited for spring, summer, fall, and winter. In the off-peak periods, Brickman schedules
Cost estimation, cumulative average-time learning curve The Nautilus Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with
Cost estimation, incremental unit-time learning model Assume the same information for the Nautilus Company as in Problem 10-36 with one exception. This exception is that Nautilus uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its
Regression; choosing among models. (chapter appendix) Tilbert Toys (TT) makes the popular Floppin' Freddy Frog and Jumpin' Jill Junebug dolls in batches. TT has recently adopted activity-based costing. TT incurs setup costs for each batch of dolls that it produces. TT uses "number of setups" as the
Multiple regression (continuation of 10-38) Bebe Williams wonders if she should run a multiple regression with both number of setups and number of setup-hours, as cost drivers. Required 1. Run a multiple regression to estimate the regression equation for setup costs using both number of setups and
Purchasing Department cost drivers, activity-based costing, simple regression analysis Fashion Bling operates a chain of 10 retail department stores. Each department store makes its own purchasing decisions. Barry Lee, assistant to the president of Fashion Bling, is interested in better
Purchasing Department cost drivers, multiple regression analysis (continuation of 10-40) (chapter appendix) Barry Lee decides that the simple regression analysis used in Problem 10-40 could be extended to a multiple regression analysis. He finds the following results for two multiple regression
Interpreting regression results, matching time periods, ethics Jayne Barbour is working as a summer intern at Mode, a trendy store specializing in clothing for twenty-some-things. Jayne has been working closely with her cousin, Gail Hubbard, who plans promotions for Mode. The store has only been in
Copley Enterprises manufactures digital video equipment. For each unit $1,475 of direct material is used and there is $1,500 of direct manufacturing labor at $30 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.
Proration of overhead with two indirect cost pools. New Rise, Inc., produces porcelain figurines. The production is semi-automated where the figurine is molded almost entirely by operator-less machines and then individually hand-painted. The overhead in the molding department is allocated based on
ABC, cost hierarchy, service (CMA, adapted) Vineyard Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Vineyard aggregates all operating costs of $1,190,000 into a single overhead cost pool. Vineyard
Balanced scorecard. Ridgecrest Corporation manufactures corrugated cardboard boxes. It competes and plans to grow by selling high-quality boxes at a low price and by delivering them to customers quickly after receiving customers’ orders. There are many other manufacturers who produce similar
Analysis of growth, price-recovery, and productivity components (continuation of 13-16). An analysis of Ridgecrest’s operating-income changes between 2011 and 2012 shows the following:Operating income for 2011.........$1,850,000Add growth component............85,000Deduct price-recovery
Strategy, balanced scorecard, merchandising operation. Roberto & Sons buys T-shirts in bulk, applies its own trendsetting silk-screen designs, and then sells the T-shirts to a number of retailers. Roberto wants to be known for its trendsetting designs, and it wants every teenager to be seen in
Identifying and managing unused capacity (continuation of 13-18). Refer to Exercise 13-18.Required1. Calculate the amount and cost of unused administrative capacity at the beginning of 2011, based on the actual number of customers Roberto served in 2011.2. Suppose Roberto can only add or reduce
Strategy, balanced scorecard. Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2011 to be distinct from its competitors. It has been generally regarded as a superior machine. Stanmore presents the following data for
Strategy, balanced scorecard, service company. Westlake Corporation is a small information systems consulting firm that specializes in helping companies implement standard sales-management software. The market for Westlake's services is very competitive. To compete successfully, Westlake must
Analysis of growth, price-recovery, and productivity components (continuation of 13-27). Suppose that during 2011 the market for implementing sales-management software increases by 5%. Assume that any decrease in selling price and any increase in market share more than 5% are the result of
Identifying and managing unused capacity (continuation of 13-26). Refer to Exercise 13-26.Required1. Calculate the amount and cost of unused software-implementation support capacity at the beginning of 2011, based on the number of jobs actually done in 2011.2. Suppose Westlake can add or reduce its
Balanced scorecard and strategy. Music Master Company manufactures an MP3 player called the Mini. The company sells the player to discount stores throughout the country. This player is significantly less expensive than similar products sold by Music Master’s competitors, but the Mini offers just
Strategic analysis of operating income (continuation of 13-30). Refer to Problem 13-30. As a result of the actions taken, quality has significantly improved in 2011 while rework and unit costs of the Mini have decreased. Music Master has reduced manufacturing capacity because capacity is no longer
Analysis of growth, price-recovery, and productivity components (continuation of 13-31). Suppose that during 2011, the market for MP3 players grew 3%. All decreases in the selling price of the Mini and increases in market share (that is, sales increases greater than 3%) are the result of Music
Identifying and managing unused capacity (continuation of 13-31). Refer to the information forMusic Master Company in 13-31.Required1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2011 based on actual
Partial productivity measurement. Gerhart Company manufactures wallets from fabric. In 2011, Gerhart made 2,520,000 wallets using 2,000,000 yards of fabric. In 2011, Gerhart has capacity to make 3,307,500 wallets and incurs a cost of $9,922,500 for this capacity. In 2012, Gerhart plans to make
Total factor productivity (continuation of 13-37). Refer to the data for Problem 13-37. Assume the fabric costs $3.70 per yard in 2012 and $3.85 per yard in 2011.Required1. Compute Gerhart Company’s total factor productivity (TFP) for 2012.2. Compare TFP for 2012 with a benchmark TFP for 2011
Give two examples of nonfinancial measures of customer satisfaction relating to quality.
