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management cost accounting
Cost Accounting A Managerial Emphasis 15th Global Edition Madhav Rajan, Srikant M. Datar, Charles T. Horngren - Solutions
-20 Plant-wide, department, and activity-cost rates. Triumph Trophies makes trophies and plaques and operates at capacity. Triumph does large custom orders, such as the participant trophies for the Minnetonka Little League. The controller has asked you to compare plant-wide, department, and
-19 Plant-wide, department, and ABC indirect cost rates. Automotive Products (AP) designs and produces automotive parts. In 2014, actual variable manufacturing overhead is $308,600. AP’s simple costing system allocates variable manufacturing overhead to its three customers based on machine-hours
-18 Alternative allocation bases for a professional services firm. The Walliston Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and(b) support services (at 30% of the direct professional costs billed). The three
-17 ABC, cost hierarchy, service. (CMA, adapted) Vineyard Test Laboratories does heat testing (HT)and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Vineyard aggregates all operating costs of $1,190,000 into a single overhead cost pool. Vineyard
-16 Cost hierarchy. Forrester, Inc., manufactures karaoke machines for several well-known companies.The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2014:a. Indirect manufacturing labor costs such as supervision that
-15 Discuss the term cost object in the four levels of indirect costs within ABC systems.
-14 Can ABC systems be used to decide to add or drop a product or service? Explain.
-13 “Activity-based costing is the wave of the present and the future. All companies should adopt it.”Do you agree? Explain.
-12 “ABC systems only apply to manufacturing companies.” Do you agree? Explain.
-11 Does cost allocation imply the use of absorption costing or variable costing? Explain.
-10 Discuss the different costing systems from an efficiency and effectiveness perspective.
-9 “Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.
-8 Relate the term causality to the different costing systems discussed in this chapter.
-7 What are the key reasons for product cost differences between simple costing systems and ABC systems?
-6 Is it possible that a simple costing system leads to the same or better information than ABC systems?
-5 Give an example of a company that calculates the cost of a cost object more accurately with a department costing system than with ABC systems.
-4 Under what conditions do ABC systems lead to the same conclusion as department costing�systems? Explain.
-3 What is costing system refinement? Describe three guidelines for refinement.
-2 Why should managers worry about product overcosting or undercosting?
-1 What is broad averaging, and what consequences can it have on costs?
Evaluate the costs and benefits of implementing activity-based costing systems
Describe a four-part cost hierarchy
Distinguish between simple and activity-based costing systems
-41 Job costing—service industry. Jordan Brady schedules gigs for local bands and creates CDs and T-shirts to sell at each gig. Brady uses a normal-costing system with two direct-cost pools, labor and materials, and one indirect-cost pool, general overhead. General overhead is allocated to each
-40 Job costing, contracting, ethics. Rand Company manufactures modular homes. The company has two main products that it sells commercially: a 1,000-square-foot, one-bedroom model and a 1,500-square-foot, twobedroom model. The company recently began providing emergency housing (huts) to the Federal
-39 Allocation and proration of overhead. InStep Company prints custom training material for corporations. The business was started January 1, 2014. The company uses a normal-costing system. It has two direct cost pools, materials and labor, and one indirect cost pool, overhead. Overhead is charged
-38 Overview of general ledger relationships. Brandon Company uses normal costing in its job-costing system. The company produces custom bikes for toddlers. The beginning balances (December 1) and ending balances (as of December 30) in their inventory accounts are as follows:Beginning Balance 12/1
-37 General ledger relationships, under- and overallocation. (S. Sridhar, adapted) Southwick Company uses normal costing in its job-costing system. Partially completed T-accounts and additional information for Southwick for 2014 are as follows:Direct Materials Control Work-in-Process Control
-36 Proration of overhead with two indirect cost pools. Premier Golf Carts makes custom golf carts that it sells to dealers across the Southeast. The carts are produced in two departments, fabrication (a mostly automated department) and custom finishing (a mostly manual department). The company
-35 Normal costing, overhead allocation, working backward. Gardi Manufacturing uses normal costing for its job-costing system, which has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost category (manufacturing overhead). The following information is
-34 Proration of overhead. (Z. Iqbal, adapted) The Zaf Radiator Company uses a normal-costing system with a single manufacturing overhead cost pool and machine-hours as the cost-allocation base. The following data are for 2014:Budgeted manufacturing overhead costs $4,800,000 Overhead allocation
-33 Service industry, job costing, two direct- and two indirect-cost categories, law firm (continuation of 4-32). Kidman has just completed a review of its job-costing system. This review included a detailed analysis of how past jobs used the firm’s resources and interviews with personnel about
