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Managerial Accounting 6th Edition Pierre L. Titard - Solutions
Give an example of each. What is factory overhead?
Give an example. How can indirect materials be both a raw materials cost and a factory overhead cost?
In what way is activity-based costing superior to the traditional manner of accounting for manufacturing costs?
"Since delivery trucks are used to deliver the product, depreciation on delivery trucks is a product cost." Comment on the validity of this statement.
The vice president of sales and the vice president of manufacturing are arguing about whether their salaries are product costs or period costs. How would you settle the argument?
Since fixed factory overhead does not vary, what is the justification for applying it at a predetermined rate, which makes the fixed cost appear to vary?
Assume that a company's normal activity is 30,000 direct labor hours per year. If expected variable factory overhead is $60,000 and expected fixed factory overhead is $100,000, determine the factory overhead application rates.
If the debits to fixed factory overhead total $42,500 and the credits total $43,200, what does the difference represent?
What is the entry to dispose of an overapplied amount of variable factory overhead?
What does it mean to say that fixed factory overhead has been overapplied by $500?
If a balance of $12.000 in cost of goods sold is to be adjusted for a $200 underapplication of variable factory overhead, what is the amount of cost of goods sold after the adjustment? Explain.
Can cost of goods manufactured and cost of goods sold ever be the same? Explain
Product Costs; Period Costs. Indicate which of the following costs are product costs and which are period costs:a. Rent on an office building.b. Wages of a plant guard.c. Freight costs of shipping finished goods to distribution points.d. The salary of the president of a company.e. Sweeping compound
Raw Materials Journal Entries (Actual Cost System). Ace Manufacturing Company purchased raw materials on account for $40,000 on March 1, 20x2. On March 2, direct materials costing $15,000 were placed into production, and manufacturing supplies costing $1,500 were drawn from inventory for use in the
Direct Labor and Indirect Labor Journal Entries (Actual Cost System). For the week ending July 26, 20x0, Buildrite Construction Company incurred direct labor costs of $20.000 and indirect labor costs of $2,500. Prepare the journal entries to record these transactions on an actual cost system.
Factory Overhead Journal Entries (Actual Cost System). The Rally Company incurred the following factory overhead costs during October, 20x1: Indirect materials Indirect labor Depreciation on factory-equipment Rani on factory building. Factory managers salaries $2.000 5,000 8.000 10,000 20,000
Direct Materials and Direct Labor Journal Entry. Potter Corporation used direct materials costing $25,000 and incurred direct labor costs of $45,000 in its manufacturing process for the week ending January 9, 20x1. Prepare the journal entry to record these transactions.
Materials, Labor, and Overhead Journal Entries (Actual Cost System). A company incurred the following costs in its manufacturing process for the month ending June 30, 20x1: Disect materials Indirect materials. Direct labor $40,000 24,000 60,000 Indirect labor 30.000 Depreciation of factory and
Completion and Sale of Product Journal Entries. The Dawson Rubber Band Company complete production on rubber bands costing $65,000 during August, 20x2. During August, it sold rubbe bands on account for $35,000. The rubber bands sold cost $20,000 to manufacture. Prepare journa entries to record
Completion and Sale of Product Journal Entries. Happy Tot Toy Company began business o January 1, 20x3. During the year, it incurred production costs of $700,000 and completed manufacture of toys costing $500,000. It sold toys costing $450,000 for $600,000.a. Prepare journal entries as of December
Completion and Sale of Product Journal Entries. The Miker Manufacturing Company had a balance of $140,000 in work-in-process inventory and a balance of $275,000 in finished goods inventory as of March 31, 20x2. On April 1, completed products totaling $95,000 were transferred to the finished goods
Overhead Rate Calculation. Normal activity for the Whiz-Bank Firecracker Company is 80,000 direct labor hours. Management predicts that variable factory overhead next year will total $120,000 and fixed factory overhead will total $200,000. Calculate the variable and fixed factory overhead rates for
Overhead Rate Calculation. Determine the variable and fixed factory overhead rates under the conditions of parts (a), (b), and (c) below. Assume that the total variable factory overhead for the year is estimated to be $250,000 and the total fixed factory overhead is estimated to be $400,000. The
