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cost accounting

Cost Accounting Foundations And Evolutions 6th Edition Michael R. Kinney, Jenice Prather-Kinsey, Cecily A. Raiborn - Solutions

(Cycle time and MCE) Billy Bubbly is the manager of Mill House Inc., which makes flavored fruit beverages. Company employees perform the following functions when preparing the beverages:LO1. Receiving and transferring ingredients to storage Storing ingredients Transferring the ingredients from
(Cost drivers) The following costs are commonly incurred in manufacturing companies. For each cost, identify a cost driver and explain why it is appro¬ priate.a. Computer operationsb. Material handlingc. Factory depreciationd. Engineering changese. Freight costs for materialsf. Equipment
(Identifying cost drivers) Cruise-IN fast-food restaurant relies on computer- controlled equipment to prepare food for customers. Classify each of the fol¬ lowing costs as unit level (U), batch level (B), product/process level CP), or organizational level (O).a. Napkinsb. Oil for the deep-fat
(Value chart) Gonzales Manufacturing produces special-order desk nameplate stands. Production time is two days, but the average cycle time for any or¬ der is three weeks. The company president has asked you, as the new con¬ troller, to discuss missed delivery dates. Prepare an oral presentation
(Cost allocation using cost drivers) Blanco Worldwide Industries has decided to implement an activity-based costing system for its in-house legal department.The principal expense in the legal department is professional salaries, and the estimated cost of professional salaries associated with each
(Activity-based costing) Barbizon Enterprises is in the process of instituting an activity-based costing project in its 10-person purchasing department. Annual departmental overhead costs are $390,000. Because finding the best supplier takes the majority of effort in the department, most of the
(Activity-based costing) Eloquence Publishing is concerned about the prof¬ itability of its paperback dictionaries. Company managers are considering producing only the top-quality, hand-sewn dictionaries with gold-edged pages. Eloquence is currently assigning the $1,000,000 of overhead costs to
(Product profitability) Moldthan Systems manufactures lawn mowers and gar¬ den tractors. Lawn mowers are relatively simple to produce and are made in large quantities. Garden tractors are customized to individual wholesale cus¬ tomer specifications. The company sells 200,000 lawn mowers and
(( ontrolling overhead) Flagship Company is in the process of analyzing and updating its cost information and pricing practices. Since the company’s product line changed from general paints to specialized marine coatings, there has been tremendous overhead growth, including costs in customer
(Traditional vs. ABC methods) The cost systems at many companies selling multiple products have become less than adequate in today’s global compe¬ tition. Managers often make important product decisions based on distorted cost information because the cost systems have been primarily designed to
(Ethics) Many manufacturers are deciding to service only wholesalers or re¬ tailers that buy $10,000 or more of products from the manufacturers annu¬ ally. Manufacturers defend such policies by stating that they can provide better service to customers that handle more volume and more diverse
(Identifying non-value-aclded activities) Mark Dickenson plans to build a con¬ crete walkway for his home during his vacation. The following schedule shows how project time will be allocated:a. Identify the value-added activities. How much of the total is value-added time?b. Identify the
(Activity analysis: MCE) Log Cabins Unlimited constructs vacation houses in the North Carolina mountains, value chart:a. What are the value-added activities and their total time?b. What are the non-value-added activities and their total time?c. Calculate the manufacturing cycle efficiency of the
Activity-based costing) Outdoor Living makes umbrellas, gazebos, and lawn chairs. The company uses a traditional overhead allocation scheme and as¬ signs overhead to products at the rate of $20 per direct labor hour. In 2006, the company produced 200,000 umbrellas, 20,000 gazebos, and 60,000 lawn
Activity-bused cosiing; advanced) Stylish Components manufactures two products. Following is a production and cost analysis for each product for the year 2007.Peter Yound, the firm’s cost accountant, has just returned from a seminar on activity-based costing. To apply the concepts he has learned,
(Using ABC to set price) The budgeted manufacturing overhead costs of Up- and-Out Door Company for 2006 are as follows:For the last live years, the cost accounting department has been charging overhead production costs based on machine hours. The estimated budgeted capacity for 2006 is 1,000,000
(Activity driver analysis and decision making) Elsinore Manufacturing is con¬ cerned about its ability to control factory labor-related costs. The company has recently finished an analysis of these costs for 2006. Following is a sum¬ mary of the major categories of labor costs identified by the
