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managerial accounting

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

What are nonvalue-added activities? Nonvalue-added costs? Give an example of each.
Identify and define four different ways to manage activities so that costs can be reduced.
What is cycle time? Velocity?
Discuss the differences between static and flexible budgets.
Why are flexible budgets superior to static budgets for performance reporting?
Explain why mixed costs must be broken down into their fixed and variable components before a flexible budget can be developed.
What is the purpose of a before-the-fact flexible budget?
What is the purpose of an after-the-fact flexible budget?
Explain how an activity-based budget is prepared.
What is the difference between an activity flexible budget and a functional-based (traditional) flexible budget?
Why would an activity-based performance report be more accurate than a report based on a traditional flexible budget?
Explain why the variable overhead spending variance is not a pure price variance.
The variable overhead efficiency variance has nothing to do with efficient use of variable overhead. Do you agree or disagree? Why?
Describe the difference between the variable overhead efficiency variance and the labor efficiency variance.
Explain why the fixed overhead spending variance is usually very small.
What is the cause of an unfavorable volume variance?
Does the volume variance convey any meaningful information to managers?
Which do you think is more important for control of fixed overhead costs: the spending variance or the volume variance? Explain.
Multiple-Choice Questions1. For performance reporting, it is best to compare actual costs with budgeted costs usinga. Flexible budgets.b. Static budgets.c. Master budgets.d. Short-term budgets.e. None of the above.2. To create a meaningful performance report, actual costs and expected costs should
1. A unit-level driver is consumed by a product each and every time thata. a batch of products is produced.b. a purchase order is issued.c. a unit is produced.d. a customer complains.e. none of the above.2. Which of the following is a nonunit-level driver?a. Direct labor hoursb. Machine hoursc.
1. Which of the following is a true statement about activity-based supplier costing?a. The cost of a supplier is the purchase price of the components or materials acquired.b. Suppliers can affect many internal activities of a firm and significantly increase the cost of purchasing.c. It encourages
1. Which of the following is a quality prevention cost?a. Quality planningb. Supplier evaluation and selectionc. Quality auditsd. Field trialse. All of the above2. Which of the following is an appraisal cost (quality)?a. Design reviewsb. Quality reportingc. Manager of an inspection teamd.
Rico Company produces two types of boots: cowboy and cowgirl. There are four activities associated with the two products. Drivers for the four activities are as follows:Required:1. Calculate the consumption ratios for the four drivers.2. Is there evidence of product diversity?Explain.
Refer to Cornerstone Exercise 7-29. The following activity data have been collected:Cutting .......$60,000Assembling .....25,000Inspecting .......12,000Reworking .....6,000Required:Calculate the activity rates that would be used to assign costs to each product.
Morrison Bank has collected the following information for four activities and two types of credit cards:There are 5,000 holders of Classic cards and 20,000 holders of the Gold cards.Required:Calculate the unit cost for Classic and Gold creditcards.
Norrison Automotive produces brake systems for major automobile producers. The accounts payable department at Norrison has five clerks who process and pay supplier invoices. The total cost of their salaries is $250,000. The work distribution for the activities that they perform is as
Underwood Company produces sofas for 20 retail outlets. Of the 20 retail outlets, 19 are small, separately owned furniture stores and one is a retail chain. The retail chain buys 60 percent of the sofas produced. The 19 smaller customers purchase sofas in approximately equal quantities, where the
Webb Computers uses Alpha Electronics and La Paz Company to buy two electronic components used in the manufacture of its computers: Component 125X and Component 30Y. Consider two activities: testing and reordering components. After the two components are inserted, testing is done to ensure that the
Dykes, Inc. has the following two activities:(1) Retesting reworked products, cost: $160,000. The retesting cost of the most efficient competitor is $50,000.(2) Welding subassemblies, cost: $300,000 (15,000 welding hours). A benchmarking study reveals that the most efficient level for Dykes would
Kay Company takes 4,000 hours to produce 16,000 units of a product.Required:What is the velocity? Cycle time?
Gladmark Company produces two types of get-well cards: scented and regular. Drivers for the four activities are as follows:The following activity data have been collected:Inspecting products ....$3,000Setting up equipment ....3,750Machining .........6,000Moving materials .......1,350Required:1.