Overhead Rate Calculation and Journal Entry. In 20x4, the Wilshire Woolen Company used 200,000 direct labor hours and incurred variable factory overbead of $120,000. The company used this information as a basis for determining the variable factory overhead rate of 20x5.a. What is the rate for
Overhead Journal Entries: Adjusting Cost of Goods Sold. The following information applied to Braker Corporation for the month ended June 30 20x1. Overhead Rate Overhead per DLH) Variable Fixed $1.10 250 Incurred $4,950 12,820 The number of direct labor hours for June totaled 5,000.a. Prepare
Overhead Journal Entries: Adjusting Cost of Goods Sold. For the year ending December 31, 20x6, Risor Corporation incurred variable factory overhead totaling $93,000 and fixed factory overhead totaling $218,000. The company applied variable overhead on the basis of 30 percent of direct labor cost
Adjusting Cost of Goods Sold; Allocating Underapplied or Overapplied Overhead. In 20x3. Ding Dong Bell Company incurred fixed factory overhead totaling $200,000. However, it applied only $150,000. The amount of fixed factory overhead applied in 20x3 and remaining in the accounts as of December
is as follows: Work-in-process Finished goods inventory Cost of goods sold Total $30,000 45.000 75.000 $150.000a. Prepare the journal entry as of December 31, 20x3, to adjust cost of goods sold for the entire amount of underapplied or overapplied fixed factory overhead.b. Prepare the journal entry
Allocating Underapplied Overhead. In 20x6, A.L.. Kate Company incurred fixed factory overhead totaling $240,000. However, it applied only $180.000. The account balances and the amount of fixed factory overhead applied in 20x6 and remaining in the accounts as of December 31, 20x6, are as follows:
Adjusting Cost of Goods Sold. The balances of selected ledger accounts for the Laden Company as of December 31, 20x2. are as follows: Vanable factory overhead Fixed factory overhead Cost of goods sold $2,000 credit $4,000 debit $340.000a. Prepare journal entries as of December 31, 20x2, to adjust
Journal Entries (Actual Cost System). Transactions for Berrington Corporation for October, 20x1 are shown below: Oct 1 2 15 15 15 16 17 20 31 31 31 31 31 31 31 31 31 Purchased on account raw materials costing $80,000. Placed into the production process direct materials costing $30,000. Direct labor
Overhead Rate Calculation: Adjusting Cost of Goods Sold. The Mason Machine Company applies variable factory overhead on the basis of machine hours and fixed factory overhead on the basis of direct labor hours. For 20x1, the company expected variable factory overhead to total $60,000 and fixed
Incomplete Ledger Accounts. Below are incomplete ledger accounts for a manufacturing company. Not all of the company's accounts are shown. The company uses a combined factory overhead sate and applies overhead at a rate of 60 percent of direct labor cost. Raw Materials Inventory Work-in-Process
Schedule of Cost of Goods Manufactured. Manufacturing information for 20x3 for the E-Z. Rest Mattress Company is provided below! On January 1, 20x3, raw materials inventory included direct materials with a cost of $20,000. During the year, the firm purchased direct materials costing $50,000. At
Schedule of Cost of Goods Manufactured. The beginning and ending inventory balances for Brite- Lite Company for 20x8 are shown below. January! December 31
Raw materials inventory Work-in-process inventory. Finished goods inventory $24,000 $32,000 36.000 40,000 25.000 45.000 Raw materials included $6,000 of indirect materials in beginning inventory and $7,000 in ending inventory. Raw materials purchases during the year totaled $80,000, of which
Determining Sales from Given Data. Cathy's Calculator Company requires ten numbered buttons for every hand calculator produced. During June, 20x0, 350,000 buttons were purchased. Information regarding inventories is shown below: Required: June 1, 200 June 30, 20x0 Buttons Calculators
Determining Amounts from Given Data. The following information relates to the Wilson Watch Company for the year ended June 30, 20x4: Raw materials inventory tall direct materials) Work-in-process inventory Finished goods inventory In addition, the following information is available: July 120x3 Jun
Schedule of Cost of Goods Manufactured. The Wanda Walker Company manufactures a single product. Information for the month caded June 30, 20x1, follows: Sales Production Direct materials inventary June 1 Direct materials purchases Work-in-process inventory June 1 Work-in-process inventory June 30
Determining Amounts after Fire Loss. Combust Oil Company had a fire on February 28, 20x2, two months into its fiscal year. The company's work-in-process inventory was completely destroyed. You have been asked to help determine the amount of work-in-process inventory at the time of the fire. in
How is contribution margin determined?