(Activity-based costing and pricing) Orlando Community Hospital has been under increasing pressure to be accountable for the charges it assesses its patients. Its current pricing system is ad hoc, based on pricing norms for the geographical area, and it explicitly considers direct costs only for
Determining product cost) Grand Forks Corp. has identified activity centers to which overhead costs are assigned. The cost pool amounts for these cen¬ ters and their selected activity drivers for 2006 are as follows.a. Determine unit product cost using the appropriate cost drivers for each
(Product complexity) Superior Electronics is a world leader in the produc¬ tion of electronic test and measurement instruments. The company experi¬ enced almost uninterrupted growth through the 1990s, but in the 2000s, the low-priced end of the Portables Division’s product line was challenged
(Activity-based costing) X-tra Sturdy Co. manufactures several different types of printed circuit boards; however, two of the boards account for the major¬ ity of the company’s sales. The first of these boards, a television (TV) circuit board, has been a standard in the industry for several
(Activity-based costing) Kingston Inc. provides a wide range of engineering and architectural consulting services through its three branch offices in Sky, Ruene, and Wayne. The company allocates resources and bonuses to the three branches based on the net income reported for the period. The fol¬
(Activity-based costing and pricing) Black West owns and manages a com¬ mercial cold-storage warehouse. He stores a vast variety of perishable goods for his customers. Historically, he has charged customers using a flat rate of $0.08 per pound per month for goods stored. His cold-storage warehouse
(Essay) Companies that want to be more globally competitive can consider the implementation of activity-based management (ABM). Such companies have often used other initiatives that involve higher efficiency, effectiveness, or output quality. These same initiatives are typically consistent with and
(Decision making; ethics: essay) As the chief executive officer of a large cor¬ poration, you have decided after discussion with production and accounting personnel to implement activity-based management concepts. Your goal is to reduce cycle time and, in turn, costs. A primary way to accomplish
The following list shows the cost pools at Menard Company. For each pool, identify a cost driver and explain why it is appropriate.a. Maintenanceb. Utilities C. Information technologyd. Quality controle. Material handling S. Material storage g. Factory costs, including rent, property taxes,
HOW DOES PROCESS COSTING DIFFER FROM JOB ORDER COSTING? LO.1
FOR WHAT REASONS ARE EQUIVALENT UNITS OF PRODUCTION USED IN PROCESS COSTING?LO.1
HOW ARE EQUIVALENT UNITS OF PRODUCTION, UNIT COSTS, AND INVENTORY VALUES DETERMINED USING THE WEIGHTED AVERAGE METHOD OF PROCESS COSTING?LO.1
HOW ARE EQUIVALENT UNITS OF PRODUCTION, UNIT COSTS, AND INVENTORY VALUES DETERMINED USING THE FIFO METHOD OF PROCESS COSTING?LO.1
HOW CAN STANDARD COSTS BE USED IN A PROCESS COSTING SYSTEM?LO.1
WHY WOULD A COMPANY USE A HYBRID COSTING SYSTEM?LO.1
(APPENDIX 1) WHAT ALTERNATIVE METHODS CAN BE USED TO CALCULATE EQUIVALENT UNITS OF PRODUCTION?LO.1
(APPENDIX 2) HOW ARE NORMAL AND ABNORMAL SPOILAGE LOSSES TREATED IN AN EUP SCHEDULE?LO.1
Process costing• is similar to job order costing in that they both are averaging techniques used to assign costs to output in manufacturing companies.• differs from job order costing in that process cost¬ ing is used in companies making large quantities of homogeneous products; job order
Equivalent units of production are used in process costing to• approximate the number of whole units of out¬ put that could have been produced during a pe¬ riod from the actual effort expended during that period.• assign production costs for material, labor, and overhead to completed and
The weighted average method of process costing• combines the beginning inventory and current period production activity.• determines>- equivalent units of production by adding to the units in beginning inventory the units started and completed plus the equivalent units in ending inventory.»-
The FIFO method of process costing• does not commingle the beginning inventory and current period production activity.• determines>- equivalent units of production by adding to the equivalent units of the beginning in¬ ventory completed in the current period the units started and completed
Standard costs can be used in a process costing sys¬ tem in combination with the FIFO method to• assign a “normal” production cost to the equiv¬ alent units of output each period.• allow managers to quickly recognize and inves¬ tigate significant deviations from expected pro¬ duction
A hybrid costing system allows companies to• combine the characteristics of both job order and process costing systems.• trace direct material and/or direct labor that is re¬ lated to a particular batch of goods to those spe¬ cific goods using job order costing.• use process costing
What are the characteristics of a company that would be more likely to use process costing rather than job order costing?LO1.
