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business
cornerstones cost management
Cost Management Accounting And Control 3rd Edition Don R. Hansen, Maryanne M. Mowen - Solutions
Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically in 1998 by acquiring one of its suppliers of alloy steel plates, Reigis Steel Company. To manage the two separate businesses, the operations of Reigis are reported sep¬arately as an investment
Kauffman, Inc., has acquired two new companies, one in consumer products and the other in financial services. Kauffman's top management believes that the executives of the two newly acquired companies can be most quickly assimilated into the parent company if they own shares of Kauffman stock.
The following selected data pertain to Beck Company's Beam Division for 2001:Required:1. How much is the residual income?2. How much is the return on investment? (CPA adapted) Sales $1,000,000 Variable costs 600,000 Traceable fixed costs 100,000 Average invested capital 200,000 Imputed interest
Casey Bertholt graduated from State U with a major in accounting five years ago. She ob¬tained a position with a well-known public accounting firm upon graduation and has be¬come one of their outstanding performers. In the course of her work, she has developed nu¬merous contacts with business
Sandia, Inc., manufactures radios, televisions, and VCRs in its four divisions: Radio, TV, VCR, and Components. The Components Division produces electronic components that can be used by the other three. All the components produced by this division can be sold to out¬side customers; however, from
Robinson Company has a decentralized organization with a divisional structure. Each di¬visional manager is evaluated on the basis of ROI.The Plastics Division produces a plastic container that the Chemical Division can use.Plastics can produce up to 100,000 of these containers per year. The
Greg Peterson has recently been appointed vice president of operations for Webster Cor¬poration. Peterson has a manufacturing background and previously served as operations manager of Webster's Tractor Division. The business segments of Webster include the man¬ufacture of heavy equipment, food
Renslen, Inc., a truck manufacturing conglomerate, has recently purchased two divisions:Meyers Service Company and Wellington Products, Inc. Meyers provides maintenance ser¬vice on large truck cabs for ten-wheeler trucks, and Wellington produces air brakes for the ten-wheeler trucks.The employees
Jump Start Company (JSC), a subsidiary of Mason Industries, manufactures go-carts and other recreational vehicles. Family recreational centers that.feature go-cart tracks along with miniature golf, batting cages, and arcade games have increased in popularity. As a result, JSC has been pressured by
Lynsar Corporation started as a single plant that produced the major components assem¬bled into electric motors—the company's main product. Lynsar later expanded by devel¬oping outside markets for some of the components used in its motors. Eventually, Lynsar reorganized into four manufacturing
Explain the role of the accountant in the international environment.
Discuss the varying levels of involvement that firms can take in international trade.
Explain the ways accountants can manage foreign currency risk.
Explain why multinational firms choose to decentralize.
Explain how environmental factors can affect performance evaluation in the multinational firm.
Discuss the role of transfer pricing in the multinational firm.
Discuss ethical issues that affect firms operating in the international environment.
How do international issues affect the role of the ac¬countant?
What are joint ventures, and why do companies en¬gage in them?
What are maquiladoras? Why have so many U.S. firms joined forces with maquiladoras?
What is an exchange rate for currency? What is the dif¬ference between a spot rate and future rate?
Define currency appreciation. What impact does cur¬rency appreciation have on a company's ability to im¬port goods?
What impact does currency appreciation have on a company's ability to export its goods?
What is transaction risk? Economic risk? Translation risk?
What is hedging? If a company imports raw materials, payable in full in 90 days in the foreign currency, why might the company want to hedge?
The performance of the subsidiary manager is equiv¬alent to the performance of a subsidiary. Do you agree?Explain.
What environmental factors may affect divisional per¬formance in a multinational firm?
Explain how unit standards are set and why standard cost systems are adopted.
Explain the purpose of a standard cost sheet.
Describe the basic concepts underlying variance analysis, and explain when variances should be investigated.
Compute and journalize the materials and labor variances, and explain how they are used for control.
