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cost accounting
Cost Accounting 11th Edition Lawrence H. Hammer, William K. Carter, Milton F. Usry - Solutions
Why is a schedule of work in process prepared?LO.1
What is the control account for the finished goods ledger?LO.1
Why should a physical inventory of finished goods be taken?LO.1
How are shortages of finished goods accounted for?LO.1
When finished goods are sold, what two amounts must be recorded in the sales journal? Describe a typical entry.LO.1
Are special-order goods entered in the finished goods ledger? Explain.LO.1
Which inventory accounts appear on the statement of cost of goods manufactured? On the income statement? On the balance sheet?LO.1
What are the benefits of using special journals such as the completed jobs journal?LO.1
When a job is completed, management should review the job cost sheet. Which cost items would management look at most closely?Why?LO.1
What are the limitations on the usefulness to management of the statement of cost of goods manufactured? Why?LO.1
What are the advantages of maintaining a perpetual inventory record for finished goods?LO.1
Total job costs. (Obj. 2). The O'Brien Manufacturing Company finished Job 357 for 350 engines on July 30, 19X9. The following costs were recorded on the job cost sheet:Materials $46,560 Labor—Milling 38,890 Labor—Assembly 42,350 Labor—Finishing 34,238 Overhead—Milling 11,560
Journalize the cost of completed jobs. (Obj. 2). At the end of June, the total of the completed jobs journal was $673,930. Prepare the entry in general journal form to record the cost of the completed jobs.LO.1
Analyze Work in Process account postings. (Obj. 4). The Work in Process account for the Welsh Supply Corporation is shown on page LO.1
All journal entries for the month of November have been posted Describe each of the six postings.LO.1 DATE 19 X9 EXPLANATION Work in Process NO.. 122 POST REF DR. DEBIT CREDIT BALANCE CR. Nov. 1 (a) 35,790 65 DR. 30 (b) MR11 65,830 20 101,620 85 DR. 30 (c) J11-38 82,438 56 184,059 41 DR. 30 (d)
Record cost of goods sold and sales. (Obj. 5). For the month of May 19X9, the Carnegie Steel Corporation sold goods that cost $1.256.240 to produce. The corporation billed its customers $1.984,820 for these goods. Prepare the entries in general journal form record the cost of goods sold and the
Calculate gross profit. (Obj. 6). The sales journal for the Nevada Machine Company is shown below.a. Calculate the amount of gross profit (or loss) for each job and the total gross profit for the month.b. What was the gross profit percentage for the total sales for the month? LO.1 SALES JOURNAL for
Maintain a materials ledger using the FIFO costing method. LO.1
Maintain a materials ledger using the LIFO costing method. LO.1
Maintain a materials ledger using the moving average costing method. LO.1
Determine the value of inventory using the lower of cost or market by item valuation method. LO.1
Determine the value of inventory using the lower of total cost or total market valuation method. LO.1
Determine the value of inventory using the lower of total cost or total market by group valuation method. LO.1
Adjust inventory account balances applying the rule of cost or market, whichever is lower. LO.1
Explain how a physical inventory is taken. LO.1
Adjust for inventory shortages or overages. LO.1
How can the lower of cost or market method be applied to inventory? LO.1
What accounting theory justifies the use of the lower of cost or market method? LO.1
What adjusting entry is needed to value the raw materials inventory at the lower of cost or market if the ending inventory at cost is $87,450 and the market value is $76,120? LO.1
Why is it important for a company to establish a cutoff date for recording transactions? LO.1
Name two ways in which a company can schedule the taking of a physical inventory. LO.1
An inventory shortage is charged to what account and what department? LO.1
What is a major advantage of using a perpetual inventory system? LO.1
The materials on hand always are considered to be from the last ones purchased under what method of inventory costing? LO.1
The materials on hand always are considered to be from the first ones purchased under what method of inventory costing? LO.1
Which inventory costing method charges current costs against current revenue? LO.1
When must a new unit cost be calculated under the moving average method? LO.1
What are the three ways that the lower of cost or market method can be applied to inventory items? LO.1
When the lower of cost or market method is applied to the raw materials inventory, which method results in the lowest possible value for the inventory? Which method results in the highest value? LO.1
Why are general journal vouchers often used in place of recording transactions in a general journal? LO.1
How is a loss on the reduction of inventory to market value shown on the income statement? How is a recovery from a decrease in the allowance for the reduction of inventory to market value shown? LO.1
What is a physical inventory? LO.1
Inventory shortage may be caused by spoilage, and inventory overages may be caused by duplicate postings prepared by two employees. What are three other causes of shortages and overages? LO.1
In a period of rising prices, what effect would the use of FIFO have on the net income and the taxes of a company? What effect would LIFO have on the net income and the taxes? LO.1
Discuss the relationship between the physical flow of goods and the inventory costing method used. LO.1
A company that maintains an effective perpetual inventory system should take a periodic physical inventory. Why? LO.1
Management is concerned about the rise in inventory shortages.Suggest some security methods and internal control procedures that could be adopted to minimize the inventory shortages. LO.1
What are the benefits of using continuous or cycle inventory procedures? LO.1
Why would management want to adopt the lower of cost or market rule? LO.1
What is the importance to management of adhering to a clearly established inventory cutoff date? LO.1
How does an inventory exception report aid management in efficient inventory control? LO.1
Calculate the ending inventory balance and cost using FIFO. (Obj.1). The data given below relate to Material 408, 6-inch cloth zippers used by the Elite Leather Goods Company. Based on this data, determine the ending inventory balance and cost using the FIFO inventory valuation method.Beginning
Calculate the ending inventory balance and cost using LIFO. (Obj.2). Based on the data given in Exercise 5-1, determine the ending inventory balance and cost using the LIFO inventory valuation method. LO.1
Calculate the ending inventory balance and cost using the moving average method. (Obj. 3). Based on the data given in Exercise 5-1, determine the ending inventory balance and cost using the moving average inventory valuation method. LO.1
