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cost accounting

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

Lorraine DuVere has just been named chief executive officer of a high-technology company. Lorraine started in the budgeting section of the controller's office and has risen rapidly through the ranks of the organization. She has been so impressed with the importance of budgeting that she proposed
Carmen Lorenzo was recently appointed chief executive officer of a diversified corporate organization. The company has been organized along functional lines similar to Illustration 1-5. This company has three separate manufacturing divisions, each dealing with different products and markets. Each
Barbara Scott has just been hired as the new controller for Physical Therapy Equipment, Inc., a manufacturer of physical therapy equipment. The vice president of finance reports directly to the president of the company. The finance area has three offices—controller, treasurer, and internal
Reginald Langley, corporate vice president for UniProduct, a large multinational corporation, made a request for a review of the corporation's recycling management system. The review was assigned to Fiona Brooks, a senior internal auditor.The recycling management system was introduced eight years
Alert, a closely held investment services group, has been very successful over the past three years. Bonuses for top management have ranged from 50 percent to 100 percent of base salary. Top management, however, only holds 35 percent of the common stock, and recent industry news indicates that a
Jorge Martinez recently joined GroChem, Inc., as assistant controller. GroChem processes chemicals for use in fertilizers. During his first month on the job, Jorge spent most of his time getting better acquainted with those responsible for plant operations. Jorge asked the plant supervisor what the
The external auditors of HHP (Heart Health Procedures) are currently performing Obsolescence their annual audit of the company with the help of assistant controller Linda Joyner.Several years ago Heart Health Procedures developed a unique balloon technique for opening obstructed arteries in the
Florida Fruits, Inc., agreed to sell 20,000 cases of a dehydrated fruit drink called Managerial Purposes "Fang" to NASA for use on space flights at "cost plus 20 percent."Florida Fruits operates a manufacturing plant that can produce 60,000 cases per year. The company normally produces 40,000 cases
Amos Division is a division of a large corporation. It normally sells to outside customers but, on occasion, will sell to another division of the corporation. When it does, corporate policy states that the price will be cost plus 10 percent. Amos received an order from the Field Division, which is
Pete's Coffee, Inc., operates a small coffee shop in the downtown area. Profits have been declining, and management is planning to expand and add ice cream to the menu. The annual ice cream sales are expected to increase revenue by $40,000. The cost of purchasing ice cream from the manufacturer is
Denver Data Corp. writes software for computer applications. Recently, one of the company's officers was approached by a representative of a scientific research firm who offered a contract to Denver Data Corp. for some specialized programs. Denver Data Corp. reported the following costs and
Define step and mixed costs.
Since historical costs are sunk (and, hence, not directly useful for decisionmaking purposes), why are accounting systems and reports based on historical costs?
In this chapter's Real World Application why did Bethlehem Steel Corp. need to monitor costs more closely?
Will the steel industry stage a comeback? How can managerial accounting methods be used to help see that it does?
For each of the following costs incurred in a manufacturing operation, indicate whether the costs would be fixed or variable (F or V) and whether they would be period costs or product costs (P or R, respectively) under full absorption costing.a. Transportation-in costs on materials purchased.b.
For each of the following costs incurred in a manufacturing operation, indicate whether the costs would be included in prime costs (P), conversion costs (C), or both(B).a. Factory heating and air conditioning.b. Production supervisor's salary.c. Transportation-in costs on materials purchased.d.
For each of the following costs incurred in a manufacturing operation, indicate whether the costs would be fixed or variable (F or V) and whether they would be period costs or product costs (P or R, respectively) under full absorption costing.a. Factory security personnel.b. Utilities in
Laptop Computers, Inc., sells laptop computers. On January 1 last year, it had a beginning merchandise inventory of $250,000 including transportation-in costs. It purchased $1,300,000 of merchandise, had $130,000 of transportation-in costs, and had marketing and administrative costs of $800,000
Refer to the information in exercise 2-23 and assume the unit sales price is $200 per unit.Construct graphs of fixed and variable costs. (See Illustratio 2-7.)
