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Accounting 5th Edition Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones - Solutions

DE25-13 Mary Nelson from Daily Exercise 25-10 suspects that her allocation of indirect costs could be giving misleading results, so she decides to develop an ABC system. She identi- fies three activities: documentation preparation, information technology support, and train- Nelson figures that
DE25-14 Refer to the Soliloquy Softworks example in Daily Exercises 25-10 and 25-13. The Wilner and Lee engagements used the following resources last month: Cost Driver Wilner Lee Direct labor hours.. Pages... Applications used 90 90 50 1 300 7 1. Compute the cost assigned to the Wilner engagement
DE25-15 Write a memo to Mary Nelson comparing the costs of the Wilner and Lee jobs using the original direct labor single-allocation-base system (Daily Exercise 25-10) and the ABC system (Daily Exercise 25-14). Be sure to explain How have the costs changed under the ABC system? Why have the costs
DE25-16 Write a memo to Mary Nelson (Daily Exercises 25-10 through 25-15) explaining how she can use the ABC information to make decisions about her consulting firm. Consider how she could use ABC information in Setting fees (prices) Responding to client concerns about fees Controlling costs Your
DE25-17 Indicate whether each of the following is characteristic of a JIT production system or a traditional production system.a. Management works with suppliers to ensure defect-free materials.b. Products produced in large batches.c. Large stocks of finished goods protect against lost sales if
DE25-18 Look at the Mintel Company example on pages 1038-1040. Suppose Mintel's standard cost per circuit is $1.05 for materials and $6.20 for conversion costs, and that Mintel sold 2,950,000 circuits. How would this change Mintel's journal entries, including the entry to close the Conversion Cost
DE25-19 Hamilton Products uses a JIT system to manufacture trading pins for the 2002 Olympic Games in Salt Lake City. The standard cost per pin is $2 for raw materials and $3 for conversion costs. Last month Hamilton recorded the following data: Number of pins completed.. 4,000 pins Number of pins
DE25-20 Bombardier, Inc., manufactures SeaDoo personal watercraft (jet-skis). Give examples of costs Bombardier might incur in each of the four categories of quality costs: Prevention costs Appraisal costs Be as specific as possible. Internal failure costs External failure costs
DE25-21 Porsche manufactures expensive, high-quality sports cars including the 911 and Boxster. Suppose Porsche is considering spending the following amounts on a new quality program for the 911: Additional 20 minutes of testing for each car. Negotiating with and training suppliers to obtain higher
E25-1 Wheels, Inc., uses activity-based costing to account for its chrome wheel manufac- turing process. Company managers have identified four manufacturing activities; materials handling, machine setup, insertion of parts, and finishing. The budgeted activity costs for 20X3 and their allocation
E25-2 Several years after reengineering its production process, Spokes. Inc., hired a new controller, Lindsay Bays. She developed an ABC system very similar to the one used by Spokes' chief rival, Wheels, Inc., of Exercise 25-1. Part of the reason Bays developed the ABC system was that Spokes'
E25-3 Refer to Exercise 25-2. For 20X4, Spokes' managers have decided to use the same indirect manufacturing costs per wheel that they computed in 20X3. In addition to the unit indirect manufacturing costs, the following data are budgeted for the company's standard and deluxe models for 20X4:
E25-4 Refer to Exercise 25-2. Controller Lindsay Bays is surprised by the increase in cost of the deluxe model under ABC. Market research shows that to remain a viable product while still providing a reasonable profit. Spokes will have to meet a target cost of $165 for the deluxe wheel. A value
E25-5 Refer to Exercise 25-2. Why might controller Lindsay Bays have expected ABC to pass the cost-benefit test? Were there any warning signs that Spokes old direct-labor-based alloca- tion system was "broken"?
E25-6 Circuit Creations produces circuit boards. Circuit Creations uses a JIT costing system. One of the company's products has a standard direct materials cost of 56 per unit and a stan- dard conversion cost of $20 per unit. During 20X5. Circuit Creations produced 500,000 units and sold 480.000.
