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cost accounting

Cost Accounting Traditions And Innovations 3rd Edition Jesse T. Barfield, Cecily A. Raiborn, Michael R. Kinney - Solutions

(Accounting for by-products) A by-product, produced from processing the joint products of frozen potato patties and potatoes for dehydration, is potato skins. These potato skins can be frozen and sold to restaurants for use in preparing appetizers. The additional processing and disposal costs
(Accounting for by-products) Providence EDP provides computing services for its commercial clients. Records for clients are maintained on both computer files and paper files. After 7 years, the paper records are sold for recycling material. The net realizable value of the recycled paper is treated
(Accounting for scrap) Artistic Lites restores antique stained glass windows. Re¬ gardless of the job, there is always some breakage or improper cuts. This scrap can be sold to amateur stained glass hobbyists. The following estimates are made in setting the predetermined overhead rate for
(Scrap, job order costing) Madison Architects offers a variety of architectural ser¬ vices for its commercial construction clients. For each major job, architectural models of the completed structures are built for use in presentations to clients. The firm tracks all costs using a job order
(Net realizable value versus realized value) Indicate whether each item listed below is associated with the (1) realized value approach or (2) the net realizable value approach.a. Lias the advantage of better timing.b. Ignores value of by-product/scrap until it is sold.c. Is simplest.d. Is used to
(Not-for-profit, program, and support cost allocation) The Grand Rapids Opera Company is preparing a small pamphlet that will provide information on the types of opera, opera terminology, and storylines of some of the more well- known operas. In addition, there will be a request for funds to
(Joint process outputs and allocation methods) Provide five examples of businesses that engage in joint processes. For each of these businesses, describe the following:a. The various outputs, classified as joint products, by-products, scrap, or waste.b. Your recommendation of the most appropriate
(Joint process decision making) Tim Burns has been asked by his aged uncle to take over the family butcher shop. Tim knows that you are majoring in accounting— he majored in art—and asks you to help him understand the butcher shop busi¬ ness. He wants you to do the following:a. Explain, in
(By-product accounting method selection) Your company engages in joint processes that produce significant quantities and types of by-products. You have been re¬ quested by the chairman of your company’s Board of Directors to give a report to the board regarding making a good choice of accounting
(Net realizable value allocation) Star Communications is a regional television net¬ work. The firm has three service groups: Sports, News, and Entertainment. Joint production costs (costs incurred for facilities, administration, and so forth) for May 1997 were $16,000,000. The revenues and
(Allocation ofjoint cost) Nova Scotia Fish Processors produces three products from a common input. The three products are fish meat, fish oil, and fish meal. For April 1998, the firm produced the following average quantities of each product from each pound of fish processed:Note that 2 ounces of
(Journal entries) Lady Chic Cosmetics uses a joint process to make two main products: Elegance (a perfume) and Sooosoft (a skin lotion). Two departments, Mixing and Cooking, are used, but the products do not become separable until they have been through the cooking process. After cooking, the
(Joint cost allocation; by-product; income determination) East Lansing Financial Ser¬ vices has two main service lines: commercial loans and residential mortgages. As a by-product of these two main services, the firm also generates some revenue from selling credit life insurance. Joint cost for
(Joint cost allocation; scrap) Ahrginia Textiles produces terrycloth products for hotels. The company buys the fabric in 60-inch-width bolts. In the first process, the fabric is set up, cut, and separated into pieces. Setup can either be for robes and bath towels or for hand towels and
(Joint products; by-product) Indian River Mangoes runs a fruit-packing business in southern Florida. The firm buys mangoes by the truckload in season. The fruit is then separated into three categories according to its condition. Group 1 is suitable for selling as is to supermarket chains and
(Process costing.; joint cost allocation; by-product) The Evans Hair Salon provides hair styling services and sells a variety of cosmetic and hair-care products. The firm also generates some revenue from the sale of hair, which is periodically swept from the floor of the styling salon.The net
