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cost accounting

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

(Analyzing mixed costs) Erin’s Stables determined that the total overhead rate for costing purposes is $6.70 per horse per day (referred to as an “animal day”). Of this, $6.30 is the variable portion. Cost information for two levels of monthiv activity within the relevant ransre are o-iven
(High-low; least squares regression; scattergraph) Kemp Industries manufactures screens for residential and commercial applications. The firm has encountered a problem in budgeting utilities expense. The expense is apparently a mixed cost and varies most directly with machine hours worked. However,
(Scattergraph; high low; least squares) Shamus Ltd. is analyzing its overhead costs and wants to use direct labor hours as the predictor. The following 18 weeks of information is to be used in developing an overhead cost formula for the company:a. Plot the data on a scattergraph and visually fit a
(Mixed costs and predetermined overhead rates; raw bases, flexible budget) Les Is Best manufactures fiberglass swimming pools in a two-department process: Produc¬ tion and Installation. Production is highly automated and machine hours are used as the basis for allocating departmental overhead.
(Plant vs. department OH rates) Ogden Manufacturing has two departments: Fab¬ rication and Assembly. Fabrication is composed of 1 worker and 15 machines, and Assembly has 20 workers and few machines. One of the company’s products passes through both departments and uses the following quantities
(Multiple cost pools) Most overhead costs at the Bedford Company can be directly traced to its operating departments: Machining and Assembly. These directly traceable costs are as follows:In Machining, all overhead costs (direct and allocated) are applied to prod¬ ucts based on machine hours; in
(Journal entries) Banff Ltd. applies overhead at the rate of $15 per direct labor hour. The following transactions occurred during May 1997: 1. Direct material issued to production, $150,000. 2. Direct labor cost paid, 24,900 hours at $16 per hour. 3. Indirect labor cost accrued, 7,500 hours at $9
(Direct method) The management of Orlando Community Plospital (OCH) has decided to allocate the budgeted costs of its three service departments (Admin¬ istration, Public Relations, and Maintenance) to its three revenue-producing pro¬ grams (Surgery, Inpatient Care, and Outpatient Services).
(Step method) O’Reilly Real Estate classifies its operations into three departments: Commercial Sales, Residential Sales, and Property Management. The owner, Shannen O’Reilly, wants to know the full cost of operating each department. Direct costs of each department, along with several
(Comprehensive) The costs of operating the service departments (Personnel and Administration) at Buxton Architectural are allocated to the revenue-generating departments (Commercial and Residential). The direct and allocated costs are accumulated in the revenue-generating departments and applied to
(Comprehensive) Ryan Ltd.’s 1998 annual budget for its three service departments (Administration, Accounting, and Engineering) and its two production depart¬ ments (Assembly and Finishing) is presented below.Assume that expected 1998 activity bases in Assembly and Finishing, respectively, are
(Appendix) Moira Manufacturing has been using direct labor hours as a basis to predict indirect labor costs. Company management has asked the controller’s staff to evaluate machine hours as an alternative prediction base because indirect labor costs have been difficult for the company to predict
(Development of OH rates) Northcoast Manufacturing Company, a small manu¬ facturer of parts used in appliances, has just completed its first year of operations. The company’s controller, Vic Trainor, has been reviewing the actual results for the year and is concerned about the application of
{Overhead application) Rose Bach has recently been hired as controller of Empco Inc., a sheet metal manufacturer. Empco has been in the sheet metal business for many years and is currently investigating ways to modernize its manufactur¬ ing process. At the first staff meeting Bach attended, Bob
(Direct, step methods) Amar Supermarkets Corporation operates a chain of three retail stores in a state that permits municipalities to levy an income tax on busi¬ nesses operating within their respective boundaries. The tax rate is uniform in all of the municipalities that levy the tax and does
(Seiuice department allocation) Columbia Company is a regional office supply chain with 26 independent stores. Each store has been responsible for its own credit and collections. The assistant manager in each store is assigned the re¬ sponsibility for credit activities including the collection of
Haversham Machine Works is bidding on a contract with the government of Bezaire. The contract is a cost-plus situation, with an add-on profit margin of 50 percent. Direct material and direct labor are expected to total $15 per unit. Variable overhead is estimated at $4 per unit. Total fixed
One may view the income tax system in the United States as the largest system of cost allocation in the world because the tax system is used to allocate the cost of the government to the people. Assume that the tax system in the United States is mildly progressive in that people who make more money
State prisons often use inmates as “employees” in production operations. Over¬ head costs in these prison manufacturing environments are generally quite low. For instance, California’s Prison Industry Authority pays “roughly 5% of what private competing businesses in the Sacramento area
In designing an organization, management may want to establish a separate de¬ partment to be responsible for maintaining/improving the quality of organiza¬ tional output.a. What are the advantages and disadvantages associated with allocating the costs of the quality department to producing
For the distinction of being the world's greatest department store, Harrods faces few rivals. Shop¬ pers rave about the grandeur of the Harrods building, about products not seen just anywhere (a rhinoceros doll for more than $3,700), about halls filled with live music and art. Its financial
The National Institute for Consumer Education (College of Education, Eastern Michigan CIniversity) maintains an online form to prepare a budget for college spending. The form allows for both income and expense budgeting. The expense budget is divided into fixed and variable (flexible) expenses. Use
David M. Griffith & Associates provides a variety of financial services to the public sector. Find the firm’s home page and review the services the firm offers to its clients. Then read the materials describing services related to cost alloca¬ tion plans and indirect cost rate proposals.
