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managerial accounting

Managerial Accounting 1st Edition Jennifer Cainas, Celina J. Jozsi, Kelly Richmond Pope - Solutions

Questionable is the controller for a company that uses a process costing system. Questionable is concerned with the spoilage costs that have been identified as abnormal and has asked the staff accountant to review the criteria for classifying spoilage as either normal or abnormal. The staff
Discuss the differences in cost allocations when using the weighted average versus the FIFO method.
Companies use process costing systems in an effort to have lower cost of goods sold than if they used job order costing systems. Do you agree? If you disagree, explain why.
How is spoilage accounted for in a process costing system?
Both job order and process costing systems include direct materials, direct labor, and overhead as product costs. Do you agree? If you disagree, explain why.
As goods are finished in a process costing department, the costs are transferred from finished goods to cost of goods sold. Do you agree? If you disagree, explain why.
The two process costing methods are FIFO and weighted average. Weighted average is the most widely used because it is the more accurate approach. Do you agree? If you disagree, explain why.
Kralik’s Krazy Kostumes, LLC, manufactures its own costumes for business professionals and has two main products: the “Accounting Nerd” and the “Master Marketer.” The Accounting Nerd is a high-volume product, selling 25,000 costumes annually, while the Master Marketer is a low-volume
One benefit of ABM is that because it provides information about which customers require a significant amount of service, marketing personnel can determine which customers to charge a high fee or, if it is not reasonable to charge a higher fee, to eliminate. Do you agree? If you do not fully agree,
How is process costing different than job costing?
Pretty Lawn Products uses a process costing system. The following is known for July:● The company started 90,000 units and completed 87,000 units.● The beginning work in process was 3,000 units.How many units were in work in process at the end of the month?
VBD has started a home delivery business that buys items at wholesale prices and sells them to customers at retail prices. The owner has identified several key indirect cost activities for its distribution center, the cost driver rate per activity, and the activity usage for the month, as
Morgan Company, which uses a normal job order cost system, has recorded the following information in its ledgers for several jobs during July 2022. Analyze the numbers given as well as the missing data.Beginning work in process consisted of partial work on Jobs 330 and 331. Other overhead incurred
Refer to the information in Problem 6. Record the information in the T-accounts.Data from problem 6The Moez Company uses a normal job order cost system. Other data:• There are three jobs that pass through the two production departments.• Job 401 and Job 402 were completed and sold during
Wizard Architects has three types of service lines: Basic: Customer accepts the quoted “off the shelf” service with no modifications.Upgrade: Customer is allowed three changes.Specialized: Customer meets with both salespeople and architects multiple times to understand specific
Sanchez has developed the following product activity cost pool information for this year:Actual information follows for Standard Product A, Standard Product B, and Specialty Products:a. Determine the total unit cost of each product if the indirect costs are determined based on the number of units
Simple Company uses a traditional volume-based costing system with a single overhead cost pool and direct labor hours as the cost driver. Simple estimates total overhead for the year at $76,200 and total direct labor hours of 10,000. The company has conducted an ABC analysis with the following
Wall, Inc., has identified the following overhead costs and cost drivers:The following are two of the jobs completed during the year:The company’s normal activity is 4,000 direct labor hours.a. If Wall uses direct labor hours to allocate overhead costs, what is the total cost for Job 25?b. If
You have been hired as a consultant to analyze the production job costs for a prestigious financial services company. Your analysis reveals that many tasks that were subcontracted out at cheaper rates in another country were deemed to be of inferior quality. Moreover, the single average rate used
XYZ Company manufactures two products: Product DDD and Product EEE. Indirect manufacturing costs (overhead) are budgeted at $600,000 annually. The company is concerned about the assignment of the manufacturing support costs. Other data include the following:a. Estimate the manufacturing cost per
Below you will find several activity drivers that can be used to assign indirect production costs (overhead) and general, selling, and administrative costs (period costs). For each of the activities, identify the appropriate driver that best approximates the activity, assuming the usage of
With respect to indirect costs, explain the difference between a single overall plantwide rate and a departmental rate.
Value-added costs are those that customers are willing to pay for and that are necessary for the organization. Give examples of value-added and non–value-added costs for each of the following:a. Universityb. Day-care centerc. Hospitald. Shoe storee. Plant nurseryf. Movie theaterg. Bowling alley
Which steps must an organization take to implement an activity-based costing (ABC) system?
Discuss the benefits and drawbacks of ABC.
An ABM costing analysis has revealed that it should take 40 minutes to render a service that now takes 60 minutes. The cost per hour is $15, and the monthly production volume is 8,000 hours of service. What are the monthly non–value-added costs?