(Joint cost allocation; by-product) The Farmers’ Delight Company produces tomato paste and tomato sauce from a joint process. In addition, second-stage processing of the tomato sauce creates a residue mixture of tomato peels and seeds (simply referred to as P&S) as a by-product. P&S is sold for
(By-product/joint product journal entries) Midwest Wheat Farms is a 5,000-acre wheat farm. The growing process yields two principal products: wheat and straw. Wheat is sold for $3.50 per bushel (assume a bushel of wheat weighs 60 pounds). Without further processing, the straw sells for $30 per ton
(Ending inventory valuation; joint cost allocation) Emerson Meat Packers experi¬ enced the operating statistics in the following table for its joint meat cutting process during March 1997, its first month of operations. The costs of the joint process were direct material, $24,400; direct labor,
Some waste, scrap, or by-product materials have little value. In fact many such materials represent liabilities for companies because the materials require companies to incur significant disposal costs. Alternatively, some companies have historically found “cheap" ways to dispose of such
Gypsum waste is created from manufacturing phosphorous fertilizer. Pure gypsum, is better known as the wallboard used in interior walls of buildings; gypsum waste is contaminated with low levels of potentially toxic heavy metals and some radioactive elements. Freeport-McMoRan owns two fertilizer
In the late 1980’s two unlikely organizations, the Environmental Protection Agency and Amoco, agreed to form a joint venture to produce two unlikely joint products, regulation and cost savings. The substance of the joint venture was a study ofpollution at the Yorktown, Virginia, oil refinery of
Find the home page for Kraft Foods. On its home page the company provides much information regarding its philosophies, product lines, strategy, production and distribution systems. Review the information provided. Then, discuss how an operating environment, such as that at Kraft in which there are
Find the home page of AT&T. Review news announcements provided that dis¬ cuss the recent breakup of the company into three independent firms. Given that if the firm would have maintained its operations as a single business, more opportunities for new services would presumably have been available
Search the Internet for associations that promote the sale of beef or pork prod¬ ucts. One or more of the associations will provide information on the many applications of beef and pork by-products. Review these materials and write a brief summary of how various by-products of beef or pork
How can variance analysis be used for control and performance evaluation purposes?LO1
How will standard costing be affected it a company uses a single conversion element rather than the traditional labor and overhead elements?LO1
Multiple choice (assume direct materials and direct labor are variable costs):a. The basic assumption made in a variable costing system with respect to fixed manufacturing costs is that fixed manufacturing costs are:(1) A sunk cost.(2) A product cost.(3) A part of inventory.(4) A period cost.b.
Refer to the section of the chapter titled, "Is It Ethical to Increase Production to Increase Profits?" What is your view of the division manager's actions?How could increasing ending inventory hurt the company? How might increasing ending inventory help the company?
Refer to the section of the chapter titled, "Is It Ethical to Increase Production to Increase Profits?" Is full-absorption costing a less ethical accounting method than variable costing?
Refer to the real world application, "Full versus Variable Costing in Banking,"in this chapter. Why did American National Bank decide not to drop the check-processing service from its product line even though the service appeared to be unprofitable?
Multiple choice:a. Inventory under the variable costing method includes:(1) Direct materials cost and direct labor cost, but not factory overhead cost.(2) Direct materials cost, direct labor cost, and variable factory overhead cost.(3) Prime cost but not conversion cost.(4) Prime cost and total
Pratt, Inc., produces a single product, which sells for $21.50. Pratt produced 60,000 units and sold 52,000 units last year. There were no beginning inventories or ending work in process inventories last year.Manufacturing costs and marketing and administrative costs for last year were as followsa.
The following questions are based on Tustin Corporation, which produces a single product selling for $12 per unit. One hundred thousand units were produced, and 80,000 units were sold during year 1; all ending inventory was in finished goods inventory.Tustin had no inventory at the beginning of the
Covina Enterprises released the following figures from its records for Year 1 and Year 2:a. Prepare income statements for both years, using the traditional method with fullabsorption costing.b. Prepare income statements for both years, using the contribution margin method with variable costing.c.