Assume you had invested $168 in supplies to set up a window washing business for the summer. During the first week, you are presented with two opportunities. You can wash the windows at a housing development for $320, or you can help paint an apartment for $300. The additional costs you will incur
Excalabur Enterprises converted an old train station into a warehouse space, an office space, restaurants, and specialty shops. If the whole train station was used for warehouse space, the estimated revenue and variable costs per year to Excalabur would be $980,000 and $44,000, respectively. If the
For external financial reporting, all costs of manufacturing the product are product costs (that is, they are inventoriable). (See Illustration 2-1.)Using the data from exercise 2-27, what are the following:a. Product costs per unit.b. Period costs for the period.
Rob Roberts has been working a summerjob that pays $1 , 100 a month. His employer has offered to convert the job into a full-time position at $1,500 per month. Takehome pay is 70 percent of these amounts. In view of this offer, Rob is tempted not to return to school for the coming year. His friend
What are the characteristics of companies that are likely to be using a job
3-2 What is the function of the job cost record?
Refer to the Real World Aplication about Orion Prictures on page 86. What did Orion do with the cost of "flops"? How did this practice overstate assets and profits?
Refer to the Real World Application about Doughties Foods on page 66. How did the senior company official detect fraud?
Power Records, Inc., experienced the following events during the current year:1. Incurred marketing costs of $250,000.2. Purchased $800,000 of merchandise.3. Paid $20,000 for transportation-in costs.4. Incurred $400,000 of administrative costs.5. Took a periodic inventory at year-end and learned
The following events took place at the Bridal Wear Corp. for the current year.1. Purchased $90,000 in direct materials.2. Incurred direct labor costs of $52,000.3. Manufacturing overhead was $82,000.4. Transferred 70 percent of the materials purchased to work in process.5. Completed work on 60
The following transactions occurred in January at Kustom-Kraft, Inc., a job order custom manufacturer of cabinets:1. Purchased $40,000 in materials.2. Issued $2,000 in supplies from the materials inventory.3. Purchased materials costing $28,000.4. Paid for the materials purchased in transaction
Owings Corporation manufactures one product and accounts for costs by a job order cost system. You have obtained the following information for the year ended December 31 of last year from the corporation's books and records:1. Total manufacturing cost during last year (called cost to manufacture)
Apex Products estimates its manufacturing overhead to be $22,000 and its direct labor costs to be $40,000 for Year 1 . The actual direct labor costs were $10,0(X) for job 1, $15,000 for job 2, and $20,000 for job 3 during Year 1. The actual manufacturing overhead was $26,000 during Year 1 .
Avian Co. uses a predetermined factory overhead rate based on direct labor-hours.For the month of October, Avian's budgeted overhead was $300,000 based on a budgeted volume of 100,000 direct labor-hours. Actual overhead amounted to$325,000 with actual direct labor-hours totaling 1 10,000.How much
For the month of September, Touche Andersen & Company worked 300 hours for client A and 700 hours for client B. Touche Andersen bills clients at the rate of $140 per hour, whereas the labor cost for its audit staff is $70 per hour. The total number of hours worked in September was 1,000, and
Refer to the data for exercise 3-20. Assume all manufacturing overhead costs were fixed costs.How much of the under- or overapplied overhead was a spending variance, and how much was a production volume variance?
Grault Company estimates manufacturing overhead to be $80,000 + (.65 x Direct labor costs). Direct labor costs are estimated to be $100,000 for Year 1. The actual manufacturing overhead costs for Year 1 were $160,000. The actual direct labor costs were $120,000.a. What is the expected total
Assume the following facts:Estimated manufacturing tm nnn ^ ^cin x, t^- iu u ^overhead for Year 1 = ^^^'^ + ^^^^ ^ ^''^""^ labor-hours)Estimated direct labor-hours for Year 1 = 1 ,000 hoursa. Compute the predetermined overhead rate per direct labor hour.b. What is the expected manufacturing
Terne Corporation had projected its fixed overhead costs to be $240,000. Direct labor was estimated to total 30,000 hours during the year, and the direct labor-hours would be used as a basis for the application of overhead. During the year, all overhead costs were exactly as planned ($240,000).
