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Managerial Accounting 2nd edition Kurt Heisinger, Joe Ben Hoyle - Solutions
How does a company determine the number of production cost reports to be prepared for each reporting period?
Describe the last two stages of the production process at Hershey.
Describe the basic cost flow equation and explain how it is used to reconcile costs to be accounted for with costs accounted for.
Describe the basic cost flow equation and explain how it is used to reconcile units to be accounted for with units accounted for.
What two important amounts are determined in step 4 of the production cost report?
Describe the four key steps shown in a production cost report assuming the weighted average method is used.
Why do colleges convert the actual number of students attending school to a full-time equivalent number of students?
Explain why direct materials, direct labor, and overhead might be at different stages of completion at the end of a reporting period.
Explain the concept of equivalent units assuming the weighted average method is used.
Explain the difference between physical units and equivalent units.
Why is it likely that Wrigley uses a process costing system rather than a job costing system?
What are transferred-in costs?
What are the three stages of production at Coca-Cola, and what account is used to track production costs for each stage?
Describe the differences between a process costing system and a job costing system.
Describe the similarities between a process costing system and a job costing system.
Which types of companies use a process costing system to account for product costs? Provide at least three examples of products that would require the use of a process costing system.
This problem is an adaptation of the example presented at the end of Chapter 2 for Custom Furniture Company. The only difference is that this problem uses activity-based costing to allocate overhead costs rather than one plantwide rate. Recall that inventory beginning balances were $25,000 for raw
Gogle Company recently began providing cafeteria services to its employees. Because revenue from the sale of food at the cafeteria does not fully cover cafeteria expenses, Gogle must pay for the shortfall. These costs are allocated to production departments based on employee usage. That is, the
Recall from the chapter discussion that SailRite uses one plantwide rate based on direct labor hours to allocate manufacturing overhead costs to the company€™s two sailboat products€”Basic and Deluxe. Management was concerned about the inaccuracy of overhead costs being assigned
The company president makes the following statement: “Product costs are straightforward. Whatever costs are incurred to produce a product are assigned to that product.” Do you agree with this statement? Explain.
A colleague states, “We produce one product, and our operations are relatively simple. Activity-based costing and activity-based management would be a waste of time for our company!” Do you agree with this statement? Explain.
Do you agree with the following statement? Explain your answer. Total estimated overhead costs will vary depending on whether we use the plantwide method, department method, or activity- based costing to allocate overhead.
The total monthly rent is $1,500. Your bedroom is the smallest of the three bedrooms, and each of the others has a bathroom attached. You and your friends are trying to decide how to divide up the rent. Two possibilities are being discussed.1. Share the cost equally among the three of you.2.
Orth and Associates is a small firm that provides structural engineering services for its clients. The company performs structural engineering services for both residential and commercial buildings. Last year, total overhead costs of $330,000 were allocated based on direct labor costs. A total of
Truckee Community Bank uses activity-based costing to assign overhead costs to two different loan products€”student loans and auto loans. The bank identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year.
Fine Finishing, Inc., produces a wood desk that sells for $500 and a wood table that sells for $900. Last year, total overhead costs of $6,000,000 were allocated based on direct labor costs. Direct labor costs totaled $2,000,000 last year, and the company produced 15,000 desks and 5,000 tables.
Black Oak Company identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year. (These are the first three steps of activity-based costing.)The company produces three products, Z1, Z2, and Z3. Information about these
Mooring and Associates provides wetlands design and maintenance services for its customers, most of whom are developers. Billing is based on costs plus a 30 percent markup. Thus, costs are allocated to customers rather than to products.Total overhead costs this coming year are expected to be
The following activities and costs are for Ramos Corporation.1. Salary of a supervisor responsible for one product line2. Moving groups of products to the finished goods warehouse upon completion3. Maintenance performed on the factory building4. Factory building depreciation5. Direct materials used
Diablo, Inc., has two production departments (P1 and P2) and three service departments (S1, S2, and S3). Service department costs are allocated to production departments using the direct method. The $400,000 costs of department S1 are allocated based on the number of employees in each production
Ralston Company identified the following activities, estimated costs for each activity, and identified cost drivers for each activity for this coming year. (These are the first three steps of activity-based costing.)The company produces two products, MX1 and MX2. Information about these products
Lopez Company expects to incur $600,000 in overhead costs this coming year—$100,000 in the Cutting department, $300,000 in the Assembly department, and $200,000 in the Finishing department. Direct labor hours worked in all departments are expected to total 30,000 (used for the plantwide rate).
