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business
managerial accounting

Cornerstones of Managerial Accounting 3rd Edition Mowen, Hansen, Heitger - Solutions

Each of the following scenarios requires the use of accounting information to carry out one or more of the three managerial objectives: planning, control (including performance evaluation), or decision making.a. Laboratory Manager: An HMO approached me recently and offered us its entire range of
Jenna Suarez, the controller for Arben Company, has faced the following situations in the past two weeks:a. Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially assembled or to buy individual parts and assemble them at the Arben factory.b. The
Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of hard-disk capacity, two USB ports, a DVD drive, and each comes with the same basic software support package. Both come
The following describes the job responsibilities of two employees of Barney Manufacturing. Joan Dennison, Cost Accounting Manager. Joan is responsible for measuring and collecting costs associated with the manufacture of the garden hose product line. She is also responsible for preparing periodic
Consider the following true scenario between Dave, a printer, and Steve, an assistant in the local university’s athletic department.Steve: Dave, our department needs to have 10,000 posters printed for the basketball team for next year. Here’s the mock-up, and we’ll need them in a month. How
Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a profit that is 10 percent above the planned level, and I will receive a $10,000 bonus. However, given the projections for the fourth quarter, it does not look promising.I really need that $10,000. I know
The following statements have appeared in newspaper editorials:1. Business students come from all segments of society. If they have not been taught ethics by their families and by their elementary and secondary schools, a business school can have little effect.2. Sacrificing self-interest for the
The Bedron Company is a closely held investment service group that has been quite successful over the past five years, consistently providing most members of the top management group with 50 percent bonuses. In addition, both the chief financial officer and the chief executive officer have received
What is a cost object? Give some examples.
What is the difference between accumulating cost and assigning cost?
What is a direct cost? An indirect cost? Can the same cost be direct for one purpose and indirect for another? Give an example.
What is the cost of goods manufactured?
Define prime cost and conversion cost. Why can’t prime cost be added to conversion cost to get total product cost?
What is the difference between a product and a service? Give an example of each.
Explain the difference between cost and expense.
How does a period cost differ from a product cost?
What is allocation?
Define manufacturing overhead.
Explain the difference between direct materials purchases in a month and direct materials for the month.
Why do firms like to calculate a percentage column on the income statement (in which each line item is expressed as a percentage of sales)?
What is the difference between the income statement for a manufacturing firm and the income statement for a service firm?
Define selling cost. Give five examples of selling cost.
What is the difference between cost of goods manufactured and cost of goods sold?
1. Accumulating costs means thata. Costs must be summed and entered on the income statement.b. Each cost must be linked to some cost object.c. Costs must be measured and tracked.d. Costs must be allocated to units of production.e. Costs have expired and must be transferred from the balance sheet
1. Stone Inc. is a company that purchases goods (e.g., chess sets, pottery) from overseas and resells them to gift shops in the United States. Stone Inc. is which of the following?a. Retailerb. Wholesalerc. Manufacturing firmd. Service firme. None of the above2. JackMan Company produces diecast
Slapshot Company makes ice hockey sticks. Last week, direct materials (wood, paint, Kevlar, and resin) costing $24,000 were put into production. Direct labor of $40,000 (20 workers x 100 hours x $20 per hour) was incurred. Manufacturing overhead equaled $56,000. By the end of the week, the company
Slapshot Company makes ice hockey sticks. Last week, direct materials (wood, paint, Kevlar, and resin) costing $24,000 were put into production. Direct labor of $40,000 (20 workers x 100 hours x $20 per hour) was incurred. Manufacturing overhead equaled $56,000. By the end of the week, the company
Slapshot Company makes ice hockey sticks. On June 1, Slapshot had $42,000 of materials in inventory. During the month of June, the company purchased $180,000 of materials. On June 30, materials inventory equaled $51,000. Required:Calculate the direct materials used in production for the month of
Slapshot Company makes ice hockey sticks. During the month of June, the company purchased $180,000 of materials. Also during the month of June, Slapshot Company incurred direct labor cost of $165,000 and manufacturing overhead of $215,000. Inventory information is as follows:Required:Calculate the
Slapshot Company makes ice hockey sticks. During the month of June, 18,000 sticks were completed at a cost of goods manufactured of $540,000. Suppose that on June 1, Slapshot had 5,000 units in finished goods inventory costing $160,000 and on June 30, 7,000 units in finished goods inventory costing
Slapshot Company makes ice hockey sticks and sold 16,000 sticks during the month of June at a total cost of $485,000. Each stick sold at a price of $90. Slapshot also incurred two types of selling costs: commissions equal to 15 percent of the sales price, and other selling expense of $200,000.
