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managerial accounting

Managerial Accounting 12th Edition Ray H. Garrison, Eric W. Noreen, Peter C. Brewer - Solutions

Logan Products computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year it estimated that its total manufacturing overhead would be $586,000 and the total direct labor would be 40,000 hours. Its actual total manufacturing overhead for the
Kirkaid Company recorded the following transactions for the just completed month.a. $86,000 in raw materials were purchased on account.b. $84,000 in raw materials were requisitioned for use in production. Of this amount, $72,000 was for direct materials and the remainder was for indirect
Westan Corporation uses a predetermined overhead rate of $23.10 per direct labor-hour. This predetermined rate was based on 12,000 estimated direct labor-hours and $277,200 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $266,000 and
The following cost data relate to the manufacturing activities of Black Company during the just completed year:Manufacturing overhead costs:Property taxes, factory . . . . . . . . . . . . . . . . . . . . . . . $ 3,000Utilities, factory . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granger Products recorded the following transactions for the just completed month. The company had no beginning inventories.a. $75,000 in raw materials were purchased for cash.b. $73,000 in raw materials were requisitioned for use in production. Of this amount, $67,000 was for direct materials and
Cretin Enterprises uses a predetermined overhead rate of $21.40 per direct labor-hour. This predetermined rate was based on 8,000 estimated direct labor-hours and $171,200 of estimated total manufacturing overhead. The company incurred actual total manufacturing overhead costs of $172,500 and 8,250
Pearson Architectural Design began operations on January 2. The following activity was recorded in the company€™s Work in Process account for the first month of operations:Pearson Architectural Design is a service firm, so the names of the accounts it uses are different from the names
Foley Company uses a job-order costing system. The following data relate to the month of October, the first month of the company’s fiscal year:a. Raw materials purchased on account, $210,000.b. Raw materials issued to production, $190,000 (80% direct and 20% indirect).c. Direct labor cost
Heritage Gardens uses a job-order costing system to track the costs of its landscaping projects. The company provides complete garden design and landscaping services. The following table provides data concerning the three landscaping projects that were in progress during May. There was no work in
Javadi Company makes a composting bin that is subject to wide seasonal variations in demand. Unit product costs are computed on a quarterly basis by dividing each quarter€™s manufacturing costs (materials, labor, and overhead) by the quarter€™s production in units. The
The following information is taken from the accounts of FasGrow Company. The entries in the T-accounts are summaries of the transactions that affected those accounts during the year.The overhead that had been applied to production during the year is distributed among the ending balances in the
Estate Pension Services helps clients to set up and administer pension plans that are in compliance with tax laws and regulatory requirements. The firm uses a job-order costing system in which overhead is applied to clients€™ accounts on the basis of professional staff hours charged to
Diewold Company has two departments, Milling and Assembly. The company uses a job-order cost system and computes a predetermined overhead rate in each department. The Milling Department bases its rate on machine-hours, and the Assembly Department bases its rate on direct labor cost. At the
Medusa Products uses a job-order costing system. Overhead costs are applied to jobs on the basis of machine-hours. At the beginning of the year, management estimated that the company would incur $170,000 in manufacturing overhead costs for the year and work 85,000 machine-hours.Required:1. Compute
Custom Metal Works produces castings and other metal parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company estimated that it would work 576,000 machine-hours and incur
Sovereign Millwork, Ltd., produces reproductions of antique residential moldings at a plant located in Manchester, England. Since there are hundreds of products, some of which are made only to order, the company uses a job-order costing system. On July 1, the start of the company’s fiscal year,
Ravsten Company uses a job-order costing system. On January 1, the beginning of the current year, the company’s inventory balances were as follows:Raw materials . . . . . . . . . $16,000Work in process . . . . . . . . $10,000Finished goods . . . . . . . . $30,000The company applies overhead