Pool-Pro Products incurred the following costs for its line of swimming pool pumps:100,000 units were produced, and 80,000 units were sold. There were no beginning inventories.a. Using T-accounts, trace the manufacturing cost flows under variable costing.b. Using T-accounts, trace the manufacturing
Okanagan Products manufactures Ogo Pogos, a line of stuffed toys. Variable manufacturing overhead is applied at the rate of $1.60 per labor-hour, and fixed manufacturing overhead at a rate of $2.00 per labor-hour. Actual costs were as follows:During the period, 25,000 units were produced, and
Refer to exercise 9-16 and assume that Okanagan Products debits or credits underor overapplied overhead to Cost of Goods Sold.a. Prepare an income statement for the period, using variable costing.b. Prepare an income statement for the period, using full-absorption costing.
Consider the following facts:Prepare comparative income statements, using the contribution margin format for variable costing and the traditional format for full-absorption costing. Show the total results for Years 1 and 2 combined in addition to the results for each year individually.There were no
Stonegate Products uses the following unit costs for one of the products it manufactures:This year, there were 1,500 units in beginning finished goods inventory; 5,000 units were produced; and 6,500 units were sold at $200 per unit. The beginning inventory was valued at $133 per unit using variable
Assume the following data about actual prices, costs, and volume for Bostick Company for the first quarter:There were no beginning inventories.a. Using the algebraic method, derive the difference in operating profits between variable costing and full-absorption costing.There were no beginning
Refer to the information given in exercise 9-20. Assume it is now the second quarter of the same year. Volumes in the second quarter are as follows:Costs and prices remain the same in the second quarter as in the first quarter.Using the algebraic method, show the difference, if any, in operating
Refer to the information given in exercise 9-20. Assume it is now the third quarter of the same year, and the volumes in the third quarter are as follows:Variable costs and selling price per unit remain the same in the third quarter as in the first quarter, as do quarterly fixed costs.Using the
Kensington Company manufactures a single product with the following costs:Estimated and actual fixed manufacturing costs equal $100,000 for the year. Beginning inventory of 30 units is valued at $4 per unit under full-absorption costing and at $3 per unit under variable costing. Assume units flow
You have been given the following information concerning the All Fixed Company.Variable Costing , „ , , _ _ _ _ • ^d- ^, Sales: 10,000 units per year at a price of $46 per unit.Production: 15,000 units in Year 1; 5,000 units in Year 2 There was no beginning inventory in Year 1.Annual production
client requested your help to analyze the operations of one of her divisions, the Wheeler Division. "I don't understand this! I received this income statement yesterday from the Wheeler Division managers (see Exhibit 9-29 A), but one of our internal auditors came across this other one (see Exhibit
Far Eastern Couture imports designer clothing that it has manufactured by subcontractors in Taiwan. Clothing is a seasonal product. The goods must be ready for sale prior to the start of the season. Any goods left over at the end of the season must usually be sold at steep discounts. The company
Under what conditions would the engineering estimates technique be preferred to other estimation techniques?
The scattergraph and the regression methods seem to go hand in hand. Why?
Refer to this chapter's real world application. What did the University of Minnesota researchers find about the relation between complexity-based cost drivers and overhead costs? What about the relation between new manufacturing methods and overhead costs?
The accounting records of a company report the following manufacturing costs for the past year:Production was 70,000 units. Fixed manufacturing overhead was $240,000.For the coming year, the direct materials costs are expected to increase by 20 percent, excluding any effects of volume changes.
The accounting records of a company indicate the following manufacturing costs were incurred in Year 1:These costs were incurred to produce 50,000 units of product. Fixed manufacturing overhead amounts to $475,000.For Year 2, direct materials costs are expected to increase by 10 percent per unit.
The Paradise Cruiselines Company provides you with the following cost data for maintenance work on its fleet of cruiseships:a. Use the high-low method to estimate the fixed cost per month and the variable cost per hour.b. What would be Paradise's estimated costs if they operate 8,000 hours this
Yamahonda Motors Company makes motorcycles. Management wants to estimate overhead costs to plan its operations. A recent trade publication revealed that overhead costs tend to vary with machine-hours and/or materials costs. To check this, they collected the following data for the past 12 months:a.
Prepare a scattergraph based on the overhead and direct machine-hour data in exercise 10-19.
