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management cost accounting

Cost Accounting 1st Edition K. Alex - Solutions

2-4 Define the following: direct materials, direct labor, indirect matertals, indirect labor,. factory overhead, prime cost, conversion cost.
2-5 Give at least four terms that may be substituted for the term factory overhead.
2-6 Distinguish among direct labor, indirect labor, overtime premium, and idle time.
2-7 What is the major difference between the balance sheets of manufacturers and merchandisers?
2-8 Distinguish between unexpired costs and expired costs. How are manufacturing costs classified in relation to the problem of income measurement?
2-9 “For purposes of income determination, insurance, depreciation, and wages should always be treated alike.” Comment.
2-10 Why is the term manufacturing expenses a misnomer?
2-11 “Cost of goods sold is an expense.” Do you agree? Explain.
2-12 Why is the unit-cost concept helpful in accounting?
2-14 Give three examples of variable factory overhead.
2-15 Distinguish between costing for inventory valuation and other purposes.
2-16 Give three examples of fixed factory overhead.
2-17 “Fixed costs are really variable. The more you produce, the less they become.”Do you agree? Explain.
2-18 “An action once taken cannot be changed by subsequent events.” What implications does this have for the cost accountant?
2-19 Why is overtime premium usually considered an indirect cost rather than direct?
2-20 Periodic or Perpetual Inventory Methods (SIA) ‘The terms feriodic and perpetual inventories are referred to frequently in presenting the accounting procedures that are followed by businesses in recording their business transactions in any given period of their operations. Discuss the
2-21 Unit Manufacturing Cost (SIA, adapted) The Toronto Manufacturing Company incurred the following costs for the month of May:Materials used:Direct materials $6,600 Indirect materials 1,200 Payroll costs incurred:Direct labor 6,000 Indirect labor 1,700 Salaries—production 2,400 administration
2-23 Statement of Cost of Goods Manufactured The Mondale Corporation has the following accounts (in millions of dollars): Selling and administrative expenses Work in process, December 31, 19.1 Factory supplies used Direct materials, December 31, 19_2 Factory utilities Finished goods, December 31,
2-25 Statement of Cost of Goods Manufactured The following items pertain to Sorter Corporation (in dollars):FOR YEAR 19_2 Work in process, Dec. 31, 19_2 2,000 Selling and administrative Finished goods, Dec. 31, 19_1 40,000 expenses (total) 70,000 Accounts receivable, Direct materials purchased
2-26 Interpretation of Statements Refer to the preceding problem. 1. How would the answer to the preceding problem be modified if you were asked for a schedule of cost of goods manufactured and sold instead of a schedule of cost of goods manufactured? Be specific. 2. Examine Exhibit 2-6. Would the
2-27 Answers from Incomplete Data The following accounts of a manufacturing company appeared in the balance sheets of December 31, 19_1, and Decem- ber 31, 19_2:DECEMBER 317, 19_1 DECEMBER 31, 19_2 Raw-material inventory $30,000 $46,000 Goods-in-process inventory 17,500 19,000 Finished-goods
2-28 Finding Unknown Balances For each of the cases in the list below, find the unknowns designated by letters.CASE 7 CASE 2 CASE 3 CASE 4 Finished-goods inventory, 1/1 $ 5,000 $ 4,000 $ 7,800 $ G Direct material used 8,000 6,000 3,600 5,000 Direct labor 13,000 11,000 8,000 6,000 Factory overhead
2-29 Fire Loss; Computing Inventory Costs A distraught employee, Fang W. Arson, put a torch to a factory on a blustery February 26. The resulting blaze completely destroyed the plant and its contents. Fortunately, certain accounting records were kept in another building. They revealed the following
2-30 Different Cost Classifications for Different Purposes A machining department has a number of cost accounts. Some accounts selected at random are repro- duced below. Use two columns to classify each account in two ways: Direct or Indirect Product Costs Variable or Fixed Costs D or I V or F An
2-31 Overtime and Fringe Costs A city printing department had a flurry of work during a particular week. The printers' labor contract provided for payment to workers at a rate of 150 percent of the regular hourly wage rate for all hours worked in excess of 8 per day. Anthony Bardo worked 8 hours on
2-32 Comprehensive Problem on Unit Costs, Product Costs, Variable and Fixed Costs, and Budgeted Income Statement The Fancher Company makes a single. product. Costs are as follows (V stands for variable; F, for fixed): Production in units Costs incurred: Direct material used Direct labor Power
3-1 Why is it more accurate to describe the subject matter of this chapter as costvolume-profit relationships rather than as breakeven analysis?Income Before Taxes II$234 =
3-2 Why is it often more desirable to plot fixed costs above the variable costs on a breakeven chart?
