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cost accounting

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

For the following activities and their associated resources, identify the following: (1) a cost driver, (2) flexible resources, and (3) committed resources. Also, label each resource as one of the following with respect to the cost driver: (a) variable and (b) fixed.LO1 Activity Maintenance
EnviroLabs performs tests on water samples supplied by outside companies to ensure that their waste water meets environmental standards. Customers deliver water samples to the lab and receive the lab reports via the Internet. The EnviroLabs facility is built and staffed to handle the processing of
Vargas, Inc., produces industrial machinery. Vargas has a Machining Department and a group of direct laborers called machinists. Each machinist is paid $25,000 and can machine up to 500 units per year. Vargas also hires supervisors to develop machine specification plans and to oversee production
Penny Davis runs the Shear Beauty Salon near a college campus. Several months ago, Penny used some unused space at the back of the salon and bought two used tanning beds. She hired a receptionist and kept the salon open for extended hours each week so that tanning clients would be able to use the
Shirrell Blackthorn is the accountant for several pizza restaurants based in a tri-city area.The president of the chain wanted some help with budgeting and cost control so Shirrell decided to analyze the accounts for the past year. She divided the accounts into four different categories, depending
Deepa Dalal opened a free-standing radiology clinic. She had anticipated that the costs for the radiological tests would be primarily fixed, but she found that costs increased with the number of tests performed. Costs for this service over the past nine months are as follows:Required:1. Prepare a
Refer to the data in Exercise 3-17.Required:1. Compute the cost formula for radiology services using the method of least squares.2. Using the formula computed in Requirement 1, what is the predicted cost of radiology services for October for 3,500 appointments?3. What does the coefficient of
The controller of the South Charleston plant of Ravinia, Inc., monitored activities associated with materials handling costs. The high and low levels of resource usage occurred in September and March for three different resources associated with materials handling.The number of moves is the driver.
A company used the method of least squares to develop a cost equation to predict the cost of purchasing. There were 104 data points for the regression, and the following computer output was generated:The activity driver used was the number of purchase orders.Required:1. What is the cost formula?2.
Sweet Dreams Bakery was started five years ago by Della Fontera who was known for her breads, sweet rolls, and personalized cakes. Della had kept her accounting system simple, believing that she had a good intuitive handle on costs. She had been using the following formula to describe her monthly
Wyle and Partners, a regional accounting firm, performs yearly audits on a number of different for-profit and not-for-profit entities. Two years ago, Callie Egbert, Wyle’s partner in charge of operations, became concerned about the amount of audit time required by not-for-profit entities. As a
Bordner Company manufactures HVAC (heating, ventilation, and air conditioning) systems for commercial buildings. For each new design, Bordner faces a 90 percent learning rate. On average, the first unit of a new design takes 600 hours. Direct labor is paid$25 per hour.Required:1. Set up a table
Sharon Glessing, controller for Janson Company, has noticed that the company faces a 75 percent learning rate for its specialty design line. In planning the cost of the latest design, Sharon assumed that the first set of units would take 1,000 direct labor hours.She decided to use this information
The graphs below represent cost behavior patterns that might occur in a company’s cost structure. The vertical axis represents total cost, and the horizontal axis represents activity output.Required:For each of the following situations, choose the graph from the group a-I that best illustrates
DeMarco Company is developing a cost formula for its packing activity. Discussion with the workers in the Packing Department has revealed that packing costs are associated with the number of customer orders, the size of the orders, and the relative fragility of the items (more fragile items must be
Kimball Company has developed the following cost formulas:The company has a policy of producing on demand and keeps very little, if any, finished goods inventory (thus, units produced equals units sold). Each unit uses one direct labor hour for production.The president of Kimball Company has
Weber Valley Regional Hospital has collected data on all of its activities for the past 16 months. Data for cardiac nursing care follow:Required:1. Using the high-low method, calculate the variable rate per hour and the fixed cost for the nursing care activity.2. Run aregression on the data, using
The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed; thus, they must be broken
Friendly Bank is attempting to determine the cost behavior of its small business lending operations. One of the major activities is the application activity. Two possible activity drivers have been mentioned: application hours (number of hours to complete the application)and number of applications.
