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cost accounting

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

Esperata Manufacturing has four activities: receiving materials, assembly, expediting products, and storing goods. Receiving and assembly are necessary activities; expediting and storing goods are unnecessary. The following data pertain to the four activities for the year ending 2010 (actual price
Refer to Cornerstone Exercise 12-1. Assume that at the beginning of 2011, Esperata trained the assembly workers in a new approach that had the objective of increasing the efficiency of the assembly process. Esperata also began moving toward a JIT purchasing and manufacturing system. When JIT is
Lansky, Inc., produces custom-made machine parts. A setup activity is required for the batches of parts that it produces. Activity output is measured using setup hours. The value-added standard (SQ) for this activity is zero. On July 1, at the beginning of the fiscal year, five setup hours were
Foy Company has a welding activity and wants to develop a flexible budget formula for the activity. The following resources are used by the activity:* Four welding units, with a lease cost of $12,000 per year per unit* Six welding employees each paid a salary of $50,000 per year (A total of 9,000
Fresco, Inc., produces elite (priced at $300) and supreme juicers (priced at $180).Recently, Fresco has been losing market share with its supreme juicers because of competitors offering juicers with the same quality and features but at a lower price. A careful market study revealed that if Fresco
Honley Company has 20 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity:Required:Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity. For
Refer to Exercise 12-8.Required:Suppose that clerical error—either Honley’s or the supplier’s—is the common root cause of the non-value-added activities. For each non-value-added activity, ask a series of“why” questions that identify clerical error as the activity’s root cause.\LO1
Gorman Company has developed value-added standards for four activities: purchasing parts, receiving parts, moving parts, and setting up equipment. The activities, the activity drivers, the standard and actual quantities, and the price standards for 2010 are as follows:LO1 Activities Activity Driver
Refer to Exercise 12-14. Suppose that for 2011, Gorman Company has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement.Additionally, Gorman implemented a new setup procedure and provided training for its purchasing agents. As a consequence,
For each of the following situations, two scenarios are described, labeled A and B.Choose which scenario is descriptive ofa setting corresponding to activity-based responsibility accounting and which is descriptive of financial-based responsibility accounting.Provide a brief commentary on the
Cycleta, Inc., supplies small motors for a large appliance manufacturing company. The appliance company has recently requested that Cycleta decrease its delivery time. Cycleta made a commitment to reduce the lead time for delivery from seven days to one day. To help achieve this goal, engineering
Douglas Davis, controller for Marston, Inc., prepared the following budget for manufacturing costs at two different levels of activity for 2011:Required:1. Prepare a performance report for Marston’s manufacturing costs in 2011.2. Assume that one of the products produced by Marston is budgeted to
The objective of benchmarking is to improve performance by identifying, understanding, and adopting outstanding best practices from others. If this process is carried out inside the organization, then it is called internal benchmarking. It is not uncommon for one facility within an organization to
Describe a strategic-based responsibility accounting system. How does it differ from activity-based responsibility accounting?LO1
What is a Balanced Scorecard?LO1
What is meant by balanced measures?LO1
What is a lag measure? A lead measure?LO1
What is the difference between an objective measure and a subjective measure?LO1
What are stretch targets? What is their strategic purpose?LO1
How does the reward system for a strategic-based system differ from the traditional approach?LO1
What are the three strategic themes of the financial perspective?LO1
Identify the five core objectives of the customer perspective.LO1
Explain what is meant by the long-wave and the short-wave of value creation.LO1
Define the three processes of the process value chain.LO1
Identify three objectives of the learning and growth perspective.LO1
What is a testable strategy?LO1
What is meant by double-loop feedback?LO1
Identify and explain three methods for achieving strategic alignment.LO1
Chester, Inc., provided the following information for two of its divisions for last year:Required:1. For the Paper Products Division, calculate:a. Average operating assetsb. Marginc. Turnoverd. Return on investment (ROT)2. For the Chemicals Division, calculate:a. Average operating assetsb. Marginc.