3-3 What are the principal differences between the accountant’s and the economist’s breakeven charts?
3-4 Define: contribution margin, variable-cost ratio, contribution-margin ratio.
3-5 “This breakeven approach is great stuff. All you need to do is worry about variable costs. The fixed costs will take care of themselves.” Discuss.
3-6 A lithographic company follows a policy of high pricing each month until it reaches its monthly breakeven point. After this point is reached, the company tends to quote low prices on jobs for the rest of the month. What is your opinion of this policy? As a regular customer, and suspecting this
3-7 Relationships in Chapter Illustration Refer to the initial toy-rocket example in the chapter.1. Suppose the unit purchase cost of rockets rises from 50¢ to 60¢, but the sales price is unchanged. What is the new breakeven point in units?2. Suppose the unit purchase cost of rockets declines
3-9 Exercises in Cost-Volume-Profit Relationships The Fresh Buy Grocers Corpora- tion owns and operates twelve supermarkets in and around Chicago. You are given the following corporate budget data for next year: Sales Fixed expenses Variable expenses $10,000,000 1,650,000 8,200,000 Compute expected
3-11 Extension of 3-10 Refer to part 4 of Problem 3-10. 1. Compute the point of indifference between a fixed-salary plan and a com- mission plan. That is, calculate the volume level in units where the profit under each plan would be equal. Above that volume level one plan would be more profitable
3-12 Sensitivity, Prediction Errors, and Inflation Refer to Problem 3-10. As president of Look Rite, you are concerned that inflation may squeeze your profits. Spe- cifically, you feel committed to the five-dollar selling price and fear that dilut- ing the quality of the packs in the face of rising
1. Suppose that the actual demand for the year is 48,000 packs and that you contracted for 50,000 packs. What is the net profit for the store? 2. If you had had perfect knowledge, you would have contracted for 48,000 rather than 50,000 packs. What would the net profit have been if you had ordered
3-14 Cost of Prediction Errors A company set a price for its product at $20 per unit. Predicted variable costs were $14 per unit. Expected sales were 100,000 units. Fixed costs for the year were expected to be $400,000.Compute the cost of the prediction error if: 1. All of the forecasts were
3-15 Prediction Error. Channels of Distribution Through the end of 19-3, Mavis Company, a television manufacturer, had always sold its products through dis- tributors. In 193 its sales were $50,000,000 and its net income was 10 percent of sales. Total fixed expenses (manufacturing and selling) were
3-16 Effects of Size of Machines The Dore Foods Company is planning to manu- facture doughnuts for its chain of coffee shops throughout the city. Two alter- natives have been proposed for the production of the doughnuts-use of a semiautomatic machine, or a fully automatic machine. The shops now
3-17 Effects of Sales Forecast The Fragile Company has just been incorporated and plans to produce a product that will sell for $10 per unit. Preliminary market surveys show that demand will be less than 10,000 units per year, but it is not as yet clear how much less. The company has the choice of
3-18 Effect on Profits of Change in Price (SIA) The Canadian Zinc Diecasting Company is one of several suppliers of part X to an automobile manufacturing firm. Orders are distributed to the various diecasting companies on a fairly even basis; however, the sales manager of Canadian Zinc believes
3-19 Influence of Relevant Range on Cost Behavior The Charne Company's cost behavior is as follows: PRODUCTION RANGE IN UNITS FIXED COSTS 0- 20,000 $160,000 20,001-65,000 190,000 65,001-90,000 210,000 250,000 90,001-100,000 At an activity of 70,000 units per year, variable costs total $280,000.
3-20 Comparison of Two Companies (SIA, adapted) Black and White are the owners of the Modern Processing Company and the Oldway Manufacturing Company, respectively. These companies manufacture and sell the same product, and competition between the two owners has always been friendly. Cost and profit
3-21 Margin of Safety The margin of safety is the excess of budgeted or actual sales over the breakeven sales volume. It shows the amount by which sales may decrease before losses occur. This concept may be expressed as a percentage through dividing the dollar margin of safety by budgeted or actual
3-22 Role of Income Taxes Reconsider the toy-rocket problem as described in Problem 1 for Self-Study at the end of the chapter. Also study the appendix. Suppose you want to obtain a net income of $250 after taxes. How many rockets must be sold? Assume an income-tax rate of 40 percent.