PriceCut, a discount store, has gathered data on its overhead activities and associated costs for the past 10 months. Adrienne Sanjay, a member of the controller’s department, believes that overhead activities and costs should be classified into groups that have the same driver. She has decided
Randy Harris, controller, has been given the charge to implement an advanced cost management system. As part of this process, he needs to identify activity drivers for the activities of the firm. During the past four months, Randy has spent considerable effort identifying activities, their
St. Teresa’s Medical Center (STMC) offers a number of specialized medical services, including neuroscience, cardiology, and oncology. STMC’s strong reputation for quality medical care allowed it to branch out into other services. It is now ready to expand its orthopedic services and has just
The Lockit Company manufactures door knobs for residential homes and apartments.Lockit is considering the use of simple (single-driver) and multiple regression analyses to forecast annual sales because previous forecasts have been inaccurate. The new sales forecast will be used to initiate the
Rolertyme Company manufactures roller skates. With the exception of the rollers, all parts of the skates are produced internally. Neeta Booth, president of Rolertyme, has decided to make the rollers instead of buying them from external suppliers. The company needs 100,000 sets per year (currently
Thames Assurance Company sells a variety of life and health insurance products.Recently, Thames developed a long-term care policy for sale to‘members of university and college alumni associations. Thames estimated that the sale and service of this type of policy would be subject to a 90 percent
Harriman Industries manufactures engines for the aerospace industry. It has completed manufacturing the first unit of the new ZX-9 engine design. Management believes that the 1,000 labor hours required to complete this unit are reasonable and is prepared to go forward with the manufacture of
Check the Boeing website at http://www.boeing.com, and go to commercial aircraft orders. (Find ‘‘Commercial Airplanes,” “About Commercial Airplanes,” then“Orders and Deliveries.””) Boeing gives the number of orders per type of plane (e.g., 767). For which type of plane would you
What is a predetermined overhead rate? Explain why it is used.LO1
Describe what is meant by under- and overapplied overhead.LO1
Explain how a plantwide overhead rate, using a unit-based driver, can produce dis- torted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.LO1
What are non-unit-related overhead activities? Non-unit-based cost drivers? Give some examples.LO1
What is an overhead consumption ratio?LO1
Overhead costs are the source of product cost distortions. Do you agree or dis- agree? Explain.LO1
What is activity-based product costing?LO1
What are the six steps that define the design of an activity-based costing system?LO1
Explain how the cost of resources is assigned to activities. What is meant by the phrase "unbundling the general ledger accounts"?LO1
What is a bill of activities?LO1
Identify and define two types of activity drivers.LO1
What are unit-level activities? Batch-level activities? Product-level activities? Facility-level activities?LO1
How does TDABC simplify ABC?LO1
Explain why it is easy to update a TDABC model.LO1
Describe two ways to reduce a complex ABC system. Of the two ways, which has the most merit?LO1
Manteca, Inc., produces two types of speakers: deluxe and regular. Manteca uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year:Required:1. Calculate the predetermined plantwide overhead rate and
Milsap Company has the following data for the past year:Milsap uses the overhead control account to accumulate both actual and applied overhead.Required:1. Calculate the overhead variance for the year and close it to Cost of Goods Sold.2. Assume the variance calculated is material. After prorating,
Fleming, Inc., provided the following data for its two producing departments:Machine hours are used to assign the overhead of the Polishing Department, and direct labor hours are used to assign the overhead of the Painting Department. There are 60,000 units of Frame A produced and sold and 100,000
Larsen, Inc., produces two types of electronic parts and has provided the following data:There are four activities: machining, setting up, testing, and purchasing.Required:1. Calculate the activity consumption ratios for each product.2. Calculate the consumption ratios for plantwide (direct labor
Cornell Company produces two lawn mowers: basic and self-propelled. The company has four activities: machining, engineering, receiving, and packing. Information on these activities and their drivers is given below.Required:1. Calculate the four activity rates.2. Calculate the unit costs using
Golding Bank provided the following data about its resources and activities for its checking account process: Required:1. Prepare a work distribution matrix for the five primary activities.2. Calculate the cost of each activity.3. What if the cost of the supervising activity is assigned to the