Refer to Cornerstone Exercise 10-1. Chester, Inc., requires a 10 percent minimum rate of return.Required:1. Calculate residual income for the Paper Products Division.2. Calculate residual income for the Chemicals Division.3. Whatifthe minimum required rate of return was 8 percent? How would that
Dalton Industries, Inc., had after-tax operating income last year of $1,996,500. Three sources of financing were used by the company: $4 million of mortgage bonds paying 8 percent interest, $5 million of unsecured bonds paying 10 percent interest, and $11 million in common stock, which was
Eastmed, Inc., has a number of divisions, including Aberdeen Division, producer of surgical blades, and Fairfield Division, a manufacturer of medical instruments.Aberdeen Division produces a 2.6 cm steel blade that can be used by Fairfield Division in the production of scalpels. The market price of
Refer to Cornerstone Exercise 10-4.Required:1. If Eastmed, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Aberdeen and Fairfield divisions would choose to transfer at that price?2. If Eastmed, Inc., has a
Dalloway, Inc., has a number of divisions around the world. Division US (in the United States) purchases a component from Division N (in the Netherlands). The component can be purchased externally for $18.50 each. The freight and insurance on the item amount to $1.90; however, commissions of $0.95
Selfridge, Inc., presented two years of data for its Clothing Division and its Camping Division.Required:1. Compute the ROI and the margin and turnover ratios for each year for the Clothing Division. (Round your answers to four significant digits.)2. Compute the ROJ and the margin and turnover
Refer to Exercise 10-7 for data. At the end of Year 2, the manager of the Camping Division is concerned about the division’s performance. As a result, he is considering the opportunity to invest in two independent projects. The first is called the “Ever-Tent”; it is a small two-person tent
Refer to the data given in Exercise 10-8.Required:1. Compute the residual income for each of the opportunities. (Round to the nearest dollar.)2. Compute the divisional residual income (rounded to the nearest dollar) for each of the following four alternatives:a. The Ever-Tent is added.b. The
Mortimer Company manufactures elderberry wine. Last year, Mortimer earned operating income of $206,000 after income taxes. Capital employed equaled $2 million. Mortimer is 60 percent equity and 40 percent 10-year bonds paying 5 percent interest.Mortimer’s marginal tax rate is 40 percent. The
Venpool, Inc., manufactures and sells cooktops and ovens through three divisions:Home, Restaurant, and Specialty. Each division is evaluated as a profit center. Data for each division for last year are as follows (numbers in thousands):The income tax rate for Venpool, Inc., is 30 percent. Venpool,
Mouton & Perrier, Inc., has a number of divisions that produce liquors, bottled water, and glassware. The Glassware Division manufactures a variety of bottles which can be sold externally (to soft-drink and juice bottlers) or internally to Mouton & Perrier’s Bottled Water Division. Sales
Comfort Furniture Manufacturing, Inc., has a division in the United States that produces and sells furniture for discount furniture stores. One type of sofa is made in the International Division in China. The sofas are sold externally in the United States for$250 each. It costs $7.50 per sofa for
Desant, Inc., has a division in Indonesia that makes dyestuff in a variety of colors used to dye denim for jeans, and another division in the United States that manufactures denim clothing. The Dyestuff Division incurs manufacturing costs of $3.76 for one pound of powdered dye.The Clothing Division
Rayland, Inc., has a division in Canada that makes paint. Rayland has another U.S. division, the Retail Division, that operates a chain of home improvement stores. The Retail Division would like to buy the unique, long-lasting paint from the Canadian division, since this type of paint is not
A multinational corporation has a number of divisions, two of which are the North American Division and the South American Division. Data on the two divisions are as follows:Round all rates of return to four significant digits.Required:1. Compute residual income for each division. By comparing
The following selected data pertain to the Argent Division for last year:Required:1. How much is the residual income?2. How much is the return on investment? (Rounded to four significant digits.)LO1 Sales $1,000,000 Variable costs $624,000 Traceable fixed costs $100,000 Average invested capital
Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically in 2010 by acquiring one of its suppliers of alloy steel plates, Keimer Steel Company. To manage the two separate businesses, the operations of Keimer are reported separately as an investment