How does it differ from gross margin? What is variable costing?
Is cost of goods sold a variable cost?
Explain. Refer to Exhibit 4-6. Calculate the variable cost ratio and the contribution margin ratio.
"A firm with a positive contribution margin always will show a profit. A firm with a negative contribution margin always will show a loss." Do you agree with these statements? Explain.
"Regardless of changes in production, inventory always will be valued higher under absorption costing than under variable costing." Do you agree with this statement? Explain.
Since variable costing is considered a product-costing technique, how is it applicable to merchandising firms?
Since fixed cost per unit decreases with increased production, should a manufacturing firm produce as much as possible in order to lower the cost per unit as low as possible and therefore increase profits? Explain.
Since fixed cost is a cost of doing business, why does it appear to be ignored when variable costing concepts are applied in decision-making situations?
What are the primary arguments in favor of absorption costing? What are the primary arguments in favor of variable costing?
What is meant by just-in-time inventory? Why has it become popular in recent years?
(Appendix). Assume that a firm uses the LIFO method of inventory valuation. Tell whether net income under absorption costing will be greater than, less than, or equal to net income under variable costing when:a. Production exceeds sales.b. Sales exceed production.c. Product equals sales.
(Appendix). Refer to question 4-12. Explain the reason for the differences under parts (a), (b), and (c).
"In order to show a continually increasing net income, a firm should use absorption costing and always produce more than it sells." Discuss the validity of this statement.15, Not In Absorption and Variable Costing. A company incurred the following costs in its manufacturing process for the month
Net Income under Absorption and Variable Costing. Krinkle Kookie Company completed production on 50,000 cases of cookies, with a variable cost of $250,000, during March, 20x1. In addition, the company incurred fixed factory overhead of $80,000. During March, it sold 20,000 cases for $200,000. The
Inventory Balances under Variable Costing. For internal purposes, Harlow Manufacturing Company uses variable costing. As of January 31, 20x2, work-in-process inventory had a balance of $80,000, and finished goods inventory had a balance of $95,000. During February, products costing $45,000 were
Contribution Approach Income Statement. Vinson's Deep-Discount Store presented the following information for the year ended December 31, 20x2. Sales... Inventory January 1, 20x2 $850,000 60,000 Inventory December 31, 2012 30.000 Purchases 400,000 Selling expenses 160,000 Administrative expenses.
Contribution Approach Income Statement. Amabala, Inc. provides the following information regarding operations for the year ended December 31, 20x4: Sales Finished goods inventory- $1,500,000 January 1, 20x4 100.000 Finished goods inventory- December 31, 20x4 60,000 Variable cost of goods
Contribution Approach Income Statement. Newjay Corporation manufactured and sold 80,000 units of product at $12.00 each for the year ended December 31, 20x0). Cost of goods sold on an absorption basis totaled $520,000. Variable manufacturing cost per unit was $5.00. Variable selling and
Expected Net Income. Trendy's Trinket Company manufactures and sells boxes of trinkets for parties, parades, and similar activities. A box of trinkets sells for 56.00. Trendy's has calculated its variable cost as $4.00 per box. Based on 100,000 boxes per year that it now makes and sells, total
Income Statement Items; Expected Net Income. Sellco Sales Company sold 60,000 units of product for $5.00 per unit in 20x2. Its variable costs per unit were $3.00; its fixed costs per unit. $1.50.a. Using the contribution margin approach, determine the amount of net income for 20x2.b. The company is
Expected Net Income. The Noof Company sells a product that provides a contribution margin ratio of 40 percent. How will net income be affected by a proposal that is expected to increase sales by $30,000 and increase fixed costs by $15,000?
