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business
cost accounting
Cost Accounting 11th Edition Lawrence H. Hammer, William K. Carter, Milton F. Usry - Solutions
Measuring Quality Costs. Hightone Electronics Corporation manufactures electronic appliances for home use. Recent market studies suggest that con¬ sumer perception of the quality of Hightone products is high; however, sales have declined in the past few years. Analysis of the market suggests that
Define the concepts of planning and control and discuss how they relate to each other and con¬ tribute to progress toward achieving objectives. LO1
Distinguish between short-range and long-range plans. LO1
Distinguish between long-range plans and strate¬ gic plans. LO1
Is responsibility accounting identical with the concept of accountability? Explain. LO1
In what manner does the controller exercise control over the activities of other members of management? LO1
Discuss the functions of the cost department. LO1
Numerous nonaccounting departments require cost data and must also provide data to the cost department. Discuss. LO1
Why must the controller be aware of develop¬ ments in the field of communications? LO1
Why is the budget an essential tool in cost planning? LO1
Will the Standards of Ethical Conduct for Management Accountants prevent management fraud? Explain. LO1
How are CASB standards defined and what degree of authority do they have? LO1
Planning and Control. In practice, planning and control are inseparable. One example of their inseparability is the fact that the results of control activities serve as inputs for the next planning cycle. That is, a control effort or investi¬ gation may point to a flaw in planning, and the flaw is
Planning. Identify each of the following numbered items as an example of one of the three kinds of planning by writing for each item the appropriate letter identified below:A = an example of a short-range plan B = an example of a long-range plan C = an example of a strategic plan(1) A forecast made
Ethics. Adam Williams was recently hired as assis¬ tant controller of GroChem Inc., which processes chem¬ icals for use in fertilizers. Williams was selected for this position because of his past experience in the chemical¬ processing field. In his first month on the job, Williams made a point
Ethics. The Alert Company is a closely held invest¬ ment-services group that has been very successful over the past five years, consistently providing most mem¬ bers of the top management group with 50% bonuses. In addition, both the chief financial officer and the chief executive officer have
Ethics. Allstar Brands, headquartered in Cincinnati, is a large, diversified manufacturer with plants located throughout North and South America and the Pacific Rim. The company has a strong commitment to equal opportunity employment and emphasizes this commit¬ ment in frequent communications with
Ethics. Joseph Rodriquez is the controller of the Ceramics Division (CD) of Northeastern Company. Rodriquez reports directly to the CD general manager, Susan Czeisla. One of Rodriquez’s responsibilities is obtaining data from all CD department managers to pre¬ pare annual budgets. The current
Ethics. Mary Jones is controller of the Non-Ferrous Metals Division of Southeast Manufacturing Incorporated (SMI) in Tuscaloosa, Alabama. Last year, she served as her division’s representative on an SMI corporate-level task force charged with developing spe¬ cific objectives and performance
Describe a just-in-time (JIT) production system and contrast it with traditional production. LO7
Define material velocity and state its relationship to inventory levels. LO7
State the potential effect of JIT on production losses. LO7
Describe JIT’s effects on the purchasing function. LO7
State the relationship between JIT and backflushing. LO7
Prepare general journal entries and T accounts for backflush accounting. LO7
Regarding levels of raw materials and work in process inventories, what is the purpose of a JIT inventory system? LO7
What is the relationship between JIT and TQM? LO7
To achieve a good rate of flow through a JIT system, why is it necessary for the number of defects to be small? LO7
Theoretically, what is the EOQ size in an ideal JIT system? LO7
If a zero inventory level is unattainable, what improvement is actually achieved in JIT? LO7
What is the relationship between velocity and WIP levels? LO7
What is the strategic advantage of improving velocity throughout the company, from research and development to shipping? LO7
Under what conditions does reducing the level of WIP also reduce the number of defectives produced? LO7
What is a blanket purchase order? LO7