Durham Company€™s trial balance as of January 1, the beginning of the current year, is given below:Durham Company uses a job-order costing system. During the year, the following transactions took place:a. Raw materials purchased on account, $45,000.b. Raw materials requisitioned for use
Kenworth Company uses a job-order costing system. Only three jobs€”Job 105, Job 106, and Job 107€”were worked on during November and December. Job 105 was completed on December 10; the other two jobs were still in production on December 31, the end of the company€™s
Winkle, Kotter, and Zale is a small law firm that contains 10 partners and 10 support persons. The firm employs a job-order costing system to accumulate costs chargeable to each client, and it is organized into two departments€”the Research and Documents Department and the Litigation
Celestial Displays, Inc., puts together large-scale fi reworks displays€”primarily for Fourth of July celebrations sponsored by corporations and municipalities. The company assembles and orchestrates complex displays using pyrotechnic components purchased from suppliers throughout the
WoodGrain Technology makes home office furniture from fi ne hardwoods. The company uses a joborder costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine-hours, and the rate in
Skid Road Recording, Inc., is a small audio recording studio located in Seattle. The company handles work for advertising agencies€”primarily for radio ads€”and has a few singers and bands as clients. Skid Road Recording handles all aspects of recording from editing to making a
Selected ledger accounts for Rolm Company are given below for the just completed year:Required:1. What was the cost of raw materials put into production during the year?2. How much of the materials in (1) above consisted of indirect materials?3. How much of the factory labor cost for the year
The Pacific Manufacturing Company operates a job-order costing system and applies overhead cost to jobs on the basis of direct labor cost. In computing an overhead rate for the year, the company€™s estimates were: manufacturing overhead cost, $126,000; and direct labor cost, $84,000. The
Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate
Southworth Company uses a job-order costing system and applies manufacturing overhead cost to jobs on the basis of the cost of direct materials used in production. At the beginning of the current year, the following estimates were made for the purpose of computing the predetermined overhead rate:
€œDon€™t tell me we€™ve lost another bid!€ exclaimed Sandy Kovallas, president of Lenko Products, Inc. €œI€™m afraid so,€ replied Doug Martin, the operations vice president. €œOne of our competitors underbid us by
Melissa Ostwerk, the new controller of TurboDrives, Inc., has just returned from a seminar on the choice of the activity level in the predetermined overhead rate. Even though the subject did not sound exciting at first, she found that there were some important ideas presented that should get a
Sharpton Fabricators Corporation manufactures a variety of parts for the automotive industry. The company uses a job-order costing system with a plantwide predetermined overhead rate based on direct labor-hours. On December 10, 2006, the company’s controller made a preliminary estimate of the
Cristin Madsen has recently been transferred to the Appliances Division of Solequin Corporation. Shortly after taking over her new position as divisional controller, she was asked to develop the division’s predetermined overhead rate for the upcoming year. The accuracy of the rate is important
The questions in this exercise are based on Toll Brothers, Inc. one of the largest home builders in the United States. To answer the questions, you will need to download Toll Brothers’ 2004 annual report (www.tollbrothers.com/homesearch/servlet/HomeSearch?app=IRannual) and Form 10-K
What arguments can be advanced in favor of treating fixed manufacturing overhead costs as product costs?
What arguments can be advanced in favor of treating fixed manufacturing overhead costs as period costs?
If production and sales are equal, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why?
If production exceeds sales, which method would you expect to show the higher net operating income, variable costing or absorption costing? Why?
If fixed manufacturing overhead costs are released from inventory under absorption costing, what does this tell you about the level of production in relation to the level of sales?
Parker Company had $5,000,000 in sales and reported a $300,000 loss in its annual report to stockholders. According to a CVP analysis prepared for management’s use, $5,000,000 in sales is the break-even point for the company. Did the company’s inventory level increase, decrease, or remain
How is the use of variable costing limited?
Shastri Bicycle of Bombay, India, produces an inexpensive, yet rugged, bicycle for use on the city’s crowded streets that it sells for 500 rupees. (Indian currency is denominated in rupees, denoted by R.)Selected data for the company’s operations last year follow:Units in beginning inventory .