For each of the following activities, provide appropriate cost drivers if activities do not differ (use similar resources) and if activities vary significantly (use different resources).Drivers:U: Number of units or projectsD: Sales dollarsE: Number of employeesH: Number of labor or machine hoursC:
Companies frequently react to economic downturns by downsizing the workforce (firing employees). Describe in detail how activity-based management (ABM) could assist companies in making decisions and perhaps promote other reactions.
Are ABC and ABM applicable only to the production of products, or can they be used for providing services? Explain.
The ABC team found that one of the company’s products was losing money because it was using significant resources of setups, customer handling, and material handling. The chief financial officer asked the team to ignore the findings because some workers could be laid off and the chief executive
Brokerage Service, Inc., is a firm that charges a fee to buy and sell investment orders for its clients. The company has three types of service lines: discount brokers, mutual funds, and full-line brokerage services. Prior to fully analyzing an ABC system, indirect costs of servicing and selling
Valiente Company makes equipment for three major customers. As part of its ABC and ABM project, the following customer profitability report for 2022 was prepared.Other facts: Customer C has successfully negotiated significant volume sales
Give an example of how ABC can be useful in assigning general, selling, and administrative costs to various customers so that the customers are properly charged.
The Neighborhood Bank has gathered data related to its customers for a pilot project at one of its branches. The ABC team has identified three main product lines: regular account holders, loans, and investments (certificates of deposit, retirement investments, and so on). The team initially
ABC and ABM can help companies identify ways to improve certain situations and develop measures to assess quality, efficiency, flexibility, and reduction of costs through a focus on prevention rather than control of costs. Describe a situation from either your work or your college experience that
For each of the following independent scenarios and items, indicate whether the activity described is:VA: Primarily value-added and efficientNVA: Primarily non–value-added (If NVA, indicate how these costs could be avoided)a. Storing and moving extra inventory in a warehouseb. Inspecting
Indicate whether each of the following statements is true or false.T: TrueF: Falsea. Building complexity into the costing process is an important part of the ABC philosophy.b. The levels of activities in ABC are unit, batch, facility-sustaining, and conversion costs.c. In an ABC system, many
For each of the following activities, identify whether the activity cost is:U: UnitB: BatchP: Product-sustainingC: Customer-sustainingF: Facility-sustaininga. Making engineering changesb. Manually assembling each productc. Packaging a group of items per customer orderd. Providing securitye.
Caring Hospital directly captures the cost of surgical labor. The hospital has collected the following indirect cost information and identified the corresponding cost drivers:a. With respect to medical recordkeeping, can you identify any non–value-added tasks or steps that might be part of the
How can ABM be integrated with other managerial accounting tools and data analytics?
Sometimes, through ABM, management finds that the customers who were thought to be “low cost and profitable” are actually “high cost and unprofitable.” Explain.
Comment on each of the following independent scenarios. Apply the ABC and ABM techniques of focusing on processes and identifying non–value-added activities that could be either eliminated or made more efficient. Indicate how the activities could be done differently.a. In a doctor’s office,
Indicate whether each of the following is more descriptive of a traditional system or an ABC system:a. Costs are classified as unit, batch, product sustaining, customer sustaining, and facility sustaining.b. Costs are captured first by departments and then assigned to jobs, products, services, or
Look up a company such as Southwest Airlines or any of the companies listed in the chapter that have incorporated ABC into their operations. Write a memo to your boss on what you learned from your research and recommend whether ABC should be considered for your organization.
One of the key components of ABM is the analysis of value-added activities and non–value-added activities. Contrast the two types of activities.
Tucker produces 40,000 Simple and 4,000 Complex small machines. It currently allocates overhead based on machine hours. An ABC study revealed the following activity cost pool data, including the use of activity drivers by Simple machines and Complex machines:a. What is the current overhead cost per
Why does ABC correct the allocation of primarily batch and product- or customer-sustaining costs rather than correcting the allocation of unit or facility-sustaining costs?
The management of Toth Company has always taken pride in the quality of its motor products. Some of the company’s principles are:➢ Products should be designed for “manufacturability,” functionality, quality, ease of maintenance and serviceability, and reliability.➢
There is a saying, “It is better to be approximately right than precisely wrong.” Discuss how that saying could be applied to ABC if a company uses the wrong assignment of costs and drivers.
To reduce waste, management should focus only on reducing costs. Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
The best driver (base) when assigning the electricity used in manufacturing to products or jobs would be direct labor hours, since payroll numbers are already recorded. Do you agree? If you do not agree, explain.