Find Cost Technology’s home page and the discussion of function cost analysis. What is function cost analysis and how does it relate to the topic of cost allo¬ cation? How does function cost analysis contribute to product and process design?LO1
How are costs classified and why are such classifications useful?LO1
What assumptions do accountants make about cost behavior and why are these assumptions necessary?LO1
How do product and period costs differ and why is this distinction a critical one?LO1
How are cost objects and direct costs related?LO1
How does the conversion process occur in manufacturing and sendee companies?LO1
What product cost categories exist and what items compose these categories?LO1
How does a manufacturing company calculate cost of goods manufactured?LO1
Distinguish among the cost accounting uses of historical costs, replacement costs, and budgeted costs. QUESTIONS LO1
Flow does a company determine its relevant range of activity? Of what use to managers is the concept of a relevant range of activity?LO1
Why is a cost referred to as variable if it remains constant per unit for all volume levels within the relevant range?LO1
Would it be true that fixed costs will never change in an organization? Explain the rationale for your answer.LO1
What is the difference between a variable and a mixed cost, given that each changes in total with changes in activity levels?LO1
Assume you are the president of your college or university. You are concerned about controlling costs. Discuss at least five campus services that you would be willing to outsource and why you chose those services.LO1
Is tuition at your college or university a variable, step, or fixed cost? Justify your answer.LO1
How do predictors and cost drivers differ? Why is such a distinction important?LO1
What is a product cost? What types of costs are included in product costs for merchandising companies, manufacturers, and service companies?LO1
What is a period cost? What types of costs are included in period costs for merchandising companies, manufacturers, and service companies?LO1
Can you determine whether a cost is a product or period cost if you simply know for what purpose the cost was incurred (for example, depreciation, wages, prop¬ erty taxes)? If so, indicate how. If not, indicate why not and what other infor¬ mation is needed.LO1
Are all product costs unexpired costs and all period costs expired costs? Explain.LO1
Discuss why distribution costs would be important to three companies of your choice.LO1
What is the process of conversion and why does this process create a need for cost accounting?LO1
What are the accounting and reporting implications that accompany the use of a high degree of conversion?LO1
What inventory accounts are shown on the balance sheet of a manufacturer and what information is contained in each of these accounts?LO1
Why would a service company rarely show a Finished Goods Inventory account on its balance sheet?LO1
How is the concept of a direct cost related to that of a cost object?LO1
Why are some material and labor costs that should, in theory, be considered direct accounted for as indirect costs?LO1
“Prime costs and conversion costs compose product cost; therefore, the sum of these two cost categories is equal to product cost.” Is this statement true or false? Explain.LO1
A company wants to increase the amount spent on prevention costs. Would such an expenditure increase or decrease product cost? Discuss your answer.LO1
Why can it be said that the cost of goods manufactured schedule shows the flow of production costs in a manufacturing company?LO1
Why is the amount of cost of goods manufactured different from the amount of cost of goods sold? Could there be a situation in which these amounts are equal? If so, how?LO1
(Appendix) Describe the differences among merchandising, service, and manu¬ facturing firms in their respective cost of goods sold accounts.LO1
(Terminology) Match the following lettered terms on the left with the appropriate numbered description on the right.LO1 a. Direct cost b. Period cost c. Prime cost d. Distribution cost e. Variable cost f. Fixed cost g. Expired cost h. Inventoriable cost i. Budgeted cost 1. An expense or loss 2. A
(Cost classifications) Indicate whether each item listed below is a variable (V), fixed (F), or mixed (M) cost and whether it is a product or service (PT) cost or a period (PD) cost. If some items have alternative answers, indicate the alternatives and the reasons for them.f. Wages of factory
(Cost behavior) Jackson Company produces baseball caps. The company incurred the following costs to produce 2,000 caps last month:a. What did each cap component cost on a per-unit basis?b. What is the probable type of behavior that each of the costs exhibits?c. This month, the company expects to
