Horngren's Cost Accounting: A Managerial Emphasis 16th Edition

CHAPTER 1 THE MANAGER AND MANAGEMENT ACCOUNTING 1-1 How does management accounting differ from financial accounting? Management accounting measures, analyzes, and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. It focuses on internalreporting and is not restricted by generally accepted accounting principles (GAAP). that

SOLUTION (1015 min.) Professional ethics and reporting division performance. 1. Mendezs ethical responsibilities are well summarized in the IMAs Standards of Ethical Behavior for Practitioners of Management Accounting and Financial Management (Exhibit 1-7 of text). Areas of ethical responsibility include the following: Competence Confidentiality Integrity Credibility The ethical standards related to Mendezs current dilemma

SOLUTION (30 min.) Pharmaceutical company, budgeting, ethics. 1. The overarching principles of the IMA Statement of Ethical Professional Practice are Honesty, Fairness, Objectivity and Responsibility. The statements corresponding Standards for Ethical Behavior require management accountants to Perform professional duties in accordance with relevant laws, regulations, and technical standards. Refrain from engaging in any conduct

CHAPTER 10 DETERMINING HOW COSTS BEHAVE 10-1 What two assumptions are frequently made when estimating a cost function? The two assumptions are 1. Variations in the level of a single activity (the cost driver) explain the variations in the related total costs. related total costs. related total costs. 2. Cost behavior is approximated by

.SOLUTION (20 min.) Various cost-behavior patterns. 1. K 2. B 3. G 4. J Note that A is incorrect because, although the cost per pound eventually equals a constant at $9.20, the total dollars of cost increases linearly from that point onward.5. I The total costs will be the same regardless of the volume

SOLUTION (30min.) High-low method and regression analysis. 1. See Solution Exhibit 10-36. SOLUTION EXHIBIT 10-36 250 300 350 400 450 500 $22,000 $23,000 $24,000 $25,000 $26,000 $27,000 $28,000 $29,000 Number of Weekly Orders Weekly Total Costs 2. Number of Orders per week Weekly Total Costs Highest observation of cost driver (Week 8) 460 $28,315 Lowest observation of cost driver (Week 3)

SOLUTION (15-20min.) Interpreting regression results, matching time periods. 1. Here is the regression data for monthly operating costs as a function of the total freight miles travelled by Sprit vehicles: SUMMARY OUTPUT Regression Statistics Multiple R0.927299101R Square0.859883623Adjusted R Square0.845871986Standard Error132.0816002Observations 12 Multiple R0.927299101R Square0.859883623Adjusted R Square0.845871986Standard Error132.0816002Observations 12 Multiple R 0.92729910 1 R Square 0.85988362 3 Adjusted R Square 0.84587198 6 Standard Error 132.081600 2 Observations 12 ANOVA df

SOLUTION (20 min.) Cost-volume-profit and regression analysis. 1a. Average cost of manufacturing = Total manufacturing costs Number of drink bottles = $808,500 210,000 = $3.85 per bottle This cost is higher than the $3.75 per bottle that Kraff has quoted. 1b. Rellings cannot take the average manufacturing cost in 2017 of $3.85 per bottle and multiply it by 225,000 drink

SOLUTION (3040 min.) Cost estimation, cumulative average-time learning curve. 1. Cost to produce the 2nd through the 7th troop deployment boats: Direct materials, 6 $199,000 Direct materials, 6 $199,000 Direct materials, 6 $199,000 $1,194,000Direct manufacturing labor (DML), 61,8521 $42 $1,194,000Direct manufacturing labor (DML), 61,8521 $42 $1,194,000 Direct manufacturing labor (DML), 61,8521 $42 2,597,784Variable manufacturing overhead, 61,852 $26 2,597,784Variable

SOLUTION (30 min.) Multiple regression (continuation of 10-42). 1. Solution Exhibit 10-43 presents the regression output for medical supplies costs using both number of procedures and number of patient-hours as independent variables (cost drivers). SOLUTION EXHIBIT 10-43 Regression Output for Multiple Regression for Medical Supplies Costs Using Both Number of Procedures and Number

CHAPTER 11 DECISION MAKING AND RELEVANT INFORMATION 11-1 Outline the five-step sequence in a decision process. The five steps in the decision process outlined in Exhibit 11-1 of the text are 1. Identify the problem and uncertainties. 2. Obtain information.3. Make predictions about the future.4. Make decisions by choosing among alternatives.5. Implement the decision,

SOLUTION (25 min.) Dropping a customer, activity-based costing, ethics. 1. CRS would not benefit from dropping Donnellys Pizza because it would lose $43,680 in revenues and save $43,344 in costs resulting in a $336 decrease in operating income. Difference: Incremental (Loss in Revenues) and Savings in Costs from Dropping Donnellys Pizza Revenues Cost of goods soldOrder processing ($14,000 10%

SOLUTION (25 min.) Closing down divisions. 1. and 2. Division A Division B Sales $504,000 $948,000 Variable costs of goods sold ($440,000 0.90; $930,000 0.80) 396,000 744,000Variable S,G & A ($96,000 0.50; $202,500 0.50) 48,000 101,250Total variable costs 444,000 845,250Contribution margin $ 60,000 $102,750 396,000 744,000Variable S,G & A ($96,000 0.50; $202,500 0.50) 48,000