-32 Service industry, job costing, law firm. Kidman & Associates is a law firm specializing in labor relations and employee-related work. It employs 30 professionals (5 partners and 25 associates) who work directly with its clients. The average budgeted total compensation per professional for 2014
-31 Job costing, accounting for manufacturing overhead, budgeted rates. The Pisano Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a finishing department. Pisano uses normal costing with two direct-cost categories (direct materials and
-30 Proration of overhead. The Ride-On-Wave Company (ROW) produces a line of non-motorized boats.ROW uses a normal-costing system and allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2014:Budgeted manufacturing overhead cost $125,000 Budgeted direct
-29 Job costing; variation on actual, normal, and variation from normal costing. Creative Solutions designs Web pages for clients in the education sector. The company’s job-costing system has a single direct cost category (Web-designing labor) and a single indirect cost pool composed of all
-28 Job costing; actual, normal, and variation from normal costing. Cheney & Partners, a Quebec-based public accounting partnership, specializes in audit services. Its job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (audit support, which
-27 Job costing, unit cost, ending work in process. Rafael Company produces pipes for concert-quality organs. Each job is unique. In April 2013, it completed all outstanding orders, and then, in May 2013, it worked on only two jobs, M1 and M2:Direct manufacturing labor is paid at the rate of $26
-26 Job costing, journal entries. Donald Transport assembles prestige manufactured homes. Its jobcosting system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead allocated at a budgeted $31 per machine-hour in 2014).
-25 Journal entries, T-accounts, and source documents. Creation Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2014:Costs incurred:Purchases of direct materials (net) on credit $122,000 Direct manufacturing labor cost 83,000
-24 Job costing, journal entries. The University of Chicago Press is wholly owned by the university.It performs the bulk of its work for other university departments, which pay as though the press were an outside business enterprise. The press also publishes and maintains a stock of books for
-23 Accounting for manufacturing overhead. Jamison Woodworking uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or overallocated overhead, if immaterial, is written off to Cost of Goods Sold. During 2014,
-22 Time period used to compute indirect cost rates. Plunge Manufacturing produces outdoor wading and slide pools. The company uses a normal-costing system and allocates manufacturing overhead on the basis of direct manufacturing labor-hours. Most of the company’s production and sales occur in
-21 Job costing, consulting firm. Taylor & Associates, a consulting firm, has the following condensed budget for 2014:Revenues $20,000,000 Total costs:â•… Direct costsâ•…â•…Professional Labor $ 5,000,000â•… Indirect costsâ•…â•…Client support 13,000,000 18,000,000
-20 Job costing, accounting for manufacturing overhead, budgeted rates. The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct
-19 Budgeted manufacturing overhead rate, allocated manufacturing overhead. Gammaro Company uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour.The following data are available for 2014:Budgeted manufacturing overhead costs $4,200,000 Budgeted
-18 Job costing, normal and actual costing. Anderson Construction assembles residential houses.It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one indirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly
-17 Actual costing, normal costing, accounting for manufacturing overhead. Destin Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor)and one manufacturing overhead cost pool. Destin allocates manufacturing overhead costs using direct
-16 Job costing, process costing. In each of the following situations, determine whether job costing or process costing would be more appropriate.a. A CPA firmb. An oil refineryc. A custom furniture manufacturerd. A tire manufacturere. A textbook publisherf. A pharmaceutical company g. An
-15 Describe briefly why Electronic Data Interchange (EDI) is helpful to managers.
-14 When might a company use budgeted costs rather than actual costs to compute direct-labor rates?
-13 If you have underallocated indirect costs, would you prefer to determine that as a loss or not?Explain.
-12 If you have overallocated indirect costs, would you prefer to determine that as a profit or not?Explain.
-11 Comment on the following statement: “In a normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated account.”
-10 Describe two ways in which a house-construction company may use job-cost information.
-9 The over- and underallocated indirect costs can be assigned to the current period or the next period. Explain this using the three solutions given on pages 150–154.
-8 Give two reasons why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect-cost rates.
-7 What is the advantage of using computerized source documents to prepare job-cost records?
-6 Describe three major source documents used in job-costing systems.
-5 Is it possible to use a mixture of job costing and process costing? Explain.
-4 Describe the seven steps in job costing.
