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business
fundamentals cost accounting
Questions and Answers of
Fundamentals Cost Accounting
What is the basic difference between the allocation of joint costs to joint products and to by-products?
Why Are Costs Allocated?—Ethical Issues You are the division president of Stable Division of Giga-Corp. Your friend, Ligia, is the division president of Giga-Corp’s Turmoil Division. These are
Cost Allocations: Direct Method Warren Ltd. has two production departments, Building A and Building B, and two service depart- ments, Maintenance and Cafeteria. Direct costs for each department and
Cost Allocations: Direct Method (L.O. 2)University Printers has two service departments (Maintenance and Personnel) and two operating departments (Printing and Developing). Management has decided to
What is the difference between the planning and control functions of the budget? What problems do these differences create?
Estimate Sales Revenues SVI is a large securities dealer. Last year, the company made 120,000 trades with an average commission of $110. Because of the general economic climate, SVI expects trade
Estimate Sales Revenues EZ-Credit, Inc., has $40 million in consumer loans with an average interest rate of 13.5 percent.The bank also has $32 million in home equity loans with an average interest
Estimate Sales Revenues Starlite Company manufactures office products. Last year, it sold 22,500 electric staplers for $20 per unit. The company estimates that this volume represents a 30 percent
Estimate Production Levels Hoffmann Corporation has just made its sales forecasts and its marketing department estimates that the company will sell 24,000 units during the coming year. In the past,
Estimate Production and Materials Requirements The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators.(Each calculator requires one shell.) For each of the next
Estimate Purchases and Cash Disbursements Westile Company buys plain ceramic tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe,
Estimate Purchases and Cash Disbursements White Products wishes to purchase goods in one month for sale in the next. On March 31, the company has 24,000 portable music players in stock, although
Estimate Cash Disbursements Ashland Corporation is preparing its cash budget for October. The following information is available concerning its inventories:Required What are the estimated cash
Estimate Cash Collections Duluth Company is preparing its cash budget for December. The following information is available concerning its accounts receivable:Required What is the estimated amount of
Estimate Cash Collections ;Nassau Products is preparing a cash budget for April. The following information on accounts receivable collections is available from past collection experience:Required
Estimate Cash Receipts Scare-2-B-U (S2BU) specializes in costumes for all occasions. The average price of each of its costumes is $320. For each occasion, S2BU receives a 20 percent deposit two
Estimate Cash Receipts Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe
What problems might there be if the same methods used to compute firm income were used to compute divisional income? Does your answer depend on the type of business a firm is in?
Compute Divisional Income Eastern Merchants shows the following information for its two divisions for Year 1:Required Compute divisional operating income for the two divisions. Ignore taxes. Comment
Compute RI and ROI ras Bonds Division of Giant Bank has assets of $3.6 billion. During the past year, the division had profits of $900 million. Giant Bank has a cost of capital of 12 percent. Ignore
ROI versus RI A division is considering the acquisition of a new asset that will cost $720,000 and have a cash flow of $280,000 per year for each of the five years of its life. Depreciation is
Compare Alternative Measures of Division Performance The following data are available for two divisions of Solomons Company:The cost of capital for the company is 15 percent. Ignore taxes.Requireda.
Impact of New Project on Performance Measures Ocean Division currently earns $780,000 and has divisional assets of $2.6 million. The division manager is considering the acquisition of a new asset
What are the advantages and disadvantages of a negotiated transfer price system?14-9, What is the general transfer pricing rule? What is the transfer price that results from this rule when:a. There
Give two reasons that dividing production cost variances into price and efficiency variances is useful for management control.
Flexible Budgeting The master budget at Hamilton, Inc., last period called for sales of 90,000 units at \($24\) each. The costs were estimated to be \($10\) variable per unit and \($600,000\) fixed.
