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Accounting 5th Edition Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones - Solutions
Stouse Import Corporation is positioned ideally in its business. Located in Tucson, Arizona, Stouse is the only company between Texas and California with reliable sources for its imported gifts. The company does a brisk business with specialty stores such as Pier 1 Imports. Stouse's recent success
The following information was taken from the records of Escobedo Corporation at June 30, 20X5: Preparing a detailed income statement (Obj. 5) Common stock, no-par, 22,000 shares authorized and issued........... $350,000 Preferred stock. 6%. $25 par, Selling expenses General expenses. Income from
Pacer Communications, Inc., reported the following statement of stockholders' equity for the year ended September 30, 20X1 PACER COMMUNICATIONS, INC. Statement of Stockholders' Equity Year Ended September 30, 20X1 Additional Common Paid-in Retained Treasury (Dollar Amounts in Millions) Stock
Ganache Industries had the following stockholders' equity amounts on June 30, 20X2: Common stock, no-par, 100,000 shares issued. Retained earnings...... Total stockholders' equity.. $ 750,000 790,000 $1,540.000 In the past. Ganache has paid an annual cash dividend of $1.50 per share. Despite the
Back to Chapter 9 (Accounting Principles). Gladewater Petroleum Company is an inde- pendent oil producer in Gladewater, Texas. In February, company geologists discovered a pool of oil that tripled the company's proven reserves. Prior to disclosing the new oil to the public, top managers of the
Use the Target Corporation financial statements in Appendix A to answer the following questions. Required 1. Study Target's income statement, which the company labels "consolidated results of operations. Consolidated means that Target owns other companies. Target reported one "special" item of
Obtain the annual reports (or annual report data) of five well-known companies. You can get the reports either from your college library or by mailing a request directly to the company (allow two weeks for delivery). Or you can visit the Web site for this book (http://www.prenhall.com/harrison/) or
Compute the price to the nearest dollar for the following bonds with a face value of $10.000:a. 93b. 88 3/4d. 122 1/2e. 100c. 101 3/8
Identify the accounts to debit and credit for transactionsa. to issue bonds at parb. to pay interestc. to accrue interest at year endd. to pay off bonds at maturity.
Identify the accounts to debit and credit for transactionsa. to issue bonds at a discountb. to pay interestc. to accrue interest at year endd. to pay off bonds at maturity
Identify the accounts to debit and credit for transactionsa. to issue bonds at a premiumb. to pay interestc. to accrue interest at year endd. to pay off bonds at maturity
A company retires ten-year bonds payable of $100,000 after five years. The business issued the bonds at 104 and called them at 103. Compute the amount of gain or loss on retirement. How is this gain or loss reported on the income statement?
A business signs a capital lease for the use of a building. with the first lease payment due immediately. What accounts are debited and credited to begin the lease term?
Describe the four criteria for an effective accounting system.
The accountant for T-Questa Company posted all amounts correctly from the cash receipts journal to the general ledger. However, he failed to post three credits to customer accounts in the accounts receivable subsidiary ledger. How would this error be detected?
How does a static budget differ from a flexible budget?
McLaren, Inc., prepared its static (master) budget for a sales level of 35.000 for the month. Actual sales totaled 46,000. Describe the problem of using the static budget to evaluate company performance for the month. Propose a better way to evaluate McLaren's performance.
What advantage does a flexible budget graph offer over a columnar flexible budget with four levels of volume?
What does a price variance measure? How is it computed?
What does an efficiency variance measure? How is it computed?
How are the price variance and the efficiency variance related to the flexible budget variance for direct materials and direct labor?
Describe how managers can trade off direct materials price and efficiency variances.
When should a cost variance be investigated?
What causes an overhead flexible budget variance? What information does this variance provide?
Scott & White, Inc.. uses standard costing. The actual quantity of direct materials used to manufacture inven- tory, costed at standard prices, was $21,600. The direct materials efficiency variance was $1.400 favorable. Make the journal entry to record the use of materials in pro- duction.
How does a standard cost income statement for management differ from an income statement reported to the public?
