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cost accounting
Cost Accounting 4th Edition Michael W. Maher, Edward B. Deakin - Solutions
For each of the following independent cases, determine the information requested, using FIFO costing.a. Beginning inventory amounted to 1 ,000 units. There were 4,500 units started and completed this period. At the end of the period, there were 3,000 units in inventory that were 30 percent
For each of the following independent cases, determine the units or equivalent units requested, (assuming weighted-average costing):a. There were 8,200 units in the beginning inventory that were 40 percent complete with respect to conversion costs. During the period, 7,000 units were started.There
What is ati operation?
Name three types of companies that are likely to use operation costing.
True or false? All products have to flow through the same operations in operation costing.
True or false? An operation could be an entire department or it could be part of a department.
What is the key difference between backflush costing and traditional sequential costing?
True or false? Backflush costing can only be used by companies that use justin-time production methods.
What are important requirements for a company to use just-in-time production methods?
Traditional production methods are sometimes called production push while just-in-time production is sometimes called demand pull. Why do you think just-in-time is called demand pulll
What are key characteristics of lean production?
Refer to the Real World Application for this chapter. Why did a strike against General Motors' Lordstown plant affect the Saturn plant?
Refer to the Real World Application in this chapter. What was the effect of maintaining minimal inventories for the Apache helicopter during the Persian Gulf War?
What is the problem faced by a company that makes Christmas ornaments and wants to use just-in-time production? What would you recommend to the management of this company?
"We cannot successfully implement JIT without higher quality in production."Why might JIT require particularly high quality?
As a manager, would you prefer to see normal spoilage costs computed and presented using Method 1 or Method 2 in the text? Why? (Method 1 incorporates spoilage costs into good units.)
Which method of accounting for spoilage do you think would be simpler in practice: Method 1, which assigns spoilage costs to good units, or Method 2, which computes the cost of spoiled units?
Why might advocates of total quality management prefer to see all spoilage considered abnormal spoilage?
The chapter discusses the cost of spoilage when spoilage is detected during the production. What costs might a company incur if spoilage is not detected during production and defective goods are sold to customers?
Refer to the data in exercise 5-20. Show the flow of costs through T-accounts.
Refer to the data in exercise 5-20. New operations have been discovered that will reduce the cost of sewing and cutting by 10 percent. This operation requires a new type of cloth that will increase materials costs by 6 percent. No other costs would be affected. Customers would not detect a
Refer to the data in exercise 5-23. Show the flow of costs through T-accounts.
Refer to the data in exercise 5-23. New operations have been discovered that will reduce the cost of Operations I and 3 by 10 percent. This operation requires a new type of cloth that will increase materials costs by 5 percent. No other costs would be affected. This change in materials and
Interplay Systems, Inc., manufactures networking devices for personal computer systems. The company uses a JIT system. An order for 600 devices was received. To fill this order, materials costing $7,000 were purchased on account. Manufacturing costsof $24,000 were incurred, of which $8,000 was paid
Carson Biotech, inc., manufactures surgical tools. An order was received for 500 autoclaves. Materials costing $12,500 were ordered on account. Additional manufacturing costs were $47,000, of which $25,000 were accounts payable and the balance was wages payable. At the end of the accounting period,
Artful Designs uses JIT production in producing designs for dresses. For the month of June, the company incurred costs of $500,000 in making designs. Assume the credit entries for these costs when they were recorded during the month were: 40 percent to Accounts Payable and 60 percent to Wages
Refer to the data for exercise 5-26. Show the flow of costs through T-accounts using both traditional sequential costing and backflush costing.
Refer to the data for exercise 5-27. Show the flow of costs through T-accounts using both traditional sequential costing and backflush costing.
Refer to the data for exercise 5-28. Show the flow of costs through T-accounts using both traditional sequential costing and backflush costing.