E25-7 E-Voice produces cellular phones. Suppose that E-Voice's standard cost per phone is $22 for materials and $30 for conversion costs. The following data apply to July production: Materials purchased $5,300,000 Conversion costs incurred. $6.120,000 Number of phones completed.. 200,000 phones
E25-8 JIT costing is typically used by businesses that (1) assign standard costs to each prod- uct, and (2) have low inventories. Explain why each of these conditions makes JIT costing more feasible.
E25-9 Abraham & Co. makes electronic components. Evan Abraham, the president, recently instructed vice president Steve Givens to develop a total quality control program. "If we don't at least match the quality improvements our competitors are making." he told Givens. "we'll soon be out of
E25-10 RPP manufactures radiation shielding glass panels. Suppose RPP is considering spending the following amounts on a new total quality management (TQM) program: Strength-testing one item from each batch of panels.. $50,000 Training employees in TQM. 25,000 Training suppliers in TQM.. 35,000
E25-11 Baxter Fabricators, Inc.. completed two jobs in June 20X4. Baxter recorded the fol- lowing costs assigned to the jobs by the company's activity-based costing system: Allocated Cost Activity Allocation Base Job 204 Job 609 Materials handling Number of parts Lathe work Number of turns $ 400
P25-1A The Electronics Manufacturing Department of Digital Sound, Inc., in Dallas, Texas, assembles and tests electronic components used in digital music equipment. Consider the fol- lowing data regarding component Q42: Direct materials cost. Activity costs allocated Manufacturing product cost.
P25-2A MacArthur. Inc., manufactures CD racks and uses an activity-based costing system. MacArthur's activity areas and related data follow. Budgeted Cost Activity of Activity Allocation Base Cost Allocation Rate Materials handling Assembling Finishing $ 200,000 3,000,000 160.000 Number of parts $
P25-3A Camden Pharmaceuticals manufactures an over-the-counter allergy medication called Breathe. Camden is trying to win market share from Sudafed and Tylenol. Camden has developed several different Breathe products tailored to specific markets. For example, the company sells large commercial
P25-4A Continuing Problem 25-3A. Camden controller Sandra Whitney is surprised that A ABC reports such a higher indirect production cost per travel pack. She wonders whether g Camden is making the desired profit of $1.25 per unit on this product. The current sale price ( is $5.75 per travel pack,
P25-5A Rugged Ways produces backpacks. The company uses JIT costing for its JIT produc- tion system. Rugged Ways has two inventory accounts: Raw and In Process Inventory and Finished Goods Inventory. On October 1. 20X4, the account balances were Raw and In Process Inventory, $3,000; Finished Goods
P25-6A Pedals. Inc.. is using a costs-of-quality approach to evaluate design engineering efforts for a new bicycle helmet. Pedal's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activities over the
P25-1B Nouveau Technology's Desktop PC Department, which assembles and tests printed circuit (PC) boards, reports the following data regarding PC Board XR1: Direct materials cost Activity costs allocated Manufacturing product cost. $45.00 ? ? The activities required to build the PC boards are as
P25-2B Canyon Creek's Shelf Department manufactures bookshelves in its Santa Clarita. California. plant. The company uses activity-based costing. Its activities and related data follow. Activity Budgeted Cost of Activity Allocation Base Cost Allocation Rate Materials handling Assembling Painting $
P25-3B The Software Department of Innovations, Inc., develops software for Internet appli- cations. The market is very competitive, and Innovations' competitors continue to introduce new products at low prices. Innovations offers a wide variety of different software-from simple programs that enable
P25-4B Even though Problem 25-3B shows that MyPage's ABC costs are lower than under the simpler original cost system. Innovations' CEO Tony Millano is still concerned that the software's profitability may be less than expected. Millano asks Zeller to recommend a sale price that will yield a profit