DE24-1 In a series of Daily Exercises, we are going to prepare budgets and variance analyses for Digital Systems, Inc., a firm that installs household wiring for high-speed Internet connections and high-definition audio and video. For each installation. Digital Systems has budgeted direct materials
DE24-2 Turn to the Kool-Time Pools example on page 974. 1. Using the data from Exhibit 24-3 (page 974), develop flexible budgets for three- and ten- pool levels of output. 2. Would Kool-Time's managers use the flexible budgets you developed in requirement 1 for planning or for controlling? What
DE24-3 Link Back to Chapter 22. Exhibit 22-7 (page 899). Refer to Daily Exercise 24-1. Digital Systems reports the following actual results for January and February: January February Expected number of installations. per the static budget... 20 30 Actual number of installations. 25 20 Actual sale
DE24-4 Look at Kool-Time Pools' graph of actual and budgeted monthly costs in Exhibit 24-5 on page 976. 1. How many pools did Kool-Time install in May? 2. How much were Kool-Time's actual expenses in May? 3. Using Kool-Time's flexible budget formula, what is the flexible budget total cost for the
DE24-5 Refer to the Digital Systems data in Daily Exercises 24-1 and 24-3. Compute January and February flexible budget variances for total costs. Has Digital Systems done a bet- ter-than-expected job or a worse-than-expected job of controlling total costs in January? In February? Explain.
DE24-6 Use your results from Daily Exercise 24-4 to prepare an income statement perfor- mance report for Kool-Time Pools for May. Use Exhibit 24-7 (page 978) as a guide. Assume that the actual sale price per pool remains $12,000, actual variable expenses total $59.000. and actual fixed expenses are
DE24-7 Use the data in Daily Exercises 24-1. 24-3, and 24-5 to prepare an income statement performance report for Digital Systems for January. Use Exhibit 24-7 (page 978) as a guide. Interpret the variances for Digital Systems' management.
DE24-8 Consider the Kool-Time Pools example on pages 973-980. 1. What is the relevant range for the flexible budget total cost formula? 2. Explain whether Kool-Time would have a sales volume variance for fixed expenses in Exhibit 24-7 (page 9781 ifa. Kool-Time installs 14 pools per month.b.
DE24-9 Fill in the blank with the phrase that best completes the sentence. Actual number of outputs Expected number of outputs Sales volume variance Beginning of the period End of the period Flexible budget variancea. The static budget is developed at the Static budget varianceb. The flexible
DE24-10 Lladr is a Spanish manufacturer of porcelain art objects. Raw materials are mixed to form clay, which is shaped into figurines. The pieces are then glazed and fired at high temperatures. Explain how the five benefits of standard costs (pages 983-984) apply to Lladr. Be as specific as
DE24-11 As explained in the chapter opening story, each McDonald's uses historical data to budget sales for each hour, and the restaurant computes hourly sales variances. If actual sales are less than budgeted, the manager can send employees home. 1. What variance does McDonald's control by sending
DE24-12 In a series of Daily Exercises, we will compute variances and record journal entries for TimTam Pottery, a manufacturer of ceramic cookie jars. The company has the following standards: Direct materials (clay). Direct labor Static budget variable overhead. Static budget fixed overhead Static
DE24-13 As explained in the chapter opening story, the standard direct materials for a regu- lar McDonald's hamburger are 1 bun 1 hamburger patty 1 pickle slice 1/8 teaspoon dehydrated onion 1/4 teaspoon mustard 1/2 ounce ketchup Assume that a San Diego, California. McDonald's sold 500 hamburgers
DE24-14 Refer to the TimTam data in Daily Exercise 24-12. Compute the direct labor vari- ances
DE24-15 Refer to Daily Exercises 24-12 and 24-14. For each variance, who in TimTam's organization is most likely responsible? Interpret the direct materials and direct labor vari- ances for Tim Tam's management.
DE24-16 Use the TimTam data in Daily Exercise 24-12 to compute the standard predeter- mined variable manufacturing overhead rate and the standard predetermined fixed manufac- turing overhead rate.
DE24-17 Refer to the TimTam data in Daily Exercises 24-12 and 24-16. 1. Compute the overhead variances. (Use Exhibit 24-14 as a guide.) 2. Is manufacturing overhead under- or overallocated? By how much?