How do the weighted average and FIFO methods of process costing differ in the manner in which beginning work in process inventory is treated?LO1.
What is an “equivalent unit of production,” and why is it a necessary con¬ cept to employ a process costing sytem?LO1.
Describe the six steps of process costing. What is the objective to be achieved by applying the six steps?LO1.
Which cost pool can be found in a downstream department that will not be present in the most upstream department? Discuss.LO1.
Why does standard costing make process costing more clerically and com¬ putationally efficient?LO1.
What is a hybrid costing system? In what circumstances are hybrid costing systems typically employed?LO1.
(Appendix 2) In a process costing system, how are normal and abnormal spoilage typically treated? Why are normal and abnormal spoilage treated differently?LO1.
(EUP; weighted average) Newton Inc. uses a weighted average process cost¬ ing system. All material is added at the start of the production process. Di¬ rect labor and overhead are added at the same rate throughout the process. Newton's records indicate the following production for October
(EUP; FIFO) Assume that Newton Inc. in Exercise 9 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 conversion?LO1.
(EUP: weighted average & FIFO) Shannon Inc. makes metal toy soldiers in a one-department production process. All metal is added at the beginning of the process. Paint for the toys and plastic bags for packaging are considered indirect materials. The following information is available relative to
(EUP; weighted average & FIFO) Clean-Up Corp. produces outdoor brooms. On April 30, 2006, the firm had 3,600 units in process that were 60 percent complete as to material, 40 percent complete as to direct labor, and 20 per¬ cent complete as to overhead. During May, 187,000 brooms were started.
(EUP: weighted average & FIFO) Matisse Company produces steel and uses a process costing system to assign production costs. During March 2006, the firm had a beginning Work in Process Inventory of 60,000 tons of steel that were 100 percent complete as to material and 40 percent complete as to
(Cost per EUP; weighted average) Hogg Inc. manufactures pillar candles. In October 2006, 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 October, direct material, conversion, and overhead
(i ost per EUP; FIFO) Assume that Hogg Inc. in Exercise 14 had 3,600 EUP for direct material in October’s beginning inventory, 4,000 EUP for direct la¬ bor, and 3,960 EUP for overhead. What was the October FIFO cost per equivalent unit for direct material, direct labor, and overhead?LO1.
(Cost per EUP; weighted average & FIFO) Fantastic Borders manufactures concrete garden border sections. May 2006 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) Ouch! manufactures canisters of mace. On August 1, 2006, the company had 9,800 units in beginning Work in Process Inventory that were 100 percent complete as to canisters, 60 per¬ cent complete as to other materials, 40 percent complete as to direct labor, and
(EUP; cost per EUP; FIFO) Roll-Along makes skateboards and uses a FIFO process costing system. The company began April 2006 with 1,000 boards in process that were 70 percent complete as to material and 85 percent com¬ plete as to conversion. During the month, 3,800 additional boards were started.
