Questions and Answers of Fundamentals Cost Accounting

Why is performance measurement an important component of a management control system in a decentralized organization?
What does decentralization mean in the context of a management control system?
Imperial Mining is a coal company that produces three grades of coal—High, Medium, and Low—in fixed proportions. The joint costs of mining total $1,500,000. In a typical month, the company will
Gipps Business College (GBC) has two degree programs, undergraduate (UG) and graduate (GRAD) and three service departments, information technology (IT), Event Planning (EP), and Career Services (CS).
Model, Inc., produces model automobiles made from metal. It operates two production departments, Molding and Painting, and has three service departments, Administration, Accounting, and Maintenance.
Trans-Pacific Lumber runs a mill in the Northwest that produces two grades of lumber, A and B, and a by-product, sawdust. The company chooses to allocate the costs on the basis of the physical
Refer to the facts in Exercise 11-51. 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
The following questions relate to Kyle Company, which manufactures products KA, KB, and KC from a joint process. Joint product costs were $189,000. Additional information follows. Requireda.
GG Products, Inc., prepares tips and stems from a joint process using asparagus. It produced 215,000 units of tips having a sales value at the split-off point of $75,600. It produced 215,000 units of
Refer to the data in Exercise 11-41, suppose that Oak View Chemicals uses the physical quantities method to allocate joint costs and the revenues from by-products are credited to joint
Oak View Chemicals produces two main products, M-10 and M-20, and one by-product, B-60, from a single input, Chem-X. Products M-10 and M-20 can either be sold at split-off or processed further and
Refer to Exercises 11-29, 11-31, and 11-34 (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
Refer to the data for Bens Corporation in Exercise 11-35.RequiredUse the reciprocal method to allocate the service department costs to the production departments. (Matrix algebra is not
Refer to the data for Bens Corporation in Exercise 11-35.RequiredUse the step method to allocate the service department costs to the production departments. Allocate HR costs first, followed by IT,
Bens Corporation has three service departments (Repairs, HR, and IT) and two production departments (M1 and M2). The following usage data for each of the service departments for the previous period
Refer to the data for University Printers in Exercise 11-29.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 11-29.RequiredAllocate the service department costs using the step method, starting with the Maintenance Department. What effect does using this
University Printers has two service departments, Maintenance and Personnel, and two operating departments, Printing and Developing. Management has decided to allocate maintenance costs on the basis
Wyoming Parts has collected information on overhead costs and unit output for the past 12 months, reported here. Requireda. Draw a scattergraph relating overhead costs to the number of units.b.
Consider a firm with three service departments (S1?S3) with a pattern of usage as follows: That is, service department S2 uses 10 percent of the service from S1, service department S3 uses 30
What is a limitation of the step method of allocating service department costs?
Consider the information in Problem 10-62. The sales manager of Kilda Corporation has proposed to the purchasing manager at RCC that KC be given an exclusive contract to supply the aggregate. Assume
Roscoe Construction Company (RCC) is a company specializing in building roads and highways. As a part of its business, it receives supplies of aggregate from two suppliers: Toorak Gravel (TG) and
SkiBlu, Ltd., divides its customers into Gold customers and Silver customers. The company has one full-time customer representative per 1,000 Gold customers and one full-time customer representative
Curt’s Casting manufactures metal parts in a large manufacturing facility. Curt’s customers order 50,000 tons of castings each quarter. The facility has a practical capacity of 80,000 tons. Curt
Berkeley Bank reports the following information about resources in two functions. RequiredCompute unused resource capacity at Berkeley Bank. Cost Driver Rate Cost Driver Volume Resources used:
The Purchasing Department at Arnold & Daughters reports the following information about resources. RequiredCompute unused resource capacity in the Purchasing Department at Arnold &
Refer to the data in Exercise 10-38.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
Kinnear Plastics manufactures various components for the aircraft and marine industry. Kinnear buys plastic from two vendors: TappanCorporation and Hill Enterprises. Kinnear chooses the vendor based
Lygon Food Distributors (LFD) hired a consultant to update its system for reporting the cost of customers. The consultant showed Anjana Malik, the owner of LFD, an analysis that indicates that
Consider the Business Application, “Filling Excess Capacity ‘below Cost’.” As noted there, the determination of cost depends on the way in which costs of delivery services are allocated to
Cathy, the manager of Cathy?s Catering, Inc., uses activity-based costing to compute the costs of her catered parties. Each party is limited to 20 guests and requires four people to serve and clean
Refer to the information in Exercise 9-38.Requireda. Compute the unit costs for the two products, V-1 and V-2, using the current costing system at Upriver (using machine hours as the allocation
Upriver Parts manufactures two products, V-1 and V-2, at its River Plant. Selected data for an average month for the two products follow. Production at the plant is automated and any labor cost is
Consider the Business Application, “What Are a Hospital’s Costs?” The article provides information on the cost per minute in three areas of the hospital: emergency room, intensive care unit,
The cost accounting manager at your business says that he is trying to choose between a job costing system and an ABC system. How would you respond?