Carnover, Inc., manufactures a broad line of industrial and consumer products. One of its plants is located in Madrid, Spain, and another in Singapore. The Madrid plant is operating at 85 percent capacity. Its main product, electric motors, has experienced softness in the market, which has led to
Jump Start Company (JSC), a subsidiary of Mason Industries, manufactures go-carts and other recreational vehicles. Family recreational centers that feature go-cart tracks along with miniature golf, batting cages, and arcade games have increased in popularity. As a result, JSC has been pressured by
What does it mean to obtain a competitive advantage? What role does the cost management system play in helping to achieve this goal?LO1
What is customer value? How is customer value related to a cost leadership strat- egy? To a differentiation strategy? To strategic positioning?LO1
Explain what internal and external linkages are.LO1
What are organizational and operational activities? Organizational cost drivers? Operational cost drivers?LO1
What is the difference between a structural cost driver and an executional cost driver? Provide examples of each.LO1
What is value-chain analysis? What role does it play in strategic cost analysis?LO1
What are the three viewpoints of product life cycle? How do they differ?LO1
What are the four stages of the marketing life cycle?LO1
What are life-cycle costs? How do these costs relate to the production life cycle?LO1
What are the four stages of the consumption life cycle? What are post-purchase costs? Explain why a producer may want to know post-purchase costs.LO1
"Life-cycle cost reduction is best achieved during the development stage of the production life cycle." Do you agree or disagree? Explain.LO1
What is target costing? What role does it have in life-cycle cost management?LO1
Explain why JIT with dedicated cellular manufacturing increases product costing accuracy.LO1
Explain how backflush costing works.LO1
Thomas Inc., is currently producing a motorcycle that uses five specialized parts. Engineering has proposed replacing these specialized parts with commodity parts, which will cost less and can be purchased in larger order quantities. Current activity capacity and demand (with specialized parts
Vidrio Company is a car window repair and replacement company operating in the aftersales market. Vidrio’s purchasing manager uses two suppliers (Smith Glass and Wolf Glass) for the source of its passenger car windows. Data relating to side windows (Side)and windshields (WS) are given
Tranax Company sells machine parts to industrial equipment manufacturers by bidding cost plus 40 percent, where cost is defined as manufacturing cost plus order processing cost. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent
Kagle design engineers are in the process of developing a new “green” product, one that will significantly reduce impact on the environment and yet still provide the desired customer functionality. Currently, two designs are being considered. The manager of Kagle has told the engineers that the
Hepworth Company has implemented a JIT system and is considering the use of backflush costing. Hepworth had the following transactions for the current fiscal year:Purchased raw materials on account for $600,000.Placed all materials received into production.Incurred actual direct labor costs of
Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering hours h. Direct labor hours i. Scope j.
McConkie Company has decided to pursue a cost leadership strategy. This decision is prompted, in part, by increased competition from foreign firms. McConkie’s management is confident that costs can be reduced by more efficient management of the firm’s operational activities. Improving
Carbon Company sells electrical components to medical equipment manufacturers for an average price of $1.05 per part. There are two types of customers: those who place small, frequent orders and those who place larger, less frequent orders. Each time an order is placed and processed, a setup is
Assume that a company has recently switched to JIT manufacturing. Each manufacturing cell produces a single product or major subassembly. Cell workers have been trained to perform a variety of tasks. Additionally, many services have been decentralized. Costs are assigned to products using direct
Milman Company has installed a JIT purchasing and manufacturing system and is using backflush accounting for its cost flows. It currently uses a two-trigger approach with the purchase of materials as the first trigger point and the completion of goods as the second trigger point. During the month
Refer to Exercise 11-15.Required:Prepare the journal entries for the month of June using backflush costing, assuming that Milman uses the sale of goods as the second trigger point instead of the completion of goods.
