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Principles Of Accounting Volume 2 Chapters 12-25 1st Edition Robert Libby, Patricia Libby, Fred Phillips, Stacey Whitecotton - Solutions

E21-4 Determining Cost Behavior and Preparing Contribution Margin Income Statement Paddle Away, Inc., makes one model of wooden canoe. Partial information for it follows. Number of canoes produced and sold Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed
E21-3 Analyzing Mixed Costs Using High-Low Method and Scattergraph Aspen, Inc., manufactures one model of computer desk. The following data are available regarding units shipped and total shipping costs. Month Number of Units Shipped Total Shipping Cost January 30 $3,600 February 60 2,300 March 40
E21-2 Analyzing Mixed Costs Using Scattergraph Method Refer to the information in E21-1 regarding Valley Dental. 1. Create a scattergraph using Valley’s activity and cost information and draw a line on the graph that you believe has the best fit. 2. Using this graph and best fitting line,
E21-1 Analyzing Mixed Costs Using High-Low Method Valley Dental Services is a specialized dental practice whose only service is filling cavities. Valley has identified the following monthly costs. Month Number of Cavities Filled Total Cost January 625 $2,800 February 700 2,900 March 500 2,100 April
M21-3 Preparing a Scattergraph Taylor’s Tan-O-Rama is a local tanning salon. The information below reflects Taylor’s number of appointments and total costs for the first half of the year: Month Number of Appointments Total Cost January 500 $5,400 February 600 5,900 March 1,000 6,700 April 450
M21-2 Identifying Cost Behavior Steve’s Snow Cones is a small refreshment stand located near a football stadium. Steve’s fixed expenses total $300 per week, and the variable cost per snow cone is $0.35. Complete the following table for the various levels.
M21-1 Identifying Cost Behavior Martha Trent is trying to prepare a budget and has come up with the following list of monthly costs. Identify each cost as fixed, variable, or mixed. Indicate a possible cost driver for any variable or mixed cost. 1. Rent. 2. Utilities. 3. Car payment. 4. Telephone.
M21-10 Identifying Margin of Safety Refer to the information in M21-9 for Theodora Patel. If Theodora sells 275 bears next month, what is the margin of safety in number of units? What is the margin of safety in sales dollars and as a percentage of sales?
M21-9 Calculating Target Profit Theodora Patel makes stuffed teddy bears. Recent information for her business follows. Selling price per bear $ 25.00 Total fixed cost per month 1,500.00 Variable cost per bear 15.00 If Theodora wants to earn $1,250 profit next month, how many bears will she have to
M21-8 Calculating Break-Even Point Refer to the information for Lezoli Enterprises in M21-7. If the company’s fixed costs total $6,660 this year, determine how many clocks Lezoli must sell to break even.
M21-7 Calculating Contribution Margin and Contribution Margin Ratio Lezoli Enterprises sells handmade clocks. Its variable cost per clock is $6, and each clock sells for $15. Calculate Lezoli’s contribution margin per unit and contribution margin ratio. Suppose Lezoli sells 2,000 clocks this
M21-6 Preparing a Contribution Margin Income Statement Following is relevant information for Sunsplash Smoothie Shop, a small business that serves fruit drinks. Total fixed cost per month $1,200.00 Variable cost per drink 1.25 Sales price per drink 4.75 During the month of June, Sunsplash sold 500
M21-5 Analyzing Mixed Costs Using High-Low Method Wendy’s Widgits builds the world’s best widgits. The information for the last eight months of Wendy’s operations follows. Month Number of Widgits Produced Total Cost January 4,000 $7,000 February 2,250 5,000 March 3,500 6,250 April 4,300 7,750
M21-4 Analyzing Mixed Costs Using High-Low Method Refer to the Tan-O-Rama data in M21-3. Using the high-low method, calculate the fixed cost per month and the variable cost per tanning appointment. How does the estimate of fixed cost compare to what you estimated in M21-3?
