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cost accounting

Introduction To Cost Accounting 1st International Edition Don R. Hansen, Maryanne Mowen, Liming Guan, Mowen/Hansen - Solutions

Explain how safety stock is used to deal with demand uncertainty.LO1
What is the economic order quantity?LO1
What approach does JIT take to minimize total inventory costs?LO1
One reason for inventory is to prevent shutdowns. How does the JIT approach to inventory management deal with this potential problem?LO1
Explain how the Kanban system helps reduce inventories.LO1
Explain how long-term contractual relationships with suppliers can reduce the ac- quisition cost of materials.LO1
What is a constraint? An internal constraint? An external constraint?LO1
Explain the procedures for graphically solving a linear programming problem. What solution method is used when the problem includes more than two or three products?LO1
Define and discuss the three measures of organizational performance used by the theory of constraints.LO1
Explain how lowering inventory produces better products, lower prices, and better responsiveness to customer needs.LO1
What are the five steps that TOC uses to improve organizational performance?LO1
Barker Company has the following departmental manufacturing structure for one of its products:Required:1. Calculate the total time it takes to produce a batch of 20 units using Barker’s traditional departmental structure.2. Using cellular manufacturing, how much time is saved producing the same
During the week of June 12, Leonard Manufacturing produced and shipped 7,500 units CORNERSTONE 15-2 of its aluminum wheels: 1,500 units of Model A and 6,000 units of Model B. The following costs were incurred:Required:1. Assume initially that the value-stream costs and total units shipped apply
In 2011, Shawnee Company implements a new process affecting labor and materials. CORNERSTONE 15-3 The following reported data are provided to evaluate the effect on the company’s productivity:Required:1. Calculate the productivity profile for 2010.2. Calculate the productivity profile for 2011,
Refer to Cornerstone Exercise 15-3. Shawnee Company provides the following addi- CORNERSTONE 15-4 tional information so that total productivity can be valued:Required:1. Calculate the cost of inputs in 2011, assuming no productivity change from 2010 to 20VN 2. Calculate the actual cost of inputs
Helix, Inc., formed the following matrix for its five products:Required:Using the information in the matrix, identify the value streams.LO1 Product Order Production Production Activities/Processes Subassembly Basic Assembly Model Entry Planning 47A Cell Cell Cell Inspecting Packaging & Shipping
Vitacom, Inc., has the following departmental structure for producing a well-known multivitamin:Required:1. Calculate the time required to produce a batch of 12 bottles using a batch processing departmental structure.2. Calculate the time to process 12 units using cellular manufacturing.3. How much
Vitacom, Inc., implemented cellular manufacturing as recommended by a consultant.The production flow improved dramatically. However, the company was still faced with the competitive need to improve its cycle time so that it could produce one bottle every four minutes (15 bottles per hour). The cell
A value stream has three activities and two products. The units produced and shipped per week are 100 of the deluxe model (Model A) and 300 of the basic model (Model B).The resource consumption patterns are shown as follows:Required:1. Calculate the ABC product cost for Models A and B.2. Calculate
Shorts Manufacturing, Inc., has implemented lean manufacturing in its Kansas City plant as a pilot program. One of its value streams produces a family of small electric tools.The value-stream team managers were quite excited about the results, as some of their efforts to eliminate waste were
The following Box Scorecard was prepared for a value stream:Required:LO1 Last Week This Week (6/30/11) Planned Future State (12/31/11) Operational Units sold per person 100 108 115 On-time delivery 85% 90% 95% Dock-to-dock days 12 11 First-time through 60% 62% 70% Average product cost $75 $74 $70
Refer to Exercise 15-14. Suppose the following input prices are provided for each year:Required:1. Compute the profit-linked productivity measure. By how much did profits increase due to productivity?2. Calculate the price-recovery component for 2011. Explain its meaning.LO1 2010 2011 Unit price
Continuous improvement is the governing principle of a lean accounting system. Following are several performance measures. Some of these measures would be associated with a traditional standard-costing accounting system, and some would be associated with a lean accounting system.Required:1.
