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cost accounting

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

Pronto Pizza Company makes frozen pizzas that are sold through grocery stores. Pronto developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas.Pronto put a batch of 2,000 pounds of direct materials (enough for 800 frozen sausage pizzas) into
Pronto Pizza Company makes frozen pizzas that are sold through grocery stores. Pronto.uses two types of direct labor: machine operators and packers. Pronto developed the following standard mix for spreading on premade pizza shells to produce 16 giant-size sausage pizzas.Pronto’s recent batch
Refer to Cornerstone Exercise 9-9.Required:1. Calculate the yield ratio based on the standard amounts given.2. Calculate the standard cost per pound of the yield.3. Calculate the standard yield for actual input of 2,000 pounds of direct materials.4. Calculate the yield variance.5. What if the total
Quincy Farms is a producer of items made from farm products that are distributed to supermarkets. For many years, Quincy’s products have had strong regional sales on the basis of brand recognition. However, other companies have been marketing similar products in the area, and price competition
During the year, Atwood Company produced 280,000 lathe components for industrial metal working machinery. Atwood’s direct materials and direct labor standards per unit are as follows:Required:1. Compute the standard pounds of direct materials allowed for the production of 280,000 units.2. Compute
Timmons Company produces a dark chocolate candy bar. Recently, the company adopted the following standards for one 8-ounce bar of the candy:During the first week of operation, the company experienced the following actual results:a. Bars produced: 78,000.b. Ounces of direct materials purchased:
Fellers, Inc., uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 160,000 units.requiring 640,000 direct labor hours. (Practical capacity is 700,000 hours.) Annual budgeted overhead costs total $723,200,
Refer to the data in Exercise 9-15.Required:1. Compute overhead variances using a two-variance analysis.2. Compute overhead variances using a three-variance analysis.3. Illustrate how the two- and three-variance analyses are related to the four-variance analysis.LO1
Chypre, Inc., produces a cologne mist using a solvent mix (water and pure alcohol) and aromatic compounds (the scent base) which it sells to other companies for bottling and sale to consumers. Chypre developed the following standard cost sheet:Required:1. Calculate the yield ratio.2. Calculate the
Refer to Exercise 9-17. Chypre, Inc., purchased the amount used of each direct material input on May 2 for the following actual prices: solvent mix, $5.20 per gallon and aromatic compound, $8,010 per gallon.Required:1. Compute and journalize the direct materials price variances.2. Compute and
Delano Company uses two types of direct labor for the manufacturing of its products:fabricating and assembly. Delano has developed the following standard mix for direct labor, where output is measured in number of circuit boards.Required:1. Calculate the yield ratio.2. Calculate the standard cost
Jameson Company produces paper towels. The company has established the following direct materials and direct labor standards for one case of paper towels:During the first quarter of the year, Jameson produced 45,000 cases of paper towels.The company purchased and used 135,700 pounds of paper pulp
Vaquero Corporation produces cowboy boots. The company uses a standard costing system and has set the following standards for direct materials and direct labor (for one pair of boots):LO1 Leather (6 strips @ $10) Direct labor (2 hrs. @ $12) Total prime cost $60 24 $84
Plimpton Company produces countertop ovens. Plimpton uses a standard costing system.The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that two direct labor hours should be used for every oven produced. The normal
The Bartlesville plant of Harmon Company produces an industrial chemical. At the beginning of the year, the Bartlesville plant had the following standard cost sheet:The Bartlesville plant computes its overhead rates using practical volume, which is 72,000 units. The actual results for the year are
Business Specialty, Inc., manufactures two staplers: small and regular. The standard quantities of direct labor and direct materials per unit for the year are as follows:Required:1. Prepare a standard cost sheet showing the unit cost for each product.2. Compute the direct materials price and usage
Nosemer Company produces engine parts for large motors. The company uses a standard cost system for production costing and control. The standard cost sheet for one of its higher volume products (a valve), is as follows:During the year, Nosemer experienced the following activity relative to the
Misterio Company uses a standard costing system. During the past quarter, the following variances were computed:Misterio applies variable overhead using a standard rate of $2 per direct labor hour allowed. Two direct labor hours are allowed per unit produced. (Only one type of product is
Refer to the data in Problem 9-29. Vet-Pro, Inc., also uses two different types of direct labor in producing the anti-anxiety mixture: mixing and drum-filling labor (the completed product is placed into 50-gallon drums). For each batch of 20,000 gallons of direct materials input, the following
Ingles Company manufactures external hard drives. At the beginning of the period, the following plans for production and costs were revealed:Required:1. Prepare a performance report comparing expected costs to actual costs.2. Determine the following:Direct materials usage variance.Direct labor rate
Leather Works is a family-owned maker of leather travel bags and briefcases located in the northeastern part of the United States. Foreign competition has forced its owner, Heather Gray, to explore new ways to meet the competition. One of her cousins, Wallace Hayes, who recently graduated from
Aspen Medical Laboratory performs comprehensive blood tests for physicians and clinics throughout the Southwest. Aspen uses a standard process-costing system for its comprehensive blood work. Skilled technicians perform the blood tests. Because Aspen uses a standard costing system, equivalent units
What is decentralization? Discuss the differences between centralized and decentralized decision making.LO1
Explain why firms choose to decentralize.LO1
Explain how access to local information can improve decision making.4, What are margin and turnover? Explain how these concepts can improve the evaluation of an investment center.LO1