M21-3 Preparing a Scattergraph Taylor’s Tan-O-Rama is a local tanning salon. The information below reflects Taylor’s number of appointments and total costs for the first half of the year: Month Number of Appointments Total Cost January 500 $5,400 February 600 5,900 March 1,000 6,700 April 450
M21-2 Identifying Cost Behavior Steve’s Snow Cones is a small refreshment stand located near a football stadium. Steve’s fixed expenses total $300 per week, and the variable cost per snow cone is $0.35. Complete the following table for the various levels.Number of snow cones 500 1,000 1,500
M21-1 Identifying Cost Behavior Martha Trent is trying to prepare a budget and has come up with the following list of monthly costs. Identify each cost as fixed, variable, or mixed. Indicate a possible cost driver for any variable or mixed cost. 1. Rent. 2. Utilities. 3. Car payment. 4. Telephone.
10. Hathaway Corp. manufactures garden hoses. Last month its ending inventory level increased. In comparing absorption costing to variable costing,a. Both would show the same amount of profit.b. Variable costing would show more profit.c. Absorption costing would show more profit.d. Effect on income
9. Which of the following statements about a CVP graph is true?a. Total revenue is a downward-sloping line.b. Break even is the point at which the total revenue and total cost lines intersect.c. The dollar value of sales revenue and total cost are plotted on the horizontal (X) axis.d. The total
8. Refer to the information in question 7 above. Suppose Happy Camper decides to lower its selling price to $27. How many sleeping bags must it sell to match last month’s profit?a. 585.c. 780.b. 375.d. 130.
7. Various information for Happy Camper Co., which makes sleeping bags, follows. Selling price per bag $ 30 Total fixed cost per month 2,250 Variable cost per bag 21 Last month’s profit 1,260 How many sleeping bags did the company sell last month?a. 159.c. 140.b. 250.d. 390.
6. Recent information for Shady Co., which makes automobile sunscreens, follows. Selling price per screen $ 18 Total fixed cost per month 1,225 Variable cost per screen 7 If Shady wants to earn $1,250 profit next month, how many screens must it sell?a. 109.c. 186.b. 136.d. 225.
5. Whistler Co. sells one model of radio. Suppose its cost per radio is $125 and its total fixed costs are $4,130. Each radio sells for $195. How many radios must Whistler sell to break even?a. 33.c. 45.b. 21.d. 59.
4. Bombay Co. sells handmade rugs. Bombay’s variable cost per rug is $30 and each rug sells for $50. What are Bombay’s contribution margin per unit and contribution margin ratio?a. $20 and 40 percent.c. $20 and 60 percent.b. $30 and 60 percent.d. $30 and 40 percent.
3. Consider the following information for a local concession stand’s first four weeks of operation:Week Drinks Served Total Cost 1 1,000 $2,500 2 2,000 3,250 3 1,750 3,000 4 2,250 3,200 Using the high-low method, what is the equation for total operating cost for this concession stand?a. Operating
2. Which of the following is not a method used to separate mixed costs?a. Regression analysis.c. High-low method.b. Break-even analysis.d. Visual fit method.
1. Which of the following would increase when the activity level increases?a. Total variable cost.b. Total fixed cost.c. Total mixed cost.d. Both a and c.
22. When will variable costing show the same income as absorption costing? When will they be different and why?
21. Explain the difference between absorption costing and variable costing. Why do internal users need variable costing?
20. Explain margin of safety. Why is it important for managers to know their margin of safety? Give an example of a company to which margin of safety is particularly important.
19. Your supervisor has requested that you prepare a CVP graph for your company’s product but does not understand its meaning or how changes would affect the graph. Explain to your supervisor how your graph would be affected by:a. an increase in the selling price.b. a decrease in variable cost
18. Why is it important for managers to create a CVP graph?
17. Explain the difference between break-even analysis and target profit analysis.
16. Bert Company and Ernie Company are competitors in the same industry. The companies produce the same product and have the same amount of fixed costs and the same selling price per unit. However, Bert has higher variable cost per unit. Compare the break-even point of each company.