Different Performance Measures Across the Organization At one time, a well-known communications firm measured all managers at all levels on return on net assets (RONA). Write a report to the firm’s
Benchmarks Match each of the following specific measurements with its benchmark category. a. Material quality b. Customer returns c. Training hours completed d. Errors reported 1. Employee
Benchmarks Match each of the following specific measurements to its benchmark category. a. Number of product recalls b. Percentage of late deliveries. c. Number of requests for transfer d. Length of
Manufacturing Cycle Time and Efficiency Lancaster Metals has the following average times (in hours):Required Calculate the manufacturing cycle efficiency. Transporting product.. 1.0 Manufacturing
Functional Measures For each category of functional measures listed in Exhibit 17.5, add one additional specific measurement that is not already listed.
Specifying Nonfinancial Measures Write a memo to Jordan Carr outlining how you would recommend measuring customer satisfaction for JYC Investments. Be sure to discuss the advantages and disadvantages
Manufacturing Cycle Time and Efficiency A manufacturing company has the following average times (in days):Required Calculate the manufacturing cycle efficiency. 16 4620 Transporting product
Benchmarks Write a report to the CEO of Borders Books and Music recommending specific benchmark measures. Include specific competitors against which to measure. SS
Mission Statement Write a report to the president of your college or university indicating the factors that you believe should be included in its mission statement. If your college has a mission
What are important criteria in determining the choice of an allocation base?
Why might two companies have different cost systems?
Basic Cost Flow Model Williams Stationery Supplies experienced the following events during the current year: 1. Incurred $250,000 in marketing costs. 2. Purchased $800,000 of merchandise. 3. Paid
Basic Cost Flow Model (L.O. 3)Assume that the following events occurred at a division of General Electric for the current year.RequiredGive the amounts for the following items in the Work-in-Process
Basic Cost Flow Model Fill in the missing items for the following inventories: A B C Beginning balance $102,000 $28,400 $117,000 Ending balance 24,800 96,000 Transferred in... 96,000 210,000
Basic Cost Flow Model Fill in the missing items for the following inventories: A B C Beginning balance... $163,200 $14,200 $156,000 Ending balance 12,400 128,000 Transferred in....... 153,600 280,000
Basic Cost Flow Model Fill in the missing items for the following inventories: A B C Beginning balance $34,000 $106,500 $195,000 Ending balance 93,000 160,000 Transferred in.... 32,000 350,000
Basic Product Costing Lilly Liquids Corporation manufactures a special liquid cleaner at its Midvale plant. Operating data for June follow:The Midvale plant produced 1,700,000 gallons in June. The
Basic Product Costing Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 1,200,000 checks in August. It takes only seconds to process a check,
Basic Product Costing Kim & Smith Refiners starts business on March 1. The following operations data are available for March for the one lubricant it produces:Requireda. Compute cost of goods
Basic Product Costing: Ethical Issues Old Tyme Soda produces one flavor of a popular local soft drink. It had no work in process on October 31 in its only inventory account. During November, Old Tyme
Predetermined Overhead Rates Tiger Furnishings produces two models of cabinets to house home theatre components, the basic and the dominator. Data on operations and costs for March follow:Required
Operations Costing Oregon Instruments manufactures two models of calculators. The finance model is the Fin-X and the scientific model is the Sci-X. Both models are assembled in the same plant and
Assigning Costs to Jobs The following transactions occurred in April at Darlington Workshops, a custom manufacturer of furniture:Required Prepare journal entries to record these transactions. 1.
