Cost Accounting 3rd Edition James A. Cashin, Ralph S. Polimeni, Sheila Handy - Solutions

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-15 Discuss the concepts of contribution margin and gross margin against the background of absorption costing and direct costing.
-14 When calculating the contribution margin for breakeven analysis purposes, should one handle variable selling and administrative costs the same way as variable manufacturing costs? Explain.
-13 “There is no such thing as a fixed cost. All costs can be ‘unfixed’ given sufficient time.” Do you agree? What is the implication of your answer for CVP analysis?
-12 Compare the operating leverage with the financial leverage. Discuss the similarities and differences.
-11 Is it possible to calculate the breakeven point for a company which produces and sells more than one type of product? Explain.
-10 Is CVP analysis more focused on the short or the long term? Explain.
-9 Describe sensitivity analysis. How has the advent of the electronic spreadsheet affected the use of sensitivity analysis?
-8 Is CVP analysis more applicable to trading companies rather than manufacturing companies? Explain.
-7 “CVP analysis is both simple and simplistic. If you want realistic analysis to underpin your decisions, look beyond CVP analysis.” Do you agree? Explain.
-6 Why is it more accurate to describe the subject matter of this chapter as CVP analysis rather than as breakeven analysis?
-5 Describe three methods that managers can use to express CVP relationships.
-4 Define contribution margin, contribution margin per unit, and contribution margin percentage.
-3 Distinguish between operating income and net income.
-2 Is CVP analysis based on the absorption costing or the variable costing concept? Explain.
-1 Define cost–volume–profit analysis.
Apply CVP analysis to a company producing multiple products
Explain how sensitivity Â�analysis helps managers cope with uncertainty
-42 Finding unknown amounts. An auditor for the Internal Revenue Service is trying to reconstruct some partially destroyed records of two taxpayers. For each of the cases in the accompanying list, find the unknowns designated by the letters A through D.Case 1 Case 2(in thousands)Accounts
-41 Cost classification; ethics. Jason Hand, the new plant manager of Old Tree Manufacturing Plant Number 7, has just reviewed a draft of his year-end financial statements. Hand receives a year-end bonus of 8% of the plant’s operating income before tax. The year-end income statement provided by
-40 Comprehensive problem on unit costs, product costs. Atlanta Office Equipment manufactures and sells metal shelving. It began operations on January 1, 2014. Costs incurred for 2014 are as follows (V stands for variable; F stands for fixed):Direct materials used $149,500 V Direct manufacturing
-39 Missing records, computing inventory costs. Ron Howard recently took over as the controller of Johnson Brothers Manufacturing. Last month, the previous controller left the company with little notice and left the accounting records in disarray. Ron needs the ending inventory balances to report
-38 Labor cost, overtime, and idle time. Louie Anderson works in the production department of Southwest Plasticworks as a machine operator. Louie, a long-time employee of Southwest, is paid on an hourly basis at a rate of $20 per hour. Louie works five 8-hour shifts per week Monday–Friday (40
-37 Terminology, interpretation of statements (continuation of 2-36).1. Calculate total prime costs and total conversion costs.2. Calculate total inventoriable costs and period costs.3. Design costs and R&D costs are not considered product costs for financial statement purposes. When might some of
-36 Income statement and schedule of cost of goods manufactured. The following items (in millions)pertain to Chester Corporation:Chester’s manufacturing costing system uses a three-part classification of direct materials, direct manufacturing labor, and manufacturing overhead costs.For Specific
-35 Interpretation of statements (continuation of 2-34).1. How would the answer to Problem 2-34 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. Would the sales manager’s salary (included in
-34 Income statement and schedule of cost of goods manufactured. The Howell Corporation has the following account balances (in millions):For Specific Date For Year 2014 Direct materials inventory, Jan. 1, 2014 $15 Purchases of direct materials $325 Work-in-process inventory, Jan. 1, 2014 10 Direct
-33 Cost of goods manufactured, income statement, manufacturing company. Consider the following account balances (in thousands) for the Shaler Corporation:Shaler Corporation Beginning of 2014 End of 2014 Direct materials inventory 130,000 68,000 Work-in-process inventory 166,000 144,000 Finished