P25-5B Connection produces cellular phones. The company has a JIT production system and uses JIT costing. Connection has two inventory accounts, Raw and In Process Inventory and Finished Goods Inventory. On August 1, 20X5. the account balances were Raw and In Process Inventory, $1,500: Finished
P25-6B KoffeeKup is using a costs-of-quality approach to evaluate design engineering efforts for a new electric coffeemaker. The company's senior managers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reduc- tions in activities
Case 1. SunSystems specializes in servers for workgroup, e-commerce, and ERP applications. The company's original job cost system has two direct cost categories-direct materials and direct labor. Overhead is allocated to jobs at the single rate of $23 per direct labor hour. A task force headed by
Case 2. To remain competitive. SunSystems' management believes the company must produce Job B-type servers (from Decision Case 1) at a target cost of $5.400. SunSystems has just joined a B2B e-market site that management believes will enable the firm to cut direct material costs by 10%. SunSystems
Grace Luft is assistant controller at Allpax Packaging, Inc., a manufacturer of cardboard boxes and other packaging materials. Luft has just returned from a packaging industry conference on activity-based costing. She realizes that ABC may help Allpax meet its goal of reducing costs by 5% over each
Project 1 Quick Trades, Inc., began operations in 1988 as a regional discount brokerage firm. The company grew quickly because of its low trading fees. In the late 1990s, Quick Trades began offering on-line trading. Quick Trades established two types of accounts: a standard service account that
Project 2 Form groups of four to six students. Identify a local company that has developed an activity- based costing system, and interview the accounting staff. Before the interview, learn The name of your company contact What the company produces Who are the company's major customers As part of
K2, Inc., is a leading designer, manufacturer, and marketer of brand name sporting goods, other recreational products, and selected industrial products. The sporting goods and recreational products markets are highly competitive, with competition centering on product innovation, performance, and
Explain the basic difference between job costing and process costing.
Distinguish direct materials from indirect materials and direct labor from indirect labor. Direct materials and direct labor are debited to what account when placed in production?
Give examples of direct materials and indirect materials for a caterer.
How can information technology simplify tracing direct materials and direct labor to specific jobs?
Is manufacturing overhead cost allocated to jobs by pre- cisely identifying the overhead cost of each job or by an estimation? Explain.
Would a heavily automated manufacturing plant be more likely to use machine hours or direct labor hours as the manufacturing overhead allocation base? Explain.
Why do companies use predetermined rather than actual manufacturing overhead rates?
Transactions in what account summarize the cost of goods manufactured? Show the T-account and label the transactions.
Which of the following accounts have their balances brought to zero at the end of the period, and which keep their ending balances to start the next period? Materials Inventory, Manufacturing Overhead. Finished Goods Inventory. Manufacturing Wages.
Cost of goods sold is just one line-item in the Income Statement. What kinds of costs are included in cost of goods sold?
Why would an international professional services firm like PricewaterhouseCoopers use job costing?
How do professional service firms such as law firms and management consulting firms trace direct labor to indi- vidual jobs?
What do the debits represent?
What do the credits represent?
To what account are indirect materials and indirect labor debited?
DE20-1 Job costing and process costing differ in (a) the cost object, and (b) the number of units over which costs are averaged. Explain these two differences.
DE20-2 Would the following companies use job costing or process costing?a. A manufacturer of plywood.b. A manufacturer of wakeboards.c. A manufacturer of luxury yachts.d. A professional services firm.e. A landscape garden contractor.
DE20-3 Suppose Olympic Paints incurs $560,000 to produce 250.000 gallons of deck stain. What is the cost per gallon? Would Olympic Paints use job or process costing? Why?