Golding Bank provided the following data about its resources and activities for its check- CORNERSTONE 4-7 ing account process:Required:1. Calculate the capacity cost rate for the checking account process.2. Calculate the activity rates for the four activities. If the total number of statements
Patterson Company produces wafers for integrated circuits. Data for the most recent year are provided:Required:1. Using the five most expensive activities, calculate the overhead cost assigned to each product. Assume that the costs of the other activities are assigned in proportion to the cost of
Selected activities and other information are provided for Patterson Company for its most recent year of operations.Required:1. Form reduced system cost pools for activities 7 and 8.2. Assign the costs of the reduced system cost pools to Wafer A and Wafer B.3. What if the two activities were 1 and
Glencoe, Inc., costs products using a normal costing system. The following data are available for last year:Overhead is applied on the basis of direct labor hours.Required:1. What was the predetermined overhead rate?2. What was the applied overhead for last year?3. Was overhead over- or
Jackson Company and Royce Company both use predetermined overhead rates to apply manufacturing overhead to production. Jackson’s is based on machine hours, and Royce’s is based on materials cost. Budgeted production and cost data for Jackson and Royce are as follows:At the end of the year,
Menotti Company uses a predetermined overhead rate to assign overhead to jobs.Because Menotti’s production is machine intensive, overhead is applied on the basis of machine hours. The expected overhead for the year was $3.8 million, and the practical level of activity is 250,000 machine
Narpet Company produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Ray Johnson, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignnients than can a plantwide rate.Narpet has the following data for its two
Larsen Company produces two types of leather purses: standard and handcrafted. Both purses use equipment for cutting and stitching. The equipment also has the capability of creating standard designs. The standard purses use only these standard designs. They are all of the same size to accommodate
Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year:Required:1. Determine the unit cost for each model using direct labor hours to apply overhead.2. Determine the unit cost for each model using the four activity drivers.3. Which method
Golding Bank is in the process of implementing an activity-based costing system. A copy ofan interview with the manager of Golding’s Credit Card Department follows.Required:Prepare an activity dictionary using five columns: activity name, activity description, activity type (primary or
Refer to the interview in Exercise 4-16 (especially to Questions 4 and 7). The general ledger reveals the following annual costs:All nonlabor resources, other than the ATM, are spread evenly among the eight credit department employees (in terms of assignment and usage). Credit department employees
Bob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the company’s Manufacturing Engineering Department. The department has the following activities: creating bills of materials(BOMs), studying manufacturing capabilities,
Calzado Company produces leather shoes in batches. The shoes are produced in one plant located on 20 acres. The plant operates two shifts, five days per week. Each time a batch is produced, just-in-time suppliers deliver materials to the plant. When the materials arrive, a worker checks the
Bob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the company’s Manufacturing Engineering Department. The department has the following activities: creating bills of materials(BOMs), studying manufacturing capabilities,
Silven Company has identified the following overhead activities, costs, and activity drivers for the coming year:Required:1. Determine the total overhead assigned to each product using the four activity drivers.2. Determine the total overhead assigned to each model using the two most expensive
Refer to Exercise 4-21.Required:Calculate the global consumption ratios for the two products.Using the activity consumption ratios for number of orders and number of setups, show that the same cost assignment can be achieved using these two drivers as that of the complete, four-driver ABC system.LO1
Maricopa Company produces two products and uses a predetermined overhead rate to apply overhead. Maricopa currently applies overhead using a plantwide rate based on direct labor hours. Consideration is being given to the use of departmental overhead rates where overhead would be applied on the
Fisico Company produces exercise bikes. One of its plants produces two versions: a standard model and a deluxe model. The deluxe model has a wider and sturdier base and a variety of electronic gadgets to help the exerciser monitor heartbeat, calories burned, distance traveled, etc. At the beginning