Compute overhead variances three different ways, and explain overhead accounting.
Calculate mix and yield variances for materials and labor.
Should standards be set by engineering studies? Why or why not?
Discuss the differences between actual costing, normal costing, and standard costing.
The materials usage variance is always the responsi¬bility of the production supeiAusor. Do you agree or disagree? Why?
Explain why standard cost systems are adopted.
Explain how the two-variance, three-variance, and four-variance overhead analyses are related.
Quincy Farms is a producer of items made from farm products that are distributed to su¬permarkets. For many years, Quincy's products have had strong regional sales on the basis of brand recognition. However, other companies have been marketing similar products in the area, and price competition
During the year, Gelstrop Company produced 98,000 valves used in truck engines. Gelstrop's material and labor standards areRequired:1. Compute the standard pounds of materials allowed for the production of 98,000 units.2. Compute the standard hours allowed for the production of 98,000 units. Direct
Riquisimo Company produces a popular candy bSr called cocolate. The candy is produced in Guatemala and exported to the United States. Recently the company adopted the fol¬lowing standards for one 5 ounce bar of the candy:During the first week of operation, the company experienced the following
Pratt, Inc., uses a standard cost system and develops its overhead rates from the current an¬nual budget. The budget is based on an expected annual output of 100,000 units requiring 500,000 direct labor hours. (Practical capacity is 550,000 hours.) Annual budgeted overhead costs total $437,500, of
Refer to the data in 9-4.Required:1. Compute overhead variances using a two-way analysis.2. Compute overhead variances using a three-way analysis.3. Illustrate how the two- and three-way analyses are related to the four-way analysis.
Chemcobre, Inc., produces chemical compounds for industrial use. Two liquid organic chem¬icals, Liq-1 and Liq-2, are mixed and heated to produce a liquid compound that is sold to copper companies for use in a process that leaches copper from low-grade ore. After the liq¬uid compound is produced
Refer to the data in 9-6. Chemcobre, Inc., also uses two different types of labor in produc¬ing the copper-leaching compound; mixing and drum-filling labor. For each batch of 10,000 gallons of material input, the following standards have been developed for labor:The actual labor hours used for the
Franklin Company uses the following rule to determine whether labor efficiency variances ought to be investigated. A labor efficiency variance will be investigated anytime the amormt exceeds the lesser of $16,000 or 10% of the standard labor cost. Reports for the past five weeks provided the
Zapato Corporation produces leather boots. The company uses a standard cost system and has set the following standards for materials and labor (for one pair of boofs):During the year, Zapato produced 2,000 pairs of leather boots. The actual leather purchased was 6,200 strips at $9.96 per strip.
Iverson Company produces microwave ovens. Iverson's plant in Buffalo uses a standard cost system. The standard cost system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that 4 direct labor hours should be used for every microwave unit
The Bartlesville plant of Iverson Company produces an industrial chemical. At the beginning of the year, the Bartlesville plant had the following standard cost sheet:The Bartlesville plant computes its overhead rates using practical volume, which is 72,000 units. The actual results for the year
Marvel Company uses a standard cost system. During the past quarter, the following variances were computed:Marvel applies variable overhead using a standard rate of $2 per direct labor hour allowed.Four direct labor hours are allowed per unit produced. (Only one type of product is man¬ufactured.)
The Emerson Division of Golding Company produces small kitchen appliances. The com¬pany uses a standard cost system for production costing and control. The standard cost sheet for its most popular product, a toaster, is given below.During the year, Emerson experienced the following activity
Business Specialty, Inc., manufactures two staplers, small and regular. The standard quantities of labor and materials per unit for the year areThe standard price paid per pound of direct materials is $1.60. The standard rate for labor is $8. Overhead is applied on the basis of direct labor hours.