What are the three benefits of ROI? Explain how each can lead to improved profitability.LO1
What are two disadvantages of ROI? Explain how each can lead to decreased profitability.LO1
What is residual income? Explain how residual income overcomes one of ROI’s disadvantages.LO1
What is EVA? How does it differ from ROI and residual income?LO1
What is a stock option? How can it encourage goal congruence?LO1
What is a transfer price?LO1
What is the transfer pricing problem?LO1
If an outside, perfectly competitive market exists for the intermediate product, what should the transfer price be? Why?LO1
Identify three cost-based transfer prices. What are the disadvantages of cost-based transfer prices? When might it be appropriate to use cost-based transfer prices?LO1
What is the purpose of Internal Revenue Code Section 482? What four methods of transfer pricing are acceptable under this section?LO1
The expected costs for the Maintenance Department of Greenwich Manufacturing, Inc., for the coming year include:Required:1. Calculate a single charging rate for the Maintenance Department.2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual
The expected costs for the Maintenance Department of Greenwich Manufacturing, Inc., for the coming year include:The Assembly and Packaging departments expect to use maintenance hours relatively evenly throughout the year. The Fabricating Department typically uses more maintenance hours in the month
Polonchek Company has two support departments, Human Resources and General Factory, and two producing departments, Fabricating and Assembly.Required:1. Calculate the allocation ratios for the four departments using the direct method.2. Using the direct method, allocate the costs of the Human
Refer to Cornerstone Exercise 7-3. Now assume that Polonchek Company uses the sequential method to allocate support department costs. The support departments are ranked in order of highest cost to lowest cost.Required:1. Calculate the allocation ratios (rounded to four significant digits) for the
Refer to Cornerstone Exercise 7-3. Now assume that Polonchek Company uses the reciprocal method to allocate support department costs.Required:1. Calculate the allocation ratios (rounded to four significant digits) for the four departments using the reciprocal method.2. Develop a simultaneous
Refer to Cornerstone Exercise 7-3 and solve for the allocated costs to Fabricating and Assembly using the direct method of support department cost allocation. The Fabricating Department overhead rate is based on normal activity of 82,000 machine hours. The Assembly Department overhead rate is based
Appletime, Inc., purchases apples from local orchards and sorts them into four categories.Grade A are large blemish-free apples that can be sold to gourmet fruit sellers. Grade B apples are smaller and may be slightly out of proportion. These are packed in boxes and sold to grocery stores. Apples
Refer to Cornerstone Exercise 7-7. Assume that Appletime, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:Required:1. Allocate the joint cost to the four grades of apples using the weighted average method. (Carry
Refer to Cornerstone Exercise 7-7. Assume that Appletime, Inc., uses the sales-valueat-split-off method of joint cost allocation and has provided the following information about the four grades of apples:Required:1. Allocate the joint cost to the four grades of apples using the
A company manufactures three products, L-Ten, Triol, and Pioze, from a joint process.Each production run costs $12,900. None of the products can be sold at split-off, but must be processed further. Information on one batch of the three products is as follows:Required:1. Allocate the joint cost to
Refer to Cornerstone Exercise 7-10.Required:1. Calculate the total revenue, total costs, and total gross profit the company will earn on the sale of L-Ten, Triol, and Pioze.2. Allocate the joint cost to L-Ten, Triol, and Pioze using the constant gross margin percentage method.3. What if it cost $2
Classify each of the following departments in a factory that produces créme-filled snack cakes as a producing department or a support department.LO1 a. Janitorial b. Baking c. Inspection d. Mixing j. Filling (injects crme mixture into baked snack cakes) Personnel k. 1. Cafeteria m. General factory
Classify each of the following departments in a large metropolitan law firm as a producing department or a support department.LO1 a. Copying f. Custodians b. WESTLAW computer research g. Word processing c. Tax planning h. Corporate law d. Environmental law i. Small business law C. Oil and gas law
Identify some possible causal factors for the following support departments:a. Cafeteriab. Custodial services¢. Laundryd. Receiving, shipping, and storesc. Maintenancef. Personnel g. Accounting h. Power i. Building and groundsLO1
Hallie and Ashley are planning a trip to Padre Island, Texas, during spring break. Members of the varsity volleyball team, they are looking forward to five days of beach volleyball and parasailing. They will drive Hallie’s car and estimate that they will pay the following costs during the
Jeff McMillan owns a small neighborhood shopping mall. Of the 10 store spaces in the building, seven are rented by boutique owners and three are vacant. Jeff has decided that offering more services to stores in the mall would enable him to increase occupancy. He has decided to use one of the vacant
Ormond Company manufactures both toothpaste and tooth whitener, with each product manufactured in separate departments. Three support departments support the production departments: Power, General Factory, and Purchasing. Budgeted data on the five departments are as follows:Required:1. Allocate the
Refer to the data in Exercise 7-20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost.Required:1. Allocate the overhead costs to the producing departments using the sequential
Eilers Company has two producing departments and two support departments. The following budgeted data pertain to these four departments:Required:1. Allocate the overhead costs of the support departments to the producing departments using the reciprocal method. (Round allocation ratios to four
Refer to the data in Exercise 7-22. The company has decided to simplify its method of allocating support service costs by switching to the direct method.Required:1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four
Refer to the data in Exercise 7-22. The support departments are ranked in order of highest cost to lowest cost.Required:1. Allocate the costs of the support departments using the sequential method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.)2.