DE24-18 Refer to the information in Daily Exercises 24-12 and 24-14. Record TimTam's direct materials and direct labor journal entries.
DE24-19 Refer to the information in Daily Exercises 24-12 and 24-17. Record Tim Tam's journal entries for Manufacturing Overhead, including the entry that records the overhead variances and closes the Manufacturing Overhead account.
DE24-20 Refer to the information in Daily Exercises 24-12, 24-14, and 24-17 through 24-19. TimTam sold on account each of the 60.000 jars at a sale price of $8.00 each. There were no beginning or ending inventories of any kind. Record the journal entries for the completion and sale of the 60.000
DE24-21 Use the information from Daily Exercises 24-12, 24-14, and 24-17 through 24-20 to prepare a standard cost income statement for TimTam's management, using Exhibit 24-16 as a guide. Actual marketing and administrative expenses were $88,500.
E24-1 CompuGear sells its main product, ergonomic mouse pads, for $10 each. Its variable cost is $4 per pad. Fixed expenses are $200,000 per month for volumes up to 60.000 pads. Above 60,000 pads, monthly fixed expenses are $300,000. Prepare a monthly flexible budget for the product, showing sales,
E24-2 =+ Link Back to Chapter 22. Exhibit 22-7 (page 899). Graph the flexible budget total cost line for CompuGear in Exercise 24-1. Show total costs for volume levels of 40,000, 50.000. and 70,000 pads.
E24-3 Beach Blanket Company managers received the following incomplete performance report: Output units.. Sales Revenue Variable expenses. Fixed expenses Total expenses. Operating income. BEACH BLANKET COMPANY Income Statement Performance Report Year Ended July 31, 20X3 Flexible: Actual Budget
E24-4 Top managers of Wang Industries predicted 20X4 sales of 145,000 units of its product at a unit price of $7. Actual sales for the year were 140.000 units at $8.50 each. Variable expenses were budgeted at $2.20 per unit, and actual variable expenses were $2.25 per unit. Actual fixed expenses of
E24-5 The following direct materials variance computations are incomplete: Price variance = (S? - $12) x 14,500 pounds = $5,800 U Efficiency variance = (? - 14,700 pounds) x $12 = ? F Flexible budget variance = $? Fill in the missing values, and identify the flexible budget variance as favorable or
E24-6 Forever Frames, which uses a standard cost accounting system, manufactured 400,000 picture frames during the year, using 1.350,000 board feet of lumber purchased at $1.55 per foot. Production required 9,500 direct labor hours that cost $12.00 per hour. The materials standard was 3 board feet
E24-7 Make the journal entries to record the purchase and use of direct materials and direct labor in Exercise 24-6.
E24-8 The managers of Diaz Co., a contract manufacturer of disk drives. are seeking expla- nations for the variances in the following report. Explain the meaning of each of Diaz's mate- rials, labor, and overhead variances. DIAZ CO. Standard Costing Income Statement Year Ended December 31, 20X4
E24-9 Polystar manufactures carpeting. The company charges the following standard unit costs to production on the basis of static budget volume of 30,000 linear feet of carpet per month: Direct materials Direct labor... $2.50 2.00 Manufacturing overhead. 1.50 $6.00 Standard unit cost. Polystar uses
E24-10 European Cuisine. Inc., revenue and expense information for the month of April follows. Sales revenue $440.000 Cost of good sold (standard). 242.000 Direct materials price variance 2.000 F Direct materials efficiency variance: 4.000 F Direct labor price variance.... 3.000 U Direct labor
E24-11 Laptop Solutions repairs and upgrades laptop computers. The company measures "production output in terms of the number of laptops serviced. The company allocates over- head at the rate of $80 per laptop serviced. Variable Fixed. Overhead Rate per Unit $30 50 In June. 20X6. Laptop Solutions
P24-1A +Link Back to Chapter 22. Exhibit 22-7 (page 899). Cellular Technologies manufactures capacitors for cellular base stations and other communications applications. The company's static budget income statement for October 20X4 follows. It is based on expected sales volume of 9.000 units.