Why do the distinction between direct and indirect labor and the distinction between pro¬ ducing departments and some service func¬ tions disappear in many JIT work cells? LO7
In what ways does backflush costing alter the accounting for work in process inventory? LO7
Why are the materials and work in process inventory accounts combined into a single account in backflush costing? LO7
What is meant by postdeduction? LO7
What basic inventory accounting method used by merchandising companies is analogous to back- flush costing used by manufacturing companies? LO7
Cost Savings from Smaller Inventory. Circuitboard Assembly Company maintains a WIP inventory at each of 10 work stations, and the average size of the inventory is 300 units per station. The physical flow of units into and out of each WIP location is first in, first out. The total number of
Inventory Size, Velocity, and Lead Time. Acrotemp Incorporated requires an average lead time of 37 days on customer orders that require parts not kept in stock. When such a customer order is received, the parts order is placed with a vendor immediately by telephone and the parts are received in an
Inventory Size, Velocity, and Lead Time. Tennessee Panel Company needs an average of eight weeks’ lead time to produce and ship an order. Customers are willing to wait only five weeks for orders to be shipped, so presently all orders are filled from finished goods inventory. The annual carrying
Comparison of Process Costing and Backflushing; Unit Cost Calculations. Quicker Company had 24 units in process, 50% converted, at the beginning of a recent, typical month; the conversion cost component of this beginning inventory was $740. There were 20 units in process, 50% converted, at the end
Backflush Costing; Entries in RIP and Finished Goods. Charcola Manufacturing has a cycle time of less than a day, uses a raw and in process (RIP) account, and expenses all conversion costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their conversion cost components
Backflush Costing; Entries in RIP and Finished Goods. The Sweetwater Manufacturing Company has a cycle time of 1.5 days, uses a raw and in process (RIP) account, and charges all conversion costs to Cost of Goods Sold. At the end of each month, all inventories are counted, their conversion cost
Backflush Costing; Entries in RIP Account. The Stillville Manufacturing Company uses a raw and in process (RIP) inventory account and expenses all conversion costs to the cost of goods sold account. At the end of each month, all inventories are counted, their conversion cost components are
Backflush Costing; Entries in RIP Account. The Pensawater Manufacturing Company uses a raw and in process (RIP) inventory account and expenses all conversion costs to the cost of goods sold account. At the end of each month, all inventories are counted, their conversion cost components are
Backflush Costing with No Finished Goods Account. The Highspeed Manufacturing Company produces only for customer order, and most work is shipped within 36 hours of receipt of an order. Highspeed uses a raw and in process (RIP) inventory account and expenses all conversion costs to the cost of goods
Calculation of Materials and Conversion Cost Components of Finished Goods in Backflushing. During the most recent month, Backflushers Inc. started 3,000 units, finished 3,100 units, and incurred conversion costs totaling $290,160. The finished goods ending inventory consisted of 50 units. The RIP
Calculation of Materials and Conversion Cost Components of RIP in Backflushing. use the source data in the previous exercise. LO7(1) Calculate the materials cost of the RIP ending inventory.(2) Calculate the conversion cost component of the RIP ending inventory. Provide three different answers
Effects Of Smaller Inventory. (Expands on exercise E10-1.) Electronics Assembly Co. maintains WIP inven¬ tory at each of 40 work stations. The average size of inventory at each station is 200 units. The physical flow of all WIP is first in, first out. Based on recent experience, 1,400 processing
Inventory Size, Velocity, and Lead Time. (Expands on exercise E10-2) On customer orders (excluding rush orders) that require special-ordered parts, Protech Company has achieved an average lead time of 78 days, the best in its industry. When such a customer order is received, Protech places the
Backflush Costing. The Fast Manufacturing Company produces finished product within two days of the receipt of raw materials. Inventory accounts consist of a supplies account for indirect factory materials, a fin¬ ished goods account, and a combined raw and in process (RIP) inventory account. All