Required Sales. Douglas Williams wants to sell hot dogs at the local football stadium. To do this. he will incur fixed costs of $750 for the season. Each hot dog sells for $3.00 and has a variable cos of $1.75. How many hot dogs must he sell in order to avoid losing money on this venture?
Net Income under Absorption Costing and Variable Costing. (Appendix A company produced 120,000 units and sold 100.000 units of product in 20x3. Fixed factory overhead for the year totaled $240,000. The company uses the LIFO method of inventory valuation. Under which type of costing. absorption or
Net Income under Absorption and Variable Costing. (Appendix). A Company produced 80,000 units and sold 90,000 units of product in 2015. Fixed factory overhead for the year totaled $100.000. Production and fixed factory overhead were the same in 20x5 as they were in 2014. The company uses the LIFO
Net Income under Variable Costing for Two Years. (Appendix). Abvar Company incurred fixed factory overhead of $50,000 in both 20x1 and 20x2. Unit sales and production for each year were as follows: Sales Production 20x2 20x1 230,000 200,000 200,000 250,000 Net income under absorption costing was
Net Income ander Absorption Costing for Two Years. (Appendix). Varab Company computes its net income on a variable costing basis for internal purposes. For 20x3, this amount was $65,000, for 20x4, $82,000 Unit sales and production for each year were as follows: 2013 Sales Production 2014 75.000
What is the primary purpose of a budget?
A retail firm that had no budget recently ran out of a very popular product. How could a budget have helped prevent this problem?
The credit department of a retail store had a budget of $500 for office supplies in a recent month. The department actually spent $1,000 for office supplies that month, but nothing was said to the credit department manager about it. What purpose did the budget serve in this case?
Explain. A manufacturing firm recently forecast a 30 percent decrease in sales for the next year. During the year, inventories increased significantly, although the sales forecast was right on target. Give one possible reason for this problem. What is feedback?
What is a performance report, and how is it used?
Is a significant unfavorable variance on a performance report a sign that the manager responsible has done a poor job?
Explain. "A favorable variance indicates good managerial performance." Comment on the validity of this statement.
What role does human relations play in budgeting?
Why is the sales forecast considered the cornerstone of the budgeting process?
A firm's cash budget projected that $100,000 of excess cash would be on hand at year-end. Of what value is the budget to the firm in this case?
A firm expects record net income for the year. However, it expects a loss in the second quarter, How might the budgeted income statement provide stability to the firm's dividend policy in this situation.
A firm has bonds outstanding that require that its current assets always be at least twice its current liabilities. How might a budgeted balance sheet assist the firm in insuring that this requirement is met?
Performance Report. A partial performance report for a department is as follows: Direct materials Director Totals Budget $20,000 $15.000 Actual Variance $5.000 F 45000 $65.000 50.000 $15.000 5.000 U Since the total variance is zero, the department manager believes that there is no problem. Do you
Schedule of Accounts Receivable Collections. Alton Corporation expects credit sales for next year as follows: first quarter. $50,000, second quarter, $70,000; third quarter. $140,000; fourth quarter, $200,000. Sales last quarter totaled $150,000. Seventy percent of credit sales are collected in the
Schedule of Cash Receipts. Riley Company has projected sales for next year as follows: first quarter. $250,000; second quarter, $400,000; third quarter, $350,000; fourth quarter, $500,000. Beginning accounts receivable total $120,000. Sixty percent of all sales are creat sales and are collected in
Schedule of Accounts Receivable Collections. Cook Company sells 70 percent of its merchandise os credit. Accounts are normally collected in the following pattern: 65 percent in the month following sale; 30 percent in the second month following sale; and 5 percent uncollectible. Total sales for
Schedule of Accounts Receivable Collections. Varsity Company is preparing its cash budget for the month of May. The following information on accounts receivable collections is available from Varsity's past collection experience: Sales for the current month Sales for the prior month. Sales wo months
Schedule of Required Production Davis Manufacturing Company pouces a single product. Current finished goods inventory is 20,000 units; and the company expectsanit sales next year as follows: first quarter, 80,00C units; second quarter, 60,000 units; third quarter, 75,000 units; fourth quarter.