Assigning Costs to Jobs Partially completed T-accounts and additional information for Bird Corporation for the month of July follow.Additional information for July follows:• Labor wage rate was $30
Predetermined Overhead Rates Guava, Inc., manufactures one product and accounts for costs using a job cost system. You have ob- tained the following information from the corporation’s books and
Predetermined Overhead Rates Cincy Corporation estimates its manufacturing overhead to be $110,000 and its direct labor costs to be $200,000 for year 1. The actual direct labor costs were $50,000 for
Prorate Under- or Overapplied Overhead Refer to the information in Exercise 6.19. Prepare an entry to allocate the overhead as follows: Exercise 6.19.Cincy Corporation estimates its manufacturing
Applying Overhead Using a Predetermined Rate Mel’s Tool & Die uses a job order cost system. The following debits (credits) appeared in Work in Process for October:Mel’s applies overhead to
Calculating Over- or Underapplied Overhead Mills, Inc., uses a predetermined factory overhead rate based on direct labor-hours. For October, Mills’s budgeted overhead was \($2,520,000\) based on a
Job Costing in a Service Organization At the beginning of the month, Arthur’s Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months:During
Job Costing in a Service Organization For August, Regal Consulting Services (RCS) worked 900 hours for Ernst Company and 2,100 hours for Julius Corporation. RCS bills clients at the rate of \($210\)
Estimate Hours Worked from Overhead Data Griffin Corporation estimated that direct labor for the year would be 39,000 hours. Griffin’s overhead (all fixed) is applied on the basis of direct
Assigning Costs—Missing Data The following T-accounts represent September activity.Required Compute the missing amounts indicated by the letters (a) through (i). Materials Inventory
Assigning Costs: Missing Data The following T-accounts represent November activity.Additional Data Required Complete the T-accounts. EB (11/30) Materials Inventory 56,400 Finished Goods Inventory
Analysis of Overhead Using a Predetermined Rate Salinas Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to
Finding Missing Data A new computer virus (AcctBGone) destroyed most of the company records at BackupsRntUs. The computer experts at the company could recover only a few fragments of the company’s
Cost Accumulation: Service (L.O. 4)Youth Athletic Services (YAS) provides adult supervision for organized youth athletics. It has a president, William Mayes, and five employees. He and one of the
Job Costs: Service Company For the month of January, Peninsula Accountants worked 2,000 hours for Lake Lumber, 600 hours for Marty’s Marina, and 1,000 hours for the State Prison System. Peninsula
Job Costs in a Service Company On September 1, two jobs were in process at Mission Masonry. Details of the jobs follow:Materials Inventory on September 1 totaled \($5,520,\) and \($696\) worth of
Cost Estimation, Deriving Overhead Rates Ipanema Pen Company manufactures office supplies such as paper clips and staples. It runs large batches of any one single product and uses a normal job
Plantwide versus Department Allocation Munoz Sporting Equipment manufactures baseball bats and tennis rackets. Department B pro- duces the baseball bats, and Department T produces the tennis rackets.
Plantwide versus Department Allocation Main Street Ice Cream Company uses a plantwide allocation method to allocate overhead based on direct labor-hours at a rate of $5 per labor-hour. Strawberry and
Activity-Based Costing in a Nonmanufacturing Environment Cathy, the manager of Cathy’s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited
Activity-Based versus Traditional Costing Rodent Corporation produces two types of computer mice, wired and wireless. The wired mice are designed as low-cost, reliable input devices. The company only
Activity-Based Costing in a Service Environment We-Clean, Inc., is a home-cleaning service. It originally specialized in serving small residential clients but recently started contracting for work in
Activity-Based versus Traditional Costing ;Isadore’s Implements, Inc., manufactures pens and mechanical pencils often used for gifts. Overhead costs are currently allocated using direct
Activity-Based versus Traditional Costing—Ethical Issues Wendy Chen established Windy City Coaching (WCC) to provide teen counseling and executive coaching services to its clients. WCC charges a
Activity-Based Costing: Cost Flows through T-Accounts Delta Parts, Inc., recently switched to activity-based costing from the department allocation method. The Fabrication Department manager has
Activity-Based Costing: Cost Flows through T-Accounts Hill Fashions, a shirt manufacturer, recently switched to activity-based costing from the department product costing method. The manager of
Comparative Income Statements and Management Analysis EZ-Seat, Inc., manufactures two types of reclining chairs, standard and ergo. Ergo provides support for the body through a complex set of sensors
What are examples of two nonvalue-added activities that could be found in each of the following service organizations: (a) a health clinic and (b) a bank? HUE
"You can get the cost of customers by first computing the cost of the products they buy and then multiplying by the number of units the customer buys." Do you think this approach would assist in cost
If you are considering buying a second car, what are the differential costs of that decision? Are they the same as in question 3-24? Why or why not?question 3-24If you are considering driving to a
Profit Equation Components Identify each of the following profit equation components on the graph that follows: a. The total cost line. b. The total revenue line.. c. The total variable costs area.