After an ABC and ABM study, Analytical Company identified four groups of activities, as follows:● Group 1: Activities designed to prevent errors and mistakes during production and delivery● Group 2: Activities designed to review, evaluate, and measure conformance with procedures● Group 3:
Katelynn Corporation manufactures two products—kites and gliders.Annual production:● Kites: 2,000 units and 2,000 direct labor hours● Gliders: 400 units and 2,000 direct labor hours● Total estimated overhead: $154,000The company is looking at the possibility of changing to an ABC system for
In an ABC system, facility-sustaining expenses should all be assigned to specific product lines according to the direct labor hours or machine hours consumed by each product line. Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
The goal of a properly constructed ABC system is to have the most precise costs (typically per-unit costs are carried out to three digits). Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
ABC systems should be used primarily for budgeting (spending) decisions. Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
Traditional cost accounting systems typically distort product costs by overcosting the complex products and undercosting the simple products. ABC systems have been introduced primarily to correct this problem. Do you agree? If you do not fully agree, indicate why you disagree. Be specific.
Most ABC systems should be initiated, planned, and controlled by top management personnel, such as the chief executive officer, because those managers are in a position to understand both the costs and the most efficient ways to perform the activities. Do you agree? If you do not fully agree,
Refer to the information in Problem 2. Record the information in the T-accounts.Data from Problem 2Sue Enterprises uses a normal job order costing system and a predetermined overhead rate based on machine hours. At the beginning of 2022, Sue estimated the overhead for the year would be $720,000 and
CMG uses a normal job order costing system and applies overhead on the basis of direct labor hours. At the beginning of 2022, management estimated that 250,000 direct labor hours would be worked and $400,000 of overhead costs would be incurred. During 2022, the company had 270,000 direct labor
Sue Enterprises uses a normal job order costing system and a predetermined overhead rate based on machine hours. At the beginning of 2022, Sue estimated the overhead for the year would be $720,000 and that production would use 90,000 machine hours. The following information relates to the month of
The Moez Company uses a normal job order cost system. Other data:• There are three jobs that pass through the two production departments.• Job 401 and Job 402 were completed and sold during January.• Job 403 was not completed as of December 31, 2022.• The company considers under- or
Precious Glassworks, Inc., produces unique hand-blown glass light fixtures for custom-built homes and uses a job order costing system for its production costs. The company bases its predetermined overhead rate on the estimated number of firing hours and uses actual firing hours to apply overhead to
Refer to the information in Problem 4. Record the information in the T-accounts.Data from Problem 4.Precious Glassworks, Inc., produces unique hand-blown glass light fixtures for custom-built homes and uses a job order costing system for its production costs. The company bases its predetermined
Following are the 2022 estimated and actual recorded subsidiary ledger results from several jobs for an architectural firm:The president is concerned with the wide differences and with the loss on Job 24.a. Estimated costs per job used to calculate the bid sales price are as follows:Compare the
Assume the same data from Problem 4. Record all necessary journal entries.Data from Problem 4DER, Inc., manufactures a single product. The following information is available for 2022:● Raw materials: Beginning balance: $5,000. Purchased $40,000 on credit. Direct materials used in production were
The following information applies to Amanda Company for 2022:• Prime costs were $145,000.• Direct labor was one-third of conversion costs.• Sales were $310,000.• Conversion costs $120,000.• The balances in the work in
Premium Manufacturers is a manufacturer. Positive selected account balances for the company as of January 1, 2022, were as follows:During the month of January, Premium Manufacturers had the following transactions:● Salaries: $6,800. Of this amount, $2,200 is selling and
HEW estimates 2022 factory overhead at $320,000 and direct labor cost at $200,000. Direct labor hours are estimated to be 20,000. Cost information for the month of April, 2022 is as follows:a. If factory overhead is allocated using a predetermined overhead rate based on direct labor cost, what is
Managers should analyze underallocated overhead to determine why there was not enough overhead estimated. If overhead is overallocated, there is no need to analyze why it was overallocated. Do you agree? If you do not agree, explain why the statement is false.
Mignon Company has estimated overhead of $50,000 in 2022 ($10,000 in Department 1 and $40,000 in Department 2), and estimates a total of 10,000 machine hours in each of its two departments (20,000 machine hours total). The company has two jobs. Each job produces 4,000 units. Both jobs pass through
Explain what is meant by a normal costing system.
Why is overhead typically estimated and allocated as opposed to just traced to each job and recorded as indirect costs are paid?
Explain how seasonal fluctuations may affect overhead application.
If the under- or overallocated overhead amount is material, it should be recorded as a separate period expense (selling, general, and administrative). Do you agree? If you do not agree, explain why the statement is false.