-32 Cost of goods manufactured, income statement, manufacturing company. Consider the following account balances (in thousands) for the Peterson Company:Peterson Company Beginning of 2014 End of 2014 Direct materials inventory 21,000 23,000 Work-in-process inventory 26,000 25,000 Finished goods
-31 Flow of Inventoriable Costs. Renka’s Heaters selected data for October 2014 are presented here (in millions):Direct materials inventory 10/1/2014 $ 105 Direct materials purchased 365 Direct materials used 385 Total manufacturing overhead costs 450 Variable manufacturing overhead costs 265
-30 Cost of goods manufactured. You consider the purchase of a copier for your business. The initial investment is $15,000. After one year the copier will be replaced by a new one. In order to calculate the cost of one copy, you need to know the depreciation of the copier. The manufacturer of the
-29 Computing cost of goods purchased and cost of goods sold. The following data are for Marvin Department Store. The account balances (in thousands) are for 2014.Marketing, distribution, and customer-service costs $ 37,000 Merchandise inventory, January 1, 2014 27,000 Utilities 17,000 General and
-28 Inventoriable costs versus period costs. Each of the following cost items pertains to one of these companies: Star Market (a merchandising-sector company), Maytag (a manufacturing-sector company), and Yahoo! (a service-sector company):a. Cost of lettuce and tomatoes on sale in Star Market’s
-27 Variable and fixed costs. Accounting firm Weetman, Doemen, & Co conducts a variety of activities for small and medium (SM) firms. The number of employees on January 1, 2009, was 25. Due to frequent mergers and acquisitions, a lot of SM firms are taken over. The consequence of this is that the
-26 Total costs and unit costs, service setting. The Big Event (TBE) recently started a business organizing food and music at weddings and other large events. In order to better understand the profitability of the business, the owner has asked you for an analysis of costs—what costs are fixed,
-25 Variable costs. An industrial company is dealing with five groups of variable costs:Production volume Group A Group B Group C Group D Group E 1,000 400 400 400 400 400 2,000 700 800 500 1,200 600 4,000 1,000 1,600 600 3,600 900 8,000 1,300 3,200 700 10,800 1,300 16,000 1,600 6,400 800 32,400
-24 Cost drivers and value chain. Roxbury Mobile Company (RMC) is developing a new touch-screen smartphone to compete in the cellular phone industry. The company will sell the phones at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the final customer.
-23 Classification of costs, manufacturing sector. Company Doezo produces and sells four types of product: A, B, C, and D. If a product is manufactured after normal working hours, the employees are paid an extra bonus for overtime. Answer the following questions by choosing and explaining one of
-22 Strategic cost decision making. A holding company consists of a board of directors, three profit centers (I, II, and III), and supporting staff. In profit center I, simple plastic products are made and sold; in profit center II, electronic parts are made; and in profit center III, writing
-21 Variable and fixed costs. In the general economy the law of increasing and decreasing incremental revenues is well known. This finds its origin in agriculture. David Ricardo (1772–1823) discovered a relationship between the number of employed laborers and the quantity of harvested grain when
-20 Classification of costs. Judge the following examples and indicate whether each is:a. a cash expense and no cost.b. a cost and no cash expense.c. a cash expense and a cost.d. neither a cash expense nor a cost.1. The salary of the owner of a sole proprietorship 2. The salary of a director of a
-19 Classification of costs, manufacturing sector. Fill in the following table by putting an X in the relevant cells.Different Costs Direct Indirect Variable Fixed Product Period Prime Conversion Material Labor Rent Interest Depreciation Supervision
-18 Classification of costs, service sector. Market Focus is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $60 per session to provide comments on new products. These focus groups meet in hotels and are led
-17 Direct, indirect, fixed, and variable costs. Wonder Bakery manufactures two types of bread, which it sells as wholesale products to various specialty retail bakeries. Each loaf of bread requires a three-step process. The first step is mixing. The mixing department combines all of the necessary
-16 Costs and cash expenses. When you combine costs and cash expenses, you have four possible combinations.Cash expenses No Cash expenses Costs 1 2 No costs 3 4 Give an example of each combination.