Profit Equation Components Identify the letter of each profit equation component on the graph that follows. g a Area f Line d Area e
Basic Decision Analysis Using CVP Anu’s Amusement Center has collected the following data for operations for the year:Requireda. What is the average selling price for a ticket?b. What is the
CVP Analysis—Ethical Issues Mark Ting desperately wants his proposed new product, DNA-diamond, to be accepted by top management. DNA-diamond is a piece of jewelry that contains the DNA of a boy or
Basic Decision Analysis Using CVP T-Tunes, Inc., is considering the introduction of a new music player with the following price and cost characteristics:Requireda. What number must T-Tunes sell to
Basic Decision Analysis Using CVP Refer to the data for T-Tunes, Inc., in exercise
Assume that the projected number for the year is 6,500 units. Consider requirements (b), (c), and (d) independent of each other.Requireda. What will the operating profit be?b. What is the impact on
Analysis of Cost Structure Lowe’s Convenience Store’s cost structure is dominated by variable costs with a contribution margin ratio of .35 and fixed costs of $30,000. Every dollar of sales
Special Orders nae : Maria’s Tool & Die Shop makes gears for transmissions. Data from the forecasted income statement for the year before any special orders are as follows:Fixed costs included
Pricing Decisions Assume that Jen & Barry’s sells ice cream for \($3\) per quart. The cost of each quart follows:One of Jen & Barry’s regular customers asked the company to fill a special
Target Costing and Pricing Sid’s Skins makes a variety of covers for electronic organizers and portable music players. The company’s designers have discovered a market for a new clear plastic
Make-or-Buy Decisions Mobility Partners makes wheelchairs and other assistive devices. For years it has made the rear wheel assembly for its wheelchairs. A local bicycle manufacturing firm,
Make-or-Buy Decisions Mel’s Meals 2 Go purchases cookies that it includes in the 10,000 box lunches it prepares and sells annually. Mel’s kitchen and adjoining meeting room operate at 70 percent
Dropping Product Lines Atlantic Soup Company is presently operating at 75 percent of capacity. Worried about the company’s performance, the president is considering dropping its clam chowder. If it
Theory of Constraints CompDesk, Inc., makes a single model of an ergonomic desk (with chair) for computer usage. The desk is manufactured in building 1, and the chair is manufactured in building 2.
CVP Analysis and Price Changes Stone Systems is concerned about the possible effects of inflation on its operations. Presently, the company sells 60,000 units for $60 each unit. The variable
Extensions of the CVP Basic Model—Semifixed (Step) Costs Cathy’s Cafeteria serves only a fixed-price lunch. The price of $9 and the variable cost of $5 per meal remain constant regardless of
Extensions of the Basic CVP Model—Taxes Heather’s Health Foods is considering adding a new line of fruit juices to its merchandise products. This line of juices has the following prices and
Extensions of the Basic CVP Model—Taxes Action Games has developed a new computer game that it plans to sell for $32. The variable costs associated with each game (for materials, shipping,
Extension of Basic CVP Model—Multiple Products On-the-Go, Inc., produces two models of traveling cases for laptop computers: the Programmer and the Executive. The bags have the following
Extension of Basic CVP Model-Multiple Products and Taxes Assume that Ocean King Products sells three varieties of canned seafood with the following prices (L.O. 1)and costs:The sales mix (in cases)
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