(Cost assignment; weighted average) The following production and cost per EUP information are available for Degas Co. for January 2006:LO1. Units transferred out during month 520,000 Units in ending inventory (100% complete as to direct material; 30% complete as to direct labor; 45% complete as to
(Cost assignment; FIFO) In November 2006, Monet Corporation computed its equivalent unit costs under FIFO process costing as follows:Direct material $12.75 Packaging 1.50 Direct labor 6.42 Overhead 3.84 Direct material and packaging are added, respectively, at the start and end of
(EUP; cost per EUP; cost assignment; FIFO & weighted average) Manet Com¬ pany mass-produces miniature speakers for portable CD players. The follow¬ ing T-account presents the firm’s cost information for February 2006:During February, the firm started 4,200 units and ended the month with 150
(EUP; weighted average & FIFO; two departments) Dali Metals has two pro¬ cessing departments, Fabrication and Assembly. Metal is placed into produc¬ tion in the Fabrication Department, where it is cut and formed into various components. These components are transferred to Assembly, where they
(Standard process costing; variances) DiskCity Products manufactures CDs 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 CD is as follows:d. Using the FIFO
Standard process costing) Renoir Company uses a standard costing system to account for its pita bread manufacturing process. The pita bread is pack¬ aged and sold by the dozen. The company has set the following standards for production of each package:On June 1, the company had 6,000 individual
(Hybrid costing; advanced;: Windy City Co. makes capes (one size fits most). Each cape goes through the same conversion process, but three types of fabric (Dacron, denim, and cotton) are available. The company uses a standard costing system, and standard costs for each type of cape follow:a.
Internet > Search the Internet to identify a vendor of process costing soft¬ ware. Read the on-line literature provided by the vendor regarding the soft¬ ware. Then briefly describe the major features of the software in the areas of product costing, cost budgeting, and cost control.LO1.
Research) In a team of three or four people, choose a company whose mass production process you would like to learn. Use the library, the Inter-net, and (if possible) personal resources to gather information. Prepare a vi¬ sual representation (similar to Exhibit 6-3) of that production process. In
(Appendix; EUP computations; normal loss) Southeastern Corp. produces paint in a process in which spoilage occurs continually. Spoilage of 1 per¬ cent or fewer of the gallons of raw material placed into production is con¬ sidered normal. The following operating statistics are available for June
(Appendix; normal vs. abnormal spoilage; WA) Weezer Plastics uses a weighted average process costing system, and company management has specified that the normal loss from shrinkage cannot exceed 3 percent of the units started in a period. All raw material is added at the start of the production
(Appendix; El IP computation; normal loss; cost per EUP; FIFO; advanced)Rodin Inc. produces small plastic toys. As the raw material is heated, shrink¬ age occurs. Management believes that shrinkage of less than 8 percent is normal. All direct material is entered at the beginning of the process.
(Appendix; EUP computation; normal and abnormal loss; FIFO; advanced)Waykita Foods manufactures corn meal in a continuous, mass production process. Com is added at the beginning of the process. Losses are few and occur only when foreign materials are found in the com meal. Inspection occurs at the
(Weighted average) Wyeth Products manufactures electronic language transla¬ tors. Analysis of beginning Work in Process Inventory for February 2006 re-vealed the following for 800 units:During February, Wyeth Products started production of another 11,400 trans¬ lators and incurred $259,012 for
(FIFO) Use the information from Problem 32 for Wyeth Products,a. Prepare a cost of production report for February using the FIFO method.b. In general, what differences exist between the weighted average and FIFO methods of process costing and why do these differences exist?LO1.
(Weighted average) Lei Enterprises manufactures belt buckles in a single-step production process. To determine the proper valuations for inventory bal¬ ances and Cost of Goods Sold, you have obtained the following information for August 2006:Beginning inventory units were 100 percent complete as
(Weighted average) Sun Valley Micro produces computer cases. In the production process, materials are added at the beginning of production and overhead is applied to each product at the rate of 70 percent of di¬ rect labor cost. No Finished Goods Inventory existed at the beginning of July. A
(FIFO cost per EUP) Zack’s Corp. makes a variety of snacks. The following information for August 2006 relates to a cashew and dried mango mix. Mate¬ rials are added at the beginning of processing; overhead is applied on a di¬ rect labor basis. The mix is transferred to a second department for
(Cost assignment; FIFO) Fresh Seasons Processors is a contract manufacturer for Delectable Dressing Company. Fresh Seasons uses a FIFO process cost¬ ing system to account for its salad dressing production. All ingredients are added at the start of the process. Delectable provides reusable vats to