Refer to the data in Exercise 7-1 for Shastri Bicycle. An absorption costing income statement prepared by the company€™s accountant appears below:Required:1. Determine how much of the ending inventory of R740,000 above consists of fixed manufacturing overhead cost deferred in inventory to
High Tension Transformers, Inc., manufactures heavy-duty transformers for electrical switching stations. The company uses variable costing for internal management reports and absorption costing for external reports to shareholders, creditors, and the government. The company has provided the
The questions below pertain to two different scenarios involving a manufacturing company. In each scenario, the cost structure of the company is constant from year to year. Selling prices, unit variable costs, and total fixed costs are the same in every year. However, unit sales and/or unit
CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $200. Data for last year’s operations follow:Units in beginning inventory . . . . . . . . . . . . . . . . . . 0Units produced. . . . . . . . . . . . . . . . . . . . . . . . . 10,000Units sold . . . .
Refer to the data in Exercise 7-5 for CompuDesk. Assume in this exercise that the company uses absorption costing.Required:1. Compute the unit product cost for one computer desk.2. Prepare an income statement for the year
Maxwell Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:VARIABLE COSTS PER UNIT:Manufacturing:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . $18Direct labor . . . . . . . . . . . . . . . . . .
Amcor, Inc., incurs the following costs to produce and sell a single product.Variable costs per unit:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5Variable manufacturing overhead . . . . . .
Morey Company has just completed its first year of operations. The company€™s absorption costing income statement for the year appears below:The company€™s selling and administrative expenses consist of $300,000 per year in fixed expenses and $3 per unit sold in variable
During Denton Company€™s first two years of operations, the company reported absorption costing net operating income as follows:The company€™s $34 unit product cost is computed as follows:Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wiengot Antennas, Inc., produces and sells a unique type of TV antenna. The company has just opened a new plant to manufacture the antenna, and the following cost and revenue data have been provided for the first month of the plant€™s operation in the form of a worksheet.Since the new
Advance Products, Inc., has just organized a new division to manufacture and sell specially designed tables using select hardwoods for personal computers. The division’s monthly costs are shown in the schedule below:Manufacturing costs: Variable costs per unit: Direct materials . . . .
Sandi Scott obtained a patent on a small electronic device and organized Scott Products, Inc., to produce and sell the device. During the first month of operations, the device was very well received on the market, so Ms. Scott looked forward to a healthy profit. For this reason, she was surprised
Linden Company manufactures and sells a single product. Cost data for the product follow:Variable costs per unit:Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . $ 6Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Variable factory overhead . . . . . . . . . .
Aristotle Constantinos, the manager of DuraProducts’ Australian Division, is trying to set the production schedule for the last quarter of the year. The Australian Division had planned to sell 100,000 units during the year, but current projections indicate sales will be only 78,000 units in
€œCan someone explain to me what€™s wrong with these statements?€ asked Cheri Reynolds, president of Milex Corporation. €œThey just don€™t make sense. We sold the same number of units this year as we did last year, yet our profits have tripled! Who
Memotec, Inc., manufactures and sells a unique electronic part. Operating results for the first three years of activity were as follows (absorption costing basis):Sales dropped by 20% during Year 2 due to the entry of several foreign competitors into the market.Memotec had expected sales to remain
Michael Lee was hired as chief executive officer (CEO) in late November by the board of directors of Hunter Electronics, a company that produces a state-of-the-art DVD drive for personal computers. The previous CEO had been fi red by the board due to a series of questionable business practices
John Ovard, president of Mylar, Inc., was looking forward to receiving the company's second quarter income statement. He knew that the sales budget of 20,000 units sold had been met during the second quarter and that this represented a 25% increase in sales over the first quarter. He was especially
Why are there two stages of allocation in activity-based costing?