Slapshot Company makes ice hockey sticks and sold 16,000 sticks during the month of June at a total cost of $485,000. Each stick sold at a price of $90. Slapshot also incurred two types of selling costs: commissions equal to 15 percent of the sales price, and other selling expense of $200,000.
Allstar Exposure designs and sells advertising services to small, relatively unknown companies. Last month, Allstar had sales commissions costs of $50,000, technology costs of $75,000, and research and development costs of $200,000. Selling expenses were $10,000, and administrative expenses equaled
The sales staff of Central Media (a locally owned radio and cable television station) consists of two salespeople, Derek and Lawanna. During March, the following salaries and commissions were paid:Derek spends 100 percent of his time selling advertising. Lawanna spends two-thirds of her time
Holmes Company produces wooden playhouses. When a customer orders a playhouse, it is delivered in pieces with detailed instructions on how to put it together. Some customers prefer that Holmes puts the playhouse together, and they purchase the playhouse plus the installation package. Holmes then
Hummer Company uses manufacturing cells to produce its products (a cell is a manufacturing unit dedicated to the production of subassemblies or products). One manufacturing cell produces small motors for lawn mowers. Suppose that the motor manufacturing cell is the cost object. Assume that all or a
Martinez Manufacturing Inc. showed the following costs for last month:Direct materials ....... $7,000Direct labor ......... 3,000Manufacturing overhead ... 2,000Selling expense ........ 8,000Last month, 6,000 units were produced and sold.Required:1. Classify each of the costs as product cost or
Loring Company incurred the following costs last year:Direct materials ..................$216,000Factory rent ...................24,000Direct labor ....................120,000Factory utilities ..................6,300Supervision in the factory .............. 50,000Indirect labor in the factory
A factory manufactures jelly. The jars of jelly are packed six to a box, and the boxes are sold to grocery stores. The following types of cost were incurred:JarsSugarFruitPectin (thickener used in jams and jellies)BoxesDepreciation on the factory buildingCooking equipment operators€™
Grin Company manufactures digital cameras. In January, Grin produced 6,400 cameras with the following costs:Direct materials .........$400,000Direct labor ..........80,000Manufacturing overhead .....320, 000There were no beginning or ending inventories of WIP.Required:1. What was total product cost
Refer to the data provided in Exercise 2-33.Required:1. What was the total prime cost in January?2. What was the prime cost per unit in January?3. What was the total conversion cost in January?4. What was the conversion cost per unit in January?Exercise 2-33Grin Company manufactures digital
Hannah Banana Bakers makes chocolate chip cookies for cafe restaurants. In June, Hannah Banana purchased $15,500 of materials. On June 1, the materials inventory was $3,700. On June 30, $1,600 of materials remained in materials inventory.Required:What is the cost of the direct materials used in
Allyson Ashley makes jet skis. During the year, Allyson manufactured 54,000 jet skis. Finished goods inventory had the following units:January 1 ......2, 100December 31 ......2, 750Required:1. How many jet skis did Allyson sell during the year?2. If each jet ski had a product cost of $1,125, what
In March, Chilton Company purchased materials costing $14,000 and incurred direct labor cost of $20,000. Overhead totaled $36,000 for the month. Information on inventories was as follows:Required:1. What was the cost of direct materials for March?2. What was the total manufacturing cost in March?3.