DE20-4 For a manufacturer that uses job costing, diagram the flow of costs through the accounts. Label each transaction. Include the following accounts in your diagram: Finished Goods Inventory. Manufacturing Wages, Cost of Goods Sold, Work in Process Inventory. Materials Inventory. Manufacturing
DE20-5 + Link Back to Chapter 9 (Inventory). Refer to E-Z-Boy's Material Ledger Record in Exhibit 20-5. Suppose material requisition # 334 indicated that on July 24. 20 units of lumber (rather than teni. were used in Job 293. What is the ending balance of item B-220- Lumber/Recliner Chairs?
DE20-6 Turn to E-Z-Boy's Materials subsidiary ledger in Exhibit 20-6. Suppose that on July 24. the balance of the Upholstery Fabric account was $300 rather than $390. What is the total Materials Inventory balance?
DE20-7 Walkabout manufactures backpacks. Its plant records the following materials- related transactions: Purchases of canvas (on account)............. Purchases of thread (on account) Material requisitions: Canvas. Thread. $70,000 700 63,000 280 What journal entries record these transactions? Post
DE20-8 Use the following T-accounts to determine direct materials used and indirect materials used. MATERIALS INVENTORY Bal. 16 Purchases 320 X Bal. 24 WORK IN PROCESS INVENTORY Bal. 32 Direct materials Direct labor Y 240 Cost of goods manufactured 744 Manufacturing overhead Bal. 200 8
DE20-9 Art Glass reports the following labor-related transactions at its plant in Seattle. Washington. Plant janitor's wages... Furnace operator's wages. Glass blowers' wages 600 900 76,000 Record the journal entries for the incurrence and assignment of these wages.
DE20-10 Touch Enterprises produces LCD touch screen products. The company reports the following information at December 31, 20X4. Touch began operations on January 30, 20X4. WORK IN PROCESS MANUFACTURING MANUFACTURING FINISHED GOODS INVENTORY WAGES OVERHEAD INVENTORY MATERIALS INVENTORY 40,000
DE20-11 Refer to Daily Exercise 20-10. 1. What is the actual manufacturing overhead? Allocated manufacturing overhead? 2. What is the predetermined manufacturing overhead rate, as a percentage of direct labor cost? 3. Is manufacturing overhead underallocated or overallocated? By how much?
DE20-12 All-Wood Outdoor furniture reports the following costs for June 20X4. What is the balance in the Manufacturing Overhead account? Wood. Nails and glue. $120,000 15,000 Wood preserving stain 8.000 Depreciation on saws.. 3,000 Depreciation on delivery truck. 2,200 Assembly-line workers' wages
DE20-13 Arctic-Tex produces fleece textiles woven from recycled plastic bottles. The company uses a predetermined manufacturing overhead rate to allocate overhead based on the machine hours each job requires. Arctic-Tex reports the following data for 20X5: Expected Actual Manufacturing overhead.
DE20-14 Refer to Daily Exercise 20-13. Arctic-Tex's Job 744 requireda. 20 direct labor hours, at a total cost of $4,096b. $2,140 of direct materialsc. 15 machine hours 1. Record the journal entry to allocate the manufacturing overhead to Job 744. 2. Compute the total cost of Job 744.
DE20-15 In the E-Z-Boy job cost record (Exhibit 20-11), how much manufacturing overhead cost would be allocated to Job 293 if the predetermined manufacturing overhead allocation rate is 90% of direct labor cost rather than 80%? What would be the total cost assigned to Job 293?
DE20-16 Turn to the E-Z-Boy illustration on pages 801-814. Suppose direct material requisitions totaled $300,000 rather than $285,000. (Indirect materials used and cost of goods manufactured remain the same.) Use T-accounts to show the new ending balances of Materials Inventory and Work in Process
DE20-17 In the E-Z-Boy illustration on pages 814-815, actual manufacturing overhead was $210,000. Suppose instead that the actual manufacturing overhead was $175,000. 1. What would be the actual manufacturing overhead rate? 2. Is manufacturing overhead underallocated or overallocated? By how much?