15. Apple Company and Baker Company are competitors in the same industry. They produce the same product and have similar variable costs per unit and selling prices, but Baker has more fixed costs. Explain the impact of this on the break-even point of each company.
14. Explain the difference in calculating the break-even point in units and in dollars. How can one be used to doublecheck the other?
13. A company’s cost structure can have a high proportion of fixed costs or a high proportion of variable costs. Which cost structure is more vulnerable to decreases in demand? Why?
12. Why is it important for a company to know its breakeven point? What happens to the break-even point if variable cost per unit decreases? If total fixed cost increases?
11. When activity level increases, explain what happens to:a. Contribution margin per unit.b. Contribution margin ratio.c. Total contribution margin.d. Total fixed cost.e. Profit.
10. Explain how to calculate total contribution margin, contribution margin per unit, and the contribution margin ratio. What is the meaning of each?
9. Why is a contribution margin income statement more useful to managerial decision makers than an income statement intended for external users?
8. Describe the three methods of analyzing mixed costs. What are the strengths and weaknesses of each method? Will these methods always yield the same results?
7. Why is a scattergraph useful?
6. The formula for analyzing mixed costs is Y = A + B(X). Explain what each component represents.
5. Why is separating the fixed and variable components of a mixed cost important? What might happen if that is not done?
4. Why is the relevant range important in cost-volume-profit analysis?
3. What are the key assumptions of cost-volume-profit analysis? Why are they important?
2. When activity level decreases, explain what happens to:a. Total fixed cost.b. Total variable cost.c. Total mixed cost.d. Fixed cost per unit.e. Variable cost per unit.f. Mixed cost per unit.
1. Explain the difference between variable cost, fixed cost, step cost, and mixed cost, and give an example of each.
CP20-3 Researching Companies That Have Implemented Activity Based Costing Required: Review recent issues of business publications (e.g., BusinessWeek, The Wall Street Journal) for information about companies that have implemented activity based costing. Choose one company to research in detail and
CP20-2 Evaluating the Implications of Process Costing in a Service Industry Overnight package delivery is a multimillion dollar industry that has grown steadily since it began. The four largest carriers are the US Postal Service (USPS), Federal Express (FedEx), United Parcel Service (UPS), and
CP20-1 Researching Companies That Use Process Costing Consider the many different manufactured products a person might use or consume in a typical day, everything from toothpaste to a custom-made Harley Davidson motorcycle. Required: Choose three items that you use regularly and whose manufacturer
PB20-5 Calculating Activity Rates and Assigning Costs to Products in ABC Wayward Company makes two models of automobile navigation systems, the SeldomLost and the NeverLost. Information for Wayward follows. SeldomLost NeverLost Direct materials cost per unit $ 92 $ 115 Direct labor cost per unit $
PB20-4 Recording Manufacturing Costs and Preparing a Process Costing Production Report (Weighted Average) ( Supplement ) Refer to the information in PB20-3 for Firelight Company. Required: Complete all requirements for PB20-3 using the weighted average method.
PB20-3 Recording Manufacturing Costs and Preparing a Process Costing Production Report (FIFO) Firelight Company makes camping tents in a single production department. All direct materials are added at the beginning of the manufacturing process. Information for the month of July follows. Beginning
PB20-2 Preparing a Process Costing Production Report (Weighted Average) ( Supplement ) Refer to the information about Zoinks Inc. in PB20-1. Required: Complete all requirements for PB20-1 using the weighted average method.
PB20-1 Preparing a Process Costing Production Report (FIFO) Zoinks Inc. produces a popular brand of energy drink. It adds all materials at the beginning of the manufacturing process. The company has provided the following information. Beginning work in process (30% complete) 20,000 units Direct
PA20-5 Calculating Activity Rates and Assigning Costs to Products in ABC Gutierrez Company makes two models of children’s playhouses, the Castle and the Mansion. Information for Gutierrez follows. Castle Mansion Direct materials cost per unit $45 $72 Direct labor cost per unit $23 $35 Sales price
PA20-4 Recording Manufacturing Costs and Preparing a Process Costing Production Report (Weighted Average) (Supplement) Refer to the information in PA20-3 for Seemore Company. Required: Complete all requirements for PA20-3 using the
PA20-3 Recording Manufacturing Costs and Preparing a Process Costing Production Report (FIFO) Seemore Company makes camping lanterns using a single production process. All direct materials are added at the beginning of the manufacturing process. Information for the month of March follows. Beginning
PA20-2 Preparing a Process Costing Production Report (Weighted Average) ( Supplement ) Refer to the information for Boxer Corporation in PA20-1. Required: Complete all requirements for PA20-1 using the weighted average method.
