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cost management strategic

Cost Management Accounting And Control 5th Edition Don R. Hansen, Maryanne M. Mowen - Solutions

Stubing Company has two producing departments and two support centers. 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.2. Using direct labor hours, compute
Refer to the data in Exercise 7-11. 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.2. Using direct labor hours,
Refer to the data in Exercise 7-11.Required:1. Allocate the costs of the support departments using the sequential method.2. Using direct labor hours, compute departmental overhead rates.
Alomar Company manufactures four products from a joint production process: andol, incol, ordol, and exsol. The joint costs for one batch are as follows:At the split-off point, a batch yields 1,000 andol, 1,500 incol, 2,500 ordol, and 3,000 exsol. All products are sold at the split-off point: andol
Refer to Exercise 7-14 and allocate the joint costs using the sales-value-at-split-off method.
Biotechtron, Inc., has two research laboratories in the Midwest, one in Tulsa, Oklahoma, and one in Ames, Iowa. The owner of Biotechtron centralized the legal services function in the Tulsa office and had both laboratories send any legal questions or issues to the Tulsa office. The legal services
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
Homestead Pottery, Inc., is divided into two operating divisions: pottery and retail. The company allocates power and human resources department costs to each operating division.Power costs are allocated on the basis of the number of machine hours and human resources costs on the basis of the
Petro-Chem, Inc., is a small company that acquires high-grade crude oil from lowvolume production wells owned by individuals and small partnerships. The crude oil is processed in a single refinery into Two Oil, Six Oil, and impure distillates. Petro-Chem does not have the technology or capacity to
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.
House Corporation Board (HCB) of Tri-Gamma Sorority is responsible for the operation of a two-story sorority house on the State University campus. HCB has set a normal capacity of 60 women. At any given point in time, there are 100 members of the chapter: 60 living in the house and 40 living
Paula Barneck, the newly appointed director of the Lambert Medical Center (LMC), a large metropolitan hospital, was reviewing the financial report for the most recent quarter.The hospital had again shown a loss. For the past several years, it had been struggling financially. The financial problems
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.)
Caddo Company produces floor mats used in gyms and dojos. The sales budget for four months of the year is as follows:Company policy requires that ending inventories for each month be 15 percent of next month’s sales. At the beginning of July, the beginning inventory of mats met that
Galvin Company produces a variety of rolling briefcases. Two popular types are the road warrior and the prepster. The road warrior, meant for business people who travel frequently, sells for $50, and the prepster, a new model designed for school children, sells for $30. Projected sales of the two
APO Company produces stuffed toy animals; one of these is “Elliebelle the Cow.” Each elliebelle takes 0.20 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. APO has budgeted production of
Audio-2-Go, Inc., manufactures MP3 players. Models A-1, A-2, and A-3 are small and light. They are attached to arm bands 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 2007, and
Rick Moreno owns The Steak Place in Orlando, Florida. The Steak Place is an affordable restaurant near International Drive—a tourist mecca. Rick 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 8-6. Rick thinks that it may be time to refuse to accept checks and to start accepting credit cards. He is negotiating with VISA/MasterCard and American Express, and he would start the new policy on April 1. Rick estimates that with the drop in sales from the “no checks”
Crash Dobson, former all-state high school football player, owns a retail store that sells new and used sporting equipment. Crash has requested a cash budget for October. After examining the records of the company, you find the following:a. Cash balance on October 1 is $1,980.b. Actual sales for
Historically, Pine Hill Wood Products has had no significant bad debt experience with its customers. There are no cash sales, all sales are made on credit. Payments for credit sales have been received as follows:40 percent of credit sales in the month of the sale.30 percent of credit sales in the
David Campbell’s is a men’s clothing store in Mesa, Arizona. David Campbell’s has its own house charge accounts and has found from past experience that 20 percent of its sales are for cash. The remaining 80 percent are on credit. An aging schedule for accounts receivable reveals the following
Refer to Exercise 8-10. David Campbell’s purchases clothing evenly throughout the month. All purchases are on account. On the first of every month, Moira Campbell, David’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
Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, 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 Zebro Products has developed a flexible budget for overhead costs. Zebro Products makes two types of paper-based cloths: counter wipes and floor wipes. Zebro expects to produce 500,000 rolls of each product during the coming year. Counter wipes
Refer to Exercise 8-13. At the end of the year, Zebro Products actually produced 550,000 rolls of counter wipes and 500,000 of floor wipes. The actual overhead costs incurred were:Required:Prepare a performance report for the period. Maintenance $15,600 Power 17,250 Indirect labor 89,000 Rent 24,000
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
Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash budget for the fourth quarter of the year, he has assembled the following data:a. Salesb. Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for credit
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
Friendly Freddie’s is an independently owned major appliance and electronics discount chain with seven stores located in a Midwest metropolitan area. Rapid expansion has created the need for careful planning of cash requirements to ensure that the chain is able to replenish stock adequately and
Refer to Problem 8-21 for data.Required:1. Run a multiple regression equation using machine hours, number of setups, and number of purchase orders as independent variables. Prepare a flexible budget for overhead for the 12 months using the results of this regression equation. (Round the regression
Karmee Company has been accumulating operating data in order to prepare an annual profit plan. Details regarding Karmee’s sales for the first six months of the coming year are as follows:Karmee’s cost of goods sold averages 40 percent of the sales value. Karmee’s objective is to maintain a
Morrison, 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
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
Mondragon Company produces machine tools and currently uses a plantwide overhead rate, based on machine hours. Alfred Cimino, the plant manager, has heard that departmental overhead rates can offer significantly better cost assignments than can a plantwide rate. Mondragon has the following data for
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:Plata produces two models of dishwashers with the following expected prime costs and activity demands:The company’s normal activity is 4,000 direct labor hours.Required:1. Determine the
Refer to the interview in Exercise 4-7 (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,
Golder 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 4-11.Required:1. Calculate the global consumption ratios for the two products.2. 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, 4-driver ABC system.