(Weighted average & FIFO) In a single-process production system, Nile Queen Corporation produces press-on fingernails. For October 2006, the company’s accounting records reflected the following:a. For October, prepare a cost of production report, assuming that the company uses the weighted
WA-AND FIFO) Starbing Paints makes quality paint sold at premium prices in one production department. Production begins with the blending of various chemicals, which are added at the beginning of the process, and ends with the canning of the paint. Canning occurs when the mixture reaches the 90
(FIFO; second department; advanced) Xena Corp. makes porcelain sinks in a process requiring operations in three separate departments: Molding, Curing, and Finishing. Materials are introduced in Molding; additional material is added in Curing. The following information is available for the Curing
(Two departments; weighted average; advanced) Big Piney Corporation makes plastic Christmas trees in two departments, Cutting and Boxing. In the Cutting Department, wire wrapped with green “needles” is placed into production at the beginning of the process and is cut to various lengths, de¬
(Cost flows: multiple departments) Sharp Corporation produces accent stripes for automobiles in 50-inch rolls. Each roll passes through three departments (Striping, Adhesion, and Packaging) before it is ready for shipment to automo¬ bile dealers and detailing shops. Product costs are tracked by
(Comprehensive; two dep artments; advanced) Safe-N-Sound makes a back¬ yard fencing system for pet owners in a two-stage production system. In process 1, wood is cut and assembled into 6-foot fence sections. In process 2, the sections are pressure treated to resist the effects of weather and then
Standard process costing) Dark Out manufactures sunglass and ski goggle lenses. The company uses a standard process costing system and carries in¬ ventories at standard. In May 2006, the following data were available:a. Prepare an equivalent units of production schedule, to. Prepare a cost of
(Multiproduct: hybrid costing) Be-at-Ease Industries manufactures a series of three models of molded plastic chairs: standard (without arms), deluxe (with arms), and executive (with arms and padding). All are variations of the same design. The company uses batch manufacturing and has a hybrid
(Appendix; shrinkage; weighted average) Burger Babies produces frozen hamburgers. In the Forming Department, ground beef is formed into patties and cooked; an acceptable shrinkage loss for this department is 3 percent of the pounds started. The patties are then transferred to the Finishing Depart¬
(Appendix; normal and abnormal spoilage; FIFO; advanced) Robbin Darrell Company produces door pulls that are inspected at the end of production. Spoilage may occur because the door pull is improperly stamped or molded. Any spoilage in excess of 3 percent of the completed good units is consid¬ ered
(Appendix; normal and abnormal spoilage; weighted average; advanced) Use the Robbin Darrell Company data given in Problem 47. Prepare a May 2006 cost of production report using the weighted average method.LO1.
(Appendix; normal and abnormal discrete spoilage; WA) Shelley Brian Tools manufactures one of its products in a two-department process. A separate Work in Process account is maintained for each department, and the com¬ pany uses a weighted average process costing system. The first department is
(Appendix; normal and abnormal spoilage) Grand Monde Company manufac¬ tures various lines of bicycles. Because of the high volume of each type of product, the company employs a process cost system using the weighted av¬ erage method to determine unit costs. Bicycle parts are manufactured in the
When discussing a cost object, what and an indirect cost?is the distinction between a direct cost LO1.
Why is it necessary for a company to assume a relevant range of activity when making assumptions about cost behavior?LO1.
How do cost drivers and predictors differ, and why is the distinction im-portant?LO1.
What is the distinction between a product cost and a period cost?LO1.
What are conversion costs? Why are they called this?LO1.
How does an actual costing system differ from a normal costing system?What advantages does a normal costing system offer?LO1.
What is meant by the term cost ofgoods manufactured? Why does this item appear on an income statement?LO1.
(Direct vs. indirect costs) Krzyzewski Inc. manufactures stainless steel flat- ware (knives, spoons, and forks). Following are some costs incurred in the factory in 2006 for flatware production:a. What is the direct material cost for 2006?b. What is the direct labor cost for 2006?c. What are the
(Direct vs. indirect costs) Pitino State University’s College of Business has five departments: Accounting, Finance, Management, Marketing, and Infor¬ mation Systems. Each department chairperson is responsible for the depart¬ ment’s budget preparation. Indicate whether each of the following
(Direct vs. indirect costs) Following is a list of raw materials that might be used in the production of a laptop computer: touch pad and buttons, net¬ work connector, battery, AC adapter, CD drive, mother board, glue, screws, paper towels, and machinery and equipment oil. The laptops are produced

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