Energy Products Company produces a gasoline additive. Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion process.Careful controls are required during the production process to ensure that the proper mix of input
Broder Company produces a single product. Broder employs a standard cost system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Broder used a standard overhead rate equal to $12.50 per direct labor hour. The rate was computed using
During the year, 30,000 units were produced and sold. The following actual costs were incurred:Direct materials $320,000 Direct labor 220,000 Variable overhead 125,000 Fixed overhead 89,000 There were no beginning or ending inventories of raw materials. The materials price variance was $5,000
As part of its cost control program. Tracer Company uses a standard cost system for all man¬ufactured items. The standard cost for each item is established at the beginning of the fis¬cal year, and the standards are not revised until the beginning of the next fiscal year. Changes in costs, caused
Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, $0.90, compared favorably with the standard price of $1.10. Given the quan¬tity that would be purchased,
Define responsibility accounting and describe the four types of responsibility centers.
Compute and explain return on investment (ROI), residual income (Rl), and economic value added (EVA).
Discuss methods of evaluating and rewarding managerial performance.
Explain the role of transfer pricing in a decentralized firm.
Discuss the methods of setting transfer prices.
Bebida Company has three process departments: Cooking, Blending, and Canning. At the beginning of the year (July 1) there were no work in process or finished goods inventories.The following data are made available for the month of July:Required;1. Prepare journal entries that show the transfer of
A local barbershop cuts the hair of one thousand customers per month. The clients are men and the barbers offer no special styling. During the month of March, one thousand cus¬ tomers were serviced. The cost of haircuts includes the following:Required:1. Explain why process costing is appropriate
Ireland Company uses JIT manufacturing. There are several manufacturing cells set up within one of its factories. One of the cells makes space heaters. The cost of production for the month of March is given below:During March, 10,000 space heaters were produced and sold.Required:1. Explain why
Compomets, Inc., produces a standard gear for trenchers. The gears are produced in two de¬partments: Machining and Finishing. The data for the Machining Department are as follows:Required:1. Prepare a physical flow schedule.2. Calculate equivalent units of production for:a. Raw materialsb.
Wantler Company manufactures a household detergent. The Mixing Department, the first process department, mixes the chemicals required for the detergent. The following data are for 2001:Materials are added at the beginning of the process. Ending inventory is 95 percent com¬plete with respect to
Amarid Company manufactures a product that passes through two processes: fabrication and assembly. The following information was obtained for the Fabrication Department for April:1. All materials are added at the beginning of the process.2. Beginning work in process had 12,000 units, 30% complete
Baden Company uses FIFO to account for the costs of production. For Grinding, the first processing department, the following equivalent unit schedule has been prepared:The cost of beginning work in process was materials, $20,000; conversion costs, $40,000.Required:1. Determine the cost of ending
The following are data for four independent process costing departments. Inputs are added continuously.Required:Compute the equivalent units of production for each of the preceding departments using the weighted average method. A B C D Beginning inventory 3,000 2,000 25,000 Percent completion 30 75
Using the data from 5-8, compute the equivalent units of production for each of the four de¬partments using the FIFO method.
Watson Products, Inc., produces plastic cases used for video cameras. The product passes through three departments. For May, the following equivalent unit schedule was prepared for the first department:Costs assigned to beginning work in process: materials, $30,000; conversion, $5,000.
White Company produces men's shorts and uses FIFO to account for its manufacturing costs.The product White makes passes through two processes: Cutting and Sewing. During April, White's controller prepared the following equivalent unit schedule for the Cutting Department:Costs in beginning work in
Manford Company has a product that passes through two processes: Mixing and Cooking.During October, the Mixing Department transferred 10,000 units to the Cooking Department.The cost of the units transferred into the second department was $20,000. Materials are added uniformly in the second process.
Using the same data found in 5-12, assume the company uses the FIFO method.Required:Prepare a schedule of equivalent units, and compute the unit cost for the month of October.