PA20-1 Preparing a Process Costing Production Report (FIFO) Boxer Corporation manufactures metal toolboxes. It adds all materials at the beginning of the manufacturing process. The company has provided the following information. Beginning work in process 40,000 units Direct materials (30% complete)
E20-9 Calculating Activity Rates and Assigning Costs to Products in ABC Refer to the activity pool, cost driver, and activity rate information given in E20-8. Suppose Matson has compiled the following information for its deluxe floor mat line. Activity Cost Driver for Deluxe Floor Mat Line 60 moves
E20-8 Calculating Activity Rates and Assigning Cost to Products in ABC Matson Corp. manufactures automobile floor mats. It currently has two product lines, standard and deluxe. Matson has identified the following information about its overhead activity pools and the standard product line.Activity
E20-7 Calculating Activity Rates and Assigning Costs to Products in ABC Titan Corp. has identified the following information about its cost pools and cost drivers. Cost pools Materials handling $40,000 Machine maintenance 25,500 Cost drivers Number of material moves 800 Number of machine hours
E20-6 Calculating Equivalent Units, Cost per Equivalent Unit, and Reconciling the Cost of Work in Process (Weighted Average) ( Supplement ) Refer to E20-5 for information regarding Raindrop Company. Required: Using the weighted average method, complete each of the following steps: 1. Reconcile the
E20-5 Calculating Equivalent Units, Cost per Equivalent Unit, and Reconciling the Cost of Work in Process (FIFO) Raindrop Company manufactures umbrellas and has the following information available for the month of May.Work in process, May 1 (100% complete for materials, 90% for conversion) 72,000
E20-4 Calculating Equivalent Units, Cost per Equivalent Unit and Reconciling the Cost of Work in Process (Weighted Average) ( Supplement ) GoFly Company manufactures kites and has the following information available for the month of April. Work in process, April 1 (100% complete for materials, 40%
E20-3 Calculating Equivalent Units, Cost per Equivalent Unit and Reconciling the Cost of Work in Process (FIFO) GoFly Company manufactures kites and has the following information available for the month of April. Work in process, April 1 (100% complete for materials, 40% for conversion) 26,000
E20-2 Recording Manufacturing Costs in Process Costing Rock-On Company produces wooden rocking chairs. The company has two sequential production departments, Cutting and Assembly. The wood is cut and sanded in Cutting, and then transferred to Assembly to be assembled and painted. From Assembly, the
E20-1 Recording Manufacturing Costs in Process Costing Forrest Co. makes wooden tables. Required: Prepare the journal entries to record each of the following transactions.a. Purchased $20,000 of raw materials on credit.b. Issued $18,000 of direct materials into production.c. Applied $47,500 of
M20-8 Calculating Cost per Equivalent Unit (Weighted average) (Supplement) Refer to M20-4 for information regarding Incontro Company. Using the weighted average method, calculate Incontro’s cost per equivalent unit for materials and conversion during December.
M20-7 Calculating Physical Units and Equivalent Units (Weighted Average) (Supplement) Refer to M20-3 for information regarding Bedford Company. Using the weighted average method, reconcile the number of physical units and calculate the number of equivalent units.
M20-6 Calculating Activity Rates and Assigning Costs to Products in ABC Newkirk Co. has identified one of its cost pools to be quality control and assigned $50,000 to that pool. The number of inspections has been chosen as the cost driver for this pool. Newkirk performs 25,000 quality control
M20-5 Classifying Activities in ABC For each of the following activities, indicate the appropriate category (unit, batch, product, customer, or facility level) and suggest a possible cost driver for each pool. 1. Factory utilities. 2. Machine setups. 3. Research and development for a new product.