Johanssen Company uses activity-based costing (ABC). Johansson manufactures outdoor water toys using two activities: plastic injection molding and decal application. Johansson’s 2009 total budgeted overhead costs for these two activities are $250,000 (70 percent for injection molding and 30
The Mackinaw Chocolate Company uses activity-based costing (ABC). The controller identified two activities and their budgeted costs:Setting up equipment .....$ 36,000Other overhead .......$120,000Setting up equipment is based on setup hours, and other overhead is based on machine hours.Mackinaw
Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients:Required:1. Determine the total nursing costs assigned to each patient category.2. Output is measured in patient days. Assuming that the normal patient category uses10,000
Receiving has three activities: unloading, counting goods, and inspecting. Unloading uses a forklift that is leased for $12,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,400 per year. Other operating costs (maintenance) for the forklift total $1,000 per
Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non- JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater
Hepworth Company manufactures heating systems. Hepworth produces all the parts necessary for its product except for one electronic component, which is purchased from two local suppliers: Wood Inc. and Hardy Company. Both suppliers are reliable and seldom deliver late; however, Wood sells the
The following six situations are independent.a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product. Automating the insertion process requires 15 minutes of machine time and 7.5 pounds of material. The cost per labor hour is $12, the cost per machine hour is
Refer to the six situations in Exercise 7-44.Required:For each situation, identify the possible root cause(s) of the activity cost (such as plant layout, process design, and product design).Exercise 7-44a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product.
Refer to the six situations in Exercise 7-44.Required:For each situation, identify the cost reduction measure: activity elimination, activity reduction, activity sharing, or activity selection.Exercise 7-44a. A manual insertion process takes 30 minutes and 8 pounds of material to produce a product.
A manufacturing cell produces 90,000 stereo speakers per quarter. A total of 15,000 production hours are used within the cell per quarter.Required:1. Compute the velocity (per hour).2. Compute the cycle time (minutes per unit produced).
Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs:Setting up
Tristar Manufacturing produces two types of battery-operated toy soldiers: infantry and special forces. The soldiers are produced by using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each
A hospital is in the process of implementing an ABC system. A pilot study is being done to assess the effects of the costing changes on specific products. Of particular interest is the cost of caring for patients who receive in-patient recovery treatment for illness, surgery (noncardiac), and
Hammer Company produces a variety of electronic equipment. One of its plants produces two laser printers: the deluxe and the regular. At the beginning of the year, the following data were prepared for this plant:In addition, the following information was provided so that overhead costs could be
Waterfun Technology produces engines for recreational boats. Because of competitive pressures, the company was making an effort to reduce costs. As part of this effort, management implemented an activity-based management system and began focusing its attention on processes and activities.
For years, Tamarindo Company produced only one product: backpacks. Recently, the company decided to add a line of duffel bags. With this addition, the company began assigning overhead costs by using departmental rates. (Prior to this, the company used a predetermined plantwide rate based on units
Ramsey Company produces speakers (Model A and Model B). Both products pass through two producing departments. Model A's production is much more labor intensive than that of Model B. Model B is also the more popular of the two speakers. The following data have been gathered for the two
Willow Company produces lawn mowers. One of its plants produces two versions of mowers: a basic model and a deluxe model. The deluxe model has a sturdier frame, a higher horsepower engine, a wider blade, and mulching capability. At the beginning of the year, the following data were prepared for
Trinity Clinic has identified three activities for daily maternity care: occupancy and feeding, nursing, and nursing supervision. The nursing supervisor oversees 150 nurses, 25 of whom are maternity nurses (the other nurses are located in other care areas such as the emergency room and intensive
Oaklawn National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their
Sorensen Manufacturing produces several types of bolts used in aircrafts. The bolts are produced in batches according to customer orders. Although there are a variety of bolts, they can be grouped into three product families. Because the product families are used in different kinds of aircraft,
Levy Inc. manufactures tractors for agricultural usage. Levy purchases the engines needed for its tractors from two sources: Johnson Engines and Watson Company. The Johnson engine is the more expensive of the two sources and has a price of $1,000. The Watson engine is $900 per unit. Levy produces
Danna Martin, president of Mays Electronics, was concerned about the end-of-the year marketing report that she had just received. According to Larry Savage, marketing manager, a price decrease for the coming year was again needed to maintain the company’s annual sales volume of integrated circuit
John Thomas, vice president of Mallett Company (a producer of a variety of plastic products), has been supervising the implementation of an ABC management system. One of John’s objectives is to improve process efficiency by improving the activities that define the processes. To illustrate the
Goldman Company has a JIT system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of telescopes, has four operations: machining, finishing, assembly, and qualifying (testing).For the coming year, the
Consider the following independent environmental activities:a. A company takes actions to reduce the amount of material in its packages.b. After its useful life, a soft-drink producer returns the activated carbon used for purifying water for its beverages to the supplier. The supplier reactivates
Sharp Paper Inc. has three paper mills, one of which is located in Memphis, Tennessee. The Memphis mill produces 300 different types of coated and uncoated specialty printing papers. This large variety of products was the result of a full-line marketing strategy adopted by Sharp's management.