P24-2A Refer to Cellular Technologies. Problem 24-1A. The company sold 11.000 units dur- ing October 20X4. and its actual operating income was as follows: CELLULAR TECHNOLOGIES Income Statement October 20X4 Sales revenue $235.000 Variable expenses: Cost of goods sold. 90.250 Sales commissions.
P24-3A Bronx Co. manufactures insulated hunting jackets and uses flexible budgeting and a standard cost system. Bronx allocates overhead based on yards of direct materials. The com- pany's performance report includes the following selected data: Sales (1.000 jackets x $200) (975 jackets x $192)
P24-4A The State of Ohio has a shop that manufactures road signs used throughout the state. The manager of the shop uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and the manager has only partial data for March. The manager knows that the
P24-5A SportsTime manufactures T-shirts that it sells to other companies for customizing with their own logos. SportsTime prepares flexible budgets and uses a standard cost system to control manufacturing costs. The standard unit cost of a basic white T-shirt is based on static budget volume of
P24-6A School Tools manufactures ring binders. During August, the company produced and sold 104,000 binders and recorded the following cost data: Direct materials: Standard (2 parts @ $0.12 per part). Actual (209,500 parts @ $0.16 per part) Direct labor: Standard (0.02 hr @ $6.00 per hr). Actual
P24-1B Link Back to Chapter 22 Exhibit 22-7 (page 899). Medix Inc.. produces and sells prepackaged first-aid kits. The company's static budget income statement for August 20X3 fol- lows. It is based on expected sales volume of 55,000 kits. MEDIX, INC. Static Budget Income Statement August 20X3
P24-2B Refer to Medix, Inc., of Problem 24-1B. The company sold 60,000 kits during August 20X3, and its actual operating income was as follows: Sales revenue. MEDIX, INC. Income Statement August 20X3 Variable expenses: Cost of goods sold. Sales commissions. Utilities expense $245,000 $ 66,500
P24-3B Multicast Co. assembles TVs and uses flexible budgeting and a standard cost system. Multicast allocates overhead based on the number of direct materials parts. The company's performance report includes the following selected data: Sales (20,000 TVs x $200) Static Budget Actual Results
P24-4B The City of Jackson has a shop that manufactures park benches. The manager of the shop uses standard costs to judge performance. Recently, a clerk mistakenly threw away some of the records, and the manager has only partial data for October. The manager knows that the direct labor flexible
P24-5B Pacific Products manufactures fishing waders. The company prepares flexible bud- gets and uses a standard cost system to control manufacturing costs. The following standard unit cost of a pair of waders is based on the static budget volume of 14,000 pairs per month: Direct materials (3.0 sq.
P24-6B Tucker Industries produces industrial plastics. During May, the company produced and sold 42.000 sheets of plastic and recorded the following cost data: Actual Standard Total Unit Cost Cost Direct materials: Standard (3 lb @ $1.25 per lb).. Actual (134.400 lb @ $1.20 per lb). Direct labor:
Case 1. Source, Inc.. distributes computer games to software retailers, including dot.coms. Source's top management meets monthly to evaluate the company's performance. Controller Jenniler Lee prepared the performance report on page 1013 for the meeting. Lee also revealed that the actual sale price
Case 2. Assume you manage your local McDonald's restaurant. Your restaurant is chosen to test the company's "Made-for-You" kitchen system. The system eliminates batch SOURCE, INC. Income Statement Performance Report Month Ended July 31, 2001 Actual Result Static Budget Variance Sales revenue
Terry Tubbs is a bottling machine operator for Harmony, Inc., which produces dietary supple- ments and homeopathic medicines. Harmony uses standard costing. Tubbs enters the beginning and ending times for each job on a computer touch screen. This provides the actual direct labor hours and machine
Cabletronix is a contract manufacturer of electronic components, including Cisco equipment cables. Cabletronix has a number of network installers who are regular customers for the company's cables. To grow its business. Cabletronix has joined a business-to-business trading community. Sales manager
Vail Resorts, Inc., is a holding company operating in two business segments, mountain resorts and real-estate development. For the mountain resort segment, revenues and expenses can vary widely depending on the amount of snow and other weather conditions. Assume that to plan for these differences,
List three management accounting techniques that managers use to achieve their strategic goal of delivering value to customers.