Glencoe First National Bank operated for years under the assumption that profitability can be increased by increasing dollar volumes. Historically, First National’s efforts were directed toward increasing total dollars of sales and total dollars of account balances. In recent years, however,
Cushing Medical Clinic operates a cardiology care unit and a maternity care unit.Ned Carson, the clinic’s administrator, is investigating the charges assigned to cardiology patients. Currently, all cardiology patients are charged the same rate per patient day for daily care services. Daily care
Autotech Manufacturing is engaged in the production of replacement parts for automobiles.One plant specializes in the production of two parts: Part #127 and Part#234. Part #127 produced the highest volume of activity, and for many years it was the only part produced by the plant. Five years ago,
Refer to the data given in Problem 4-30 and suppose that the expected activity costs are reported as follows (all other data remain the same):Required:1. Determine the percentage of total costs represented by the three most expensive activities.2. Allocate the costs of all other activities to the
The Bienestar Cardiology Clinic has two major activities: diagnostic and treatment. The two activities use four resources: nursing, medical technicians, cardiologists, and equipment.Detailed interviews have provided the following work distribution matrix:Required:1. Calculate the cost of each
Reducir, Inc., produces two different types of hydraulic cylinders. Reducir produces a major subassembly for the cylinders in the Cutting and Welding Department. Other parts and the subassembly are then assembled in the Assembly Department. The activities, expected costs, and drivers associated
Springs Company produces two type of calculators: scientific and business. Both products pass through two producing departments. The business calculator is by far the most popular. The following data have been gathered for these two products:Required:1. Compute the overhead cost per unit for each
ABC software is a critical component of an ABC system implementation. ABC software produces the results that will be used by decision makers. Thus, the capabilities of ABC software are extremely important. The choice of ABC software can have a dramatic effect on the success or failure of an
What is cost measurement? Cost accumulation? What is the difference between the two?LO1
Why is actual costing rarely used for product costing?LO1
Explain the differences between job-order costing and process costing.LO1
What are some differences between a manual job-order costing system and an auto- mated job-order costing system?LO1
What is the role of materials requisition forms in a job order costing system? Time tickets? Predetermined overhead rates?LO1
How do firms collect job-related information on driver usage in an activity-based costing system?LO1
Explain the role of activity drivers in assigning costs to products.LO1
Define the following terms: expected actual activity, normal activity, practical activ- ity, and theoretical activity.LO1
Why would some prefer normal activity to expected actual activity to compute a predetermined overhead rate?LO1
When using normal costing, how are jobs charged with overhead?LO1
Wilson Company has a predetermined overhead rate of $5 per direct labor hour." The job-order cost sheet for Job 145 shows 1,000 direct labor hours costing $10,000 and materials requisitions totaling $7,500. Job 145 had 500 units com- pleted and transferred to Finished Goods Inventory. What is the
Why are the accounting requirements for job-order costing more demanding than those for process costing?LO1
Explain the difference between normal cost of goods sold and adjusted cost of goods sold.LO1
Amber Company produces custom framing. For one job, the trainee assigned to cut the mat set the mat dimensions incorrectly into the computer. The mat was unusable and had to be discarded; another mat was cut to the correct dimensions. How is the cost of the spoiled mat handled?LO1
Amber Company produces custom framing. For one job, the dimensions of the picture were such that the computer-controlled mat cutting device could not be used. Amber warned the customer that this was a particularly difficult job, and her normal price would be increased to reflect its difficulty.
What is an accounting information system?LO1
What is the difference between a financial accounting information system and a cost management information system?LO1
What are the objectives of a cost management information system?LO1
Define and explain the two major subsystems of the cost management information system.LO1
What is a cost object? Give some examples.LO1
What is an activity? Give some examples of activities within a manufacturing firm.LO1
What is a direct cost? An indirect cost?LO1
What does traceability mean?LO1
What is allocation?LO1
Explain how driver tracing works.LO1
What is a tangible product?LO1

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