Consider the following conversation between Leonard Bryner, president and manager of a firm engaged in job manufacturing, and Chuck Davis, certified management accountant, the firm’s controller.Leonard: Chuck, as you know, our firm has been losing market share over the past three years. We have
Multiple-Choice Questions1. In a performance report that details the spending and efficiency variances, which of the following columns will be found?a. A cost formula for each itemb. A budget for actual hours for each itemc. A budget of standard hours for each itemd. All of the above.e. Only a and
Dagmar Company provided the following information for last year.Master Budget Actual DataBudgeted production 3,000 ......... 2,900 unitsDirect materials:3 pounds @ 0.80 per pound ......... $6,900Direct labor:0.5 hr. @ $12.00 per hour .......... 17,340Variable overhead:0.5 hr. @
Dagmar Company budgeted the following amounts:Variable costs of production:Direct materials ....... 3 pounds @ 0.80 per poundDirect labor ........ 0.5 hr. @ $12.00 per hourVariable overhead ...... 0.5 hr. @ $1.50Fixed overhead:Materials handling ..... $6,200Depreciation
Dagmar Company budgeted the following amounts:Variable costs of production:Direct materials ........ 3 pounds @ 0.80 per poundDirect labor ........... 0.5 hr. @ $12.00 per hourVariable overhead ....... 0.5 hr. @ $1.50Fixed overhead:Materials handling ........ $6,200Depreciation
A company showed the following information for the year:Standard variable overhead rate (SVOR) per direct labor hour .... $4.50Standard hours (SH) allowed per unit ............. 3Actual production ..................... 12,000Actual variable overhead costs ................ $163,172Actual direct
A company provided the following information:Standard variable overhead rate (SVOR) per direct labor hour .... $4.50Actual variable overhead rate (AVOR) per direct labor hour .... $4.52Actual direct labor hours worked (AH) ................36,100Actual production in units
A company provided the following information:Standard variable overhead rate (SVOR) per direct labor hour ..... $4.50Actual variable overhead costs:Inspection ................................... $66,722Power ...................................... $96,450Actual direct labor hours worked (AH)
A company provided the following data:Standard fixed overhead rate (SFOR) ........ $7 per direct labor hourActual fixed overhead costs ........... $250,895Standard hours allowed per unit .......... 3 hoursActual production .............. 12,000 unitsRequired:1. Calculate the standard hours
A company provided the following information:Standard fixed overhead rate (SFOR) per direct labor hour ..... $7.00Actual fixed overhead rate (AFOR) per direct labor hour ..... $6.95Actual direct labor hours worked (AH) ............ 36,100Actual production in units
Jefferson Company decided to look more closely at the inspection activity in its factory.The following information for a year was collected:Demand for inspections: 130,000Resources needed:a. 7 inspectors, capable of inspecting 20,000 units per year. Salary is $35,000 each.b. Supplies (small tools,
Cohlmia Company provided information on the following four overhead activities.Cohlmia has found that the following driver levels are associated with two different levels of production.Required:Prepare an activity-based flexiblebudget.
Cohlmia Company produced 32,000 units last year. The information on the actual costs and budgeted costs at actual production of four activities is provided below.Required:Prepare an activity-based performance report for the four activities for the pastyear.
Performance ReportMaster Budget Actual DataBudgeted production: 2,500 ...……. Actual production: 2,600 unitsMaterials:2 leather strips @ $3.00 ………...….. Materials
Budgeted amounts for the year:Materials .......2 leather strips @ $3.00Labor ..........0.5 hr. @ $12.00Variable overhead .....0.5 hr. @ $1.00Fixed overhead ......$4,500Required:1. Prepare a flexible budget for 2,000, 3,000, and 4,000 units.2. Calculate the unit cost at 2,000, 3,000, and 4,000
CHC, Inc., produces a variety of shampoos, conditioners, and hair care products. CHC€™s controller has developed standard costs for the following four overhead items:Next year, CHC expects production to require 150,000 direct labor hours.Required:1. Prepare an overhead budget for the
Refer to the information provided in Exercise 11-32. Assume that CHC’s actual production required 156,000 direct labor hours at standard. The actual overhead costs incurred were as follows:Maintenance ....... $207,800Power ........ 63,000Indirect labor ..... 435,000Rent ..........