3-23 Role of Income Taxes Reconsider Problem 2 for Self-Study at the end of the chapter. Also study the appendix. With the proposed increase in fixed ex- penses, what amount of sales will yield a net income of $50,000 after taxes? The income tax rate is 40 percent.
3-24 Cost-Volume Relationships, Income Taxes (CMA) R. A. Ro and Company, maker of quality handmade pipes, has experienced a steady growth in sales for the past five years. However, increased competition has led Mr. Ro, the president, to believe that an aggressive advertising campaign will be
3-26 Hospital Breakeven (CPA) The Columbus Hospital operates a general hos- pital but rents space and beds to separate entities for specialized areas such as pediatrics, maternity, psychiatric, and so on. Columbus charges each separate entity for common services to its patients such as meals and
3-27 Review of Chapters 2 and 3 For each of the following independent cases, find the unknowns, designated by letters.CASE 1 CASE 2 CASE 3 Sales $100,000 $ M $100,000 Direct material used 29,000 55,000 40,000 Direct labor 10,000 25,000 15,000 Variable selling and administrative expenses 16,000
4-1 Distinguish between producing departments and service departments.
4-2 Give two definitions of control as the word may be used by an accountant.
4-3 What is the purpose of a department cost sheet?
4-4 What is the principal difference between job-cost and process-cost account- ing systems?
4-5 Distinguish between a clock card and a work ticket. 4-6 What are the limitations of the general ledger as a cost accounting device?
4-7 What is a normal product cost?
4-8 T-Accounts The following data relate to operations of the Donnell Printing Stores control, December 31, 19_4 $ 12 Work-in-process control, December 31, 19 4 3 Finished-goods control, December 31, 19_4 6 Materials and supplies purchased on account 150 Direct materials issued to the producing
4-9 Journal Entries and Source Documents Refer to Problem 4-8. Prepare journal entries. For each entry, (a) indicate the most likely name of the source docu- ments that would authorize the entry, and (b) give a description of the entry into the subsidiary ledgers affected, if any.
4-11 Accounting for Overhead The Lynn Company has made the following pre- dictions for 19-4: MACHINING ASSEMBLY Factory overhead $ 600,000 $ 800,000 Direct-labor cost 1,000,000 1,600,000 Direct-labor hours 100,000 200,000 Machine-hours 50,000 200,000 The company uses a predetermined overhead rate
4-13 The Burke Company has budgeted the following performance for 19-4: Beginning inventories Sales Net income None $10,000,000 800,000 Factory overhead: Variable 1,000,000 Fixed 2,000,000 Selling and administrative expenses: Variable 1,000,000 Fixed 1,000,000 4,000,000 Plant and equipment, net It
4-14 Incomplete Data The Fullerton Company uses perpetual inventories and a normal cost system. Balances from selected accounts were:BALANCES BALANCES DECEMBER 31, 19_1 DECEMBER 31, 19_2 Factory department overhead control $ 56,000 Finished goods $50,000 40,000 Cost of goods sold 180,000
4-16 Accounting for Overhead On December 30, 192, the Mitchell Company has completed all jobs in process except for Job # 447; the job cost sheet through that date showed direct materials of $40,000 and direct labor of $30,000.Total factory overhead incurred through Décember 30 was $900,000. The
4-17 Overhead Application and Year-End Disposition (D. Jacque Grinnell) A manufacturing company is divided into three producing departments, A, B, and C.All production is to customer’s order. Budgeted manufacturing costs for 19_1 are as follows:DEPT. A DEPT. B DEPT. C TOTAL Direct material
4-18 Overview of General-Ledger Relationships The Blakely Company uses a joborder cost system. The total debits and credits in certain accounts at yearend are:DECEMBER 30, 19_6 Total Debits Total Credits Direct-material control $100,000 $ 70,000 Work-in-process control 320,000 305,000 Factory
Computation of wages under various methods of wage payment: In an engineering factory, wages are paid on a weekly basis (48 hours per week) at a guaranteed hourly rate of Rs 3.00. A study revealed that the time required to manufacture a product was 12 minutes. However, a contingency allowance of
Three workers (Govind, Ram and Shyam), having worked for 8 hours, produced 80, 100 and 120 pieces of a product X, respectively, on a particular day in May in a factory. The time allowed for 10 units of product X is 1 hour and their hourly rate is Rs 4.Calculate for each of the three workers
A worker completes a job in a certain number of hours. The standard time allowed for the job is 10 hours, and the hourly rate of wages is Re 1.The worker earns at the 50% rate a bonus of Rs 2 under Halsey’s plan. Ascertain his total wages under the Rowan premium plan.