Lopez Company expects to incur $600,000 in overhead costs this coming year—$100,000 in the Cutting department, $300,000 in the Assembly department, and $200,000 in the Finishing department. Direct labor hours worked in all departments are expected to total 30,000 (used for the plantwide rate).
For each firm listed in the following, identify whether it would use job costing or process costing.1. Canned soup producer 2. Custom automobile restorer 3. Facial tissue manufacturer 4. Accounting services provider 5. Printer paper producer 6. Pool builder 7. Cereal
Lucerne Company has 15 production departments and produces hundreds of products. Service department costs are allocated to production departments using the direct method. Five service departments provide the following services to the production departments.1. The Computer Technology department
Water Sports Inc., manufactures custom-made kayaks and accessories. The company performs the following activities.1. Storing parts and materials2. Queuing orders before beginning production3. Assembling kayaks4. Waiting for materials to arrive to continue production5. Painting kayaks6. Designing
McHale Architects, Inc., designs, engineers, and supervises the construction of custom homes. The following activities were identified as being most important (step 1 and step 2 of activity-based costing), and cost pools were formed for each activity.1. Meeting with customers2. Coordinating
Palisades Company identified the activities listed in the following as being most important (step 1 and step 2 of activity-based costing), and it formed cost pools for each activity.1. Purchasing raw materials2. Inspecting raw materials3. Storing raw materials4. Maintaining production equipment5.
Describe the four categories included in the hierarchy of costs.
Describe the four categories related to the costs of quality. How might the allocation of quality costs to these four categories help managers?
Manufacturing overhead costs totaling $500,000 are expected for this coming year—$200,000 in the Assembly department and $300,000 in the Finishing department. The Assembly department expects to use 4,000 machine hours, and the Finishing department expects to use 30,000 direct labor
Calculating Plantwide Predetermined Overhead Rate. Manufacturing overhead costs totaling $5,000,000 are expected for this coming year. The company also expects to use 100,000 direct labor hours and 40,000 machine hours.Required:a. Calculate the plantwide predetermined overhead rate using direct
Refer to the dialogue presented at the beginning of the chapter and the follow-up dialogue before Figure 3.7.Required:a. In the opening dialogue, why was the owner concerned about the product costs for each of the company€™s boats?b. In the follow-up dialogue before Figure 3.7, what did
How does the hierarchy of costs help managers allocate overhead costs?
What is the difference between a facility-level cost and a unit-level cost?
What are service departments? Why do some managers allocate service department costs to production departments?
What selling costs and general and administrative costs might be allocated to products using activity- based costing? Why do some managers prefer allocating these costs to products?
What was management’s primary concern in deciding to implement an activity-based costing system?
What did the survey of 296 users of ABC and ABM show were the top two objectives in using these systems?
How did activity-based costing help BuyGasCo Corporation settle its predatory pricing case?
What is the difference between a value-added activity and a non-value-added activity? Provide two examples of non-value-added activities for each of the following:a. Fast-food restaurantb. Clothing storec. College bookstore
How does activity-based management differ from activity-based costing?
Describe the three steps required to implement activity-based management.
Explain how to record the application of overhead to products using activity-based costing.
What were the two common characteristics of the 130 U.S. manufacturing companies that used activity-based costing?
What are some disadvantages of using an activity-based costing system?
What are some advantages of using an activity-based costing system?