Riobamba Manufacturing produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be
Maxwell Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following activity rates have been computed:Two products are produced by Maxwell: a deluxe disk player and a regular disk player.Each product has an area
Bienstar Company produces treadmills. 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
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
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, First
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, Part
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
Refer to the data given in Problem 4-20 and suppose that the expected activity costs are reported as follows (all other data remain the same):The per-unit overhead costs using the 14 activity-based drivers are $1,108 and $779 for Cylinder A and Cylinder B, respectively.Required:1. Determine the
BKM Foundry manufactures different kinds of equipment used by the aerospace, commercial aircraft, and electronic industries. Twenty different products are created using two major manufacturing processes: molding and assembly. The procurement and sustaining processes are also used in the plant. The
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
Primo Paper, Inc., has three paper mills, one of which is located in Seattle, Washington.The Seattle mill produces 200 different types of coated and uncoated specialty printing papers. This large variety of products was the result of a full-line marketing strategy adopted by Primo’s management.
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
Why would some prefer normal activity to expected actual activity to compute a predetermined overhead rate?
(Appendix) Amber Company produces custom framing. For one job, the trainee assigned to cut the mat entered 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?
(Appendix) 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
What is the difference between a line position and a staff position?
The controller should be a member of the top management staff. Do you agree or disagree with this statement? Explain.
Review the code of ethical conduct for management accountants. Do you believe that the code will have an effect on the ethical behavior of management accountants?Explain.
Classify each of the following actions as either being associated with the financial accounting information system (FS) or the cost management information system (CMS):a. Determining the future cash flows of a proposed flexible manufacturing systemb. Filing reports with the SECc. Determining the
Byers Electronics produces hand-held calculators. Three of the major electronic components are produced internally (components 2X334K, 5Y227M, and 8Z555L). There is a separate department in the plant for each component. The three manufactured components and other parts are assembled (by the
A number of mail-order computer and software companies have set up customer service telephone lines. Some are toll-free. Some are not. A customer can wait on hold anywhere from three seconds to 20 minutes.Required:Evaluate all of the costs that these companies might consider when setting up the
The external auditors for Heart Health Procedures (HHP) are currently performing the annual audit of HHP’s financial statements. As part of the audit, the external auditors have prepared a representation letter to be signed by HHP’s chief executive officer(CEO) and chief financial officer
Many other certifications are available to accountants other than the three described in the chapter. Using Internet resources, select three of these additional certifications and write a memo for each describing them. In describing the certifications, answer the following questions: What are the
What is an accounting information system?
Define and explain the two major subsystems of the cost management information system.
What is allocation?
Cardinal Company’s southeastern factory provided the following information for the last calendar year:During the year, direct materials purchases amounted to $150,000, direct labor cost was $200,000, and overhead cost was $324,700. There were 100,000 units produced.Required:1. Calculate the total
For each of the following independent situations, calculate the missing values:1. The Chico plant purchased $275,000 of direct materials during May. Beginning direct materials inventory was $16,000, and direct materials used in production were $200,000. What is ending direct materials inventory?2.
Cimino Company manufactures staplers. At the beginning of June, the following information was supplied by its accountant:During June, direct labor cost was $22,000, direct materials purchases were $70,000, and the total overhead cost was $216,850. The inventories at the end of June were:Required:1.