For the month of May, Correctall Accountants worked 500 hours for Misfit Manufacturing, 150 hours for Hang Ten Surf Shop, and 250 hours for Mandarin Restaurants.Correctall bills clients at $80 an hour, and labor costs are $30 an hour. A total of 1 ,000 hours were worked in May with 100 hours not
Maria Peters, an accountant for a consulting firm, has just received the monthly cost reports for the two jobs she supervises: one for General Dynamics and one for the U.S. government. She immediately called her boss after reading the figures for the General Dynamics job."We're going to be way over
When a company produces custom products to the specifications of its custom¬ ers, why should it not aggregate costs across customer orders to determine the prices to be charged?LO1
What production conditions are necessary for a company to use job order costing?LO1
What is the alternative to the use of a job order costing system? In what type of production environment would this alternative costing system be found?LO1
Identify the three valuation methods discussed in the chapter. What are the differences among these methods?LO1
In a job order costing system, what is a job?LO1
What are the three stages of production of a job? Of what use is cost information pertaining to completed jobs?LO1
What are the principal documents used in a job order costing system and what are their purposes?LO1
Why is the material requisition form an important document in a company’s audit trail?LO1
What is a job order cost sheet, and what information does it contain? How do job order cost sheets relate to control accounts for Work in Process, Finished Goods, and Cost of Goods Sold?LO1
Of what use to management are job order cost sheets? Why do some job order cost sheets contain columns for both budgeted and actual costs?LO1
“Because the costs of each job are included in the job order cost sheet, they do not need to be recorded in the general ledger.” Is this statement true or false, and why?LO1
Which document in a job order costing system would show the amount of over¬ time worked by a specific individual? Explain.LO1
Is an actual overhead application rate better than a predetermined overhead rate? Why or why not?LO1
What creates underapplied or overapplied overhead when applying overhead to jobs?LO1
What is the principal difference between service and manufacturing firms in job order costing?LO1
How is the cost of goods sold determined in a company that uses job order costing?LO1
(Appendix) What differences exist between job order costing based on actual costs and job order costing based on standard costs? Why would a company use a standard cost job order system?LO1
(Appendix) If a company produces a given type of product only one time, will standard costing be as useful as if the company continually produces the same type of product? Explain.LO1
(Appendix) How does a firm use information on “variances” in a standard costing system to control costs?LO1
(Classifying) For each of the following firms, determine whether it is more likely to use job order or process costing. This firma. does custom printing.b. manufactures bottled soft drinks.c. is involved in landscape architecture.d. is an automobile repair shop.e. provides public accounting
(Journal entries) Olson Inc. produces custom-made trash containers for recycling waste. During June 1997, the following information was obtained relating to operations and production: 1. Direct material purchased on account, $190,000. 2. Direct material issued to jobs, $163,800. 3. Direct labor
(Journal entries; cost flows) Prefab Storage produces customized storage buildings that serve the midwest U.S. market. For February 1997, the company incurred the following costs:The February beginning balance in Work in Process Inventory was $4,200, which consisted of $2,800 for Job #217 and
(Cost flows) Canadian Steel began operations on March 1, 1997. Its Work in Process Inventory account on March 31 appeared as follows:job was still in process on March 31. That job had $44,200 in direct material and $31,200 in direct labor cost assigned to it.a. What was the predetermined overhead
(Normal versus actual costing) For fiscal year 1998, Synthetic Solutions estimated it would incur total overhead costs of $1,200,000 and work 40,000 machine hours. During January 1998, the company worked exclusively on one job, Job #1211. It incurred January costs as follows:a. Assuming the company