Refer to the facts for exercise 5-32. Assume spoilage occurred when the process was 50 percent complete. Costs are added evenly throughout the process. The ending inventory is 100 percent complete.a. What is the cost of good units when spoilage costs are assigned to good units(Method D?b. What is
Refer to the facts for exercise 5-33. Assume spoilage occurred when the process was 60 percent complete. Costs are added evenly throughout the process. The ending inventory is 100 percent complete.a. What is the cost of good units when spoilage costs are assigned to good units(Method 1)?b. What is
In manufacturing its products for the month of March, Domingo Co. incurred abnormal spoilage of $12,000 that occurred during work in process. What is the journal entry to record Domingo Co.'s abnormal spoilage?
In its June production, Gorkei Co. incurred $30,000 normal spoilage and $40,000 abnormal spoilage. How would Gorkei Co. account for spoilage costs? (Choose one.)(1) Inventoriable cost of $30,000 and period expense of $40,000.(2) Period expense of $30,000 and inventoriable cost of $40,000.(3)
Refer to the data in problem 5-38. Assume Allterra Company has an opportunity to purchase tube kits from Colorado Mountain Bikes for $40 per kit. Colorado Mountain Bikes could supply any or all of the tube kits that Allterra needs to produce frames.Colorado Mountain Bikes' products are high
Quad Cities Precision Instruments produces sensitive heat measurement devices.The units are produced in three manufacturing stages: (1) meter assembly, (2) case assembly, and (3) testing. The company has a large backlog of orders and had no beginning inventories because all units in production last
The annual costs of hospital care under the medicare program exceed $20 billion per year. In the medicare legislation, Congress mandated that reimbursement to hospitals be limited to the costs of treating medicare patients. Ideally, neither nonmedicare patients nor hospitals would bear the costs of
The Cost Accounting Standards Board has concluded that certain indirect costs that cannot be related to a government contract by any other manner are to be charged to the contract based on a three-factor formula. The three factors are property, payrolls, and "all other costs" charged to the
If 0-Hi-O Corporation, problem 6-41, above, used the reciprocal method for cost allocation, what would the company's estimated cost savings (or loss) be if it were to acquire electricity from the outside and sell natural gas for a net realization from the gas sales of $29,000 per year? Use a
Birmingham Fabrication Corp. produces fence materials. One division manufactures fence rails and fence posts. As a general rule, more fence rails are produced than posts. For example, during the past week, 900 rails and 30 posts were manufactured.Direct materials costs are $3. 10 per rail and $3.00
Using the data for the law firm in exercise 6-33, what is the cost allocation if there are fixed word processing costs of $200,000 that are allocated on the basis of department payroll, and the remaining costs (all variable) are allocated on the basis of pages of word processing used by the
Refer to data for the company in exercise 6-19.Determine the cost allocation if $26,000 of the wire service costs are fixed and allocated on the basis of hours of news; and the remaining costs, which are variable, are allocated on the basis of wire service-hours used.
Refer to exercises 6-25, 6-27, and 6-30 (Wear-with-AII Fashions). Which method do you think is best? How much would it be worth to the company to use the best method compared to the worst of the three methods? (Numbers not required in this answer.)
Refer to the data for Wear-with-All Fashions in exercise 6-25. Allocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two service departments.)
Refer to the data for the Cytotech Corporation (exercise 6-23). Use the reciprocal method to allocate the service costs. (Matrix algebra is not required.)
Refer to the data for Wear-with-All Fashions in exercise 6-25. Allocate the service department costs using the step method, starting with the Maintenance Department.What effect does using this method have on the allocation of costs?
Refer to the data for the Cytotech Corporation (exercise 6-23). Use the step method to allocate the service costs, using:a. The order of allocation starting with SI.b. The allocations made in the reverse order (starting with S2).
Refer to your calculations for exercise 6-21. Your supervisor wants to know how much it costs to make a standard jacket and a deluxe jacket, including the cost of materials; labor, which costs $8 per hour; and manufacturing overhead.a. Give your supervisor four different answers, for each type
The Hatfields and the McCoys own two adjacent tracts of land. Each tract has a Allocated surface area of 4,000 acres. During a recent shoot-out, crude oil came bubbling to the(L.0.1) surface where a bullet had entered the ground. A petroleum geologist determined that there was an underground rock
Refer to the Real World Application about Bellcore on page 193. What effect did the initial cost allocations have? Why were the allocated costs so high?