In 2010, Fleming Chemicals used the following input combination to produce 55,000 gallons of an industrial solvent:In 2011, Fleming again planned to produce 55,000 gallons of solvent and was considering two different changes in process, both of which would be able to produce the desired output. The
Explain how CVP analysis can be used for managerial planning.LO1
Describe the difference between the units-sold approach to CVP analysis and the sales-revenue approach.LO1
Define the term break-even point.LO1
Explain why contribution margin per unit becomes profit per unit above the break-even point.LO1
Arestaurant owner who had yet to earn a monthly profit said, “The busier we are, the more we lose.” What do you think is happening in terms of contribution margin?LO1
What is the variable cost ratio? The contribution margin ratio? How are the two ratios related?LO1
If the contribution margin increases from 30 to 35 percent of sales, what will happen to the break-even point, and why will this occur?LO1
Define the term sales mix, and give an example to support your definition.LO1
Explain how CVP analysis developed for single products can be used in a multiple- product setting.LO1
Why might a multiple-product firm choose to calculate just overall break-even rev- enue rather than the break-even quantity by product?LO1
How do income taxes affect the break-even point and CVP analysis?LO1
Explain how a change in sales mix can change a company's break-even point.LO1
Why does the activity-based costing approach to CVP analysis offer more insight than the conventional approach does?LO1
Custom Screenprinting Company plans to sell 8,000 T-shirts at $15 each in the coming year. Product costs include:Variable selling expense is the redemption of a coupon, which averages $1.00 per T-shirt; fixed selling and administrative expense totals $10,000.Required:LO1 Direct materials per
Jerez Company makes an in-car navigation system. Next year, Jerez plans to sell 6,000 units at a price of $300 each. Product costs include:Required:1. Calculate the sales commission per unit sold. Calculate the contribution margin per unit.2. How many units must Jerez Company sell to break even?
Cameron Company is a placement agency for temporary nurses. It serves hospitals and clinics throughout the metropolitan area. Cameron Company believes it will place temporary nurses for a total of 25,000 hours next year. Cameron charges the hospitals and clinics $75 per hour and has variable costs
Cherrington Company wants to earn $420,000 in net (after-tax) income next year. Its product is priced at $480 per unit. Product costs include:Variable selling expense is $45 per unit; fixed selling and administrative expense totals $340,000. Cherrington has a tax rate of 30 percent.Required:1.
Sandman Enterprises produces and sells two products: a bedside lamp decorated with comic book characters, and a baby mobile that hangs above a crib and can play lullabies.Sandman plans to sell 30,000 bedside lamps and 20,000 lullaby mobiles in the coming year. Product price and cost information
Dunst and Dafoe Copy Shop (D&D) provides photocopying service. Next year, D&D estimates it will copy 2,400,000 pages at a price of $0.08 each in the coming year. Product costs include:Required:LO1 Direct materials Direct labor Variable overhead Total fixed overhead $0.020 $0.004 $0.001
Sharda Company is considering two different processes to make its product—process 1 and process 2. Process 1 requires Sharda to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed overhead is higher. Process 2 involves purchasing all
Kool-skinz Company manufactures custom-designed skins (covers) for iPods® and other portable MP3 devices. Variable costs are $10.80 per custom skin, the price is $18, and fixed costs are $66,960.Required:1. What is the contribution margin for one custom skin?2. How many custom skins must
Shellenberger Company manufactures high-end gas grills. Fixed costs amount to$19,980,000 per year. Variable costs per gas grill are $395, and the average price per gas _ |grill is $950.Required:1. How many gas grills must Shellenberger Company sell to break even?2. If Shellenberger Company sells
Parker Pharmaceuticals, Inc., plans to sell 500,000 units of anti-venom at an average price of $6 each in the coming year. Total variable costs equal $600,000. Total fixed costs equal $8,000,000.Required:1. What is the contribution margin per unit? What is the contribution margin ratio?2. Calculate
McDuffy’s, Inc., has developed a chew-proof dog bed—the McTuffie. Fixed costs are$144,000 per year. The average price for the McTuffie is $32, and the average variable cost is $24 per unit. Currently, McDuffy produces and sells 20,000 McTuffies.Required:1. How many McTuffies must be sold to
Sasha Melton owns and operates The Green Belt Company (GBC), which provides live plants and flower arrangements to professional offices. Sasha has fixed costs of $2,380 per month for office/greenhouse rent, advertising, and a delivery van. Variable costs for the plants, fertilizer, pots, and other
Big Blue Motors, Inc., employs 24 sales personnel to market its line of luxury automobiles.The average car sells for $85,000, and a 6 percent commission is paid to the salesperson. Big Blue Motors is considering a change to the commission arrangement where the company would pay each salesperson a