Photo-Dive, Inc., manufactures disposable underwater cameras. During the last calendar year, a total of 150,000 cameras were made, and 154,000 were sold for $8.00 each.The actual unit cost per camera is as follows:The selling expenses consisted of a commission of $0.25 per unit sold and advertising
Araj Company, a manufacturing firm, has supplied the following information from its accounting records for the last calendar year:Required:1. Prepare a cost of goods manufactured statement.2. Prepare a cost of goods sold statement. Direct labor cost $371,500 Purchases of direct materials 160,400
Marcus Washington owns and operates three Compufix shops in the Chicago area.Compufix repairs and upgrades computers on site. In May, purchases of materials equaled $9,350, the beginning inventory of materials was $1,050, and the ending inventory of materials was $750. Payments for direct labor
Shellenberger Company provided the following information for last year:During the year, direct materials purchases amounted to $270,000, direct labor cost was $320,000, and overhead cost was $490,000. During the year, 25,000 units were completed.Required:1. Calculate the total cost of direct
Refer to Exercise 2-13. Last year, Shellenberger recognized revenue of $1,380,000 and had selling and administrative expense of $216,300.Required:1. What is the cost of goods sold for last year?2. Prepare an income statement for Shellenberger for last year.
Dalal Company produced 150,000 floor lamps during the past calendar year. These lamps sell for $50 each. Dalal had 2,500 floor lamps in finished goods inventory at the beginning of the year. At the end of the year, there were 11,500 floor lamps in finished goods inventory. Dalal’s accounting
CPA-Skilz Company creates, produces, and sells CD-ROM-based CPA review courses for individual use. Susan Wayans, head of human resources, is convinced that question development employees must have strong analytical and problem-solving skills. She asked Jeremy Slater, controller for CPA-Skilz, to
Young, Andersen, and Touche (YAT) is a tax services firm. The firm is located in San Diego and employs 10 professionals and eight staff. The firm does tax work for small businesses and well-to-do individuals. The following data are provided for the last fiscal year. (The Young, Andersen, and Touche
Jordan Company produces a chemical reagent used by medical laboratories. For 2007, Jordan reported the following:Jordan produced 100,000 units during 2007 and sold 127,000 units at $6 per unit.Required:1. Prepare a statement of cost of goods manufactured.2. Prepare an absorption-costing income
Divide the class into groups of four or five students. Each group should have one piece of paper and a pen or pencil. The paper and pencil pass clockwise around the group, giving each student a chance to write down his/her response to the following exercise.As the student writes the response,
On the Internet, access the homepages of several enterprise resource planning (ERP) vendors (e.g., http://www.baan.com; http://www.cai.com; http://www.jdedwards.com; http://www.oracle.com; http://www.peoplesoft.com; http://www.sap.com). What are the advantages touted by each? Does there appear to
Describe the method of least squares. Why is this method better than either the high-low method or the scatterplot method?
Assume you are the manager responsible for implementing a new service. The time to perform the service is subject to the learning curve. Would you prefer that the new service follow the cumulative average-time learning curve model or the incremental unit-time learning curve model? Why?
Gupta Company manufactures miniature speakers that are built into the headrests of high-end lounge chairs. Based on past experience, Gupta has found that its total annual overhead costs can be represented by the following formula: Overhead cost = \($175,000\) + \($1.10X\), where X = number of
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. Activity Maintenance Inspection
Tad Jennings opened a tanning salon in a new shopping center. He had anticipated that the costs for the tanning service would be primarily fixed, but he found that tanning salon costs increased with the number of visits. Costs for this service over the past nine months are as follows:Required:1.
Refer to the data in Exercise 3-7.Required:1. Compute the cost formula for tanning services using the method of least squares.2. Using the formula computed in Requirement 1, what is the predicted cost of tanning services for October for 2,200 appointments?3. What does the coefficient of
The controller of the Beresford plant of Gamerco, Inc., monitored activities associated with purchasing and receiving raw materials. The high and low levels of resource usage occurred in October and March for three different resources associated with purchasing and receiving. The number of purchase
A company used the method of least squares to develop a cost equation to predict the cost of receiving. There were 80 data points for the regression, and the following computer output was generated:The activity driver used was the number of receiving orders.Required:1. What is the cost formula?2.
Kidstuff, Inc., was started 10 years ago by selling children’s clothing through catalogs.Jan Switzer, Kidstuff’s controller, had determined that the cost of filling and shipping orders was fairly consistently related to the number of orders. She had been using the following formula to describe
Allmen, Inc., a manufacturer of heavy machinery, is interested in improving its factory safety record. Jennifer Cybert, Allmen’s controller, has investigated the past four years of industrial accidents, both at Allmen and at other similar factories. She has found that more accidents seem to
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
St. Luke’s Medical Center (SLMC) offers a number of specialized medical services, including neuroscience, cardiology, and oncology. SLMC’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
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 = units sold). Each unit uses one direct labor hour for production.The president of Kimball Company has recently
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 a regression on the data, using
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
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
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
Refer to Problem 3-24. Now assume that an 80 percent incremental unit-time learning curve model is applicable.Required:1. Set up a table with columns for cumulative number of units, individual unit time for the nth unit in hours, cumulative total time in hours, and cumulative average time per unit
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

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