Questions and Answers of Fundamentals Cost Accounting

Refer to Exercises 11-28 (University Printers).Requireda. Which method do you think is best? Why?b. How much would it be worth to the company to use the best method compared to the worst of the three
Assume that all of the information is the same as in Integrative Case 15-49, but instead of receiving only one outside bid, Logistics Services receives two. The new bid is from World Services for
Refer to Problem 15-47. Suppose Health Services could sell time on the machine to other companies in the area on a per-hour basis. Further, it can sell all the time available for $30 per
Refer to the data in Problem 15-45. At the end of the year, the following data are available on actual operations at the landfill.
Mathes Corporation manufactures paper products. The company operates a landfill, which it uses to dispose of nonhazardous trash. The trash is hauled from the two nearby manufacturing facilities in
Gage Corporation has two operating divisions in a semiautonomous organizational structure. Adams Division, located in the United States, produces a specialized electrical component that is an input
Skane Shipping Ltd. (SSL) operates a fleet of container ships in international trade between Sweden and Singapore. All of the shipping income (that is, that related to SSL’s ships) is deemed to be
Refer to the data in Problem 15-34. Division managers are evaluated using residual income using a 13 percent cost of capital.Requireda. What is the residual income for Thames without the transfer to
Perth Corporation has two operating divisions, a casino and a hotel. The two divisions meet the requirements for segment disclosures. Before transactions between the two divisions are considered,
Leapin’ Larry’s Pre-Owned Cars has two divisions, Operations and Financing. Operations is responsible for selling Larry’s inventory as quickly as possible and purchasing cars for future sale.
Refer to the information in Exercise 15-30. Suppose Manufacturing is located in Country X with a tax rate of 65 percent and Marketing in Country Y with a tax rate of 35 percent. All other facts
aintRefer to the information in Exercise 15-28. Suppose Manufacturing is located in Country A with a tax rate of 60 percent and Assembly in Country B with a tax rate of 40 percent. All other facts
Refer to the data in Exercise 15–20. Suppose that Government Division will charge the client interested in implementing an activity-based costing system by the hour based on cost plus a fixed fee,
Southwest Division offers its product to outside markets for $30. It incurs variable costs of $11 per unit and fixed costs of $37,500 per month based on monthly production of 4,000 units. Northeast
Mid-Atlantic Company permits its decentralized units to “lease” space to one another. Maryland Division has leased some of its idle warehouse space to Virginia Division for $120 per square foot
Refer to Question 15-13. What type of responsibility center would you recommend the company make Alpha Division? Beta Division? Explain your reasons.Data From Question 15-13:Alpha Division and Beta
Biddle Company uses EVA to evaluate the performance of division managers. For the Wallace Division, after-tax divisional income was $600,000 in year 3.The company adjusts the after-tax income for
Bisbee Health Products invests heavily in research and development (R&D), although it must currently treat its R&D expenditures as expenses for financial accounting purposes. To encourage
Hy’s is a nationwide hardware and furnishings chain. The manager of the Hy’s Store in Boise is evaluated using ROI. Hy’s headquarters requires an ROI of 8 percent of assets. For the coming
Pharmaceutical firms, oil and gas companies, and other ventures inevitably incur costs on unsuccessful investments in new projects (e.g., new drugs or new wells). For oil and gas firms, a debate
Refer to the facts in Problem 14-45. Assume that Pitt’s performance measurement and bonus plans are based on residual income instead of ROI. Pitt uses a cost of capital of 12 percent in computing
Refer to the facts in Problem 14-43. Assume that Pitt’s performance measurement and bonus plans are based on residual income instead of ROI. Pitt uses a cost of capital of 12 percent in computing
Oscar Clemente (Problem 14-43) is still assessing the problem of whether to acquire LSI’s assembly machine. He learns that the new machine could be acquired next year, but if he waits until then,