Describe the five steps required to implement activity-based costing.
How do cost flows using activity-based costing differ from cost flows using one plantwide rate?
What is the difference between an activity and a cost driver?
What is a cost pool, and how does it relate to allocating overhead to products?
Describe the three methods of allocating overhead costs.
Why do managers allocate overhead costs to products?
The following activities and costs are for Collins Company.1. Direct materials used by workers to assemble products2. Factory building rent3. Machines set up to produce groups of products4. New product research and development5. Maintenance performed on the factory building6. Direct labor
Meteor Company has two production departments (Finishing and Painting) and three service departments (Maintenance, Computer Support, and Personnel). Service department costs are allocated to production departments using the direct method. Maintenance allocates costs totaling $3,000,000 based on the
Assume Orth and Associates, discussed in Problem 44, uses activity-based costing. Required:a. Using the data presented at the beginning of Problem 44, calculate the predetermined overhead rate for each activity. Round results to the nearest cent.b. The following activity associated with the
Commercial Products, Inc., has two production departments (P1 and P2) and three service departments (S1, S2, and S3). Service department costs are allocated to production departments using the direct method. The $400,000 costs of department S1 are allocated based on the number of employees in each
Downeyville Products, Inc., is deciding which of three approaches it should use to apply overhead to products. Information for each approach is provided as follows.€¢ One plantwide rate. The predetermined overhead rate is $140 per direct labor hour.€¢ Department rates. The
Assume Fine Finishing, Inc., discussed in Problem 41, uses activity-based costing.Required:a. Using the data presented at the beginning of Problem 41, calculate the predetermined overhead rate for each activity.b. The following activity associated with the desk product was reported for the month of
Provincial Company is deciding which of three approaches it should use to apply overhead to products. Information for each approach is provided in the following.€¢ One plantwide rate. The predetermined overhead rate is 120 percent of direct labor cost.€¢ Department rates. The
Carson Company produces a regular computer monitor that sells for $175 and a premium computer monitor that sells for $300. Last year, total overhead costs of $3,675,000 were allocated based on direct labor hours. A total of 63,000 direct labor hours were required last year to build 36,000 regular
Mountain Nursery Company grows a variety of plants and sells them to local nurseries. Raw materials consist of such items as seeds and the fertilizer required to grow plants from the seedling stage to a viable, saleable plant. Mountain Nursery uses a job costing system to track revenues and costs
Jansen, Inc., is a defense contractor that uses job costing. Because the firm uses a perpetual inventory system, the three supporting schedules to the income statement (the schedule of raw materials placed in production, the schedule of cost of goods manufactured, and the schedule of cost of goods
Both General Motors (GM) and Toyota have production facilities in Texas. GM’s plant was built in 1956 on a 249-acre site and has since undergone billions of dollars in renovations. Toyota’s plant was built in 2006 on 2,000 acres. Each plant has a production capacity of 200,000 vehicles per
Over the past several decades, manufacturing companies have tended to move away from direct labor and more toward automation (i.e., using machinery rather than people to produce products). Required:How might this shift to automation affect the allocation base used to allocate overhead to
Heston Corporation provides accounting services. It uses a job costing system to track each client€™s revenues and costs. The firm is currently working on two jobs. The first job, preparing tax returns for Hinkle Corporation, was bid at $50,000 and had budgeted costs of $36,000. The
Riverside Company incurred actual manufacturing overhead costs of $630,000 during the year ended December 31, 2016. A total of $570,000 in overhead was applied to jobs. At December 31, 2016, work-in-process inventory totals $200,000, and finished goods inventory totals $400,000. Cost of goods sold
Denner Company incurred actual manufacturing overhead costs of $260,000 during the year ended December 31, 2016. A total of $350,000 in overhead was applied to jobs. At December 31, 2016, work-in-process inventory totals $100,000, and finished goods inventory totals $300,000. Cost of goods sold
Westley Company provides engineering services. It began jobs 1 through 3 in the first week of June. The following transactions occurred during that time.1. Purchased supplies on account totaling $1,5002. Used supplies totaling $800 for various jobs3. Processed timesheets showing the following:4.
