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cost management strategic
Cost Management Strategies For Business Decisions 3rd Edition Michael W. Maher, Frank Selto Ronald W. Hilton - Solutions
3.11 Describe several ways in which job costing can be misused.
3.10 Does it matter how the overhead variance is disposed? Explain.
3.9 How can overhead be over- or underapplied?
3.8 How does job-order costing differ for service organizations and manufacturing organizations?
3.7 How are the events "complete a job," "sell a job." and "end the accounting period" different and how are inventory accounts affected by these events?
3.6 Explain how to measure the costs of a product using nor- mal costing, actual costing, and standard costing.
3.5 Distinguish between work-in-process, finished-goods, and cost of goods sold.
3.4 Describe the basic cost-flow model as an algebraic equation.
3.3 What is each component of the basic cost-flow model? Describe each component.
3.2 What are the characteristics of the following three product- costing methods: (a) job-order costing, (b) process costing. and (c) operation costing? Give an example of a product or service that would be accounted for by each method.
3.1 What is a product-costing system and what does it do?
24. Cotierre imports designer clothing manufactured by subcontractors in Mexico. Clothing is a seasonal prod- uct. The goods must be ready for sale prior to the start of the season. Any goods left over at the end of the season usually must be sold at steep discounts. The company prepares a dress
23. The new president promptly stepped up production to an annual rate of 30 million units. Sales for year 2 remained at 10 million units. The resulting Brassinni Company absorption-costing income state- ment for year 2 follows: BRASSINNI COMPANY Income Statement For the Year Ending December 31,
22. (This classic case is based on an actual company's experience.) Brassinni Company uses an actual absorption cost system to apply all production costs to units produced. The plant has a maximum pro- duction capacity of 40 million units but produced and sold only 10 million units during year 1.
21. Campus Bookstore is a profit-making organization that reports to the Student Council. Martha Wailua, a part-time student employee, noticed that the managers at the bookstore seemed unconcerned about the costs of carrying large inventories. For example, several times a year the manager of the
20. Alexander Corporation, which uses throughput costing, just completed its first year of operations. Planned and actual production equaled 10,000 units, and sales totaled 9,600 units at $72 per unit. Cost data for the year are as follows: Direct material (per unit) $ 12 Conversion cost: Direct
19. The following questions are based on Laredo Leather Corporation, which produces belts that sell for $12 per unit. Of the 100,000 units produced, 80,000 were sold during the year. All ending inventory was in finished-goods inventory. Laredo had no inventory at the beginning of the year. Required
18. Miami Enterprises released the following figures from its records for the past two years: Sales (units) Production (units) Year I Year 2 250,000 250.000 250,000 344,000 Selling price per unit... $40 $40 Variable manufacturing cost per unit $24 $24 Annual committed manufacturing cost.. $860,000
17.Ticonderoga Toner Company (TTC) manufactures toner used in photocopy machines. The company's product is sold by the jug at $50 per unit. TTC uses an actual costing system, which means that the actual costs of direct material, direct labor, and manufacturing overhead are entered into work-in-
16. Toronto Tool Corporation (TTC) manufactures small electric hand tools in Toronto, Ontario. The firm uses a standard absorption-costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding TTC's planned and actual operations for 20x0
15. On December 31 of last year, a fire destroyed the bulk of the accounting records of Ozark Company, a small, one-product manufacturing firm. In addition. the chief accountant mysteriously disappeared. You have the task to reconstruct last year's records. The general manager has said that the
14. Huron Fabricating Company (HFC) employs an absorption-costing system for external reporting and internal management purposes. The latest annual income statement follows: Sales revenue Cost of goods sold: Beginning finished-goods inventory. Cost of goods manufactured Ending finished-goods
13. You have been given the following information concerning Eclipse Corporation, which manufactures the ever-popular cosmic gismo. # Sales: 10.000 units per year at a price of $46 per unit Production: 15.000 units in year 1: 5,000 units in year 2 Beginning inventory: None in year 1 # Variable
12. Florida Fruits, Inc., agreed to sell 40,000 cases of Fang, a dehydrated fruit drink, to NASA for use on space flights at "cost plus 10 percent." The company operates a manufacturing plant that can produce 120,000 cases per year, but it normally produces 80,000. The costs to produce 80,000 cases
11. Items (a) through (e) are based on the following data pertaining to Atlantic Company's manufacturing operations: Inventories Raw material November I $ 9.000 November 30 $ 7,500 4,500 3,000 Work in process Finished goods.. Additional information for the month of November: Raw material purchased.