DE20-18 Refer to Daily Exercise 20-17. Make the journal entry to close out E-Z-Boy's Manufacturing Overhead account if the balance is closed to Cost of Goods Sold.
DE20-19 In the Barnett Legal Associates example on page 818, suppose Teresa Fox's annual salary is $120,000 rather than $100,000. 1. What would be the hourly (cost) rate to Barnett Legal Associates of employing Fox? 2. What direct labor cost would be traced to client 367?
DE20-20 Return to the original data in the Barnett Legal Associates example on pages 818-819. Suppose the Barnett attorneys expected to work a total of 8,000 direct labor hours rather than 10,000 direct labor hours. 1. What is the indirect cost allocation rate? 2. What indirect costs will be
E20-1 Listed below are several terms. Complete the following statements with one of these terms. You may use a term more than once, and some terms may not be used at all. Cost allocation Cost driver Cost tracinga. Job cost record Job costing Materials requisition Process costing is used by
E20-2 Horn's Printing job cost records yielded the following information: Date Job No. Started Finished Sold Total Cost of Job at March 31 I February 21 March 16 March 17 $ 2,800 2 February 29 March 21 March 26 17.000 3 March 3 April 11 April 13 5,900 4 March 7 March 29 April 1 6.200 5 March 9
E20-3 Record the following transactions in Systems Engineering's general journal.a. Incurred and paid Web site expenses, $6,500.b. Incurred and paid manufacturing wages, $16,000.c. Purchased materials on account, $13,500.d. Used in production: direct materials, $9,000; indirect materials, $2,000.e.
E20-4 Describe the lettered transactions in the following manufacturing accounts: MANUFACTURING WAGES MANUFACTURING OVERHEAD COST OF GOODS SOLD (a) (b) (b) (c) (e) (f) (g) (f) (d) MATERIALS INVENTORY WORK IN PROCESS INVENTORY FINISHED GOODS INVENTORY (h) (i) (c) (i) (j) (j) (g) (b) (e)
E20-5 September production generated the following activity in Digital Connection's Work in Process Inventory: WORK IN PROCESS INVENTORY September 1 Bal. Direct materials used 14,000 28,000 Direct labor assigned to jobs 30,000 Manufacturing overhead allocated to jobs 11.000 Completed production,
E20-6 Selected cost data for All-Flooring Co. are as follows: Expected manufacturing overhead cost for the year. Expected direct labor cost for the year Actual manufacturing overhead cost for the year. Actual direct labor cost for the year.. $119,600 46,000 104.600 40.500 Required 1. Compute the
E20-7 Isle Awning Company in Charleston. South Carolina. uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs, based on the direct labor hours required. At the beginning of 20X4, the company expected to incur the following: Manufacturing overhead costs. Direct
E20-8 Refer to the data in Exercise 20-7. Isle Awning's accountant found an error in her 20X4 expense records. Depreciation on manufacturing property, plant, and equipment was actually $600,000. not the $480.000 she had originally reported. Unadjusted balances at the end of 20X4 include Finished
E20-9 Terra Nova, an environmental consulting firm, specializes in advising electric utilities on compliance with recent environmental regulations. Terra Nova uses a job cost system with a predetermined indirect cost allocation rate, computed as a percentage of expected direct labor costs. At the
E20-10 At the end of the 20X4 fiscal year, SeaPro's manufacturing records show the following unadjusted ending account balances: Work in Process Inventory Finished Goods Inventory Cost of Goods Sold Direct materials. $100,000 $170,000 $360,000 Direct labor. 80,000 250,000 600,000 Manufacturing
P20-1A Highcountry Manufacturing builds storage systems for office and home use. Its job cost records yield the following information. The company uses a perpetual inventory system. Total Cost Date Job of Job Total Manufacturing Costs Added No. Started Finished Sold at November 30 in December 1
P20-2A Plantation Construction, Inc. is a home builder in the Southeast. Plantation uses a perpetual inventory system and a job cost system in which each house is a job. Because it constructs houses, the company uses accounts titled Construction Wages. Construction Overhead, and Supervisory