Head-Gear Company produces helmets for bicycle racing. Currently, Head-Gear charges a price of $230 per helmet. Variable costs are $80.50 per helmet, and fixed costs are $1,255,800. The tax rate is 25 percent. Last year, 14,000 helmets were sold.Required:1. What is Head-Gear’s net income for last
Carmichael Corporation is in the process of preparing next year’s budget. The pro forma income statement for the current year is as follows:Required:1. What is the break-even sales revenue (rounded to the nearest dollar) for Carmichael Corporation for the current year?2. For the coming year, the
Choose the Jest answer for each of the following multiple-choice questions.MeNally wants to sell an additional 50,000 units at the same selling price and contribution margin. By how much can fixed costs increase to generate additional profit equal to 10 percent of the sales value of the additional
Tintique, Inc., produces novelty nail polishes. Each bottle sells for $3.84. Variable unit costs are as follows:Required:1. What is the contribution margin per unit for a bottle of nail polish? What is the contribution margin ratio?2. How many bottles must be sold to break even? What is the
Coale Company produces GPS devices. One model is the GPS-auto, a basic model that is designed to attach to the windshield of a car. Another model, the GPS-marine, has extensive charts of oceans around the world. For the coming year, Coale expects to sell 80,000 GPS-autos and 5,000 GPS-marines. A
X-Cee-Ski Company recently expanded its manufacturing capacity, which will allow it to produce up to 21,000 pairs of cross-country skis of the mountaineering model or the touring model. The Sales Department assures management that it can sell between 9,000 and 14,000 pairs of either product this
Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is $1. Costs are as follows:Required:1. Compute the break-even point in units using conventional analysis.2. Compute the break-even point in units using activity-based analysis.3. Suppose that Busy-Bee could
Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand production into sweet rolls as well. The average price of a loaf of bread is $1.Anticipated price for a package of sweet rolls is $1.50. Costs for the new level of production are as follows:Required:1.
More-Power Company has projected sales of 75,000 regular sanders and 30,000 minisanders for next year. The projected income statement is as follows:Required:1. Set up the given income statement on a spreadsheet (e.g., Excel). Then, substitute the following sales mixes, and calculate operating
Consider the following information on four independent companies.LO1 Sales Less: Variable costs $10,000 B C ? $ ? $9,000 8,000 11,700 9,750 ? Contribution margin $ 2,000 $ 7,800 S ? ? Less: Fixed costs 4,500 900 Operating income $ 1,000 ? $8,000 $2,850 Units sold 1,300 300 500 Price/Unit $4 $? $130
Furyk Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows.Required:1. What is Furyk’s variable cost ratio? Its contribution margin ratio?2. Suppose Furyk’s actual revenues are $150,000 greater than budgeted. By how much will before-tax
Cabrera produces and sells bobblehead dolls. Last year, Cabrera sold 156,250 units. The income statement for Cabrera, Inc., for last year is as follows:Required:LO1 Sales Less: Variable expenses Contribution margin Less: Fixed expenses Operating income $625,000 343,750 $281,250 180,000 $101,250
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows:Required:1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point.
Katayama Company produces a variety of products. One division makes neoprene wetsuits.The division’s projected income statement for the coming year is as follows:Required:LO1 Sales (65,000 units) Less: Variable expenses Contribution margin Less: Fixed expenses Operating income $15,600,000
Mahan Consulting is a service organization that specializes in the design, installation, and servicing of mechanical, hydraulic, and pneumatic systems. For example, some manufacturing firms, with machinery that cannot be turned off for servicing, need some type of system to lubricate the machinery
Drake Company produces a single product. Last year’s income statement is as follows:Required:1. Compute the break-even point in units and sales revenue.2. What was the margin of safety for Drake Company last year?3. Suppose that Drake Company is considering an investment in new technology that
Salem Electronics currently produces two products: a programmable calculator and a tape recorder. A recent marketing study indicated that consumers would react favorably to a radio with the Salem brand name. Owner Kenneth Booth was interested in the possibility.Before any commitment was made,
What is tactical decision making?LO1
"Tactical decisions are often small-scale decisions that serve a larger purpose." Explain what this means.LO1
What is tactical cost analysis? What steps in the tactical decision-making model correspond to tactical cost analysis?LO1
What is a relevant cost? Explain why depreciation on an existing asset is always irrel- evant.LO1
Give an example of a future cost that is not relevant.LO1
Relevant costs always determine which alternative should be chosen. Do you agree or disagree? Explain.LO1
Can direct materials ever be irrelevant in a make-or-buy decision? Explain. Give an example of a fixed cost that is relevant.LO1
What role do past costs play in tactical cost analysis?LO1