Give two examples of nonfinancial measures of internal-business-process quality.
Distinguish between customer-response time and manufacturing cycle time.
Costs of quality analysis. Dream Rider produces car seats for children from newborn to two years old. The company is worried because one of its competitors has recently come under public scrutiny because of product failure. Historically, Dream Rider’s only problem with its car seats was stitching
Costs of quality, ethical considerations. Refer to information in Exercise 19-17 in answering this question. Dream Rider has discovered a more serious problem with the plastic core of its car seats. An accident can cause the plastic in some of the seats to crack and break, resulting in serious
Nonfinancial measures of quality and time. Worldwide Cell Phones (WCP) has developed a cell phone that can be used anywhere in the world (even countries like Japan that have a relatively unique cell phone system). WCP has been receiving complaints about the phone. For the past two years, WCP has
Quality improvement, relevant costs, relevant revenues. SpeedPrint manufactures and sells 18,000 high-technology printing presses each year. The variable and fixed costs of rework and repair are as follows: SpeedPrint's current presses have a quality problem that causes variations in the shade
Quality improvement, relevant costs, relevant revenues. Flagstar Conference Center and Catering is a conference center and restaurant facility that hosts over 300 national and international events each year attended by 50,000 professionals. Due to increased competition and soaring customer
Waiting time, service industry. The registration advisors at a small midwestern university (SMU) help 4,200 students develop each of their class schedules and register for classes each semester. Each advisor works for 10 hours a day during the registration period. SMU currently has 10 advisors.
Waiting time, cost considerations, customer satisfaction. Refer to the information presented inExercise 19-22. The head of the registration advisors at SMU has decided that the advisors must finish their advising in two weeks and therefore must advise 420 students a day. However, the average
Nonfinancial measures of quality, manufacturing cycle efficiency. (CMA, adapted) Torrance Manufacturing evaluates the performance of its production managers based on a variety of factors, including cost, quality, and cycle time. The following are nonfinancial measures for quality and time for 2010
Theory of constraints, throughput margin, relevant costs. The Mayfield Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Each cabinet sells for $72 and has direct material costs of $32 incurred at the start of the machining
Statistical quality control. Keltrex Cereals produces a wide variety of breakfast products. The company's three best selling breakfast cereals are Double Bran Bits, Honey Wheat Squares, and Sugar King Pops. Each box of a particular type of cereal is required to meet pre-determined weight
Compensation linked with profitability, waiting time, and quality measures. East Coast Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semi-annual bonus plan for each medical group??s president has three components:a. Profitability performance. Add 0.75% of
Waiting times, relevant revenues, and relevant costs (continuation of 19-31). Seawall is still debating whether it should introduce Y28. The following table provides information on selling prices, variable costs, and inventory carrying costs for Z39 and Y28:Required1. Using the average
Theory of constraints, throughput margin, and relevant costs. Nevada Industries manufactures electronic testing equipment. Nevada also installs the equipment at customers' sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as
Theory of constraints, contribution margin, sensitivity analysis. Fun Time Toys (FTT) produces dolls in two processes: molding and assembly. FTT is currently producing two models: Chatty Chelsey and Talking Tanya. Production in the molding department is limited by the amount of materials available.
Quality improvement, Pareto diagram, cause-and-effect diagram. Pauli's Pizza has recently begun collecting data on the quality of its customer order processing and delivery. Pauli's made 1,800 deliveries during the first quarter of 2012. The following quality data pertains to first quarter
Ethics and quality. Wainwright Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Wainwright’s largest manufacturing plants. The plant’s General Manager, Chris Sheldon, has just returned from a meeting at corporate
Quality improvement, theory of constraints. The Wellesley Corporation makes printed cloth in two departments: weaving and printing. Currently, all product first moves through the weaving department and then through the printing department before it is sold to retail distributors for $1,250 per
Customer profitability, customer-cost hierarchy. Orsack Electronics has only two retail and two wholesale customers. Information relating to each customer for 2012 follows (in thousands): Orsack??s annual distribution-channel costs are $34 million for wholesale customers and $5 million for retail
Variance analysis, working backward. The Jinwa Corporation sells two brands of wine glasses: Plain and Chic. Jinwa provides the following information for sales in the month of June 2011:Static-budget total contribution margin...........$11,000Budgeted units to be sold of all
Variance analysis, multiple products. Soda-King manufactures and sells three soft drinks: Kola, Limor, and Orlem. Budgeted and actual results for 2011 are as follows: Required1. Compute the total sales-volume variance, the total sales-mix variance, and the total sales-quantity variance.