Refer to Exercise 11-15.Required:1. Prepare the journal entries for the month of May using backflush costing, assuming that Milman uses the completion of goods as the only trigger point.2. Prepare the journal entries for the month of May using backflush costing, assuming that Milman uses the sale
Amado, Inc., manufactures riding lawn mowers. Amado uses JIT manufacturing and carries insignificant levels of inventory. Amado manufactures everything needed for the riding lawn mowers except for the engines. Several sizes of mowers are produced. The most popular line is the small mower line. The
Pawnee Works makes machine parts for manufacturers of industrial equipment. Over the years, Pawnee has been a steady and reliable supplier of quality parts to medium and small machine manufacturers. Michael Murray, owner of Pawnee Works, once again was disappointed in the year-end income statement.
Mott Company recently implemented a JIT manufacturing system. After one year of operation, Heidi Burrows, president of the company, wanted to compare product cost under the JIT system with product cost under the old system. Mott’s two products are weed eaters and lawn edgers. The unit prime costs
Gee Company has implemented a JIT flexible manufacturing system. Gary Polson, controller of the company, has decided to reduce the accounting requirements given the expectation of lower inventories. For one thing, he has decided to treat direct labor cost as a part of overhead and to discontinue
Reddy Heaters, Inc., produces insert heaters that can be used for various applications, ranging from coffeepots to submarines. Because of the wide variety of insert heaters produced, Reddy uses a job-order costing system. Product lines are differentiated by the size of the heater. In the early
Discuss the difference between budgets and standard costs.LO1
What is the quantity decision? The pricing decision?LO1
Why is historical experience often a poor basis for establishing standards?LO1
What are ideal standards? Currently attainable standards? Of the two, which is usu- ally adopted? Why?LO1
How does standard costing improve the control function?LO1
Explain why the direct materials price variance is often computed at the point of purchase rather than at the point of issuance.LO1
The direct materials usage variance is always the responsibility of the production supervisor. Do you agree or disagree? Why?LO1
The direct labor rate variance is never controllable. Do you agree or disagree? Why?LO1
Suggest some possible causes of an unfavorable direct labor efficiency variance.LO1
Explain why the variable overhead spending variance is not a pure price variance.LO1
What is the cause of an unfavorable volume variance? Does the volume variance convey any meaningful information to managers?LO1
What are control limits, and how are they set?LO1
Explain how the two-, three-, and four-variance overhead analyses are related.LO1
Explain what mix and yield variances are.LO1
Lester’s Oil and Lube Company is a service company that offers oil changes and lubrication for automobiles and light trucks. On average, Lester has found that a typical oil change takes 30 minutes and 6 quarts of oil are used. In June, Lester’s Oil and Lube had 780 oil changes.Required:1.
Refer to Cornerstone Exercise 9-1. Lester’s Oil and Lube Company provided the following information for the production of oil changes during the month of June:Actual number of oil changes performed: 780 Actual number of direct labor hours worked: 410 hours Actual rate paid per direct labor hour:
Sholar Company set a standard cost for one item at $230,000; allowable deviation is+$8,000. Actual costs for the past six months are as follows:Required:1. Calculate the variance from standard for each month. Which months should be investigated?2. What 7f the company uses a two-part rule for
Baxter Company has the following balances in its direct materials and direct labor variance accounts at year-end:Unadjusted Cost of Goods Sold equals $560,000, unadjusted Work in Process equals $175,000, and unadjusted Finished Goods equals $80,000.Required:1. Assume that the ending balances in the
Asher Company manufactures consumer products and provided the following information for the month of February:Required:1. Calculate the total variable overhead variance.2. What if actual production had been 120,600 units? How would that affect the total variable overhead variance?LO1 Units produced
Refer to Cornerstone Exercise 9-6.Required:1. Calculate the variable overhead spending variance using the formula approach. (If you compute the actual variable overhead rate, carry your computations out to five significant digits and round the variance to the nearest dollar.)2. Calculate the
Asher Company manufactures consumer products and provided the following information for the month of February:Required:1. Calculate the fixed overhead spending variance using the formula approach.2. Calculate the volume variance using the formula approach.3. Calculate the fixed overhead spending

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