When will flexible resources be relevant to a decision?LO1
When will the cost of committed resources be relevant to a decision?LO1
What are the main differences between a traditional and an activity-based make-or- buy analysis?LO1
Explain why activity-based segmented reporting provides more insight concerning keep-or-drop decisions.LO1
Should joint costs be considered in a sell-or-process-further decision? Explain.LO1
Why would a firm ever offer a price on a product that is below its full cost?LO1
Each year, Subramanian Company produces 20,000 units of a component used in radar detectors. An outside supplier has offered to supply the part for $2.36. The unit cost is:Overhead is applied on the basis of machine hours; the component requires 10,000 machine hours per year.Required:1. What are
Ambi Company makes three types of rug shampooers. Model 1 is the basic model rented through hardware stores and supermarkets. Model 2 is a more advanced model with both dry and wet vacuuming capabilities. Model 3 is the heavy duty riding shampooer sold to hotels and convention centers. A segmented
Aspen Leaf Paper Products, Inc., manufactures boxed stationery for sale to specialty shops. Currently, the company is operating at 90 percent of capacity. A chain of drugstores has offered to buy 50,000 boxes of Aspen Leaf’s blue-bordered thank-you notes as long as the box can be customized with
Avalon Chemicals Company processes a number of chemical compounds for use in veterinary medicine. One compound is decomposed into two chemicals: avacol and selgene.The cost of processing one batch of compound is $74,000, and the result is 4,000 gallons of avacol and 6,000 gallons of selgene. Avalon
Six months ago, Lee Anna Carver purchased a fire-engine red, used LeBaron convertible for $10,000. Lee Anna was looking forward to the feel of the sun on her shoulders and the wind whipping through her hair as she zipped along the highways of life. Unfortunately, the wind turned her hair into
Barker, Inc., has six salaried clerks to process purchase orders. Each clerk is paid a salary of $26,300 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process
Sportz-a-Lot, Inc., manufactures toys and sporting equipment, including golf kits for preschoolers. A national sporting goods chain recently submitted a special order for 7,600 golf kits. Sportz-a-Lot was not operating at capacity and could use the extra business.Unfortunately, the order’s
Saccamano Company is currently manufacturing Part KAV-71, producing 35,000 units annually. The part is used in the production of several products made by Saccamano. The cost per unit for KAV-71 is as follows:Of the total fixed overhead assigned to KAV-71, $12,950 is direct fixed overhead (the
Venable, Inc., a manufacturer of snowmobiles, has just received an offer from a supplier to provide 3,000 units of a component used in its main product. The component is a _ track assembly that is currently produced internally. The supplier has offered to sell the track assembly for $64 per unit.
Harding, Inc., produces two types of cough syrup: Basic and Multi-Symptom. Of the two, Basic is the more popular. Data concerning the two products follow:Annual overhead costs are listed below. These costs are classified as fixed or variable with respect to the appropriate activity
Schulzer, Inc., is a pork processor. Its plants, located in the Midwest, produce several products from a common process: sirloin roasts, chops, spare ribs, and the residual. The roasts, chops, and spare ribs are packaged, branded, and sold to supermarkets. The residual consists of organ meats and
Grassley, Inc., is considering opening a new warehouse to serve the Southwest region. Dante Moore, controller for Grassley, has been reading about the advantages of foreign trade zones. He wonders if locating in one would be of benefit to his company, which imports about 90 percent of its
Apulio Company manufactures two types of cold-pressed olive oil, Refined Oil and Top Quality Oil, out of a joint process. The joint (common) costs incurred are $84,000 for a standard production run that generates 40,000 gallons of Refined Oil and 20,000 gallons of Top Quality Oil. Additional
Apollonia Dental Services is part of an HMO that operates in a large metropolitan area.Currently, Apollonia has its own dental laboratory to produce two varieties of porcelain crowns—all porcelain and porcelain fused to metal (PFM). The unit costs to produce the crowns are as follows:Overhead is
Pharmaco Corporation buys three chemicals that are processed to produce two popular ingredients for liquid pain relievers. The three chemicals are in liquid form. The purchased chemicals are blended for two to three hours and then heated for 15 minutes.The results of the process are two separate
Define price elasticity of demand. Give an example of a product with relatively elas- tic demand and an example of a product with relatively inelastic demand. (Give examples not given in the text.)LO1
What are the features of a perfectly competitive market? Give two examples of com- petitive markets. How could a firm in such a market move to a less competitive market?LO1
How do you calculate the markup on cost of goods sold? Is the markup pure profit? Explain.LO1
How does target costing differ from traditional costing? How does a target cost relate to price?LO1

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