10. The following data pertain to the photon gismo manufactured by Gizmos R Us, Inc.: Sales price Fixed costs Selling and administrative Manufacturing overhead. Variable costs: Selling and administrative $160 per unit $20,000 per period $15,000 per period $5 per unit Manufacturing overhead. $30 per
9. Each of the following columns is independent and for a different company. Use the data given, which refer to one year for each example, to find the unknown account balances. Company Account Raw-material inventory, January 11 Raw-material inventory, December 31 Work-in-process inventory, January
8. The following data appeared in Tuscaloosa Tile Company's records on December 31 of last year: Direct material used. $191,050 Work-in-process inventory, December 31 12,300 Raw-material inventory, December 31. 42.500 Raw-material purchased during the year. 180,000 Finished-goods inventory,
7. Airway Comfort Corporation manufactures a special fabric used to upholster the seats in small aircraft. The company's annual fixed production cost is $100,000. Requireda. Graph the company's fixed production cost showing the total cost at the following production lev- els of upholstery fabric:
6. Albany Alloys, Inc. incurs a variable cost of $40 per pound for direct material to produce a special alloy used in manufacturing aircraft. Requireda. Draw a graph of the firm's direct material cost, showing the total cost at the following production levels: 10,000 pounds, 20,000 pounds, and
5. Interview with Jamie O'Connell, president, CEO, and cofounder of Datacom, Inc., a leading designer and manufacturer of storage area network (SAN) switching devices. Author: How did you decide to drop other products and direct Datacom's resources toward the design and manufacture of these
4. Many companies use the services of internal auditors, who perform various investigative and consulting. tasks within organizations, such as reviewing divisional financial statements and making recommenda- tions to improve operating performance (e.g., improving quality and customer service). In
3. You have recently been hired as a new cost-management analyst by Corporate Express, the world's largest supplier of office supplies to large corporations. Corporate Express takes orders from its cus- tomers via the Internet, processes those orders with office supply manufacturers, and delivers
2. Change Management Corp. is a consulting firm that helps companies adapt organizational structures to current industry trends. Recently, one of its officers was approached by a representative of a high-tech research firm that offered a six-month contract to Change Management for some help in
1. Place all facts, assumptions, and estimates in a "data input" section of the spreadsheet. For exam- 2. ple, place each number used in the spreadsheet in a separate. labeled cell. This is the only place you should enter any numbers. Write the relations among the spreadsheet's numbers (or
138. Aroma Coffee, Inc., operates a small coffee shop in the downtown area. Its profits have been declining, and management is planning to expand and add ice cream to the menu. The annual ice cream sales are expected to increase revenue by $30,000. The cost to purchase ice cream and cones from the
137. Andover Division is part of a large corporation. It normally sells to outside customers but, on occasion, sells to another division of its corporation. When it sells internally, corporate policy states that the price must be cost plus 25 percent. Andover received an order from Baltimore
136. Paul Martinez recently joined Toxic. Inc., as assistant controller. Toxic processes chemicals to use in fertiliz- ers. During his first month on the job, Martinez spent most of his time getting better acquainted with those responsible for plant operations. In response to his questions as to
135. Great Basin Oil Company, Inc., is a large oil and gas producer headquartered in Utah. Historically, most of its operations have been in the continental United States. However, in the past decade, Great Basin expanded its operations to 14 foreign locations where it operates alone or in
134. Consider the following data on last year's accounting operations that were obtained by Clean Air Systems, Inc. (CAS), from an industry trade association that gathers and reports data from all members of the association anonymously.CAS Cost per Year CAS Cost per Transaction Association Cost per
133. Vasco Corporation is considering outsourcing its accounts receivable function, a support service in the finance department. Vasco's cost management analyst expects annual benefits that include personnel cost savings of $121,000. facilities savings of $90,000, other support service cost savings
132. Match the following operations with appropriate elements of an organization's value chain. Operation or Decision Value-Chain Elementa. Research and developmentb. Design C. Supplyd. Productione. Marketingf. Distribution g. Customer service Dell Computer's replies to customers' questions via
131. Find a recent article in a professional magazine, such as Strategic Finance, Management Accounting (UK), Journal of Cost Management, or Harvard Business Review, that describes accounting and finance support of strategic decision making at a specific organization.Requireda. Prepare an outline
recommend? Why?