Prepare a scattergraph based on the overhead and materials cost data in exercise 10-19.
Simple regression results from the data of Yamahonda Motors Company (exercise 10-19) are as follows:Prepare an estimate of overhead if the company expects to use 190 machine-hours for the next period and costs are stable. Equation: Overhead = $348.17+ ($24,298 x Machine-hours) Statistical data:
Megolith Co. has developed a regression equation to analyze the behavior of its maintenance costs (Q) as a function of machine-hours (Z). The following equation was developed using 30 monthly observations:Q = $6,000 + $5.25Z If 1,000 machine-hours are worked in one month, the estimate of total
Multiple regression results from the data of Yamahonda Motors Company (exercise 10-19) are as follows:Assume that management predicts the materials cost to be $5,000 and machinehours to be 190 for the coming period.Use the multiple regression results to prepare an estimate of overhead costs for the
The advertising manager of the Jarvis Company wants to know if the company's advertising program is successful. The manager used a pocket calculator to estimate the relation between advertising expenditures (the independent variable) and sales dollars. Monthly data for the past two years were
What is usually the difference between CVP analysis on a cash basis and that on an accounting accrual basis? For a company having depreciable assets,
would you expect the accrual break-even point to be higher, lower, or the same as the cash break-even point?
How can CVP analysis be used for planning and performance evaluation?Name three common assumptions of linear CVP analysis.
Refer to the first real world application on page 412. If the auto companies cannot raise prices, what must they do to break even?
Refer to the second real world application on page 425. What costs were"step" costs? Why were they called step costs!
Refer to the real world application about Gretzky. For a sports star that was recently traded, or signed as a rookie, what analysis do you think the hiring team used?
Refer to the real world application, "Costs and Quality." Why might the manager of the maintenance staff not already have hired the maintenance people needed to prevent the compressor breakdowns?
What are the typical characteristics of a company that should employ a process costing system?LO1
Why is the process of assigning costs to products essentially an averaging process?LO1
How are job order and process costing similar? How do they differ?LO1
Why are equivalent units of production used as an output measure in process costing? In your answer, be sure to address the problems created by partially completed inventories.LO1
How are units “started and completed” in the current period calculated? Is this figure used in both weighted average and FIFO cost assignment? Why or why not?LO1
How is the unit cost for each cost component assigned to the units produced during the current period under (a) the weighted average method and (b) the FIFO method?LO1
What is the purpose of the cost of production report? How would such a report assist accountants in making entries for a period?LO1
Why does the “Transferred” section of the FIFO method cost of production report include multiple computations, whereas the same section for the weighted average report only includes one computation?LO1
How does process costing differ in a multidepartmental manufacturing environ¬ ment from a single-department manufacturing environment? Why does this dif¬ ference exist?LO1
Why are the EUP calculations made for standard process costing the same as the EUP calculations for FIFO process costing?LO1
How are inventories accounted for under a standard process costing system? What information is provided to management when inventories are accounted for in this manner?LO1
What is a hybrid costing system? Under what circumstances is the use of such a system appropriate?LO1
(EUP; weighted average) Pacioli Pasta uses a weighted average process costing system. All material is added at the start of the production process. Direct labor and overhead are added at the same rate throughout the process. Pacioli’s records indicate the following production for February
(EUP; FIFO) Assume that Pacioli Pasta in exercise 16 uses the FIFO method of process costing.a. What are the equivalent units of production for direct material?b. What are the equivalent units of production for labor and overhead?LO1
(EUP; weighted average & FIFO) Pershing Corporation makes toy metal soldiers in a one-department production process. All metal is added at the beginning of the process. Paint for the figures and the plastic bags for packaging are consid¬ ered indirect materials. The following information is
(Cost per EUP; weighted average) Sensational Scents Inc. manufactures candles. In March 1997, company production is 26,800 equivalent units for direct ma¬ terial, 24,400 equivalent units for labor, and 21,000 equivalent units for over¬ head. During March, direct material and conversion costs