In the context of time-driven ABC, what are time equations?
Refer to the data in Exercise 8-48. The marketing manager cannot believe that the controller wants to treat all bicycles the same. He says that in order to understand where to target marketing
Refer to the data in Exercise 8-48. The plant controller believes that keeping track of the three models and separating costs in the Assembly and Customization Departments is not worth the time and
Coastal Cycles makes three models of electric bicycles: E20, E35, and E60.The models differ by the size of the battery and the quality of the components. The bicycles are produced in two departments.
Refer to the data in Exercise 8-24. Suppose that GP Industries uses FIFO process costing at Plant #2 for product costing.RequiredThe following equivalent units (materials; conversion) used to compute
The following data are taken from the production records at Plant #2 of GP Industries for March. Work-in-process beginning inventory consisted of 10,000 units fully complete with respect to materials
Consider a manufacturing firm with multiple departments all using continuous production processes and process costing. Suppose Department A transfers product to Department B for completion to the
Which method, weighted-average or FIFO, better reflects the current cost of production when using process costing?
Wabash Products uses a job costing system and applies overhead based on direct labor cost. Last year, manufacturing overhead was expected to be $2,400,000 and direct labor cost was estimated to be
Pepper Products uses a job costing system. The company applies manufacturing overhead using a predetermined rate based on direct materials. The following debits (credits) appeared in Work-in-Process
Cook Contractors is a general construction company with a wide variety of projects. Budgeted and actual (to date) results (in thousands of dollars) for a building project follow. Requireda. At this
Spot Construction builds roads, bridges, and other infrastructure. The following is the budget for a road project along with the actual results (in thousands of dollars) for the last fifteen
Mary?s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August. Mary?s applies overhead to production at a predetermined rate of 80
Refer to the information in Exercise 7-31. Prepare an entry to allocate the over- or underapplied overhead. Overhead applied in each of the inventoryaccounts is as follows.Work-in-process inventory
Yarra Fabrication estimates that its manufacturing overhead will be $2,240,000 in year 1. It further estimates that direct material costs will amount to $1,400,000. During July, Yarra worked on four
Consider the Business Application, “Assessing Product Profitability for Products with Large Development Expenses and Long Product Lives.” What estimates can the manager make that affect the
Refer to the information in Exercise 6-43 and Problem 6-57. SMI thought that maybe there should be three types of administrative costs. They felt that some of the costs in the User-related pool were
Refer to the information in Exercise 6-43 for Social Media, Inc. (SMI). The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product
Channing Corporation makes two products (A1 and B2) that require direct materials, direct labor, and overhead. The following data refer to operations expected for next month. RequiredChanning uses
Consider the cost allocation system used at Sandia Custom Furniture and illustrated in Exhibit 6.9. RequiredThe system is referred to as a two-stage cost allocation system, because:a. There are
Refer to the data in Exercise 6-43.Requireda. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the engineering cost to allocate
Refer to the data in Exercise 6-43.Requireda. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the engineering hours to allocate
Refer to the data in Exercise 6-43.Requireda. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the revenue to allocate administrative
Social Media, Inc. (SMI), has two services for users. Toot!, which connects tutors with students who are looking for tutoring services, and TiX, which can be used to buy, sell, or exchange event
Enviro Corporation manufactures a special liquid cleaner at its Green plant.Operating data for June follow.Materials ...........................$2,142,000Labor
Fill in the missing items for the following inventories. Beginning balance $ 30,000 $102,000 $ 12,000 Ending balance Transferred in 114,000 22,000 108,000 210,000 Transferred out 127,000 815,000
Fill in the missing items for the following inventories. A B Beginning balance $39,000 $21,300 Ending balance Transferred in $50,000 32,000 18,600 66,000 52,000 Transferred out 54,000 70,000
What is two-stage cost allocation?