130. Quantorus Corporation manufactures disk drives for computers by assembling parts and components from hundreds of suppliers. Cost-management analysts have been analyzing costs to produce disk drives and have determined that a large proportion of the cost is caused by detecting and replacing
129. Two of the world's largest soft drink companies are PepsiCo and Coca-Cola. Find their most recent annual reports in either your library or on the Internet (look, for example, at the companies' Websites or the Securities and Exchange Commission's EDGAR site, www.sec.gov). From the presidents'
128. Review the elements of strategic missions in Exhibit 1-1. Assume that you are managing a small busi- ness that sells coffee. espresso, and possibly various other drinks in a university's engineering center. Consider the possibility that the business mission could be any of the four basic
1.27 Select the decision-making team that most likely would be best for each of the following operations or decisions. Explain your choices. Type of Teama. Individual (no team)b. Small doubles tennis team whose members have special skills that complement each other's strengths and weaknesses C.
1.26 New Zealand recently transformed many of its government agencies into private corporations. This is a difficult process that many developing and former communist and socialist countries have been imple- menting. Match the following general techniques of cost management with the management
1.25 Review the IMA analysis of management accounting practice (www.imanet.org) and prepare a memo or visual presentation (instructor's choice) that explains one of the following:a. The most important personal attributes of successful financial managers.b. The most important competencies for
1.24 One of your fellow classmates remarks, "I thought this was an accounting class. If I wanted to study strategic decision making. I would take a management class. When do we get to crunch numbers?" How would you explain the importance to accounting students of understanding strategic decision
1.23 "I understand the possible value of strategic planning, but I really consider it to be a luxury. I am doing all that I can just to keep the doors open and meet the next payroll." What advice would you offer this harried CEO of a small manufacturing company?
1.22 For many years, department stores prospered because they enhanced the process of shopping, which for many people was a break from the routine of housework and child care and was an opportunity to obtain information about avail- able products and services. What changes have occurred in recent
1.21 Some years ago, General Motors installed industrial robots worth billions of dollars in its automobile assembly lines. believing that the robots would increase the efficiency of its manufacturing processes and improve profitability. In fact, General Motors lost many billions of dollars more
1.20 "If every manager minimizes the cost of the process he or she supervises, overall costs of the company will decrease." Do you think this would be a wise strategy? Why or why not?
1.19 A recent survey by KPMG, one of the world's largest busi- ness services firms, determined that 88 percent of other large U.S. companies have outsourced at least some parts of their value chains or support services. One of the most com- monly outsourced services is income tax reporting. Assume
1.18 Refer to Exhibit 1-4. How could Pursuit Data determine whether it has a competitive advantage in new product development? What would it mean to employees of Pursuit Data if it does or does not have an advantage?