-3 Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits?
-2 If you have job costing on the one hand and process costing on the other, give some examples of companies that are in between. Can you put an emphasis on the one or the other?
-1 Does the applicability of job costing differ between a manufacturer of airplanes and a manufacturer of steel constructions for housing? Explain.
Describe the approaches to�evaluating and implementing�job-costing systems
Describe the building-block�concepts of costing systems
-49 Deciding where to produce. (CMA, adapted) Portal Corporation produces the same power generator in two Illinois plants, a new plant in Peoria and an older plant in Moline. The following data are available for the two plants.Required RequiredAll fixed costs per unit are calculated based on a
-48 Ethics, CVP analysis. Kirk Corporation produces a molded plastic casing, LX201, for desktop computers. Summary data from its 2013 income statement are as follows:Revenues $4,000,000 Variable costs 2,400,000 Fixed costs 1,728,000 Operating income $ (128,000)Bridgett Hewitt, Kirk’s president,
-47 Gross margin and contribution margin. The Museum of America is preparing for its annual appreciation dinner for contributing members. Last year, 525 members attended the dinner. Tickets for the dinner were $24 per attendee. The profit report for last year’s dinner follows.Ticket sales $12,600
-46 Sales mix, two products. The Stackpole Company retails two products: a standard and a deluxe version of a luggage carrier. The budgeted income statement for next period is as follows:Standard Carrier Deluxe Carrier Total Units sold 187,500 62,500 250,000 Revenues at $28 and $50 per unit
-45 Multiproduct CVP and decision making. Crystal Clear Products produces two types of water filters.One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-cum-filter that only purifies water meant for drinking.The unit that attaches to the faucet is
-44 CVP analysis. The Germa company produces two products, Spick and Span, on one machine.Spick and Span cannot be made simultaneously. There is no time required to adjust the machine when switching from one product to the other. One unit of Spick requires 2 machine hours to produce, whereas one
-43 Choosing between compensation plans, operating leverage. (CMA, adapted) BioPharm Corporation manufactures pharmaceutical products that are sold through a network of external sales agents. The agents are paid a commission of 20% of revenues. BioPharm is considering replacing the sales agents
-42 CVP analysis, income taxes, sensitivity. (CMA, adapted) Carlisle Engine Company manufactures and sells diesel engines for use in small farming equipment. For its 2014 budget, Carlisle Engine Company estimates the following:Selling price $ 4,000 Variable cost per engine $ 1,000 Annual fixed
-41 CVP analysis. A company produces only product X during 2014. The company uses a profit-volume chart for decision-making purposes. The following information is available:■ Every unit produced is sold immediately at a selling price of $20.■ The selling price consists of 30% gross margin.■
-40 Alternate cost structures, uncertainty, and sensitivity analysis. Deckle Printing Company currently leases its only copy machine for $1,200 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Deckle
-39 CVP analysis, shoe stores (continuation of 3-38). Refer to requirement 3 of Problem 3-38. In this problem, assume the role of the owner of HighStep.1. As owner, which sales compensation plan would you choose if forecasted annual sales of the new store were at least 10,000 units? What do you
-38 CVP analysis, shoe stores. The HighStep Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men’s shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary.
-37 CVP, sensitivity analysis. The Derby Shoe Company produces its famous shoe, the Divine Loafer that sells for $70 per pair. Operating income for 2013 is as follows:Sales revenue ($70 per pair) $350,000 Variable cost ($30 per pair) 150,000 Contribution margin 200,000 Fixed cost 100,000 Operating
-36 CVP analysis. Alucamp is a company that produces and sells two types of camping chairs. The following manufacturing costs are given for the year 2014:Type Locarno Type Rimini Direct material ╇ $8 ╇ $5 Variable Indirect material ╇ $6 ╇ $3 Fixed labor costs $20 $15
-35 CVP analysis. The owner of company Bibi wants to judge its profitability. After an extensive time of observations, he obtained the following information:Range (in units (q)) Costs Fixed costs 0–30 ╇ $5,000 30–80 ╇ $7,500 80–150 $10,000 Variable costs 0–100 100 * q
-34 CVP, target operating income, service firm. KinderKids provides daycare for children Mondays through Fridays. Its monthly variable costs per child are as follows:Lunch and snacks $100 Educational supplies 30 Other supplies (paper products, toiletries, etc.) 20 Total $150 Monthly fixed costs
-33 CVP analysis, service firm. Lifetime Escapes generates average revenue of $7,500 per person on its 5-day package tours to wildlife parks in Kenya. The variable costs per person are as follows:Airfare $1,600 Hotel accommodations 3,100 Meals 600 Ground transportation 300 Park tickets and other
-32 Uncertainty and expected costs. Hillmart Corp., an international retail giant, is considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Hillmart $1,000,000 per month and $45 per order. Hillmart has two options, a
-31 Contribution margin, gross margin, and margin of safety. Mirabella Cosmetics manufactures and sells a face cream to small ethnic stores in the greater New York area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr.