Refer to the data in Problems 14-40 and 14-41. Al, the manager of the AC Division, complains that the calculation of EVA is unfair, because a much longer life is assumed for the SO Division in
Refer to the data in Exercise 14-36. Assume that the division uses beginning-of-year asset values in the denominator for computing ROI.Requireda. Compute ROI, using net book value.b. Compute ROI,
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing $45 million and having a four-year expected life, after which the assets can be
Refer to the facts in Exercise 14-34, but assume that Harbor has been leasing the machine for $12,000 annually. Assume also that the machine generates income of $5,400 annually after the lease
Refer to the information in Exercises 14-31 and 14-32.a. What is the division’s residual income before considering the project?b. What is the division’s residual income if the asset is
Refer to the data in Exercise 14-31. The division manager learns that he has the option to lease the asset on a year-to-year lease for $740,000 per year. All depreciation and other tax benefits would
Refer to the data in Exercise 14-28.RequiredEvaluate the performance of the two divisions assuming BMI uses economic value added.Data From Exercise 14-28:Back Mountain Industries (BMI) has two
Refer to the data in Exercise 14-28.RequiredEvaluate the performance of the two divisions assuming BMI uses residual income.Data From Exercise 14-28:Back Mountain Industries (BMI) has two divisions:
Refer to Exercise 14-22. The results for year 2 have just been posted: RequiredCompute divisional operating income for the
By using economic value added, we avoid managers focusing on short-term gains like they would with accounting income. Do you agree with this statement? Explain.
Lucas Company is considering investing in a new machine. The machine costs $10,000 and has an economic life of four years. The machine will generate cash flows of $3,000 (cash revenues less cash
Bell & Porter has the following average times (in hours):Inspecting product . . . . . . . . . . . 0.30Manufacturing product . . . . . . . 2.10Storing inventory . . . . . . . . . . . .
Consider a locally owned coffee shop, a Starbucks store for example, and a retail gas station that offers fresh coffee in its convenience stores. Characterize these stores according to the Porter
Refer to the information in Problem 17-45.RequiredWrite a memo to the managers at Matthews & Bros. recommending which variances they should investigate this period, along with your reasons.Data
Refer to the data for the Peninsula Candy Company (Problem 17-42). Break down the total activity variance into sales mix and quantity parts.Data From Problem 17-42:Peninsula Candy Company makes three
Refer to the information in Problem 17-40.RequiredWrite a memo to the managers at Bay Area Bank recommending which variances they should investigate this period, along with your reasons.Data From
Refer to the information in Exercise 17-34.RequiredWrite a memo to Harry recommending which variances he should investigate this period along with your reasons.Data From Exercise 17-34:The standard
Refer to the data in Exercise in 17-30. Prepare a profit variance analysis for K&B like the one in Exhibit 16.5 of the previous chapter.Exhibit 16.5:
Refer to the data in Exercise 17-30. Prepare a sales activity variance analysis like the one in Exhibit 16.4 of the previous chapter.Exhibit 16.4:
Refer to the data in Problem 13-49. Estimate the cash from operations expected in year 2.Data From Exercise 13-49:Gulf States Manufacturing has the following data from year 1 operations, which are to
Refer to the data in Problem 13-47. Estimate the cash from operations expected in year 2.Data From Problem 13-47:The following information is available for year 1 for Pepper Products:
Refer to the data in Exercise 13-36. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber
Using the data for the consulting firm in Exercise 12-35, what is the cost allocation if fixed computer costs of $7 million are allocated on the basis of number of consultants and the remaining costs
Is a division president ever a principal in the principal–agent relationship as discussed in the chapter? Explain.
Is the CEO ever an agent in the principal–agent relationship as discussed in the chapter? Explain.