(Cost behavior) The Garfield Company manufactures high-pressure garden hoses. Costs incurred in the production process include a rubber material used to make the hoses, steel mesh used in the hoses, depreciation on the factory building, and utilities to run production machinery. Graph the most
(Total cost determination with mixed cost) Accurate & Flonest Accounting Services pays $400 per month for a tax software license. In addition, variable charges average $15 for every tax return the firm prepares.a. Determine the total cost and the cost per unit if the firm expects to prepare the
(Financial statement classifications) Everglades Airboats purchased a plastics ex¬ truding machine for $100,000 to make boat hulls. During its first operating year, the machine produced 5,000 units and depreciation was calculated to be $12,500 on the machine. The company sold 4,000 of the hulls.a.
(Product and period costs) Phylo Company incurred the following costs in August 1997:* Paid a 6-month premium for insurance of company headquarters, $12,000.■ Paid 3 months of property taxes on its factory building, $7,500.* Paid a $40,000 bonus to the company president.■ Accrued $10,000 of
(Company type) Indicate whether each of the following terms is associated with a manufacturing (Mfg.), a merchandising (Mer.), or a service (Ser.) company. There can be more than one correct answer for each term.a. Prepaid rentb. Merchandise inventoryc. Cost of goods soldd. Sales salaries expensee.
(Direct vs. indirect costs) Modern Cutlery Inc. manufactures kitchen knives. Following are some costs incurred in the factory in 1997 for knife production:a. What is the direct material cost for 1997?b. What is the direct labor cost for 1997?c. What is the indirect material and total indirect labor
(Labor cost classification) Better Living Inc. produces a variety of household prod¬ ucts. The firm operates 24 hours per day with three daily work shifts. The first- shift workers receive “regular pay.” The second shift receives a 10 percent pay premium, and the third shift receives a 20
(Prime cost and conversion cost) Johnson Manufacturing’s accounting records showed the following manufacturing costs for 1997:LO1 Direct material Direct labor Indirect material Indirect labor Factory utilities Selling and administrative a. What is prime cost for 1997? b. What is conversion cost
(CGM and CGS) Leisure Products Company had the following inventory bal¬ ances at the beginning and end of March 1997:LO1 Raw Materials Inventory Work in Process Inventory Finished Goods Inventory 3/1/97 3/31/97 $12,000 $16,000 68,000 84,000 32,000 24,000 All raw materials are direct to the
(Cost of services rendered) The following information is related to the Lovejoy Veterinary Clinic for April 1998, the firm’s first month in operation:LO1 Veterinarian salaries for April $12,000 Assistants' salaries for April 4,200 Medical supplies purchased in April 1,800 Utilities for month (80%
(CGM and CGS) Cathy's Custom Clocks' August 1998 cost of goods sold was $2,300,000. August 31 work in process was 40 percent of the August 1 work in process. Overhead was 225 percent of direct labor cost. During August, $768,500 of direct materials were purchased. Other August information
(Predictors and cost drivers; team activity) Accountants often use factors that change in a consistent pattern with costs to explain or predict cost behavior.a. As a team of three or four, select factors to predict or explain the behavior of the following costs: 1. Salesperson’s travel expenses
(Essay) A portion of the costs incurred by business organizations is designated as direct labor costs. As used in practice, the term direct labor cost has a wide variety of meanings. Unless the meaning intended in a given context is clear, misunderstanding and confusion are likely to ensue. If a
(Historical vs. replacement costs; team activity) The following illustration depicts the cost of rebuilding a 1993 Taurus with Ford replacement parts.Form a team of three. With each team member representing a different per¬ spective, prepare an oral presentation to discuss the effects of an
(Cost behavior) Ann’s Papers & Pads makes stationery pads. In an average month, the firm produces 200,000 boxes of stationery; each box contains 50 pages of stationery and 40 envelopes. Production costs are incurred for paper, ink, glue, and boxes. The company manufactures this product in
(Cost behavior) A company’s cost structure may contain numerous different cost behavior patterns. Below are descriptions of several different costs; match these to the appropriate graphs. On each graph, the vertical axis represents cost and the horizontal axis represents level of activity or
(Cost classifications) Tom Stevens is a house painter who incurred the following costs during June 1998 when he painted three houses. He spent $900 on paint, $40 on mineral spirits, and $75 on brushes. He also bought two pairs of coveralls for $45 each; he wears coveralls only while he works.