Alomar Company manufactures four products from a joint production process: colgene, delgene, prosone, and freol. The joint costs for one batch are as follows:At the split-off point, a batch yields 1,200 colgene, 1,800 delgene, 3,000 prosone, and 3,600 freol. All products are sold at the split-off
Refer to Exercise 7-25 and allocate the joint costs using the sales-value-at-split-off method.LO1
AirBorne is a small airline operating out of Boise, Idaho. Its three flights travel to Salt Lake City, Reno, and Portland. The owner of the airline wants to assess the full cost of operating each flight. As part of this assessment, the costs of two support departments(maintenance and baggage) must
Sonimad Sawmill, Inc., (SSI) purchases logs from independent timber contractors and processes them into the following three types of lumber products:1. Studs for residential construction (e.g., walls and ceilings)2. Decorative pieces (e.g., fireplace mantels and beams for cathedral ceilings)3.
Define budget. How are budgets used in planning?LO1
Define control. How are budgets used to control?LO1
Discuss some of the reasons for budgeting.LO1
What is the master budget? An operating budget? A financial budget?LO1
Explain the role of a sales forecast in budgeting. What is the difference between a sales forecast and a sales budget?LO1
All budgets depend on the sales budget. Is this true? Explain.LO1
What is an accounts receivable aging schedule? Why is it important?LO1
What impact does the learning curve have on budgeting? What specific budgets might be affected? (Hint: Refer to Chapter 3 for material on the learning curve.)LO1
While many small firms do not put together a complete master budget, nearly ev- ery firm creates a cash budget. Why do you think that is so?LO1
Discuss the shortcomings of the traditional master budget. In what situations would the master budget perform well?LO1
Define static budget. Give an example that shows how reliance on a static budget could mislead management.LO1
What are the two meanings of a flexible budget? How is the first type of flexible budget used? The second type?LO1
What are the steps involved in building an activity-based budget? How do these steps differentiate the ABB from the master budget?LO1
StrikeSmart Company manufactures and sells soccer balls for teams of children in elementary and high school. StrikeSmart’s best-selling lines are the training ball line—durable soccer balls for training and practice; and the match ball line—high performance soccer balls used in games. In the
Refer to Cornerstone Exercise 8-1, through Requirement 1. StrikeSmart requires ending inventory of product to equal 20 percent of the next month’s unit sales. Beginning inventory in January was 10,000 practice soccer balls and 1,500 match soccer balls.Required:1. Construct a production budget for
Refer to Cornerstone Exercise 8-2 for the production budgets for practice balls and match balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 3 ounces of glue. StrikeSmart’s policy is that 10 percent of the following
Sussman Company cleans and applies powder coat paint to metal items on a job-order basis. Sussmann has budgeted the following amounts for various overhead categories in the coming year.In the coming year, Sussman expects to powder coat 160,000 units. Each unit takes 1.5 direct labor hours. Sussman
Play-Disc makes Frisbee-type plastic discs. Each 12” diameter plastic disc has the following manufacturing costs:For the coming year, Play-Disc expects to make 300,000 plastic discs, and to sell 285,000 of them. Budgeted beginning inventory in units is 16,000 with unit cost of $4.75. (There are
Refer to Cornerstone Exercise 8-6.Required:1. Calculate the total budgeted cost of units produced for Play-Disc for the coming year. Show the cost of direct materials, direct labor, and overhead.2. Prepare a cost of goods sold budget for Play- Disc for the year.3. What if the beginning inventory of
Timothy Donaghy has developed a unique formula for growing hair. His proprietary lotion, used regularly for 45 days, will grow hair in bald spots (with varying degrees of success). Timothy calls his lotion Hair-Again and is selling it via the telephone and Internet.His major form of marketing is
Green Earth Landscaping Company provides monthly and weekly landscaping and maintenance services to residential customers in the tri-city area. Green Earth has no variable administrative expense. Fixed administrative expenses for June, July, and August include:Required:1. Construct an
Emerson Company manufactures and sells industrial products. For the next year, 2011, Emerson has budgeted the follow sales:In Emerson’s experience, 10 percent of sales are paid in cash. Of the sales on account, 75 percent are collected in the quarter of sale; 15 percent are collected in the