M20-4 Calculating Cost per Equivalent Unit (FIFO) Incontro Company manufactures file cabinets. The following cost information is available for the month of December. Beginning work in process Direct materials $ 34,000 Conversion cost 62,000 December costs Direct materials 68,000 Conversion cost
M20-3 Calculating Physical Units and Equivalent Units (FIFO) Bedford Company produces carrying cases for CDs. It has compiled the following information for the month of June. Physical Units Percent Complete for Conversion Beginning work in process 35,000 55% Ending work in process 46,000 70 Bedford
M20-2 Calculating Physical Units For each of the following independent cases (A–D), compute the missing value in the table. Case Beginning Units Units Started Units Completed Ending Units A 400 2,300 1,650 ? B 1,200 800 ? 1,600 C ? 750 1,230 2,560 D 345 ? 900 680
M20-1 Calculating Physical Units Roundtree company had 575 units in work in process on January 1. During the month, Roundtree completed 2,400 units and had 1,000 units in process on January 31. Determine how many units Roundtree started during January.
10. When calculating product cost using the weighted average method, which of the following amounts are combined?a. Ending finished goods and cost of goods sold.b. Beginning finished goods and cost of goods sold.c. Beginning work in process and beginning finished goods.d. Beginning work in process
9. The primary difference between FIFO and weighted average methods of process costing has to do with the treatment ofa. Beginning inventory.b. Ending inventory.c. Number of units started.d. Direct materials.
8. Which of the following is not a facility level activity?a. Maintenance on the factory building.b. Factory utilities.c. Research and development for a new product.d. Salaries for plant administration.
7. Taylor Company has an overhead rate for machine setups of $200 per setup. Last month, Product A had 40 setups and Product B had 70 setups. How much overhead did Taylor assign to each product?a. $11,000 to Product A, $11,000 to Product B.b. $8,000 to Product A, $14,000 to Product B.c. $4,000 to
6. Which of the following is a nonvolume-based allocation measure?a. Machine hours.b. Direct labor hours.c. Number of batches.d. Direct labor cost.
5. Masterson Company has calculated a cost per unit of $4 for materials and $8.50 for conversion to manufacture a specific product. Ending work in process has 1,000 units that are fully complete for materials and 70 percent complete for conversion. What amount will Masterson have as ending Work in
4. If Wilson Corp. has 450 units that are estimated to be 60 percent complete, how many equivalent units are there?a. 270.c. 100.b. 210.d. 450.
3. Suppose Shadow Company has 250 units in beginning inventory, 400 units started in production, and 175 units in ending inventory. How many units did Shadow complete?a. 25.c. 475.b. 325.d. Number cannot be determined.
2. Which of the following is most likely to use a process costing system?a. A company that builds and installs custom cabinetry.b. A company that makes one style of office chair.c. A janitorial service.d. A paving company.
1. The journal entry to record the issuance of direct materials into production includesa. A credit to cash.b. A debit to Work in Process Inventory.c. A credit to Finished Goods Inventory.d. A debit to Cost of Goods Sold.
19. What are the four steps of preparing a weighted average production report? Is this different than the steps used for a FIFO production report?
18. Is the weighted average method or FIFO method usually more accurate? Why?
17. How do the weighted average and the FIFO methods treat beginning inventory.
16. With ABC, why must costs be classified into different categories? What is the basis for these categories?
15. What are the four basic steps in ABC?
14. What are the advantages and disadvantages of an activity based costing system?
13. What is an allocation base? What is the difference between a volume-based allocation measure and a nonvolume-based allocation measure?
12. How does activity based costing differ from process costing in its assignment of overhead?
10. What does a credit to the Work in Process Inventory account represent? 11. What types of business might use activity based costing?
9. How can a unit be 100% complete with respect to materials, but only partially complete in terms of conversion effort?
8. Why must a company calculate equivalent units when using process costing?

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