-15 What are three common features of cost accounting and cost management?
-14 Define product cost. Describe three different purposes for computing product costs.
-13 Describe the overtime-premium and idle-time categories of indirect labor.
-12 Define the following: direct material costs, direct manufacturing-labor costs, manufacturing overhead costs, prime costs, and conversion costs.
-11 Distinguish between inventoriable costs and period costs.
-10 What are three different types of inventory that manufacturing companies hold?
-9 Describe how manufacturing-, merchandising-, and service-sector companies differ from one another.
-8 What is the cost object in a prison? How would you calculate the cost of that cost object?
-7 What is the relevant range? What role does the relevant-range concept play in explaining how costs behave?
-6 What is a cost driver? Give one example.
-5 Can a business department be a cost object? Explain.
-4 Name three factors that will affect the classification of a cost as direct or indirect.
-3 Why do managers consider direct costs to be more accurate than indirect costs?
-2 Discuss the differences and similarities between costs and cash expenses.
-1 Define cost object and give three examples.
-36 Ethical challenges, global company. Andahl Logistics, a U.S. shipping company, has just begun distributing goods across the Atlantic to Norway. The company began operations in 2011, transporting goods to South America. The company’s earnings are currently trailing behind its competitors and
-35 Professional ethics and end-of-year actions. Macon Publishing House produces consumer magazines. The house and home division, which sells home-improvement and home-decorating magazines, has seen a 20% reduction in operating income over the past 9 months, primarily due to an economic recession
-34 Professional ethics and end-of-year actions. Linda Butler is the new division controller of the snack-foods division of Daniel Foods. Daniel Foods has reported a minimum 15% growth in annual earnings for each of the past 5 years. The snack-foods division has reported annual earnings growth of
-33 Budgeting, ethics, pharmaceutical company. Chris Jackson was recently promoted to Controller of Research and Development (R&D) for BrisCor, a Fortune 500 pharmaceutical company that manufactures prescription drugs and nutritional supplements. The company’s total R&D cost for 2013 was
-32 Role of controller, role of chief financial officer. George Jimenez is the controller at Balkin Electronics, a manufacturer of devices for the computer industry. The company may promote him to chief financial officer.1. In this table, indicate which executive is primarily responsible for each
-31 Planning and control decisions. LION is a weaving mill, with profit maximization as a main objective. An important product of LION is article Moleskin T6. The raw material used to produce Moleskin T6 can be either:a. yarn from a spinning mill in Laumoncidas, Greece, at $10 per kg.b. yarn from a
-30 Management accounting guidelines. For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes.1. Analyzing whether to keep the billing function within
-29 Strategic decisions and management accounting. Consider the following series of independent situations in which a firm is about to make a strategic decision.Decisionsa. A popular restaurant is considering hiring and training inexperienced cooks. The restaurant will no longer hire experienced
-28 Strategic decisions and management accounting. Consider the following series of independent situations in which a firm is about to make a strategic decision.Decisionsa. Pedro Phones is about to decide whether to launch production and sale of a cell phone with standard features.b. Flash
-27 Planning and control decisions, Internet company. PostNews.com offers its subscribers several services, such as an annotated TV guide and local-area information on weather, restaurants, and movie theaters. Its main revenue sources are fees for banner advertisements and fees from subscribers.