(CGM and CGS) PowerWedge Inc. began business in October of last year. The firm makes a log splitter, a machine that splits logs for more efficient burning in wood stoves and fireplaces. Below are data taken from the firm’s accounting records that pertain to its first year of operations.a. How
(Product and period cost, CGM and CGS) At the beginning of October 1998, Cris- tin Corporation had the following account balances:During October, the following transactions took place. 1. Raw materials were purchased on account, $75,000. 2. Direct materials ($21,200) and indirect materials ($2,500)
(CGM and CGS) Brooke Company produces miniature furniture for dollhouses.The company’s Raw Materials Inventory account includes the costs of both di¬ rect and indirect materials. Account balances for the company at the beginning and end of August 1997 are shown below:During the month, Brooke
(Journal entries) Debonaire Clothiers Inc. produces men’s suits. The following information has been gathered from the company records for 1998, the first year of company operations. Work in Process Inventory at the end of 1998 was $24,800.The company’s gross profit rate for the year was 35
(Missing data) The Juanita Company suffered major losses in a fire on May 23, 1997. In addition to destroying several buildings, the blaze destroyed the com- CASE pany’s work in process for an entire product line. Fortunately, the company was insured. However, the company needs to substantiate
An extremely important variable cost per employee is health care provided by the employer. In 1990, the average annual cost per employee was $3,161. This ETHICS AND QUALITY figure is expected to continue to rise each year as more and more expensive DISCUSSION technology is used on patients and as
General Motors Corp., in a move to improve relations with unhappy customers, said it will fix leaky head gaskets on as many as halfa million Quad 4 engines. In addition to payingforfuture repairs, GMsaid it will reimburse customers who already have had the gasket—which sits between the engine
Rising raw material costs are bothering Lancaster Colony these days out in Columbus, Ohio. Soybean oil, a key ingredient in the sauces and dressings that Lancaster's specialty foods division makes for the retail and food-service markets, has been priced sky-high since the end of 1993, thanks to the
Excerpted from Financial World, 1328 Broadway, New York, NY 10001. © Copyrighted 1995 by Financial World Partners. All rights reserved.]a. Although Lancaster has raised the prices of some of its products, why is such a tactic not a viable option for all products?b. Why wouldn’t the company
Outsourcing is a frequently used method of cost-cutting or of eliminating or¬ ganizational activities that are not viewed as core competencies. However, out¬ sourcing also creates new costs and, sometimes, new problems.Some companies have found themselves locked into long-term contracts with
Search the Internet to find information about Amoco Corporation’s Decision Support System for Cost Estimation. Find the discussion of the PETS system (project evaluation tool set). Describe the PETS system and the environmental changes that led to its development. What are the major financial
The Securities and Exchange Commission maintains online copies of documents filed by publicly traded companies. This online data source is referred to as EDGAR (Electronic Data Gathering and Retrieval). Pick any industry and select five firms from that industiy. For each firm selected, search the
How are flexible budgets used by managers to set predetermined overhead rates?LO1
How is underapplied or overapplied overhead treated at the end of a period?LO1
What causes underapplied and overapplied overhead?LO1
Why are cost pools necessary in large organizations?LO1
Why and how are service department costs allocated to producing departments?LO1
(Appendix) Of what significance are the coefficients of correlation and determination and the standard error of the estimate?LO1
What significant changes are taking place in the business environment?LO1
How do financial and management accounting relate to each other?LO1
How are management and cost accounting related?LO1
What is the scope of management accounting?LO1
What important indications exist that management accounting is a profession?LO1
How are organizations structured?LO1
Differentiate between the focuses and outputs of financial and management ac¬ counting. Explain the similarities between the two disciplines.LO2

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