Ideally, what does an allocation base reflect between the overhead cost and the activity (production of a product, for example)?
Park Company manufactures high-technology testing instruments. The instruments are complex and not many units of any particular model are sold. The last unit of model MF-59 sold was the eighth off of
St. Kilda Enterprises produces parts for the electronics industry. The production manager and cost analyst reviewed the accounts for the previous month and have provided an estimated breakdown of the
Refer to the Business Application, “Understanding Fixed and Variable Costs for Online Sales.” Consider a bank that offers both online and branch access for customers. Based on the costs of
A manager asks you for a cost estimate to open a new retail outlet and says, “I want you to use statistical analysis, so it will be based on real data and therefore objective.” How might you
What are some complications that can arise when collecting data for cost estimation?
Why is it important to incorporate learning into cost estimates?
What are three practical implementation problems when using regression analysis to estimate costs?
Refer to the information in Problem 4-75.Requireda. A local engineering firm claims it can revise the production process such that product X-2 only requires 1.6 machine hours on the shared machine.
?Clarke Corporation manufactures three products (X-1, X-2, and X-3) utilizing, in one of the processes, a single machine for all products. Data on the individual products follow. The single machine
Bubble Company produces a variety of bottles from recycled plastic. The company has one particular machine on which it can produce either of two types of water bottles, 1-liter bottles or 1/2-liter
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. Monthly capacities and
Refer to the details in Problem 4-62.RequiredWhat are the issues, ethical and otherwise, that arise with the product manager’s suggestion?Problem 4-62Metal
DBU Systems manufactures testing equipment for the communications industry. In developing a new device for maritime communication, the design group has estimated the following unit costs.Metal
Reunion Enterprises is considering a new video streaming device for homes. The analyst has collected some information about the product design summarized as follows.Prime cost per unit
Innerspace, Inc., produces drones. The market research department at Innerspace, Inc., gets an idea to market the drone technology, which is a small computer, to the auto industry for use in
Polar Industries makes refrigerators. Polar’s management wants to market refrigerators to students in dorm rooms and small apartments by making a compact refrigerator. The competition, led by
Christine?s Chronographs makes two models of a high-end watch?the model 94 and the model 101. Both models go through a special polishing step that requires the use of the single polishing machine at
Pappy?s Toys makes two models of a metal toy?Standard and DeLuxe. Both models are produced on a single machine. The price and costs of the two models appear as follows. The one machine that used to
Andreasen Corporation manufactures thermostats for office buildings. The following is the cost of each unit.Materials
Consider the Business Application item, “Take-Back Laws and Product Design.” What are the major differential costs between the two strategies discussed in the item (change product design versus
Consider the Business Application item, “Cost-Volume-Profit Analysis and On-Demand Services” in Chapter 3. When the executive says, “If we turn it over X amount of times, per-unit it becomes
What costs should be considered for a special order?
Refer to the Business Application discussion of accounting choices. In the case of Tesco, managers made choices about the timing of revenues and expenses that led to fraud charges. In order to avoid
Will studying cost accounting increase the chances that The AM Bakery will succeed? How? Will it guarantee success? Explain.
Hostess Brands makes a variety of baked goods just like The AM Bakery. In what ways are the cost accounting issues the same? In what ways are they different?
An airline executive asks you, “How would you calculate the cost of a passenger?” What will be your first question to the manager?
Who are the customers of cost accounting?
State University Business School (SUBS) offers several degrees, including Bachelor of Business Administration (BBA). The new dean believes in using cost accounting information to make decisions and
Refer to the information in Exercise 1-31. The dean of the Business School is considering expanding the BBA program by offering an evening program in a nearby city. The new evening program would be
You have been asked by two of your friends, Marco and Jenna, to settle a (friendly) argument they are having about splitting the cost of a road trip during spring break. They will take Jenna’s car
KC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels
Gilman?s Caf? is a popular restaurant in a local tourist town. Sarah Gilman, who opened the restaurant five years ago, has seen it grow steadily.Currently, Gilman?s is only open for dinner, but many
The cost accountant for Angie’s Apparel has compiled the following information for last month’s operations.Administrative costs ..................................$ 42,000Merchandise inventory,
Is “cost-of-goods sold” an expense? Is “cost-of-goods” a product cost or a period cost?
Palmetto Computer Shop is a small business located on the South Carolina coast. It specializes in computer repair and is known in the area for fast, reliable, and friendly service. Jeff Branson, the

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