Refer to the facts in Problem 11-54. The cost accountant at Great Eastern Credit Union estimates that the cost structures in its departments are as follows:
Refer to the facts in Problem 11-49. BluStar estimates that the cost structure in its operations is as follows:
Using the reciprocal method spreadsheet (shown in Exhibit 11.21), show the costs allocated to production for Steamco. Use the data in Problem 11-52.Exhibit 11.21:Data From Exercise 22-52:Steamco is
Refer to the facts in Exercise 11-45. After the publication of recent scientific test results, the government has banned the sale of product KC. IF KC is produced, it must be disposed of in an
Refer to the facts in Exercises 11-42 and 11-43.RequiredWhich, if any, of the four products would you recommend Deming & Sons sell at split-off (and not process further)? Explain. Does your
Refer to the facts in Exercise 11-42.RequiredAssuming that total joint costs of $384,000 were allocated using the physical quantities method, what joint costs were allocated to each product?Data From
Refer to the facts in Exercise 11-28. University Printers estimates that the variable costs in the Personnel Department total $7,000 and in the Maintenance Department variable costs total $3,000.
Refer to the facts in Exercise 11-26. Caro estimates that the variable costs in the Maintenance Department total $14,500, and in the Cafeteria variable costs total $16,000. Avoidable fixed costs in
Refer to the data for University Printers in Exercise 11-28.RequiredAllocate the service department costs using the reciprocal method. (Matrix algebra is not required because there are only two
Refer to the data for University Printers in Exercise 11-28.RequiredAllocate the service department costs using the step method, starting with the Maintenance Department. What effect does using this
What is a limitation of the direct method of allocating service department costs?
Refer to the data in Problem 16-53. Prepare a profit variance analysis for Brahms & Sons like the one in Exhibit 16.5.Exhibit 16.5:
Refer to the data in Problem 16-53. Prepare a sales activity variance analysis for Brahms & Sons like the one in Exhibit 16.4.Exhibit 16.4:
Refer to the data in Problem 16-50. Prepare a sales activity variance analysis for Odessa, Inc., like the one in Exhibit 16.4.Exhibit 16.4:
Find Data for Profit Variance Analysis RequiredFind the values of the missing items (a) through (x). Assume
Find Missing Data for Profit Variance Analysis RequiredFind the values of the
Refer to the data in Exercise 16-39. Management would like to see results reported graphically.RequiredPrepare a graph like that shown in Exhibit 16.14.Exhibit 16.14:
The following data reflect the current month’s activity for Vickers Corporation: Variable overhead is applied based on
Use the information from Exercise 16-27 to prepare a profit variance analysis for Osage, Inc., like the one in Exhibit 16.5.Exhibit 16.5:
Refer to the data in Exercise 16-27. Prepare a sales activity variance analysis for Osage, Inc.,like the one in Exhibit 16.4.Exhibit 16.4:Data From Exercise 16-27:Osage, Inc., manufactures and sells
Refer to the data in Exercises 16-21 and 16-22. Prepare a profit variance analysis like the one in Exhibit 16.5.Exhibit 16.5:Data From Exercise 16-21:The master budget at Western Company last period
Refer to the data in Exercise 16-21. Prepare a sales activity variance analysis like the one in Exhibit 16.4.Exhibit 16.4:
Refer to Integrative Case 9-65 in Chapter 9. Assume that all of the facts in Case 9-65 still hold except that the practical capacity of the machinery is 20,000 hours instead of 10,000
Refer to Problems 10-59 and 10-60. In discussing their business, Cathy and Tom realize that there are really three seasons instead of two, the third being the fall and spring (as a combined season).