Backflush Costing. The La Jolla Manufacturing Company has a mature JIT production system with average cycle time of less than one clay. Total time from receipt of raw material to completion of finished product is less than three days. La Jolla uses a finished goods account and a combined raw and in
Cost Impact Of Just-in-Time Inventory System. Margro Corporation is an automotive supplier that uses auto¬ matic machines to manufacture precision parts from steel bars. Margro’s inventory of raw steel averages $600,000, with a turnover rate of four times per year.John Oates, president of
Discuss the nature of productivity and its relationship to labor costs. LO3
Explain the theory and application of incentive wage plans. LO3
Explain and apply learning curve theory. LO3
Discuss the necessary organization for labor cost accounting and control. LO3
(Appendix) Account for nonwage benefits, payroll taxes, and other labor-related deductions. LO3
Is it generally true that all wage payments are ultimately limited by and are usually based, directly or indirectly, on the productivity of the worker? Explain. LO3
Define productivity. LO3
Why is productivity important to the firm, to workers, and to society? LO3
How can labor efficiency be determined or measured? LO3
What is the purpose of an incentive wage plan? LO3
In most incentive wage plans, does production above standard reduce the labor cost per unit of output? Discuss. LO3
Describe the straight piecework plan, the 100- percent bonus plan, and the group bonus plan. LO3
What is an organizational (gainsharing) incen¬ tive plan? LO3
State the basic concept underlying the relation¬ ship involved in the cumulative-average-time learning curve model. LO3
Name some situations in which the learning curve theory can be applied. LO3
Accounting for labor has a twofold aspect: finan¬ cial accounting and cost accounting. Differentiate between the two. LO3
In what way are the creation and maintenance of an efficient labor force a cooperative effort? LO3
What is the purpose of determining the labor hours (a) worked by each employee; (b) worked on each job, or in each department? LO3
What purpose is served by (a) the clock card; (b) the time ticket? LO3
If employees’ clock cards show more time than their time tickets, how is the difference reconciled? LO3
What are bar codes and how are they used in labor costing? LO3
(Appendix) Give two costing methods of accounting for the premium costs of overtime direct labor. State circumstances in which each method is appropriate. (AICPA adapted) LO3
(Appendix) For many years, a company has paid all employees 1 week’s wages as a year-end bonus. It is also company policy to give 2-week paid vacations. What accounting should be followed with respect to the bonus and vaca¬ tion pay? LO3
(Appendix) The term pension plan has been referred to as a formal arrangement for employee retirement benefits, whether established unilater¬ ally or through negotiation, by which specific or implied commitments have been made and used as the basis for estimating costs. Explain the preferable
One-Hundred-Percent Bonus Plan. Terry Pace, employed by the Orange City Canning Company, submitted the following labor data for the first week in June:Units Hours LO3 Monday.. 270 8Tuesday.. 250 8Wednesday.. 300 8Thursday.. 240 8Friday.. 260 8Required: Prepare a schedule showing Pace’s weekly
Incentive Wage Plans. Standard production for an employee in the Assembly Department is 20 units per hour in an 8-hour day. The hourly wage rate is $8.Required: Compute an employee’s earnings under each of the following conditions (carrying all computa¬ tions to three decimal places):(1)An
One-Hundred-Percent Group Bonus Plan. The Forming Department of the Plastic-Powell Company employs six workers on an 8-hour shift at $12.50 per hour. Factory overhead is $120 per hour. Production for the sec- 7?^. ond week of June shows: Monday, 460 units; Tuesday, 475 units; Wednesday, 492 units;
Group Bonus Plan. Ten employees are working as a group in a particular manufacturing department. When the weekly production of the group exceeds the standard number of pieces per hour, each worker in the group is paid a bonus for the excess production in addition to wages at hourly rates. The
Organizational (Gainsharing) Incentive Plan. The Guyette Company employs an organizational incentive plan for its entire manufacturing facility. For the year 19B, 755 employees were eligible, and each partici¬ pated equally.The plan provides for a gainsharing pool totaling 50% of the value of