(Cost flows) Jacob’s Well is a small firm that manufactures decorative “wishing wells” for residential and commercial applications. The firm applies overhead to jobs at a rate of 120 percent of direct labor cost. On December 31, 1997, a flood destroyed many of the firm’s computerized cost
(Departmental overhead rates) The Lunford Paving Company uses a predeter¬ mined overhead rate to apply overhead to jobs, and the company employs a job order costing system. Overhead is applied to jobs in the Mixing Department based on the number of machine hours used, whereas Paving Department
(Job cost and pricing) Jason Hart is an attorney who employs a job order costing system related to his client engagements. Hart is currently working on a case for Janice Keene. During the first 4 months of 1997, Hart logged 85 hours on the Keene case.In addition to direct hours spent by Hart, his
(Underapplied or overapplied overhead) For 1998, Specialty Advertising Products Company applied overhead to jobs using a predetermined overhead rate of $11.60 per machine hour. This rate was derived by dividing the company’s total budgeted overhead of $278,400 by the 24,000 machine hours
(Assigning costs to jobs) Minnesota Hydraulics uses a job order costing system in which overhead is applied to jobs at a predetermined rate of $1.60 per direct labor dollar. During April 1998, the company spent $6,900 on direct labor re¬ lated to Job #2144. In addition, the company incurred direct
(Assigning costs to jobs, cost flows) Joanna’s Custom Designs, an interior decorating firm, uses a job order costing system and applies overhead to jobs using a pre¬ determined rate of 60 percent of direct labor cost. At the beginning of June 1998, Job #918 was the only job in process. Costs of
(Assigning costs to jobs) Joe Show is an advertising consultant. Recently, he has been working with his accountant to develop a formal accounting system. His accountant has suggested the use of a job order costing system to simplify costing procedures. During September, Joe and his staff worked on
(Appendix) Sue’s Custom Publishing incurred the following direct material costs in November 1998 for high-volume routine print jobs:Calculate the material price variance and the material quantity variance.LO1 Actual unit purchase price Quantity purchased in November Quantity used in November
(Appendix) Atlanta Textiles uses a standard cost system. The company experi¬ enced the following results related to direct labor in December 1998:a. Calculate the total actual payroll.b. Determine the labor rate variance.c. Determine the labor quantity variance.LO1 Actual hours worked 45,500
(Appendix) Allison’s Bird Baths employs a job order costing system based on standard costs. For one of its products, a small teak-rimmed concrete bird bath (Product No. 17), the standard costs per unit are as follows:a. Record the journal entry for the transfer of direct material into production
(Cost control) Baltimore Fabricated Steel Products Company produces a variety Communication of steel drums that are used as storage containers for various chemical products.One of the products the firm produces is a 5 5-gallon drum. In the past year, the company produced this drum on four separate
(Production and marketing environment) When it comes to tortillas, Mexicans and Americans have distinctly different tastes. Americans are content to purchase mass-produced, prepackaged tortillas from their local grocery stores. Regional and national brands dominate sales. In Mexico, more than 95
(Cost manipulation) Excel Communications is a direct sales marketer of long¬ distance phone services. The company earns revenues by selling long-distance services to new subscribers. The company is preparing to “go public” through an initial public offering (IPO) of its stock. As with any IPO,
(Journal entries) Waldrip’s Custom Awning Company installs awnings on resi¬ dential and commercial structures. The company had the following transactions for February 1998:* Purchased $220,000 in building (raw) material on account.■ Issued $185,000 of building (direct) material to jobs.■
(Journal entries) Rutherford Custom Concrete uses a job order costing system based on actual costs. The following transactions relate to a single period in which the beginning inventory of Direct Material Inventory was $30,000, of Work in Process Inventory was $75,000, and of Finished Goods
(Journal entries, assigning costs to jobs) Florida Yachts uses a job order costing system. On September 1, 1998, the company had the following account balances:Sept. 16 Florida Yachts applies manufacturing overhead to jobs at a rate of $7.50 per direct labor hour each time the payroll is made.Sept.