-26 Professional ethics and reporting division performance. Joshua Wilson is the controller of Apex Picture Frame Mouldings, a division of Garman Enterprises. As the division is preparing to count year-end inventory, Wilson is appro ached by Doug Leonard, the division’s president. A selection of
-25 Professional ethics. The actions of a person within or outside an organization have different impacts. One characteristic of an action is whether it is legal or not. Another element of an action is whether it is ethical or unethical. When you combine ethics and legality, you have four possible
-24 Five-step decision-making process, service firm. Brook Exteriors is a firm that provides house-painting services. Richard Brook, the owner, is trying to find new ways to increase revenues. Mr. Brook performs the following actions, not in the order listed.a. Mr. Brook decides to buy the paint
-23 Five-step decision-making process. Prior to becoming a freshman, a student is deciding what to study and which university he/she should attend. The interest and capacities of the student must be taken into account, in addition to a number of other criteria. Discuss this by answering the
-22 Planning and control decisions. Ed Sykes is the president of Valley Tree Service. He takes the following actions, not necessarily in the order given. For each action (a–e) state whether it is a planning decision or a control decision.a. Sykes decides to expand service offerings into an
-21 Planning and control decisions. Conner Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given. For each action (a–e) state whether it is a planning decision or a control decision.a. Conner asks its marketing team to consider ways to get
-20 Key success factors. Morten Construction Company provides construction services for major projects. Managers at the company believe that construction is a people-management business, and they list the following as factors critical to their success:a. Provide tools to simplify and complete
-19 Key success factors. Dominic Consulting has issued a report recommending changes for its newest manufacturing client, Casper Engines. Casper Engines currently manufactures a single product, which is sold and distributed nationally. The report contains the following suggestions for enhancing
-18 Value chain and classification of costs, fast food restaurant. Burger King, a hamburger fast food restaurant, incurs the following costs:a. Cost of oil for the deep fryerb. Wages of the counter help who give customers the food they orderc. Cost of the costume for the King on the Burger King
-17 Value chain and classification of costs, pharmaceutical company. Pfizer, a pharmaceutical company, incurs the following costs:a. Payment of booth registration fee at a medical conference to promote new products to physiciansb. Cost of redesigning an insulin syringe to make it less painfulc.
-16 Value chain and classification of costs, computer company. Compaq Computer incurs the following costs:a. Electricity costs for the plant assembling the Presario computer line of productsb. Transportation costs for shipping the Presario line of products to a retail chainc. Payment to David
-15 What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?
-14 Discuss the cost-benefit analysis in a hospital. How do we measure benefits? How do we calculate costs?
-13 Where does the management accounting function fit into an organization’s structure?
-12 As a new controller, reply to this comment by a plant manager: “As I see it, our accountants may be needed to keep records for shareholders and Uncle Sam, but I don’t want them sticking their noses in my day-to-day operations. I do the best I know how. No bean counter knows enough about my
-11 “Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant.” Do you agree? Why?
-10 What three guidelines help management accountants provide the most value to managers?
-9 Distinguish planning decisions from control decisions.
-8 Discuss Clark’s adage of “different costs for different purposes.” What does it mean? Illustrate this with an example.
-7 How can management accountants help improve quality and achieve timely product deliveries?
-6 “Management accounting deals only with costs.” Do you agree? Explain.
-5 Explain the term supply chain and its importance to cost management.
-4 Discuss the creation of value in the value chain. What is value creation? How can it be measured?
-3 How can a management accountant help formulate strategy?
-2 Can the Management Accountant and the Financial Accountant use the same financial data in decision making? Where do the data come from?
-1 Why is it necessary to separate the accounting function from the other functions in a company?What can happen if the separation is not there?
Effects of a Change in Transfer Price. The ABC Dinghy Co. has several decentralized divisions, two of which are manufacturing and finishing. All divisions operate as profit centers and are free to buy from, and sell to, external markets. The finishing division had always purchased its intermediate
Journal and Elimination Entries. Use the information from part (c) of the preceding problem(Department X sold to Department Y at cost plus 30%).(a) Prepare the necessary journal entries to record the transactions. All interdepartmental transactions were recorded as accounts receivable, and no
Five Methods of Transfer Pricing. Divisions J and T are two decentralized divisions of the Sweet Candy Company. Division J manufactures the candy, and Division T packages and distributes the candy at a sales price of $0.15 per unit. Division J transfers 60% of its output to Division T, the
Transfer Pricing at Cost, Cost Plus, and Market Price. The Playtime Manufacturing Co.produces toy dogs in three departments, Department X manufactures the parts, Department Y does the assembling, and Department Z does the finishing. No external market exists for the unassembled parts, and
Transfer Pricing by Market Price Method. The Gates Corporation has two decentralized divisions. Division A manufactures its product at a variable cost of $5 per unit and a fixed cost of $2 per unit. The product, which has a competitive market price of $10 per unit, is transferred to Division B. The

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Cost Accounting 3rd Edition James A. Cashin, Ralph S. Polimeni, Sheila Handy - Solutions

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