Give two reasons why allocating manufacturing over- head based on direct labor can yield inaccurate product costs
Managers often use standards and variance analysis to control direct material and direct labor costs. What accounting tool can they use to help control manufactur- ing overhead cost?
Give three examples of technology that have made gath- ering ABC data less expensive.
What kinds of decisions do managers make using ABC data?
What is target pricing and how does it affect cost man- agement?
Activity-based costing systems provide more accurate information than traditional systems that use a single allocation rate. Every company should adopt ABC." Do you agree? Why or why not?
Contrast the traditional and JIT approaches to managing machine setups.
Describe "demand-pull" production scheduling.
Do companies that implement JIT usually increase or decrease the number of suppliers they use? Why?
List three differences between JIT costing and traditional standard costing.
The just-in-time costing account Raw and In Process Inventory represents two accounts in a sequential- tracking system. What are they?
Prevention costs are the most important quality costs. Explain.
DE25-1 Fill in each blank with a term. You may use a term more than once. Some terms may not be used at all. activity-based costing a cost allocation base a cost driver correctly cost direct labor overcost direct material indirect job costing target costing undercosta. ABC systems differ from
DE25-2 List the seven steps in developing an ABC system. For each step, decide whether pri- mary responsibility for the step should be assigned to The company accountant Production personnel (for example, the production foreman) Shared equally between the accountant and production personnel (Hint:
DE25-3 The vice president of marketing storms into your office, exclaiming: Activity-based costing is worse than useless. It's endangering the future of our company! Because of your ABC cost "information," the CEO is pressuring us to (1) charge customers higher prices for customized products, (2)
DE25-4 Consider Chemtech's original cost system on pages 1022-1023. Suppose Chemtech allocates manufacturing overhead at 225% of direct labor cost, instead of 200% of direct labor cost. 1. Compute the gross profit per pound for aldehyde and for PH. 2. Compute the total overhead assigned to all the
DE25-5 Suppose Chemtech's activity-based costing team identifies a fourth activity- machine setup. The foreman estimates that the total setup cost will be $270,000, and that production will require 3,000 setups. (This is less than the 4,000 total batches in Exhibit 25-7. Chemtech often eliminates a
DE25-6 Consider the Chemtech example on pages 1022-1027 and your analysis in Daily Exercise 25-5. 1. Compute the machine setup cost per pound for aldehyde and for PH. 2. Use your answer to requirement 1 to explain why switching from a traditional single- allocation-base system to an ABC system
DE25-7 Use the results of Daily Exercise 25-5 and the information in Exhibit 25-8 to revise the 1. Manufacturing overhead cost per pound for aldehyde and for PH 2. Gross profit per pound for aldehyde and for PH
DE25-8 Chemtech's value engineering team determines that new software for managing the mixing process will reduce mixing costs from $450.000 to $362,000. Given the other infor- mation in Exhibit 25-11. compute the new mixing activity cost allocation rate. Will this cost saving allow Chemtech to
DE25-9 Arnold Business Stationery produces engraved business stationery, which it sells for $360 per ream. The stationery currently costs Arnold's $280 per ream. A competitor has just cut the sale price of its comparable stationery to $300 per ream. Marketing believes that Arnold must cut its sale
DE25-10 Daily Exercises 25-10 through 25-16 center on Soliloquy Softworks, Inc., a tech- nology consulting firm and Microsoft Solutions Provider focused on Web site development and integration of Internet business applications. President Mary Nelson's ear is ringing after an unpleasant call from
DE25-11 Review Soliloquy Softworks' situation in Daily Exercise 25-10. List all the signals or clues that indicate Soliloquy's cost system may be "broken."
DE25-12 Mary Nelson has employed your management consulting firm to help her decide whether to develop an activity-based costing system. After reviewing the information in Daily Exercises 25-10 and 25-11, draft a memo to Nelson. Make a recommendation whether her firm should develop an ABC system.
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