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cost accounting
Accounting concepts and applications 11th Edition Albrecht Stice, Stice Swain - Solutions
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 inventory.)Wood requirement per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Refer to the data in PE 18-7. Using the following additional information, compute the direct labor cost.Direct labor hours per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Rate per direct labor hour . . . . . . . . . . . . . . . . . . .
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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100Expected sales (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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $180Tune-up capacity per day . .
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 FICA taxes, and 2% as a contribution to the United Way. Another 5% is deposited directly into a
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 it at a rate of $425 per month, including interest, for five years. He also rented a condominium
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 the first quarter, Eugene has 25 CD players and 130 MP3 players in stock. Experience has shown that
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 are:Beginning inventory for 15-inch, 17-inch, and 19-inch monitors are 1,300, 1,500, and 1,250, respectively.
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 Brazil. The following materials are required for production:Beginning inventory for Shanahan is 5,000,
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 experience, Annecy's management knows that it takes approximately 15 minutes to make a box of chocolate peanut
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 knows that it takes 15 minutes of direct labor to make a pair of loafers, 20 minutes to make a pair of
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 labor hours spent growing and tending the plants and trees. Variable overhead costs include
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 that the following is needed to make the baseball bats:Compute the budgeted product costs for both the
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) Fees from specialized dental reconstructive surgery. Last year, Dr. Gifford earned an average of $75
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 for the year. Assume Ian starts his job on January 1.2. Is Ian€™s offer sufficient to meet
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 taxes, and 5% for a tax-sheltered annuity. She estimates that her monthly expenses are approximately as
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 July is the peak. For the upcoming 2010 season, Six-Peak Pools’ management projects the following
Rocky Peak Company plans on the following collection pattern on its sales:Collected in month of sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70%Collected in the first month after 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 100 completed leather briefcases and 80 vinyl briefcases.Experience indicates that Bannister must
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. Direct materials needed to make a gidget: two units of X, six units of Y.b. Number of units
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 variable manufacturing overhead (MOH) costs are determined as a result of either the pounds of weight
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 has determined that the following are needed to make the candy bars:One Box of 24 Chocolate Almond
The following information is available for Laurel Company, a wholesale company:Expected sales volume:October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,200 unitsNovember . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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. Prepare the production budget, assuming that the company expects to sell 40 bookshelves and 50
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 following month.b. The desired finished goods inventory every month is 20% of the next month's
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 an active member of the club (new members do not pay monthly dues during the first calendar year of
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 of the country. The tomatoes are then processed and canned for sale in grocery stores.The processing
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” sales projections and the controller providing “ballpark” cost estimates. Although the budget has
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 company to use to determine how it will secure the necessary finances to accomplish its business goals.
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 for severely disabled adults in the community. With the help of the Ministry of Community and
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. Poland, like its neighbors, experienced tremendous upheaval in its political and economic climate. In
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 with the budgets is hurting the company’s profitability.Your friend explained that salespersons are
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5.50Direct labor . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700Actual direct materials costs . . . . . . . . . . . . .
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 flows.b. The pro-forma financial statements complete the master budget for a company.c. Pro-forma
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 mufflers, and the salary expense amounted to $179,000.1. Assuming a static budget, use the information to
Outdoors Unlimited operates a fishing lodge in northern Canada. The following cost information has been developed by the company’s accountant:Fixed costs:Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$68,000Mortgage
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 performed during May and June and projected services for July are:Credit sales are collected over a
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 the following information, prepare a cash budget for January:a. Cash in the bank on January 1 is
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 available:a. The cash balance on August 1 is $25,000.b. Actual sales for June and July and projected
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 pro-forma income statement for the year ended May 31, 2010, for Lily Craft. (Note that Lily Craft does not
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,500Dividends to be
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 and open new offices. To assess future growth, the company's accountant has gathered budgeted
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 doctor at 22,000, 26,000, 30,000, and 34,000 total patient visits.3. Interpretive Question: Why does
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 student. The following is a budget for a single seminar:Peterson Management, Inc.Budget 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 fourth quarter of the company’s fiscal year. The following information is available:a. Sales:Third
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 prepare a cash budget for each of the next four months as evidence of its ability to repay the loan.The
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000Inventory . . .
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 data:For the Year Ended December 31, 2010:Sales revenue . . . . . . . . . . . . . . . . . . . . . . . .
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,500Expected net income . . . . . . . . . . .
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 by companies in these “pro-forma” statements are based on assumptions that are not recognized as
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 of Wal-Mart’s 2009 financial performance (see the “Report of Independent Registered Public
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 relevant data for use by managers to make product and process decisions? Explain.
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 of the new equipmentd. Book value of the old equipmente. Operating costs of the new equipment
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 company will be adversely affected. Do you agree? Explain. (Ignore qualitative factors.)
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 information.)
“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 another.c. Opportunity cost is the amount of profit given up by choosing one alternative over another.d.
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 investment securities last year; the securities have recently declined in value by 50%d. Expected annual
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. Using the following cost data, decide which alternative the company should pursue with respect to
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$2,250,000Total fixed 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 usable if it is not used immediately. Alaska Apparel does not expect to be able to receive the full
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 period and has the following cost data for producing these 800 parts:Cost per UnitDirect labor. . . . .
Using the following information, decide whether Mark€™s 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 with combining the stores with their main customer will cause variable costs at each of the three
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 €œpremium€ versions of each of its products. The following information is available:Before any
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 to determine which product the company should emphasize in its marketing campaign.
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 approach to pricing products, estimate the normal selling price. Note: The markup will end up being
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 investment. Using the data given in PE 22-12 and the functional cost approach to pricing products,
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, more efficient machine has been introduced on the market. The accountant for Gilliland has
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 opportunity to send this scrap wood to a subcontractor, who would turn it into pressed board to be used
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 utilize the excess capacity, the president is negotiating with a large department store chain 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 manufacturing activity. Twenty-five percent of the fixed manufacturing overhead costs are indirect and will
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 $96 each. The company's marketing director negotiated the deal personally and is thrilled about how
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9Direct labor. . . . . . . . . . . . . . . . . .
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 his staff. One part-time employee spends almost 100% of her time sending out billing notices and
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 produce a slightly different paint.Nice & Smooth and Rich & Thick are produced jointly at a cost of
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 further. All additional processing costs are directly traceable to each product that is 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, because many customers buy the products as a set, Swanton estimates that the sales of the other two
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