Market-share and market-size variances (continuation of 14-25). Soda-King prepared the budget for 2011 assuming a 12% market share based on total sales in the western region of the United States. The total soft drinks market was estimated to reach sales of 20 million cartons in the region. However,
Customer profitability in a manufacturing firm. Bizzan Manufacturing makes a component called P14-31. This component is manufactured only when ordered by a customer, so Bizzan keeps no inventory of P14-31. The list price is $100 per unit, but customers who place "large" orders receive a 10%
Variance analysis, sales-mix and sales-quantity variances. Chicago Infonautics, Inc., produces handheld Windows CE???-compatible organizers. Chicago Infonautics markets three different handheld models: PalmPro is a souped-up version for the executive on the go, PalmCE is a consumeroriented version,
Market-share and market-size variances (continuation of 14-32). Chicago Infonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. The total handheld-organizer market was estimated by Fool instead
Variance analysis, multiple products. The Split Banana, Inc., operates a chain of Italian gelato stores. Although the Split Banana charges customers the same price for all flavors, production costs vary, depending on the type of ingredients. Budgeted and actual operating data of its three
Direct materials efficiency, mix, and yield variances. Nature's Best Nuts produces specialty nut products for the gourmet and natural foods market. Its most popular product is Zesty Zingers, a mixture of roasted nuts that are seasoned with a secret spice mixture, and sold in one-pound tins. The
Direct labor variances: price, efficiency, mix, and yield. Trevor Joseph employs two workers in his guitar-making business. The first worker, George, has been making guitars for 20 years and is paid $30 per hour. The second worker, Earl, is less experienced, and is paid $20 per hour. One guitar
Purposes of cost allocation. Sarah Reynolds recently started a job as an administrative assistant in the cost accounting department of Mize Manufacturing. New to the area of cost accounting, Sarah is puzzled by the fact that one of Mize’s manufactured products, SR460, seem to have a different
Customer-cost hierarchy, customer profitability. Denise Nelson operates Interiors by Denise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Denise serves two architecture firms
Customer profitability and ethics. Snark Corporation manufactures a product called the snark, which it sells to merchandising firms such as Snark Republic (SR), Snarks-R-Us (SRU), Neiman Snark-us (NS), Snark Buy (SB), Snark-Mart (SM), and Wal-Snark (WS). The list price of a snark is $50, and the
Dual-rate method, budgeted versus actual costs and quantities (continuation of 15-17). Chocolat Inc. decides to examine the effect of using the dual-rate method for allocating truck costs to each roundtrip. At the start of 2012, the budgeted costs were as follows:Variable cost per
Allocation of common costs. Ben and Gary are students at Berkeley College. They share an apartment that is owned by Gary. Gary is considering subscribing to an Internet provider that has the following packages available:Package Per MonthA. Internet access............$60B. Phone
Allocation of common costs. Sunny Gunn, a self-employed consultant near Sacramento, received an invitation to visit a prospective client in Baltimore. A few days later, she received an invitation to make a presentation to a prospective client in Chicago. She decided to combine her visits, traveling
Revenue allocation, bundled products. Yves Parfum Company blends and sells designer fragrances. It has a Men's Fragrances Division and a Women's Fragrances Division, each with different sales strategies, distribution channels, and product offerings. Yves is now considering the sale of a bundled
Allocation of common costs. Jim Dandy Auto Sales uses all types of media to advertise its products (television, radio, newspaper, etc.). At the end of 2011, the company president, Jim Dandridge, decided that all advertising costs would be incurred by corporate headquarters and allocated to each of
Single-rate, dual-rate, and practical capacity allocation. Perfection Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Perfection's customer service department has practical capacity to wrap 7,000 gifts at a budgeted fixed cost of $6,650
Revenue allocation. Lee Shu-yu Inc. produces and sells DVDs to business people and students who are planning extended stays in China. It has been very successful with two DVDs: Beginning Mandarin and Conversational Mandarin. It is introducing a third DVD, Reading Chinese Characters. It has decided
Fixed cost allocation. State University completed construction of its newest administrative building at the end of 2011. The University's first employees moved into the building on January 1, 2012. The building consists of office space, common meeting rooms (including a conference center), a
Common costs. Wright Inc. and Brown Inc. are two small clothing companies that are considering leasing a dyeing machine together. The companies estimated that in order to meet production, Wright needs the machine for 800 hours and Brown needs it for 200 hours. If each company rents the machine on
Stand-alone revenue allocation. MaxSystems, Inc., sells computer hardware to end consumers. Its most popular model, the CX30 is sold as a ??bundle,?? which includes three hardware products: a personal computer (PC) tower, a 23-inch monitor, and a color laser printer. Each of these products is made
Support-department cost allocations; single-department cost pools; direct, step-down, and reciprocal methods. Spirit Training, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are
Describe a situation in which the sales value at splitoff method cannot be used but the NRV method can be used for joint-cost allocation.