Refer to the data provided in Exercise 2-37.Required:What was the cost of goods sold for March?Exercise 2-37
Jasper Company provided the following information for last year:Sales in units ............300,000Selling price ................$9Direct materials ...........$150,000Direct labor ............$325,000Manufacturing overhead ......$215,000Selling expense ............$437,000Administrative expense
Refer to the data provided in Exercise 2-39.Required:1. Calculate the sales revenue for last year.2. Prepare an income statement for Jasper Company for last year. Exercise 2-39Sales in units 300,000Selling price $9Direct materials $150,000Direct labor $325,000Manufacturing overhead
Refer to the data provided in Exercise 2-39.Required:Prepare an income statement for Jasper Company for last year. Calculate the percentage of sales for each line item on the income statement. Round percentages to the nearest tenth of a percent.Exercise 2-39.Sales in units 300,000Selling price
Pop€™s Drive-Thru Burger Heaven produces and sells quarter-pound hamburgers. Each burger is wrapped and put in a €˜€˜burger bag,€™€™ which also includes a serving of fries and a soft drink. The price for the burger bag is $3.50. During December,
Harry Whipple, owner of an inkjet printer, has agreed to allow Mary and Natalie, two friends who are pursuing master’s degrees, to print several papers for their graduate courses. However, he has imposed two conditions. First, they must supply their own paper. Second, they must pay Harry a fair
Bisby Company manufactures fishing rods. At the beginning of July, the following information was supplied by its accountant:Raw materials inventory ........$40,000Work-in-process inventory .........21,000Finished goods inventory ........23,200During July, the direct labor cost was $43,500, raw
Laworld Inc. manufactures small camping tents. Last year, 200,000 tents were made and sold for $60 each. Each tent includes the following costs:Direct materials .........$18Direct labor ...........12Manufacturing overhead .....16The only selling expenses were a commission of $2 per unit sold and
Hayward Company, a manufacturing firm, has supplied the following information from its accounting records for the month of May:Direct labor cost ................$10,500Purchases of raw materials ............ .15,000Supplies used ..................675Factory insurance .................350Commissions
Following is a list of cost items described in the chapter as well as a list of brief descriptive settings for each item.Cost terms:a. Opportunity costb. Period costc. Product costd. Direct labor coste. Selling costf. Conversion costg. Prime costh. Direct materials costi. Manufacturing overhead
Berry Company is an architectural firm located in Detroit, Michigan. The company works with small and medium-size construction businesses to prepare building plans according to client contract. Berry employs 10 professionals and 5 staff. The following data are provided for last year:Number of
W. W. Phillips Company produced 4,000 leather recliners during the year. These recliners sell for $400 each. Phillips had 500 recliners in finished goods inventory at the beginning of the year. At the end of the year, there were 700 recliners in finished goods inventory. Phillips’ accounting
Luisa Giovanni is a student at New York University. To help pay her way through college, Luisa started a dog walking service. She has 12 client dogs—6 are walked on the first shift (6:30 A.M. and 5:00 P.M.), and six are walked on the second shift (7:30 A.M. and 6:00 P.M.).Last month, Luisa noted
Melissa Vassar has decided to open a printing shop. She has secured two contracts. One is a five-year contract to print a popular regional magazine. This contract calls for 5,000 copies each month. The second contract is a three-year agreement to print tourist brochures for the state. The state
Five to six times a year, Kicker puts on tent sales in various cities throughout Oklahoma and the surrounding states. The tent sales are designed to show Kicker customers new products, engender enthusiasm about those products, and sell soon to be out-of-date products at greatly reduced prices. Each
Gateway Construction Company is a family-operated business that was founded in 1950 by Samuel Gateway. In the beginning, the company consisted of Gateway and three employees laying gas, water, and sewage pipelines as subcontractors. Currently, the company employs 25 to 30 people; Jack Gateway,
Jean Erickson, manager and owner of an advertising company in Charlotte, North Carolina, had arranged a meeting with Leroy Gee, the chief accountant of a large, local competitor. The two are lifelong friends. They grew up together in a small town and attended the same university. Leroy was a
Why is knowledge of cost behavior important for managerial decision making? Give an example to illustrate your answer.