Refer to the information in Problem 10-59. The ice cream business has two seasons, summer and winter. Each season lasts exactly six months. Chuck’s orders 4,500 gallons in the summer and 4,500
Consider the information in Problem 10-56. The sales manager of Red Oak Chemicals has proposed to the purchasing manager at JFI that Red Oak be given an exclusive contract to supply the feedstock. If
JFI Foods produces processed foods. Its basic ingredient is a feedstock that is mixed with other ingredients to produce the final packaged product. JFI purchases the feedstock from two suppliers, Rex
Using the costs calculated in Exercise 10-48, construct a cost of quality report for year 1 and year 2.Data From Exercise 10-48:Nuke-It-Now manufactures microwave ovens. The following represents the
Using the costs calculated in Exercise 10-46, construct a cost of quality report for March and April.Data From Exercise 10-46:The following represents the financial information for Domingo
Refer to Exercise 10-40. Sales revenue totaled $240,000.a. Prepare a traditional income statement like the one in Exhibit 10.10.b. Prepare an activity-based income statement like the one in Exhibit
Refer to Exercise 10-38. Sales revenue from finishing totaled $30,000.Requireda. Prepare a traditional income statement like the one in Exhibit 10.10.b. Prepare an activity-based income statement
Refer to the data in Exercise 10-36.Requireda. Assume all else remains the same. What bid by Tappan would make Kinnear indifferent between buying from Tappan or Hill?b. Why, given the information, do
Refer to the data in Exercise 10-34.RequiredAssume all else remains the same. What percentage of late deliveries by Milan would make Hult indifferent between buying from Milan Components and Dundee
Refer to the data in Exercise 10-30.Requireda. How can RSB&T use the information from the activity-based costing analysis to manage its costs?b. What does RSB&T need to consider before
Consider the following actions of a hotel chain trying to manage the costs of its check-in process.RequiredMatch each of the process improvements listed with how it delivers cost reductions.
Under what conditions should the cost of excess capacity be assigned to products or customers? When should excess capacity costs not be assigned to products or customers?
Refer to Case 9-63. Jean Sharpe decides to gather additional data to identify the cause of overhead costs and figure out which products are most profitable. She notices that $30,000 of the overhead
Refer to Problem 9-49. Assume that you have prepared financial statements that show the operating profit for each of the two toys manufactured by Pepper’s Products. Further assume that under the
Refer to the facts in Problem 8-51.Requireda. Prepare a production cost report; the company uses weighted-average process costing.b. Show the flow of costs through T-accounts. Assume that current
Refer to the facts in Problem 8-48.Requireda. Prepare a production cost report using FIFO.b. Answer requirement (b) in Problem 8-48.Data From Problem 8-48:Kansas Supplies is a manufacturer of plastic
Refer to the facts in Problem 8-48.Requireda. Prepare a production cost report using FIFO.b. Answer requirement (b) in Problem 8-48.Data From Problem 8-48:Kansas Supplies is a manufacturer of plastic
Refer to the information in Exercise 8-41.Requireda. Prepare a production cost report using the FIFO method.b. Is the ending inventory higher using FIFO or the weighted-average method? Why?c. Would
Yarmouth Company produces a liquid solvent in two departments: Mixing and Finishing. Accounting records at Yarmouth show the following information for Finishing operations for February (no new
Refer to the data in Exercise 8-35. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. Is the ending inventory higher or lower under the
Refer to the data in Exercise 8-35. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. Is the ending inventory higher or lower under the
Refer to the data in Exercise 8-35. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.Data from Exercise 8-35:Pacific Ink had beginning
Refer to the data in Exercise 8-35. Compute the costs of goods transferred out and the ending inventory using the weighted-average method.Data from Exercise 8-35:Pacific Ink had beginning
Refer to the data in Exercises 8-31 and 8-33. Compute the cost of goods transferred out and the ending inventory using the FIFO method.Data From Exercise 8-31:The Matsui Lubricants plant uses the
Using the data in Exercise 8-31, compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method.Data From Exercise 8-31:The Matsui Lubricants plant uses the
Refer to the data in Exercise 8-31. Compute the cost of goods transferred out and the ending inventory using the weighted-average method.Data From Exercise 8-31:The Matsui Lubricants plant uses the
Refer to the data in Exercise 8-28. Cost data for November show the following:
Materials are added at the beginning of the production process at Campo Company. Campo uses a FIFO process costing system. The following information on the physical flow of units is available for the

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