Why should reports such as those in Exhibits 8–10 and 8–11 be supplemented with an action analysis report such as in Exhibit 8A–5 when making decisions about products or customers?
The following activities occur at Greenwich Corporation, a company that manufactures a variety of products.a. Various individuals manage the parts inventories.b. A clerk in the factory issues purchase orders for a job.c. The personnel department trains new production workers.d. The factory’s
VaultOnWheels Corporation operates a fleet of armored cars that make scheduled pickups and deliveries for its customers in the Phoenix area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service, and Other. The
As You Like It Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of customer garden beds, the distance to travel to
Larner Corporation is a diversified manufacturer of industrial goods. The company€™s activity-based costing system contains the following six activity cost pools and activity rates:Activity Cost Pool Activity RatesSupporting direct labor . . . . . . . . . . . . $7.00 per direct
Updraft Systems, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following activity cost pools and activity
Pro Golf Corporation produces private label golf clubs for pro shops throughout North America. The company uses activity-based costing to evaluate the profitability of serving its customers. This analysis is based on categorizing the company's costs as follows, using the ease of adjustment color
Pryad Corporation makes ultra-lightweight backpacking tents. Data concerning the company€™s two product lines appear below:The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead
Various activities at Morales Corporation, a manufacturing company, are listed below. Each activity has been classified as unit-level, batch-level, product-level, customer-level, or organization-sustaining.Required:Complete the above table by listing an example of an activity measure for
Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the two products follow:Additional information about the company follows:a. Rims require $17 in direct materials per unit, and Posts require $10.b. The direct labor wage rate is $16 per hour.c. Rims are
The operations vice president of First Bank of Eagle, Kristin Wu, has been interested in investigating the efficiency of the bank€™s operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would like to compare these costs at the
The manager of the Avon branch of First Bank of Eagle has provided the following data concerning the transactions of the branch during the past year:Activity Total Activity at the Avon BranchOpening accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 accounts openedProcessing
Transvaal Mining Tools Ltd. of South Africa makes specialty tools used in the mining industry. The company uses an activity-based costing system for internal decision-making purposes. The company has four activity cost pools as listed below:The managing director of the company would like
This exercise should be assigned in conjunction with Exercise 8-12. The results of the first-stage allocation of the activity-based costing system at Transvaal Mining Tools Ltd., in which the activity rates were computed, appear below:Required:1. Using Exhibit 8Aâ€“3 as a guide, prepare a
Green Glider Corporation makes golf carts that it sells directly to golf courses throughout the world. Several basic models are available, which are modified to suit the needs of each particular golf course. A golf course located in the Pacific Northwest, for example, would typically specify that
Theatre Seating, Inc., makes high-quality adjustable seats for theaters. The company€™s activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity rates:The company just completed a single order from CineMax
Refer to the data for Theatre Seating, Inc., in Exercise 8-15 and the following additional details concerning the activity rates:Management has provided their ease of adjustment codes for purposes of preparing action analyses.Ease ofAdjustment CodesDirect materials . . . . . . . . . . . . . . . . .
Various activities at Companhia de Textils, S.A., a manufacturing company located in Brazil, are listed below. The company makes a variety of products in its plant outside Sao Paulo.a. Preventive maintenance is performed on general-purpose production equipment.b. Products are assembled by hand.c.