What is the purpose of using a predetermined overhead rate?
What information is included on a time-sheet?
Tax Services, Inc., provides tax accounting services and began operations on February 1. It began jobs 1 through 4 during the first half of February. The following transactions occurred that week.1. Purchased supplies on account totaling $6,0002. Used supplies totaling $3,200 for various jobs3.
Dirt Bikes, Inc., produces custom motorized dirt bikes. Each dirt bike is built to customer specifications. During April, its first month of operations, Dirt Bikes began production of three customer orders€”jobs 1 through 3. The following transactions occurred during April.1. Purchased
Fit Right, Inc., produces custom trailers for professional racers. Each trailer is built to customer specifications. During July, its first month of operations, Fit Right began production of four customer orders€”jobs 1 through 4. The following transactions occurred during July.1.
Brody Company incurred the following actual overhead costs for the month of February.Overhead is applied based on a predetermined rate of $2 per direct labor dollar (200 percent of direct labor cost), and direct labor costs were $300,000 for the month. Required:a. Prepare a journal entry to
Access Products, Inc., incurred the following actual overhead costs for the month of November.Overhead is applied based on a predetermined rate of $24 per machine hour, and 5,100 machine hours were used during November.Required:a. Prepare a journal entry to record actual overhead costs for
Kimmel Company expects to incur $800,000 in manufacturing overhead costs this year. During the year, it expects to use 10,000 direct labor hours at a cost of $200,000 and 4,000 machine hours. Required:a. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, and
Milan Company had the following activity for the year ended December 31.Required:Prepare an income statement for year ended December 31. Sales revenue $5,000,000 $ 825,000 Selling expenses $ 570,000 General and administrative expenses Cost of goods sold (before adjustment) $2,900,000 $ 109,000
The balance in Burt Company’s finished goods inventory account was $25,000 at the beginning of September. Cost of goods manufactured for the month totaled $17,000, and cost of goods sold totaled $14,000. Required:a. Prepare separate journal entries to record the following items.1. Cost of
The balance in Jansen Company€™s work-in-process inventory account was $300,000 at the beginning of March. Manufacturing costs for the month are as follows:Required:a. Prepare separate journal entries to record the following items.1. Direct materials placed in production for the month2.
Manufacturing overhead costs totaling $8,000,000 are expected for this coming year. The company also expects to use 20,000 in direct labor hours. Calculate the predetermined overhead rate and provide a one-sentence description of how the rate will be used in a job costing system.
The following transactions occurred during the month of October:Required:a. Set up T-accounts for raw materials inventory, work-in-process inventory, manufacturing overhead, and accounts payable.b. Use the T-accounts established in part a to record the transactions for October. October 5 Raw
Indicate whether each of the firms listed in the following would use job costing or process costing.1. Landscape design firm 2. Oil refinery 3. Surgical unit of hospital 4. Pencil producer5. Auto body repair shop 6. Producer of basketballs 7. Producer of T-shirts 8.
Indicate whether each of the firms listed in the following would use job costing or process costing.1. Dairy farm2. Builder of pools3. Candy bar producer4. Legal firm5. Upholstery repair shop6. Sports drink producer7. Toner cartridge producer8. Custom home builder
Refer to the dialogue between Dan and Leslie at Custom Furniture Company that appears at the beginning of the chapter. What is Dan concerned about, and how did Leslie propose to help?
How does a job costing system help a company evaluate the profitability of jobs?
Why is it important for movie studios to have accurate costs for each movie produced?
How might a job costing system used by a service organization differ from a job costing system used by a manufacturing organization?
What two options are available when closing the manufacturing overhead account at the end of the period, depending on the significance of the balance?
When is manufacturing overhead underapplied? When is it overapplied?
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