Learning Curve and Production Cost. A company’s new process will be carried out in one department. The production process has an expected learning curve of 80%. The cost subject to the learning effect for the First batch produced by the process was $60,000.Required: Compute the cumulative average
Learning Curve and Construction Time. A construction company has just completed a bridge over the Pearl River. This is the first bridge the company has built, and it required 100 weeks to complete. Now, having a bridge construction crew with some experience, the company would like to continue
Learning Curve. Rutledge Company uses labor standards in manufacturing its products. Based on past experience, the company considers the effect of an 80% learning curve when developing standards for direct labor costs.The company is planning the production of an automatic electrical timing device
(Appendix) Overtime Earnings. A production employee in the Cutting Department is paid $9 per hour for a regular work week of 40 hours. During the week ended March 22, the employee worked 50 hours and earned time and a half for overtime hours. ' ' LO3 Required:(1) Prepare the journal entry to record
(Appendix) Bonus and Vacation Pay Liability. Four factory workers and a supervisor make up a team in the Machining Department. The supervisor earns $10 per hour, and the combined hourly direct wages of the four workers is $32. Each employee is entitled to a 2-week paid vacation and a bonus equal to
(Appendix) Employer’s Labor-Related Expenses. Clarks Company has employees engaged in manufactur¬ ing, marketing, and administrative functions. The February payroll was: LO3 Directlabor. $25,000 Indirectlabor. 10,000 Marketing. 8,000 Administrative. 7,000$50,000 The company incurs the following
(Appendix) Payroll Entries. For the second week in February, Wisconsin Products Company’s records show direct labor, $18,000; indirect factory labor, $3,000; sales salaries, $4,200; and administrative office salaries, $1,500. The FICA tax rate is 7.5%; state and federal unemployment compensation
Incentive Wage Plan Evaluation. Employees in the Assembly Department of the Bell Instruments Company are currently paid $10 per hour for an 8-hour shift. For the past several weeks, production has averaged 5 units per hour per worker. Factory overhead in this department is $12 per direct labor
Incentive Wage Plan Evaluation. Hughes Company, a relatively small supplier of computer parts, is cur¬ rently engaged in producing a new component for the computer sensory unit. The company has been pro¬ ducing 150 units per week and factory overhead (all fixed) was estimated to be $1,200 per
Incentive Wage Plans. Standard production for assembly operation A94 is 20 units per hour. For the first week in May a worker’s record shows the following: LO3 Units Hours Monday.. 140 8 Tuesday.. 160 8 Wednesday.. 175 8 Thursday.. 180 8 Friday.. 200 8 Required: Compute the employee’s earnings
Incentive Wage Plans. For the first week in March, the record of M. Roderick shows: LO3 Hours Units Worked Produced Monday.. 8 180 Tuesday.. 8 200 Wednesday.. 8 220 Thursday.. 8 224 Friday.. 8 192 Roderick’s guaranteed hourly wage rate is $6 and standard production is 24 units per hour. Factory
Incentive Wage Plans. The company’s union steward complained to the Payroll Department that several union members’ wages had been miscalculated in the previous week. The following schedule indicates the incentive wage plan, hours worked, and gross wages calculated for each worker involved. LO3
Group Bonus Plans. Employees of Dyson Enterprises work in groups of five, plus a group leader. Standard production for a group is 400 units for a 40-hour week. The workers are paid $6 an hour until production reaches 400 units; then a bonus of $1.20 per unit is paid for production over 400 units,
Quarterly Bonus Allotment. Thomas Inc., manufacturers of standard pipe fittings for water and sewage lines, pays a bonus to employees based on production recorded each calendar quarter. Normal production is set at 240,000 units per quarter. A bonus of $.50 per unit is paid for any units in excess
Learning Curve in Contract Price Negotiation. Catonic Inc. recently developed a new product that includes a rather complex printed circuit board as a component (Catonic’s part number PCB-31). Although Catonic has the ability to manufacture PCB-31 internally, the circuit board is purchased from an
(Appendix) Overtime Earnings. The pay stub of Olympic Manufacturing employee #1071, who works on the production line, showed the following for a 2-week pay period: LO3 Grossearnings. $1,140.00 Income taxwithheld. 152.92 FICAtax. 85.50 Company pensionplan. 83.54 Uniondues. 11.00 Netearnings. $
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