In an assembly shop of a motorcycle factory, four workers A, B, C and D work together as a team and are paid on group piece rate. They also work individually on day-rate jobs. In a 44-hour week, the following hours have been spent by A, B, C and D on group piecework, viz, A—40 hours, B—40
In a 10-hour working day, standard output is fixed as 100 units. The Bedeaux’s point system is under operation. A worker produced 120 units during the day. The normal time rate is Rs 20 per hour. Ascertain the earnings of the worker for the day under Bedeaux’s point system.
A worker earns Rs 2 as bonus on a job that requires 20 standard hours at Re 0.50 per hour, under Halsey’s incentive system based on the ratio 50:50. What would be his earnings under Rowan’s plan?
The standard output of a product has been fixed at 6 units in a day of 8 hours. The normal wages per day is Rs 12.Determine the total wages including bonus payable under Halsey’s plan when the outputs are 5, 8, 12 and 15 units, respectively, per day. Also calculate the labour cost per unit.
A worker takes 9 hours to complete a job on daily wages and 6 hours on a scheme of payment by results. His daily rate is Rs 7.50 per hour. The material cost of the product is Rs 40 and the overheads are recovered at 150% of the total direct wages. Calculate the factory cost of the product under(a)
What earnings will a worker receive under Halsey’s plan and Rowan’s plan if he executes a piece of work in 60 hours as against 75 hours allowed? His hourly rate is Rs 2.00 and he is paid 50% of the time saved under Halsey’s plan. He gets a DA of Rs 8.00 per day of 8 hours worked, in addition
The standard time allowed for a job is 50 hours. The hourly rate of wages is Rs 4.00 plus a DA of 25 paise per hour worked. The actual time taken by the worker was 40 hours. Calculate the earnings per hour worked under Halsey’s premium plan and Rowan’s plan.
A worker takes 9 hours to complete a job on daily wages and 6 hours on a scheme of payment by results.His day rate is Rs 7.50 an hour, the material cost of the product is Rs 40 and the overheads are 150%of the total direct wages. Calculate the factory cost of the product under (a) piecework plan,
Write about some important incentive wage plans.
What are the essential features of a sound wage incentive plan?
Bring out the merits and demerits of the piece-rate system.
Distinguish between direct and indirect labour costs.
When is overtime premium charged as an indirect manufacturing cost?
Explain the causes of idle time.
How would you treat the following in cost: (a) overtime, (b) leave with pay, (c) idle time and (d) might shift allowance?
Discuss the advantages and disadvantages of the following methods of Remuneration: (a) time rate and(b) piece rate.
What is idle time?
Write notes on (a) time study and (b) motion study.
Enumerate the causes of labour turnover
Discuss the possible effects of labour turnover.
What do you mean by labour?
What do you understand by the term labour turnover?
Under the high wage plan, a worker is paid(a) Normal wage plus bonus (b) At a double rate for overtime(c) According to his or her efficiency (d) At a time rate higher than the usual rate
Incentive method of wage payment used for indirect workers is(a) Gantt’s task and bonus plan (b) Rowan’s plan(c) Taylor’s differential piece-rate system (d) None of the above
The method of remuneration that gives stability of labour cost to the employer is(a) Group bonus scheme (b) Measured day work(c) Premium bonus system (d) Straight piece rate
The wage system that benefits the less-efficient workers is(a) Time wage (b) Piece rate(c) Halsey’s system (d) Rowan’s system
The system that combines both time and piece rate is(a) Emerson’s system (b) Merrick’s differential system(c) Halsey system (d) Bedaux system
Under Gantt’s task and bonus plan, no bonus is available to a worker if his or her efficiency is lower than(a) 100% (b) 50%(c) 75% (d) 66 2/3%
Under Emerson’s efficiency plan, the worker gets wages at(a) 100% efficiency (b) 80% efficiency(c) 33 1/3% efficiency (d) 66 2/3% efficiency
Cost of normal idle time is charged to(a) Factory overhead (b) Office overhead(c) Selling overhead (d) Administrative overhead
Wage sheet is prepared by(a) Cost accounting department (b) Payroll department(c) Personnel department (d) Timekeeping department
Time and motion study is conducted by(a) Payroll department (b) Personnel department(c) Timekeeping department (d) Engineering department
The human element in labour makes the control of labour cost difficult.State whether the following statements are true or false:

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