(Cost per EUP; FIFO) Assume that Sensational Scents Inc. in exercise 19 had 3,600 EUP for direct material in March’s beginning inventory, 4,000 EUP for direct labor, and 3,960 EUP for overhead. What was the FIFO cost per equiv¬ alent unit for direct material, labor, and overhead for March?LO1
(Cost per EUP; weighted average & FIFO) Weeding Edges manufactures concrete garden edging sections. November 1997 production and cost information are as follows:a. What is the total cost to account for?b. Using weighted average process costing, what is the cost per equivalent unit for each cost
(EUP; cost per EUP; weighted average) B-Gone manufactures canisters of mace. On October 1, 1997, the company had 4,800 units in beginning Work in Process Inventory that were 100 percent complete as to canisters, 60 percent complete as to other materials, 10 percent complete as to direct labor, and
(EUP; cost per EUP; FIFO) Slip-N-Slide makes skateboards and uses a FIFO process costing system. The company began November with 1,000 boards in process that were 70 percent complete as to material and 85 percent complete as to conversion costs. During the month, 3,800 additional boards were
(Cost assignment; weighted average) Krantz Inc. uses weighted average process costing. The company’s cost accountant has determined the following produc¬ tion and cost per EUP information for May 1997:a. What is the cost of the goods transferred during May?b. What is the cost of the goods in
(Cost assignment; FIFO) In February 1997, Saliba Corporation computed its costs per equivalent unit under FIFO process costing as follows:The raw materials are all added at the start of processing. Packaging is added at the end of the production process immediately before the units are transferred
(EUP; cost per EUP; cost assignment; FIFO & weighted average) Technosound Company mass produces miniature speakers for portable CD players. The fol¬ lowing T-account presents the firm’s cost information for February 1997:The company had 400 units in process on February. 1. These units were
(EUP; weighted average & FIFO; two departments) Blanchard Metalworks has two processing departments, Fabrication and Assembly. Metal is placed into produc¬ tion in the Fabrication Department, where it is cut, formed, or ground into various components. These components are transferred to
(Standard process costing, variances) Microtech Products manufactures 3.5-inch preformatted computer disks and uses a standard process costing system. All material is added at the start of production and labor and overhead are incurred equally throughout the process. The standard cost of one disk
(Standardprocess costing) Guillermo Company uses a standard FIFO process cost¬ ing system to account for its tortilla manufacturing process. The tortillas are packaged and sold by the dozen. The company has set the following standards for production of each one-dozen package:On April 1, the
(Hybrid costing) Snappy-Jacks Inc. manufactures sports jackets (one size fits most) for sports clubs and other organizations. Each jacket goes through the same conversion process, but customers may select the fabric (dacron, denim, or cot¬ ton) to be used. The company uses a standard costing
(Concept of EUP) Cost accountants use the concept of equivalent units of pro¬ duction (EUP) to measure actual production for a period in a process costing environment. Write a memo describing what EUP measures, and why it is nec¬ essary to use EUP to determine actual production for a period.LO1
(Production process; team activity) In a team of three or four, choose a company whose mass-production process you would like to learn. Use library, Internet, and (if possible) personal resources to gather information. Prepare a visual rep¬ resentation (similar to Exhibit 8-2) of that production
(EUP; weighted average & FIFO) Topeka Company produces outdoor brooms. On June 30, 1997, the firm had 3,600 units in process that were 70 percent complete as to material, 40 percent complete as to direct labor, and 30 percent complete as to overhead. During July, 186,000 brooms were started.
(EUP; weighted average & FIFO) The Mountain Coal Company mines and pro¬ cesses coal that is sold to four power plants in Northeast Indiana. The company employs a process costing system to assign production costs to the coal it pro¬ cesses. For the third week in March 1997, the firm had a
(Weighted average) Helsinki Products manufactures an electronic language trans¬ lator. The device can translate seven languages in either direction. Analysis of beginning Work in Process Inventory for February 1997 revealed the following:During February, Helsinki Products started production of
(Weighted average) Junge Enterprises manufactures belt buckles in a single-step production process. To determine the proper valuations for inventory balances and Cost of Goods Sold, you have obtained the following information for October 1997:Beginning inventory units were 100 percent complete as

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