-30 Contribution margin, decision making. McCarthy Men’s Clothing’s revenues and cost data for 2014 are as follows:Revenues $500,000 Cost of goods sold 250,000 Gross margin 250,000 Operating costs:Salaries fixed $160,000 Sales commissions (11% of sales) 55,000 Depreciation of equipment and
-29 CVP, not-for-profit. Genesee Music Society is a not-for-profit organization that brings guest artists to the community’s greater metropolitan area. The music society just bought a small concert hall in the center of town to house its performances. The lease payments on the concert hall are
-28 Sales mix, three products. The Janowski Company has three product lines of mugs—A, B, and C—with contribution margins of $5, $4, and $3, respectively. The president foresees sales of 168,000 units in the coming period, consisting of 24,000 units of A, 96,000 units of B, and 48,000 units of
-27 Sales mix, new and upgrade customers. Chartz 1-2-3 is a top-selling electronic spreadsheet product. Chartz is about to release version 5.0. It divides its customers into two groups: new customers and upgrade customers (those who previously purchased Chartz 1-2-3 4.0 or earlier versions).
-26 CVP analysis, international cost structure differences. Plush Decor, Inc., is considering three possible countries for the sole manufacturing site of its newest area rug: Italy, Spain, and Singapore. All area rugs are to be sold to retail outlets in the United States for $200 per unit. These
-25 Operating leverage. Carmel Rugs is holding a 2-week carpet sale at Jean’s Club, a local warehouse store. Carmel Rugs plans to sell carpets for $1,000 each. The company will purchase the carpets from a local distributor for $400 each, with the privilege of returning any unsold units for a full
-24 CVP exercises. A company has the capacity to generate a revenue of $3,000,000 a year. The breakeven revenue is $2,000,000 a year. From the breakeven point, every $100 extra revenue generates $40 extra profit and every $100 decrease in revenue results in $40 extra loss. The costs consist of
-23 CVP analysis, sensitivity analysis. Tuff Kids Jeans Co. sells blue jeans wholesale to major retailers across the country. Each pair of jeans has a selling price of $30 with $21 in variable costs of goods sold.The company has fixed manufacturing costs of $1,200,000 and fixed marketing costs of
-22 CVP analysis, income taxes. The Swift Meal has two restaurants that are open 24 hours a day.Fixed costs for the two restaurants together total $456,000 per year. Service varies from a cup of coffee to full meals. The average sales check per customer is $9.50. The average cost of food and other
-21 CVP analysis, income taxes. Brooke Motors is a small car dealership. On average, it sells a car for$27,000, which it purchases from the manufacturer for $23,000. Each month, Brooke Motors pays $48,200 in rent and utilities and $68,000 for salespeople’s salaries. In addition to their salaries,
-20 CVP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit.Consider each case separately:1. a.╇ What is the current annual operating income?╇
-19 CVP exercises. The Incredible Donut owns and operates six doughnut outlets in and around Kansas City. You are given the following corporate budget data for next year:Revenues $10,400,000 Fixed costs $╇ 2,100,000 Variable costs $╇ 7,900,000 Variable costs change based on the number
-18 CVP analysis, changing revenues and costs. Brilliant Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Ontario Air. Brilliant’s fixed costs are $36,000 per month.Ontario Air charges passengers $1,300 per round-trip ticket.Calculate the number of tickets
-17 CVP computations. Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2014.Variable cost per unit is $60, and total fixed costs are $1,640,000.1. Calculate (a) contribution margin and (b) operating income.2. Garrett’s current manufacturing process is labor intensive.
-16 CVP computations. Fill in the blanks for each of the following independent cases.Case Revenues Variable Costs Fixed Costs Total Costs Operating Income Contribution Margin Percentagea. $800 $1,200 $1,000b. $2,400 $400 $ â•›700c. $ â•›900 $500 $ â•›900d. $1,800 $400 50%
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