Norton Parts, Inc., manufactures fenders (plastic or metal, depending on the plant) for au¬tomobiles. Each fender passes through three processes; Molding, Drilling, and Painting. In July, the Molding Department of the Detroit plant reported the following data:a. In Molding, all materials are added
Refer to the data m 5-15. Assume that the FIFO method is used.Required:1. Prepare a physical flow schedule.2. Calculate equivalent imits of production for direct materials and conversion cost.3. Compute unit cost.4. Calculate the cost of goods transferred to Drilling at the end of the month.
Tasty Bread makes and supplies bread throughout the state of Kansas. There are three types of bread produced: loaves, rolls, and buns. Seven operations describe the produc¬tion process.a. Mixing: Flour, milk, yeast, salt, butter, and so on are mixed in a large vat.b. Shaping: A conveyor belt
Jacson Company produces two brands of a popular pain medication; regular strength and extra strength. Regular strength is produced in tablet form and extra strength is produced in capsule form. All materials needed for each batch are requisitioned at the start. The work orders for two batches of
Petterson Company produces a product that passes through three processes; Fabrication, Assembly, and Finishing. All manufacturing costs are added uniformly for both processes.The following information was obtained for the Assembly Department for April 2001:a.Work in process, April 1, had 10,000
Refer to the data in 5-19.Required:Prepare a cost of production report for the Assembly Department for April using the FIFO method of costing.
Loadmear Chemicals produces an agricultural pesticide that passes through three processes:blending, drying, and bagging. The weighted average method is used to account for the costs of production. Two chemicals, X and Y, are added at the beginning of the blending process and allowed to cook for six
Wallace, Inc., produces a product that goes through three departments: Machining, Assem¬bly, and Polishing. Materials are added at the beginning of the machining operation; labor and overhead are added uniformly throughout the process. The Machining Department had work in process at the beginning
Lemmons Company manufactures a product that passes through three departments: Mix¬ing, Cooking, and Bottling. In the Cooking Department, materials are added at the end of the process. Conversion costs are incurred uniformly throughout the process. During the month of December, the Cooking
Jenny, Inc., produces a drink extract that passes through three processes: mixing, blending, and bottling. During the second quarter, the Blending Department received 20,000 gallons of liquid from the Cooking Department (transferred in at $9,600). Upon receiving the liq¬uid, the Blending
Refer to 5-25.Required:Prepare a cost of production report for the Blending Department using the weighted aver¬age method.
Muskoge Company uses a process costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, materials are added at the beginning of the process; in the Assembly Department, additional materials are added at the end of the
Refer to the data in 5-27.Required:Repeat the requirements in 5-27 using the FIFO method.
Healthway uses a process costing system to compute the unit costs of the minerals that it produces. It has three departments: Picking, Encapsulating, and Bottling. In Picking, the in¬gredients for the minerals are measured, sifted, and blended together. The mix is transferred out in gallon
Refer to the data in 5-29.Required:Prepare a cost of production report for each department using the FIFO method.
Consider the following conversation between Gary Means, manager of a division that pro¬duces industrial machinery, and his controller, Donna Simpson, a CMA and CPA:GARY: Donna, we have a real problem. Our operating cash is too low, and we are in des¬perate need of a loan. As you know, our
Larkin Company produces leather strips for western belts using three processes: cutting, de¬sign and coloring, and punching. The weighted average method is used for all three de¬partments. The following information pertains to the Design and Coloring Department for the month of June.a. There was
Novel Toys, Inc., manufactures plastic water guns. Each gun's left and right frames are produced in the Molding Department. The left and right frames are then transferred to the Assembly Department where the trigger mechanism is inserted and the halves are glued together. (The left and right halves
Describe the difference between support departments and producing departments.
Explain five reasons why support costs may be assigned to producing departments.
Calculate charging rates, and distinguish between single and dual charging rates.
Allocate support center costs to producing departments using the direct method, the sequential method, and the reciprocal method.
Calculate departmental overhead rates.
Explain how allocating support service costs can be helpful m pricing decisions.
Explain how allocation of support service costs is use¬ful for planning and control.
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