P20-3A Digital Reproductions manufactures CDs and DVDs for computer software and entertainment companies. Digital Reproductions uses job costing and has a perpetual inven- tory system. On November 2. Digital Reproductions began production of 5,000 DVDs. Job 378, for Hollywood Pictures for $1.20
P20-4A Intercraft/Burns manufactures picture frames. The primary materials (wood, plastic, and glass) and direct labor are traced directly to the products. Manufacturing costs are allocated based on machine hours. Data for the year 20X4 follow: Budget Actual Machine hours. 25,000 hours 29,600 hours
P20-5A=Link Back to Chapters 2 and 19. Citronix Systems produces components for digital network routers. Initially the company manufactured the parts for its own routers, but it gradually began selling them to other companies as well. April I balances in the subsidiary ledgers were Materials
P20-6A OneClick is a Web site design and consulting firm. The firm uses a job cost system, where each client is a different "job." OneClick traces direct labor, licensing costs, and travel costs directly to each job (client). It allocates indirect costs to jobs based on a predetermined indirect
P20-1B Office Solutions refurbishes photocopy machines and sells them on the Web. Its job cost records yield the following information. Office Solutions uses a perpetual inventory system. Total Manufacturing Cost Added in April Total Cost of Job at March 31 -234 2/26 3/7 3/9 $1,400 2/3 3/12 3/13
P20-2B Mountain Homes builds prefabricated log houses in Montana. The company uses a perpetual inventory system and a job cost system in which each house is a job. The following events occurred during May.a. Purchased materials on account, $315.000.b. Incurred manufacturing wages of $142,800.
P20-3B Alliance Rubber produces transmission belts that other companies use in their manufacturing processes. Alliance Rubber uses job costing and has a perpetual inventory system. On September 22, Alliance Rubber received an order for 50 industrial-grade belts from Hoyt Corporation at a price of
P20-4B Super-Tex produces specialized textiles. The company allocates manufacturing overhead based on the machine hours each job uses. Super-Tex reports the following cost data for 20X5: Budget Actual Direct labor hours. 6.000 hours 5,000 hours Machine hours 6.900 hours Depreciation on
P20-5B + Link Back to Chapters 2 and 19. Coalton Electric manufacturers specialized parts used in power generation. Initially, the company manufactured the parts for its own use, but it gradually began selling them to public utilities as well. The trial balance of Coalton Electric's manufacturing
P20-6B Banner.com is an Internet advertising agency. The firm uses a job cost system in which each client is a different "job." Banner.com traces direct labor, software licensing costs, and travel costs directly to each job (client). The company allocates indirect costs to jobs based on a
Case 1. Coffee Central prepares gift baskets of its own blends of coffee, espresso, and coffee candies for sale to corporate clients. Each customer selects items from Coffee Central's Web site, and Coffee Central prints the customer's corporate logo on the packages. Coffee Central uses a job cost
Case 2. Wild Berries manufactures organic fruit preserves sold primarily through health food stores and on the Web. The company closes for two weeks each December to allow employees to spend time with their families over the holiday season. Wild Berries" manufacturing overhead is mostly
Link back to Chapter 19. Wave Electronics is a contract manufacturer that produces cus- tomized computer components for several well-known computer-assembly companies. Wave's latest contract with CompNow.com calls for Wave to deliver sound cards that simulate surround sound from two speakers. Wave
Gourmet Gifts prepares cheese, bread, and fruit gift baskets for sale from the company's Web site. The company obtains these products from several vendors. Customers select items for their customized gift baskets on Gourmet Gifts Web site, and then Gourmet Gifts assembles and decorates the baskets
Dell Computer Corporation entered the twenty-first century with an enviable record as the most successful company in the global computer systems industry. In terms of market share, it is the number one company in the United States, and number two in the world. One bold concept-direct customer

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