Jilly Company imports gift items from overseas and sells them to gift shops and department stores throughout the United States. Jilly Company provided the following information:a. The October 31 balance in the cash account is $53,817.b. All sales are on account. Sales in September were $900,000 and
Melton Company has the following budgeted variable costs per unit produced:Budgeted fixed overhead costs per month include supervision of $110,000, depreciation of $135,000, and other overhead of $245,000.Required:1. Prepare a flexible budget for all costs of production for the following levels of
Refer to Cornerstone Exercise 8-13. In March, Melton Company produced 216,500 units and had the following actual costs:Required:1. Prepare a performance report for Melton Company comparing actual costs with the flexible budget for actual units produced.2. What ifMelton Company’s actual direct
Shippen Company produces consumer products. The sales budget for four months of the year is presented below.Required:Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.LO1 July August
GPB Company produces stuffed toy animals; one of these is “Hootie the Owl.” Each hootie takes 0.25 yard of fabric (white with irregular black splotches) and eight ounces of polyfiberfill. Material costs $3.50 per yard and polyfiberfill is $0.05 per ounce. GPB has budgeted production of hooties
Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are small and light. They are attached to armbands and use flash memory. Models A-4 and A-5 are somewhat larger and use a built-in hard drive; they can be put into fanny packs for use while working out. It is now early 2011, and
Rosita Flores owns Rosita’s Mexican Restaurant in Tempe, Arizona. Rosita’s is an affordable restaurant near campus and several hotels. Rosita accepts cash and checks. Checks are deposited immediately. The bank charges $0.50 per check; the amount per check averages $75. “Bad” checks that
Refer to Exercise 8-20. Rosita thinks that it may be time to refuse to accept checks and to start accepting credit cards. She is negotiating with VISA/MasterCard and American Express, and she would start the new policy on April 1. Rosita estimates that with the drop in sales from the “no
Bruce “Bruiser” Hawkins, former all-state high school wrestler, owns a retail store that sells new and used sporting equipment. Bruiser has requested a cash budget for October.After examining the records of the company, you find the following:Required:1. Prepare a cash budget for October.
Historically, Maplethorpe Company has had no significant bad debt experience with its customers. Cash sales have accounted for 10 percent of total sales, and payments for credit sales have been received as follows:45 percent of credit sales in the month of the sale.35 percent of credit sales in the
Del Spencer is the owner and founder of Del Spencer’s Men’s Clothing Store. Del Spencer’s has its own house charge accounts and has found from past experience that 10 percent of its sales are for cash. The remaining 90 percent are on credit. An aging schedule for accounts receivable reveals
Refer to Exercise 8-24. Del Spencer’s purchases clothing evenly throughout the month.All purchases are on account. On the first of every month, Jana Spencer, Del’s wife, pays for all of the previous month’s purchases. Terms are 2/10, n/30 (i.e., a 2 percent discount can be taken if the bill
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased
In an attempt to improve budgeting, the controller for Hilbert Products has developed a flexible budget for overhead costs. Hilbert Products makes two types of paper-based cloths: counter wipes and floor wipes. Hilbert expects to produce 500,000 rolls of each product during the coming year. Counter
Refer to Exercise 8-27. At the end of the year, Hilbert Products actually produced 525,000 rolls of counter wipes and 497,000 of floor wipes. The actual overhead costs incurred were:Required:Prepare a performance report for the period.LO1 Maintenance Power Indirect labor Rent $ 29,050 19,900
Olympus, Inc., manufactures three models of mattresses: the Sleepeze, the Plushette, and the Ultima. Forecast sales for next year are 15,000 for the Sleepeze, 12,000 for the Plushette, and 5,000 for the Ultima. Gene Dixon, vice president of sales, has provided the following information:a. Salaries
Leitner Manufacturing, Inc., produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the United States. Projected sales in units for the coming four months are as follows:The following data pertain to
Bullen & Company makes and sells high-quality glare filters for microcomputer monitors.John Crave, controller, is responsible for preparing Bullen’s master budget and has assembled the following data for 2007.The direct labor rate includes wages, all employee-related benefits, and the

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