(Journal entries, cost flows) Custom Office Products Inc. began 1998 with three jobs in process:During 1998, the following transactions occurred: 1. The firm purchased and paid for $266,000 of raw material. 2. Factory payroll records revealed the following:® Indirect labor incurred was $27,000.•
(Simple inventory calculation) Chicago Custom Tools Company manufactures tools and dies for manufacturing firms. Production information for the first week in November 1998 is as follows:Direct labor hours worked: 340. Labor cost is $15 per direct labor hour. Machine hours worked: 600; Job #411, 175
(Job cost sheet analysis) As a candidate for a cost accounting position with Aztec Industrial, you have been asked to take a quiz to demonstrate your knowledge of job order costing. Aztec’s job order costing system is based on normal costs and overhead is applied based on direct labor cost. The
(Departmental rates) The Houston Custom Tile Corporation has two depart¬ ments: Mixing and Drying. All jobs go through each department, and the com¬ pany uses a job order costing system. The company applies overhead to jobs based on labor hours in Mixing and on machine hours in Drying. In
(Comprehensive) In May 1998, Tucson Construction Company was the successful bidder on a contract to build a pedestrian overpass in Phoenix. The firm utilizes a job order costing system, and this job was assigned Job #515. The contract price for the overpass was $150,000. The owners of Tucson
(Comprehensive) The Steel Sentinel designs and manufactures perimeter fencing for large retail and commercial buildings. Each order goes through three stages: design, production, and installation. There were three jobs started and com¬ pleted during the first week in May 1998. There were no jobs
(Appendix) One of the products made by Jersey Logistics is a system to move large oil storage tanks. A single model (Model No. 89) accounts for approxi¬ mately 60 percent of the company’s annual sales. Because the company has pro¬ duced and expects to continue to produce a significant quantity
(Appendix) Laton Mechanical uses a job order costing system. During July 1998, the company worked on two production runs of the same product, a trailer hitch component. These units were included in Jobs #918 and #2002. Job #918 consisted of 1,200 units of the product, and Job #2002 contained 2,000
(Comprehensive;job cost sheet) The Northern Plains Construction Company builds bridges. For the months of October and November 1997, the firm worked ex¬ clusively on a bridge spanning the Niobrara River in northern Nebraska. The firm is organized into two departments. The Precast Department builds
(Comprehensive) Kids Krafts is a manufacturer of furnishings for infants and chil¬ dren. The company uses a job order cost system. Kids Krafts’ Work in Process Inventory on April 30, 1998, consisted of the following jobs:Kids Krafts ; applies factory overhead on the basis of direct labor hours.
(Missing amounts) Riveredge Manufacturing Company realized too late that it had made a mistake locating its controller’s office and its electronic data pro¬ cessing system in the basement. Because of the spring thaw, the Mississippi River overflowed on May 2 and flooded the company’s basement.
[Jn 1995, British steelmaker Ispat purchased Kazakstan 's largest steel plant.] Little known outside the steel world, Ispat has in recent months assumed a new visibility—as an example of Western ETHICS AND QUALITY companies' problems in the former Soviet Union. Hundreds of its employees come to
From William J. Fife Jr., chairman of Giddings & Fewis Inc.: “The labor con¬ tent of a product today is probably less than 15%. So, I don’t care how much I cut [direct] labor, it’s not going to get to the bottom line. We have to get at overhead costs.”Today, U.S. firms have some of the
Cyclemakers Group of Washdyke near Timaru (New Zealand) is lifting its profile locally and overseas in the cycling world through its custom-built bike service.Although the prospect ofsitting astride a 10-speed may not be everyone's idea of relaxation, at least now they can dictate their choice of
There are two common types of contracts used when private firms contract to provide services to governmental agencies: cost-plus and fixed-price. The cost- plus contract allows the contracting firm to recover the costs associated with providing the product or service plus a reasonable profit. The
Many software companies produce custom programs for computerized account¬ ing applications. Search the Internet and find two or more companies that make software for job order costing (job costing). Read the ads and descriptions of the job order costing software and identify five of the most
Search the Internet for pronouncements of the Cost Accounting Standards Board and find CAS #18, “Allocation of Direct and Indirect Costs.” Read the pronouncement and write a summary of the most important points. Assuming you work for a firm that contracts with the federal government, how would
Find the home page on the Internet for E & D Plastics. Review the information found there regarding E & D’s customers, products, and production processes. Considering this information, describe the core competencies that E & D must possess to be successful.LO1
How do product life cycles affect product costing and profitability?LO1

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