Would it be unethical to intentionally develop the overhead rate by overestimating the total indirect costs or by using an incorrect driver (no cause and effect)?
In an attempt to reduce direct material costs, a company may be tempted to use less expensive materials from a different supplier with an “introductory cost offer.” Given the objective of cost-benefit decision making, what do you see as costs to consider against the benefit of lower quoted
Give examples of both internally and externally generated data that a company could analyze to determine possible production delays.
How can predictive analytics be used by a public accounting firm to assess the risk of taking on a new client?
If overhead is overallocated, the actual overhead must be greater than the allocated overhead incurred. Do you agree? If you do not agree, explain why the statement is false.
Direct materials, direct labor, and overhead are usually recorded as incurred both in the general ledger and in each job cost account so that the actual overhead and the allocated overhead match. Do you agree? If you do not agree, explain why the statement is false.
Assume that a normal costing system is used. Estimated overhead was $100. Estimated practical capacity hours were 50. Actual hours worked were 54. What was the over- or underallocated overhead?
For each of the following, indicate whether the statement is true or false.a. The main difference between job order and process costing systems is the amount of detail captured for each product.b. Most companies apply indirect costs (overhead) based on direct materials because materials are
Under a normal costing system, overhead is typically recorded in the work in process account at the beginning of the year for the amount estimated and then allocated to specific jobs as each job is completed. Do you agree? If you do not agree, explain why the statement is false.
Ellen’s Company produces boxes. In 2022, the company incurred the following costs: There were no balances in the beginning or ending work in process and finished goods inventories. The company uses a normal cost system and applies overhead based on 90% of direct labor cost.a. What is the
You have been hired by the company president to review the records of Fast Shipping Company. You found that the sales department has reported 20% of jobs as “sold,” even though the customers have not formally accepted the jobs. When you asked the sales manager, he explained that in the past
The accompanying diagram reflects the costs of various jobs for the month of September. a. Which job has proportionately more overhead relative to direct labor? Why do you think this would occur?b. As a manager, would you prefer to see these “visual results” or would you want to see the
Assume the following information for Donna Company for 2022. The company uses a normal cost system and a predetermined overhead rate based on direct labor hours.a. What is the predetermined overhead rate?b. What is the allocated overhead?c. What is the under- or overallocated overhead? Estimated
For many companies today, an electronic match of purchase orders, purchase requisitions, and receiving reports automatically triggers an electronic payment to be made to the vendor. Such a practice violates internal controls and often leads to fraud. Do you agree? If you do not agree, explain why
A job cost sheet is a report that summarizes the costs of direct materials, direct labor, overhead, selling, and administrative costs for a specific job. Do you agree? If you do not agree, explain why the statement is false.
Indicate if any part of the following chart is incorrect. Direct materials Direct labor Overhead recorded Overhead rate Overhead allocation bases (drivers) Actual Costing Job Order System 1. Recorded at actual cost 2. Recorded at actual cost 3. Recorded at estimated cost 4. Overhead must be based
For each of the following document descriptions, give the letter of the document term that best fits the description.a. Purchase requisitionb. Purchase orderc. Receiving reportd. Job cost sheete. Materials requisition formf. Time ticket or other labor tracking source such as scanning of
Service companies do not need a job costing system since such companies do not manufacture a product. Do you agree? If you do not agree, explain why the statement is false
Describe some operational business decisions that can benefit from a job costing system.
Following are the current assets sections of the balance sheets for three different companies.a. Which company is a service company?b. Which company is a retailer?c. Which company is a manufacturer?d. Assume a manufacturer is in the business of manufacturing textbooks. Provide an example of direct
Give some strategic business decisions that can benefit from a job costing system.
Identify whether each of the following companies would likely use a job order system or a process costing system.a. Construction company that builds specific bridges and highwaysb. Bakery that makes many regular cookies, pies, and cakesc. Company that makes unique shipsd. Consulting firme.
Affordable Tutoring Services had the following results for 2022:Included in the miscellaneous expense category are marketing costs, a legal retainer, accounting fees, and travel costs.a. Is this company a service company, a retailer, or a manufacturer? Explain.b. Analyze each of these costs. Which
Answer the questions regarding the partially completed T-accounts for XYZ Company for the month of May:<ART: Use minus signs instead of hyphens. Make sure a space follows the + signs for “+ Direct Materials” and “+ Direct Labor”.>Additional information:• Purchased
The following information for 2022 applies to Sue, Inc., which makes pet items:a. Complete the T-accounts for raw materials, work in process, and finished goods.b. What are prime costs?c. What are conversion costs?d. What is cost of goods manufactured?e. What is the ending balance of the raw

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