What is a driver? Give an example of a cost and its corresponding output measure or driver.
Suppose a company finds that shipping cost is $3,560 each month plus $6.70 per package shipped. What is the cost formula for monthly shipping cost? Identify the independent variable, the dependent variable, the fixed cost per month, and the variable rate.
Some firms assign mixed costs to either the fixed or variable cost categories without using any formal methodology to separate them. Explain how this practice can be defended.
Explain the difference between committed and discretionary fixed costs. Give examples of each.
Explain why the concept of relevant range is important when dealing with step costs.
Why do mixed costs pose a problem when it comes to classifying costs into fixed and variable categories?
Describe the cost formula for a strictly fixed cost such as depreciation of $15,000 per year.
Describe the cost formula for a strictly variable cost such as electrical power cost of $1.15 per machine hour (i.e., every hour the machinery is run, electrical power cost goes up by $1.15).
What is the scattergraph method, and why is it used? Why is a scattergraph a good first step in separating mixed costs into their fixed and variable components?
Describe how the scattergraph method breaks out the fixed and variable costs from a mixed cost. Now describe how the high-low method works. How do the two methods differ?
What are the advantages of the scattergraph method over the high-low method? The high-low method over the scattergraph method?
Describe the method of least squares. Why is this method better than either the high-low method or the scattergraph method?
What is meant by the best-fitting line?
Explain the meaning of the coefficient of determination.
1. A factor that causes or leads to a change in a cost or activity is a (n)a. Driver.b. Intercept.c. Slope.d. Variable term.e. Cost object.2. Which of the following would probably be a variable cost in a soda bottling plant?a. Direct laborb. Bottlesc. Carbonated waterd. Power to run the bottling
1. The following cost formula for total purchasing cost in a factory was developed using monthly data.Purchasing cost = $123,800 + ($15 Ã— Number of purchase orders)Next month, 2,000 purchase orders are predicted. The total cost predicted for the purchasing department next montha. Is
Big Thumbs Company manufactures portable flash drives for computers. Big Thumbs incurs monthly depreciation costs of $15,000 on its plant equipment and monthly advertising costs of $3,000 to place advertisements in magazines. Also, each drive requires materials and manufacturing overhead resources.
Pizza Vesuvio makes specialty pizzas. Vesuvio's controller wants to calculate the fixed and variable costs associated with labor used in the restaurant. Data for the past eight months were collected:Required:Using the high-low method, calculate the fixed cost of labor, calculate the variable rate
Refer to the Pizza Vesuvio company information in Cornerstone Exercise 3-16. Assume that Pizza Vesuvio used this information to construct the following formula for monthly labor cost.Total labor cost = $5,200 + ($7.52 × Employee hours)Required:Assume that 675 employee hours are budgeted for the
Refer to the Pizza Vesuvio company information in Cornerstone Exercise 3-16. Assume that Pizza Vesuvio used this information to construct the following formula for monthly labor cost.Total labor cost = $5,200 + ($7.52 × Employee hours)Required:Assume that 4,000 employee hours are budgeted for the
Refer to the Pizza Vesuvio company information in Cornerstone Exercise 3-16. Coefficients shown by a regression program for this data are:Intercept ......1,145X Variable ......13.82Required:Use the results of regression to make the following calculations:1. Calculate the fixed cost of labor and the
What follows are a number of resources that are used by a manufacturer of futons. Assume that the output measure or cost driver is the number of futons produced. All direct labor is paid on an hourly basis, and hours worked can be easily changed by management.All other factory workers are
Smith Concrete Company owns enough ready-mix trucks to deliver up to 100,000 cubic yards of concrete per year (considering each truck’s capacity, weather, and distance to each job). Total truck depreciation is $200,000 per year. Raw materials (cement, gravel, and so on) cost about $25 per cubic