Silicon Optics has supplied the following data for use in its activity-based costing system:During the year, Silicon Optics completed an order for a special optical switch for a new customer, Indus Telecom. This customer did not order any other products during the year. Data concerning that order
Refer to the data for Silicon Optics in Exercise 8-18.Required:1. Using Exhibit 8A–1 as a guide, prepare a report showing the first-stage allocations of overhead costs to the activity cost pools.2. Using Exhibit 8A–2 as a guide, compute the activity rates for the activity cost pools.3. Using
Kunkel Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow:These products are customized to some degree for specific
Sven's Cookhouse is a popular restaurant located on Lake Union in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing study. The intern, in consultation with the owner, identified three
Gore Range Carpet Cleaning is a small, family-owned business operating out of Eagle-Vail, Colorado. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $22.95 per hundred square feet. However, there is some question about whether
Refer to the data for Gore Range Carpet Cleaning in Problem 8-21.Required:1. Using Exhibit 8A–1 as a guide, prepare the first-stage allocation of costs to the activity cost pools.2. Using Exhibit 8A–2 as a guide, compute the activity rates for the activity cost pools.3. The company recently
Rehm Company manufactures a product that is available in both a deluxe model and a regular model. The company has manufactured the regular model for years. The deluxe model was introduced several years ago to tap a new segment of the market. Since introduction of the deluxe model, the
Denny Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. The company€™s estimator has been involved in a long-simmering dispute with the on-site work supervisors. The on-site supervisors claim that the estimator does not adequately
AnimPix, Inc., is a small company that creates computer-generated animations for films and television. Much of the company's work consists of short commercials for television, but the company also does realistic computer animations for special effects in movies.The young founders of the company
Refer to the data for AnimPix, Inc., in Problem 8-26. In addition, the company has provided the following details concerning its activity rates:Management has provided the following ease of adjustment codes for the various costs: Ease ofAdjustment CodeTechnical staff salaries . . . . . . . .
For many years, Gorski Company manufactured a single product called a mono-circuit. Then, three years ago, the company automated a portion of its plant and at the same time introduced a second product called a bi-circuit that has become increasingly popular. The bi-circuit product is a more complex
Erte, Inc., manufactures two models of high-pressure steam valves, the XR7 model and the ZD5 model. Data regarding the two products follow:Additional information about the company follows:a. Product XR7 requires $35 in direct materials per unit, and product ZD5 requires $25.b. The direct labor rate
Victorian Windows is a small company that builds specialty wooden windows for local builders. For years the company assigned overhead costs to products based on direct labor-hours (DLHs). However, the company's president became interested in activity-based costing after reading an article about it
Coffee Bean, Inc. (CBI), is a processor and distributor of a variety of blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. CBI currently has 40 different coffees that it sells to gourmet shops in one-pound bags. The major cost of
The questions in this exercise are based on JetBlue Airways Corporation. To answer the questions, you will need to download JetBlue’s 2004 10-K/A at www.hoovers.com . Once at this website, do a search for JetBlue Airways. Click on the matching company name and then click on the link called SEC fi
Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The company€™s sales budget for the third quarter showing these peak sales is given below:From past experience, the company has learned that 20% of a month€™s sales are collected in the
Crystal Telecom has budgeted the sales of its innovative mobile phone over the next four months as follows: Sales in UnitsJuly . . . . . . . . . . . . . . 30,000August . . . . . . . . . . . 45,000September . . . . . . . . 60,000October . . . . . . . . . . 50,000The
Micro Products, Inc., has developed a very powerful electronic calculator. Each calculator requires three small "chips" that cost $2 each and are purchased from an overseas supplier. Micro Products has prepared a production budget for the calculator by quarters for Year 2 and for the first quarter
The Production Department of the Riverside Plant of Junnen Corporation has submitted the following forecast of units to be produced at the plant for each quarter of the upcoming fiscal year. The plant produces high-end outdoor barbecue grills.Each unit requires 0.40 direct labor-hours and direct
The direct labor budget of Krispin Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours.The company's variable manufacturing overhead rate is $1.75 per direct labor-hour and the company's fixed manufacturing overhead is $35,000 per quarter.
The budgeted unit sales of Haerve Company for the upcoming fiscal year are provided below:The company€™s variable selling and administrative expenses per unit are $2.75. Fixed selling and administrative expenses include advertising expenses of $12,000 per quarter, executive salaries of
A cash budget, by quarters, is given below for a retail company (000 omitted). The company requires a minimum cash balance of $5,000 to start each quarter.Required:Fill in the missing amounts in the tableabove.

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