Schedule of Required Production. Malco, Inc., has 6,000 units of finished goods inventory as of December 31.Sales for the first four months of next year are projected as follows: January. 30.000 units: February, 40,000 units: March, 60.000 units: April. 50,000 units. The firm wants ending inventory
Schedule of Required Purchases. Gino's Jeans Store has 1,000 pairs of jeans on hand as of December 31.Unit sales for the first four months of next year are projected as follows: January, 6,000 pairs: February, 8,000 pairs; March, 12,000 pairs; April, 5,000 pairs. The firm pays $20 per pair of jeans
Schedule of Required Purchases. Tryler Company anticipates credit sales for the first four months of next year as follows: January, $25,000; February, $35,000; March, $20,000: April, 530.000. Beginning inventory is $3,500. The cost of merchandise averages 70 percent of sales. The firm wants ending
Schedule of Required Parchuses. Byron's Clothing Store anticipates sales for the next year a follows: first quarter. $30,000: second quarter. $45.000 third quarter. S60.000: fourth quarter. $80,000, Sales for the first quarter of the following year are expected to total $40,000. The cost of
Schedule of Payments for Purchases. Mayfield Company anticipates purchases for the next quarter as follows: January, $30,000, February, $50.000: March. $60,000. Purchases in December totaled $20,000. Thirty percent of the amount purchased is paid for in the month of purchase and 70 percent in the
Cash Payments for Inventories. Terry Company is preparing its cash budget for the month of April. The following information is available concerning its inventories. Inventories at beginning of April Estimated purchases for April $90,000 440,000 Estimated cost of goods sold for Apri 450,000
Salaries and Commission Expense for Payments. McHugh Sales Company pays to each of its five salespersons a salary of $800 per month plus a commission of 10 percent of sales. The salary is paid in the month of sale, and the commission is paid on the fifteenth day of the month following the month of
Schedule of Cash Receipts. Thurmond Company has projected sales for the year as follows: fin quarter, $40,000; second quarter, $30,000: third quarter, $50,000; fourth quarter, $80,000. Thin percent of sales are cash sales, and 70 percent are credit sales. Credit sales are collected in th quarter
Schedule of Cash Receipts. Webber Company has projected sales for the first quarter of next year as follows: January, $90,000; February, $70,000; March, $100,000. Forty percent of sales are cash sales and 60 percent are credit sales. Twenty percent of credit sales are collected in the month of
Schedules of Direct Materials Purchases and Payment. Ellner Company estimated production of finished units for next year as follows: first quarter, 40,000; second quarter, 55,000, third quarter. 45,000; and fourth quarter, 60,000. Direct materials cost $.60 per gallon, and two gallons are needed
Schedules of Production and Direct Materials Purchases and Payments. Atkins Manufacturing Company anticipates unit sales next year as follows: first quarter, 20,000; second quarter, 25,000, third quarter, 40,000; and fourth quarter, 30,000. Sales for the first quarter of the following year are
Schedules for Purchases and Payments. Del's Discount Store's sales in November and December und its projected sales for the next four months are as follows: November, $150,000: December $200,000; January, $120,000: February, $80,000; March, $100,000; and April, $110,000. Cost of goods sold averages
Janson Company expected total variable costs of $10,000 for budgeted production of 2,000 units. It produced only 1,500 units. What should variable costs be, based on the flexible budget?
The manager of Cole Company recently prepared an income statement in which she compared actual results from sales of 125,000 units with a budget for 150,000 units. She could not understand why all variable cost variances were favorable while net income was significantly less than budgeted. Explain
What is a sales variance? What information does it provide management?
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