Distinguish between the sales value at splitoff method and the NRV method.
Alternative methods of joint-cost allocation, ending inventories. The Evrett Company operates a simple chemical process to convert a single material into three separate items, referred to here as X, Y, and Z. All three end products are separated simultaneously at a single splitoff point.Products X
Accounting for a main product and a byproduct. (Cheatham and Green, adapted) Tasty, Inc., is a producer of potato chips. A single production process at Tasty, Inc., yields potato chips as the main product and a byproduct that can also be sold as a snack. Both products are fully processed by the
Joint costs and byproducts. (W. Crum adapted) Royston, Inc., is a large food processing company.It processes 150,000 pounds of peanuts in the peanuts department at a cost of $180,000 to yield12,000 pounds of product A, 65,000 pounds of product B, and 16,000 pounds of product C.Product A is
Accounting for a byproduct. Sunny Day Juice Company produces oranges from various organic growers in Florida. The juice is extracted from the oranges and the pulp and peel remain. Sunny Day considers the pulp and peel byproducts of its juice production and can sell them to a local farmer for $2.00
Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be
Joint-cost allocation. Elsie Dairy Products Corp. buys one input, full-cream milk, and refines it in a churning process. From each gallon of milk Elsie produces three cups of butter and nine cups of buttermilk. During May 2010, Elsie bought 12,000 gallons of milk for $22,250. Elsie spent another
Further processing decision (continuation of 16-30). Elsie has decided that buttermilk may sell better if it was marketed for baking and sold in pints. This would involve additional packaging at an incremental cost of $0.35 per pint. Each pint could be sold for $0.75 (note: one quart = two
Joint-cost allocation with a byproduct. Mat Place purchases old tires and recycles them to produce rubber floor mats and car mats. The company washes, shreds, and molds the recycled tires into sheets. The floor and car mats are cut from these sheets. A small amount of rubber shred remains after the
Process further or sell, byproduct. (CMA, adapted) Rochester Mining Company (RMC) mines coal, puts it through a one-step crushing process, and loads the bulk raw coal onto river barges for shipment to customers.RMC??s management is currently evaluating the possibility of further processing the raw
Joint Cost Allocation. Memory Manufacturing Company (MMC) produces memory modules in a two-step process: chip fabrication and module assembly.In chip fabrication, each batch of raw silicon wafers yields 400 standard chips and 600 deluxe chips. Chips are classified as standard or deluxe on the basis
Joint cost allocation, ending work in process inventories. Tastee Freez, Inc., produces two specialty ice cream mix flavors for soft serve ice cream machines. The two flavors, Extreme Chocolate and Very Strawberry, both start with a vanilla base. The vanilla base can be sold for $2 per gallon. The
Joint Cost Allocation, processing further and ethics. Unified Chemical Company has a joint production process that converts Zeta into two chemicals: Alpha and Beta. The company purchases Zeta for $12 per pound and incurs a cost of $30 per pound to process it into Alpha and Beta. For every 10 pounds
Operation Costing. Whole Goodness Bakery needs to determine the cost of two work orders for the month of June. Work order 215 is for 1,200 packages of dinner rolls and work order 216 is for 1,400 loaves of multigrain bread. Dinner rolls are mixed and cut into individual rolls before being baked and
Weighted-average method, assigning costs. Bio Doc Corporation is a biotech company based in Milpitas. It makes a cancer-treatment drug in a single processing department. Direct materials are added at the start of the process. Conversion costs are added evenly during the process. Bio Doc uses the
Standard-costing method, assigning costs. Refer to the information in Exercise 17-24. SupposeBio Doc determines standard costs of $8.25 per equivalent unit for direct materials and $12.70 per equivalent unit for conversion costs for both beginning work in process and work done in the current
Operation Costing. UB Healthy Company manufactures three different types of vitamins: vitamin A, vitamin B, and a multivitamin. The company uses four operations to manufacture the vitamins: mixing, tableting, encapsulating, and bottling. Vitamins A and B are produced in tablet form (in the
Weighted-average method. Ashworth Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Ashworth has

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