1.17 Assume that you are a vice president of the largest depart- ment store in the region. The store president has called you in to give you a challenging assignment: "Though we are the largest store, only 10 percent of the region's residents are our customers. Find out why the other 90 percent are
1.16 Peter Drucker, the famous management consultant, has said, "Every three years, an organization should challenge every product, every service, every policy, every distribution chan- nel with the question: If we were not in it already, would we be going into it now?" Why is this question
1.15 "Cost accounting and cost management really are the same functions and operations." Do you agree or disagree? Explain.
1.14 What are the eight steps of leading and managing change?
1.13 What is the difference between quantitative information and qualitative information?
1.12 How do organizations create and maintain competitive advantages?
1.11 How do the strategic missions of build, hold, harvest, and divest differ?
1.10 How does a code of ethics differ from personal ethical standards?
1.9 What is the value of ethical standards to individuals? To an organization? To society?
1.8 How does outsourcing affect an organization's value chain?
1.7 How do companies use benefit-cost analysis to make important decisions?
1.6 What are cross-functional teams, and why are they important?
1.5 What are some cost management techniques that help make better management decisions?
1.4 What is strategic decision making? Give examples of sev- eral strategic decisions.
1.3 What is the concept of the value chain, and why is it impor- tant for cost management?
1.2 What is the primary objective of cost management?
1.1 Review and define each of the chapter's key terms.
32. The following terms are used to describe various characteristics of costs. Opportunity cost 4. Prime cost 1. 2. Out-of-pocket cost 5. Conversion cost 3. Sunk cost 6. Average cost
31. Kingston Electronics Corporation incurred the following costs during 20x1. The company sold all of its products manufactured during the year. Direct material $3,000,000 Direct labor.. 2,200,000 Manufacturing overhead: Utilities (primarily electricity) 140,000 Depreciation on plant and
30. The following data refer to Metro Fashions Company for the year 20x2: Work-in-process inventory, December 311 Work-in-process inventory, January 1 Selling and administrative expenses $ 30,000 40.000 150,000 Income tax expense 90.000 Purchases of raw material 180,000 Raw-material Inventory,
29. You have been appointed manager of an operating division of Tucson Technology, Inc., a manufac- turer of products using the latest developments in microprocessor technology. Your division manufac- tures the chip assembly, CH-1. On January 1 of this year, you invested $1 million in automated
28. Each of the following columns is independent and for a different company. Use the data given, which refer to one year for each company, to find the unknown account balances. Company Account Sales revenue 2 3 $1,088,000 $69,600 $3.359.900 Raw-material inventory, January 1 24,600 8,000 45,000
27. Search the Internet for at least one example of an actual organization that uses throughput or variable costing (preferably not a university class or consultant's homepage). (Hint: Begin by using a search engine to find sites with the key words "variable cost" or "throughput." Prepare a
26. Pandora Pillow Company's planned production for the year just ended was 10,000 units. This produc- tion level was achieved, but it sold only 9.000 units. Other data follow: Direct material used Direct labor incurred... Fixed manufacturing overhead.. Variable manufacturing overhead Fixed selling
25. Information taken from Laramie Lumber Company's records for the most recent year is as follows: Required Direct material used $290,000 Direct labor........ 100,000 Variable manufacturing overhead.. 50,000 Fixed manufacturing overhead. 80,000 Variable selling and administrative costs 40,000
24. Philadelphia Security Systems. Inc., uses the following unit costs for one of the products it manufactures: Direct material $164.00 Direct labor 70.80 Manufacturing overhead (based on planned production of 5,000 units): Variable 31.20 Fixed 28.00 Selling and administrative costs (based on 6,500
23. Refer to the data in Exercise 2.48. Compute absorption cost of goods sold, gross margin, and operating income. Why is operating income different from one month to the next?
22. Refer to the data in the preceding exercise. Compute variable cost of goods sold, contribution margin, and operating income. Why is operating income different from one month to the next?