Joven Inc. operates a delivery service for over 70 restaurants. The corporation has a fleet of vehicles and has invested in a sophisticated, computerized communications system to coordinate its deliveries. Joven has gathered the following actual data on last year’s delivery operations:Deliveries
Refer to Exercise 11-34. Assume that the actual fixed overhead was $420,000. Budgeted fixed overhead was $405,000, based on practical capacity of 33,750 direct labor hours.Required:1. Calculate the standard fixed overhead rate based on budgeted fixed overhead and practical capacity.2. Compute the
At the beginning of the year, Raydom Company had the following standard cost sheet for one of its chemical products:Direct materials (5 lbs. @ $6.40) ....... $32.00Direct labor (2 hrs. @ $18.00) ........ 36.00Fixed overhead (2 hrs. @ $4.00) ....... 8.00Variable overhead (2 hrs. @ $1.50)
Tules Company is planning to produce 2,400,000 power drills for the coming year. Thecompany uses direct labor hours to assign overhead to products. Each drill requires 0.5standard hour of labor for completion. The total budgeted overhead was $2,700,000.The total fixed overhead budgeted for the
Messner Company is planning to produce 280,000 units for the coming year. The company uses direct labor hours to assign overhead to products. Each unit requires 0.9 standard hour of labor for completion. The total variable overhead budgeted was $801,360. The total fixed overhead budgeted for the
Minihan Company had the data below for its most recent year, ending December 31:Required:Prepare a performance report that shows the variances on an item-by-itembasis.
Usry Company decided to look more closely at the materials receiving activity in its factory. The driver for receiving is the number of receiving orders. The following information for a year was collected:Demand for receiving orders: 130,000Resources needed:a. 4 workers, capable of completing
Pulaski Company provided information on the following three overhead activities.Pulaski has found that the following driver levels are associated with two different levels of production.Required:Prepare an activity-based flexible budget for the two levels ofactivity.
Eggars produced 572,000 units last year. The information on the actual costs and budgeted costs at actual production of four activities follows.Required:Prepare an activity-based performance report for the four activities for the pastyear.
Regina Johnson, controller for Pet-Care Company, has been instructed to develop a flexible budget for overhead costs. The company produces two types of dog food. One, BasicDiet, is a standard mixture for healthy dogs. The second, SpecialDiet, is a reduced protein formulation for older dogs with
Refer to the information provided in Problem 11-43.Required:1. Calculate the direct labor hours required for production that is 10 percent higher than expected. Calculate the direct labor hours required for production that is 20 percent lower than expected.2. Prepare an overhead budget that
Refer to the information provided in Problem 11-43. Assume that Pet-Care actually produced 120,000 bags of BasicDiet and 100,000 bags of SpecialDiet. The actual overhead costs incurred were as follows:Maintenance ....... $ 40,500Indirect labor ...... 119,000Power ......... 31,700Rent
Blazer Company manufactures machine parts in its Prague plant. Blazer has developed the following flexible budget for overhead for the coming year. Activity level is measured in direct labor hours.The Prague plant produces two different types of parts. The production budget for November is 50,000
Stillwater Designs is considering a new Kicker speaker model: Solo X18, which is a large and expensive subwoofer (projected price is $760 to distributors). The company controls the design specifications of the model and contracts with manufacturers in mainland China to produce the model. Stillwater
Quarterly budgeted overhead costs for two different levels of activity follow. The 2,000 level was the expected level from the master budget.The actual activity level was 1,650 hours.Required:1. Prepare a flexible budget for an activity level of 1,650 direct labor hours.2. Suppose that all of the
Fruta Inc. purchases fruit from numerous growers and packs fruit boxes and fruit baskets for sale. Fruta has developed the following flexible budget for overhead for the coming year. Activity level is measured in direct labor hours.Required:1. Prepare an overhead budget for May.2. The Cushing High
Fernando’s is a hole-in-the-wall sandwich shop just off the State University campus. Customers enter off the street into a small counter area to order one of 10 varieties of sandwiches and a soft drink. All orders must be taken out because there is no space for dining in. The owner of
Amy Bunker, production manager, was upset with the latest performance report, which indicated that she was $100,000 over budget. Given the efforts that she and her workers had made, she was confident that they had met or beat the budget. Now she was not only upset but also genuinely puzzled over
Billy Adams, controller for Westcott, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 2010:During 2009, Westcott employees worked a total of 80,000 direct labor hours, used 250,000 machine hours, made 32,000 moves, and performed 120 batch
At the beginning of last year, Jean Bingham, controller for Thorpe Inc., prepared the following budget for conversion costs at two levels of activity for the coming year:During the year, the company worked a total of 112,000 direct labor hours and incurred the following actual costs:Direct labor
Tavera Company uses a standard cost system. The direct labor standard indicates that six direct labor hours should be used for every unit produced. Tavera produces one product. The normal production volume is 120,000 units of this product. The budgeted overhead for the coming year is as
The Lubbock plant of Morril’s Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and control. The standard cost sheet for the subassembly follows:Direct materials (6.0 lbs. @ $5.00) .......
Extrim Company produces monitors. Extrim’s plant in San Antonio uses a standard costing system. The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that four direct labor hours should be used for every microwave unit
Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Lynwood used a standard overhead rate of $18 per direct labor hour. The rate was
Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of the year, the following plans for production and costs were revealed:Pairs of shoes to be produced and sold ......55,000Standard cost per unit:Direct materials ............... $15Direct labor ..................

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