List four broad categories of common costs and the usual basis for allocation of costs in each category.
Compare and contrast the direct method, the step method, and the reciprocal method of allocating costs.
"The problem of allocating direct costs to products is the primary subject of this chapter." True, false, or uncertain? Explain.
Stage 1 cost allocation is the allocation of costs to cost pools. What is stage 2 cost allocation?
Refer to the Real World Application on page 264. What was the problem with using patient minutes in the recovery room as a cost driver?
What activities do companies using a single plantwide rate usually select for the allocation of indirect costs?
"A shortcut using department allocation is to ignore the allocation of service department costs to the production departments." True, false, or uncertain?Explain.
What exactly is a cost driver? Give at least three examples.
Lynn, the vice president of marketing, wonders how products can cost less under one cost system than under another: "Aren't costs cut-and-dried?"How would you respond?
"Activity-based costing is the wave of the future. Everyone should drop their existing cost systems and adopt ABC!" Do you agree? Explain.
A drawback to activity-based costing is that it requires more recordkeeping and extensive teamwork between all departments. What are the potential benefits of a more detailed product cost system?
"One of the lessons learned from activity-based costing is that all costs are really a function of volume of output." True, false, or uncertain? Explain.
How do managers decide which activity bases to use? Give three criteria for choosing cost drivers.
"Activity-based costing breaks down the indirect costs into several activities that cause costs (cost drivers). These should be the same for each department in an organization." True, false, or uncertain? Explain.
"The total amount of estimated overhead used to determine allocation rates will differ depending on whether you use department allocation or activitybased costing." Do you agree? Explain.
What technological change has occurred in many companies that has resulted in great potential for erroneous product cost figures?
If the allocation of overhead based on direct labor can yield erroneous results, why then do highly automated plants such as Hitachi continue this practice?
What is the difference between a capacity-related cost and a unit-level cost?Why do we need a hierarchy of overhead costs?
Assume that Bill Board, manager of the Engineering Department at Hewlett-Packard, has designed a new circuit board, the PC BB Special, which he believes can replace Type 67A described in the chapter. Bill Board is excited because he believes this new circuit board will save Hewlett-Packard money.
Ned O. Williamson has just joined the SU Company (text example) as the new production manager. He was pleased to see that the SU Company uses activity-based costing. Williamson believes he can reduce production costs if he reduces the number of machine setups. He has spent the last month working
Ms. Greenthumb, Inc., is a lawn and garden care service. The company originally specialized in serving small residential clients, but has recently started contracting for work on larger apartment and office building grounds. Since Ms. Greenthumb believes that commercial lawn care is more
Moss Manufacturing has just completed a major change in the method it uses to inspect its product. Previously 10 inspectors examined the product after each major process. The salaries of these inspectors were charged as direct labor to the operation or job. In an effort to improve efficiency, the
Explain the basic difference between the allocation of joint costs to joint products and to by-products.
Name three industries that have joint products.
Refer to the chapter's Real World Application. Why was Union Pacific's old cost system inadequate?