21. Compute throughput product cost of goods sold, throughput, and operating income from the following data for each month. Month I Month 2 Month 3 Beginning inventory, in units. 0 0 100 Units produced 500 600 400 Units sold 500 500 500 Sales $50,000 $50,000 $50,000 Material cost 10,000 12,000
20. Superior Lawn Equipment Company manufactures lawn mowers with a unit variable cost of $200. The mowers sell for $450 each. Budgeted fixed manufacturing overhead for the most recent year was $2,200,000. Planned and actual production for the year were the same. Required Under each of the
19. The following questions are based on Pittsburgh Pickle Corporation. The company's gourmet pickles are sold to restaurants for $12 per unit (one jar). Of the 100.000 units produced. 80.000 were sold during year I: all ending inventory was in finished-goods inventory. The company had no inventory
18. New Jersey Catsup Company produces catsup, which it sells exclusively to fast-food restaurants in five- gallon containers, which sell for $15 each and have the following variable costs: Direct material Direct labor.... Variable overhead.. $5 2 3 Budgeted fixed overhead in 20x0 was $300,000.
17. Minnesota Mustard Company produces a specialty mustard product, which it sells over the Internet for $21.50 per case. The company produced 120,000 units (cases) and sold 104.000 units last year. There were no beginning inventories or ending work-in-process inventories last year. Manufacturing
16. Zodiac Company manufactured 1,000 units of product last year and identified the following costs asso- ciated with the manufacturing activity (variable costs are indicated with V, fixed costs with F): Direct material used (V) $ 70,400 Direct labor (V) 133,000 Supervisory salaries (F) 62.200
15. The following questions are based on Pittsburgh Pickle Corporation. The company's gourmet pickles are sold to restaurants for $12 per unit (one jar). Of the 100.000 units produced. 80.000 were sold during year I: all ending inventory was in finished-goods inventory. The company had no inventory
14. New Jersey Catsup Company produces catsup, which it sells exclusively to fast-food restaurants in five- gallon containers, which sell for $15 each and have the following variable costs: Direct material Direct labor Variable overhead $5 2 3 Budgeted fixed overhead in 20x0 was $300,000. Actual
13. Minnesota Mustard Company produces a specialty mustard product, which it sells over the Internet for $21.50 per case. The company produced 120,000 units (cases) and sold 104.000 units last year. There were no beginning inventories or ending work-in-process inventories last year. Manufacturing
12. Refer to the information in the preceding exercise. Required Construct graphs of total fixed and variable costs.
11. Zodiac Company manufactured 1,000 units of product last year and identified the following costs asso- ciated with the manufacturing activity (variable costs are indicated with V, fixed costs with F): Direct material used (V) $ 70,400 Direct labor (V) 133,000 Supervisory salaries (F) 62,200
10. The following information appears in Tallehasse Toy Company's records for last year: Sales revenue. $97,200 Administrative costs 21,550 Manufacturing building depreciation 12,500 Indirect materials and supplies.. 2,150 Sales commissions 7,100 Raw-material inventory, January 1 8.200 Direct labor
9. The following information appears in Cleveland Cable Company's records for last year: Sales revenue.. Administrative costs Manufacturing building depreciation Indirect materials and supplies. $420,800 88.600 54,000 12,600 Sales commissions.. Raw-material inventory, January 1 Direct labor..
8. The following balances appeared in the accounts of Hasegawa Machine Tool Company during the cur- rent year. (y denotes yen, the Japanese national currency.) Finished-goods inventory Work-in-process inventory. Raw-material inventory January | December 31 146,000, 150,000 362,000, 354,000,
7. CompuTech sells computers. On January 1 of this year, it had a beginning merchandise inventory of $500,000, including transportation-in costs. It purchased $2,600.000 of merchandise, had $260.000 of transportation-in costs, and had marketing and administrative costs of $1,600.000 during the
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