Alva Community Hospital has five laboratory technicians who are responsible for doing a series of standard blood tests. Each technician is paid a salary of $30,000. The lab facility represents a recent addition to the hospital and cost $300,000. It is expected to last 20 years. Equipment used for
Alisha Incorporated manufactures medical stints for use in heart bypass surgery. Based on past experience, Alisha has found that its total maintenance costs can be represented by the following formula: Maintenance cost = $310,000 + $18.50X, where X = Number of heart stints. Last year, Alisha
Refer to the Alisha Incorporated information in Exercise 3-23. However, now assume that Alisha produced 80,000 thermometers (rather than 150,000). Round all answers to two decimal places.Required:1. What is the total maintenance cost incurred by Alisha last year?2. What is the total fixed
Bellati Inc. produces large industrial machinery. Bellati has a machining department and a group of direct laborers called machinists. Each machinist is paid $50,000 and can machine up to 500 units per year. Bellati also hires supervisors to develop machine specification plans and to oversee
Ben Palman owns an art gallery. He accepts paintings and sculpture on consignment and then receives 20 percent of the price of each piece as his fee. Space is limited, and there are costs involved, so Ben is careful about accepting artists. When he does accept one, he arranges for an opening show
Refer to the Ben Palman art gallery information in Exercise 3-26.Required:1. Assume that the cost driver is number of opening shows. Develop the cost formula for the gallery’s costs for a year.2. Using the formula developed in Requirement 1, what is the total cost for Ben in a year with 12
Luisa Crimini has been operating a beauty shop in a college town for the past 10 years. Recently, Luisa rented space next to her shop and opened a tanning salon. She anticipated that the costs for the tanning service would primarily be fixed but found that tanning salon costs increased with the
Refer to the Luisa Crimini company information in Exercise 3-28.Required:Prepare a scattergraph based on Luisa’s data. Use cost for the vertical axis and number of tanning appointments for the horizontal. Based on an examination of the scattergraph, does there appear to be a linear relationship
Refer to the Luisa Crimini company information in Exercise 3-28.Required:1. Compute the cost formula for tanning services using the results from the method of least squares.2. Using the formula computed in Requirement 1, what is the predicted cost of tanning services for September for 2,500
During the past year, the high and low use of three different resources for Fly High Airlines occurred in July and April. The resources are airplane depreciation, fuel, and airplane maintenance. The number of airplane flight hours is the driver. The total costs of the three resources and the
Refer to the Fly High Airlines company information in Exercise 3-31.Required:1. Develop annual cost formulas for airplane depreciation, fuel, and airplane maintenance.2. Using the three annual cost formulas that you developed, predict the cost of each resource in a year with 480,000 airline flight
The method of least squares was used to develop a cost equation to predict the cost of receiving. Ninety-six data points from monthly data were used for the regression. The following computer output was received:Intercept .....23,100Slope ......316The driver used was number of parts
Refer to the company information in Exercise 3-33.Required:1. What is the cost formula for a year?2. Using the cost formula from Requirement 1, predict the cost of parts inspection for a year in which 29,000 parts are inspected.
Gordon Company’s controller, Eric Junior, estimated the following formula, based on monthly data, for overhead cost:Overhead cost = $109,743 + ($80.75 × Direct labor hours)Required:1. Link each term in column A to the corresponding term in column B.Column A Column BOverhead cost .....Variable
The controller for Beckham Company believes that the number of direct labor hours is associated with overhead cost. He collected the following data on the number of direct labor hours and associated factory overhead cost for the months of January through August.Required:1. Using a computer

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