A company processes Chemical DX-1 through a pressure treatment operation. After the process is complete, there are two outputs: L and T. The January costs of processing DX-1 are $100,000 for materials and $200,000 for conversion costs. This processing results in two outputs, L and T, that sell for
Crucible Corporation operates an ore processing plant. A typical batch of ore run through the plant will yield three refined products: lead, copper, and manganese. At the split-off point, the intermediate products cannot be sold without further processing.The lead from a typical batch will sell for
Blarney Company manufactures leprechauns and shamrocks from a joint process on a product called Green. For leprechauns, 4,000 units were produced having a sales value at the split-off point of $21,000. For shamrocks, 2,000 units were produced having a sales value at split-off of $14,000. Using the
Hi-Grow Corporation uses organic materials to produce fertilizers for home gardens.Through its production processes, the company manufactures a high-nitrogen fertilizer(with the trade name Hi-Nite) and a high-phosphorus fertilizer (with the trade name Hi-Bloom). A by-product of the process is
The following questions are based on Durango, Inc., which manufactures products X, Y, and Z from a joint process. Joint product costs were $63,000. Additional information is provided below.a. Assuming that joint product costs are allocated using the physical quantities (units produced) method, what
Thin Skins Corporation engages in a manufacturing process that uses cowhide to produce three outputs (leather, suede, dog chews). Leather and suede are considered main products. Dog chews are a by-product. During a recent month, the following events occurred:i. Produced and sold 200 units of
The following questions are based on Cramden Corporation, which manufactures a product that gives rise to a by-product called Norton. The only costs associated with Norton are additional processing costs of $1 for each unit. Cramden accounts for Norton sales first by deducting its separable costs
Sierra Wood Products, Inc., operates a sawmill facility. The company accounts for the bark chips that result from the primary sawing operation as a by-product. The chips are sold to another company at a price of $6 per hundred cubic feet. Normally, sales revenue from this bark is $450,000 per
Mahalo Cane Company processes sugar cane into various output products. The outputs from the first stage of the process consist of two grades of sugar: refined and turbinado. In a typical month, $218,000 in sugar cane is processed and $322,000 in labor and overhead is incurred. A standard output mix
The Roving Eye Cosmetics Company buys bulk flowers and processes them into perfumes in a two-stage process. Their highest-grade perfume, Seduction, and a residue that is processed into a medium-grade perfume called Romance come from a certain mix of petals. In July, the company used 25,000 pounds
Refer to problem 8-27.... Show the flow of costs through T-accounts using the net realizable value method. Assume the net realizable value of by-products in part (d)was credited to Work in Process Inventory. Assume the joint products were sold.
Harrison Corporation produces three products: alpha, beta, and gamma. Alpha and gamma are main products, while beta is a by-product of alpha. Information on the past month's production processes are given as follows:i. In Department I, 1 10,000 units of raw material rho are processed at a total
Rambling Rose Corporation produces two joint products from its manufacturing operation. Product J sells for $4 1.50 per unit, while product M sells for $12 per unit at the split-off point. In a typical month, 19,000 units are processed. Fifteen thousand units become Product M. Four thousand units
Ninja Turtle Company processes input Leonardo into three outputs: Michaelangelo, Raphael, and Donatello. Michaelangelo accounts for 60 percent of the net realizable value at the split-off point, while Raphael accounts for 30 percent. The balance is accounted for by Donatello. The joint costs total
Jasper Ridge Materials, Inc., receives silicon crystals that it processes into purified wafers and chips. Silicon crystals cost $30,000 per tank-car load. The process is such that the crystals are heated for 12 hours, at the end of which time there are 45,000 purified wafers, with a market value of
How is process costing different from job order costing?LO1
Why are equivalent units of production used in process costing?LO1
How are equivalent units of production determined using the weighted average and FIFO methods of process costing?LO1
Flow are unit costs and inventory values determined using the weighted average and FIFO methods of process costing?LO1
You are considering whether to purchase a new car for personal use to replace your present car. Being strictly rational in an economic sense, which of the following cost data would you include in making your decision?a. Original cost of the present car.b. Trade-in value of your present car.c.
Why would the controller have an interest in the structure of an organization?
Sometimes the internal auditor reports to the person who is responsible for preparation of the accounting reports and the maintenance of accounting records. What are some advantages of such a supervisory relationship? What conflicts might exist, and what procedures might be installed to minimize
Refer to the Real World Application, "The Accountant as a Communicator."Why is it important for accountants at Lever Brothers Co. to communicate effectively with marketing people?
Refer to the Real World Application about Johnson & Johnson's code of conduct. Why does the company list its responsibility to stockholders last instead of first?
In your first day as a member of the controller's staff, you are asked to report on a contemplated change in the use of a new type of material in production. The new material is expected to result in a 10 percent reduction in materials costs but no changes in any other costs. Last year, materials
Management of the Microwave Division of Technology, Inc., wants to know whether to continue operations in the division. The division has been operating at a loss for the past several years as indicated in the accompanying divisional income statement.If the division is eliminated, corporate
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