Calculate inventory value using the lower of cost or market method. (Obj. 4). The data given on page 118 relates to the raw materials inventory of the Edgewood Lighting Company. Determine the value of the inventory if the lower of cost or market method is applied to the individual inventory
Calculate inventory value by group using the lower of cost or market method. (Obj. 6). Based on the data given in Exercise 5-4, determine the value of the inventory if the lower of cost or market method is applied to the inventory by groups. LO.1
Calculate inventory value using the lower of cost or market method. (Obj. 5). Based on the data given in Exercise 5-4, determine the value of the inventory if the lower of cost or market method is applied to the inventory as a whole. LO.1
Present inventory on the balance sheet at the lower of cost or market.(Obj. 7). The following information is obtained from the records of the Century Square Corporation:Inventory (at Cost): $392,780 Allowance for Reduction of Inventory to Market Value: $11,650 Show the balance sheet presentation
Calculate the cost of goods sold. (Obj. 7). From the data presented below, determine the cost of goods sold to be shown on the income statement of the Langley Corporation for the month of September 19X9.Finished Goods, September 1, 19X9 $ 52,720 -j,^Finished Goods, September 30, 19X9 59,240 Cost of
Calculate the cost of goods sold. (Obj. 7). From the data presented below, determine the cost of goods sold to be shown on the income statement of the Omega Manufacturing Company for the month of June 19X9.Finished Goods, June 1, 19X9 $145,270 Finished Goods, June 30, 19X9 138,380 Cost of Goods
Journalize inventory at the lower of cost or market. (Obj. 7).The Forbes Company has decided to value its raw materials inventory at the lower of cost or market. The Raw Materials account has an ending balance of $90,760. The market value of the raw materials is$86,160. Record the necessary general
Journalize inventory at the lower of cost or market. {Obj. 7). At the end of the current fiscal year, the Raw Materials account for the Martinez Manufacturing Company has a balance of $296,369. The company has been using the lower of cost or market method for several years. The Allowance for
Define activity-based costing and activity-based management and distinguish them from traditional analysis of costs. LO9
Identify the circumstances in which activity-based costing gives more credible results than traditional product costing. LO9
Identify the different levels of costs and cost drivers in activity-based costing and give examples of each. LO9
Calculate product costs using activity-based costing and reconcile them with a tradi¬ tional system’s product costs. LO9
Identify the strategic importance of activity-based costing in pricing and product-line decisions. LO9
State the link between activity accounting and total quality management. LO9
In tenns of the direct traceability of costs, how do traditional costing systems differ from ABC? LO9
Give some examples of significant, costly activities. LO9
What two circumstances must be present for a traditional costing system to report distorted product costs? LO9
What is meant by a complex cost structure in ABC? LO9
What is meant by a diverse product line in ABC? LO9
State as briefly as possible how traditional cost¬ ing distorts the reported cost of a product that consumes 10% of all unit-level activities and 30% of all batch-level activities. LO9
Of the four levels of costs in ABC, at which level does ABC offer little or no advantage over traditional costing? LO9
Contribution margin (CM) analysis is a short-run decision-making technique that recognizes many of ABC’s batch-level and product-level costs as fixed, while ABC treats these costs as being essentially variable. How is this differ¬ ence between ABC and CM explained? LO9
If ABC shows a product to be a money-loser and management discontinues that product, will the cost of the product reported by ABC necessarily be avoided? Why or why not? LO9
What is the relationship between activity-based costing (ABC) and activity-based management (ABM)? LO9
In what way does ABC lead to improved deci¬ sions in designing a product? LO9
What is the link between ABC and total quality management? LO9
Describe the concept of departmentalization. LO9
Distinguish between service and producing departments. LO9
Define direct and indirect departmental costs and give examples of each. LO9
Compute and use departmental overhead rates. LO9
Accumulate actual departmental overhead costs. LO9
Describe departmentalization in nonmanufacturing and not-for-profit organizations. LO9
State advantages of departmental overhead rates compared to a single plantwide rate. LO9
The statement has been made that the entire process of departmentalizing factory overhead is an extension of methods used when a single overhead rate is used. Explain. LO9
A company uses departmental factory overhead rates based on direct labor hours. Is the sum of departmental over- or underapplied overhead any different if a plantwide or blanket rate is used? Are the costs of goods sold and inventory different. LO9
What is a producing department? A service department? Give illustrations of each. LO9
Why are overhead rates established for subde¬ partments or cost pools within departments? LO9
Most companies keep plant asset records to identify equipment and its original cost by loca¬ tion or department. However, charges for depreciation, property tax, and fire insurance are often accumulated in general factory accounts and charged to departments on the basis of equipment values. Is
What are the important factors involved in selecting the rate to be used for applying the factory overhead of a producing department? LO9
What are the steps followed in establishing departmental factory overhead rates? LO9
What questions must be resolved in allocating ser¬ vice department costs to benefiting departments? LO9
What methods can be used for allocating ser¬ vice department costs to producing depart¬ ments? Which is recommended? LO9
Procedures followed in computing departmen¬ tal factory overhead rates determine the accounting for actual factory overhead. Explain. LO9
How is departmental over- or underapplied overhead detemiined? LO9
Within one department of a factory, or within a nondepartmentalized factory, the use of a single overhead rate does not necessarily give accurate product cost information if a complex product line is being produced. What is one approach to solving this product-costing problem? LO9
Overhead control in a nonmanufacturing busi¬ ness can be achieved through departmentaliza¬ tion. Explain. LO9
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