SOLUTION (30 min.) Make versus buy, activity-based costing, opportunity costs. 1. Relevant costs under buy alternative: Purchases, 40,000 $14.80 $592 ,000 Purchases, 40,000 $14.80 $592 ,000 Purchases, 40,000 $14.80 $592 ,000 Relevant costs under make alternative: Direct materials $320,000 Direct manufacturing labor 160,000 Variable manufacturing overhead 80,000 Inspection, setup, materials handling 8,000

SOLUTION (15-20 min.) Short-run pricing, capacity constraints. 1. Per pair of shorts: Fabric (3 yards $12 per yard) $36 Variable direct manufacturing labor 10 Variable manufacturing overhead 4Fixed manufacturing cost allocated 9 Total manufacturing cost $59 $36 Variable direct manufacturing labor 10 Variable manufacturing overhead 4Fixed manufacturing cost allocated 9 Total manufacturing

SOLUTION (30 min.) Special order, activity-based costing. 1. Direct materials cost per unit ($600,000 10,000 units) = $60 per unit Direct manufacturing labor cost per unit ($700,000 10,000 units) = $70 per unitVariable cost per batch = $1,500 per batch Direct manufacturing labor cost per unit ($700,000 10,000 units) = $70 per unitVariable

SOLUTION (20 min.) Choosing customers. If Newbury accepts the additional business from Kimberly, it would take an additional 800 machine-hours. If Newbury accepts all of Kimberlys and Wallaces business for February, it would require 4,000 machine-hours (2,400 hours for Wallace and 1,600 hours for Kimberly).Newbury has only 3,200 hours of machine capacity. It

SOLUTION (2025 min.) Relevant costs, contribution margin, product emphasis. 1. Cola Lemonade Punch Natural Orange Juice Selling price $19.10 $20.25 $27.10 $39.50Deduct variable cost per case 14.40 15.90 21.50 29.80Contribution margin per case $ 4.70 $ 4.35 $ 5.60 $ 9.70 Selling price $19.10 $20.25 $27.10 $39.50Deduct variable cost per case 14.40 15.90 21.50 29.80Contribution margin per

CHAPTER 12 STRATEGY, BALANCED SCORECARD, AND STRATEGIC PROFITABILITY ANALYSIS 12-1 Define strategy. Strategy specifies how an organization matches its own capabilities with the opportunities in themarketplace to accomplish its objectives. Strategy specifies how an organization matches its own capabilities with the opportunities in themarketplace to accomplish its objectives. Strategy specifies how an organization matches its

SOLUTION (2530 min.) Strategic analysis of operating income (continuation of 12-21). 1. Operating Income Statement 2016 2017 Revenues ($30 200,000; $31 225,000) $6,000,000 $6,975,000 Costs T-shirts purchased ($15 215,000; $13 245,000) 3,225,000 3,185,000 Administrative costs 1,633,500 1,593,750 Total costs 4,858,500 4,778,750 Operating income $1,141,500 $2,196,250 Change in operating income $1,054,750 F Costs T-shirts

SOLUTION (20 min.) Analysis of growth, price-recovery, and productivity components (continuation of 12-25 and 12-26). Effect of the industry-market-size factor on operating income Of the 10-unit increase in sales from 200 to 210 units, 3% or 6 (3% 200) units is due to growth in market size, and 4 (10 6) units is due

SOLUTION(30 min.) Balanced scorecard. 1. The market for color laser printers is competitive. Vics strategy is to produce and sell high-quality laser printers at a low cost. The key to achieving higher quality is reducing defects in its manufacturing operations. The key to managing costs is dealing with the high fixed costs

SOLUTION EXHIBIT 12-42A Strategy Map for WrightAir On the business side of the balanced scorecard, WrightAir measures the motivation of ground crew (learning and growth perspective) that helps to reduce turnaround time of the planes on the ground (internal business process perspective), increases the number of on-time arrivals (customer perspective) and increases

SOLUTION EXHIBIT 12-33B Strategy Map for Scott Company In the learning and growth perspective, Scott measures the percentage of employees trained in quality management and the percentage of manufacturing processes with real-time feedback. These objectives improve manufacturing processes, which has strong ties to improving productivity and quality in the internal-business process perspective. Moreover, improving quality

CHAPTER 13 PRICING DECISIONS AND COST MANAGEMENT 13-1 What are the three major influences on pricing decisions? The three major influences on pricing decisions are 1. Customers2. Competitors 3. Costs 1. Customers2. Competitors 3. Costs 1. Customers 2. Competitors 3. Costs 13-2 Relevant costs for pricing decisions are full costs of the product. Do you agree? Explain. Not

SOLUTION (20 min.) Target costs, effect of product-design changes on product costs. 1. and 2. Manufacturing costs of HJ6 in 2016 and 2017 are as follows: 2016 2017 Per Unit Per Unit Total (2) = Total (4) = (1) (1) 2,700 (3) (3) 4,600 Direct materials, $1,400 2,700; $1,300 4,600 $3,780,000 $1,400

SOLUTION (25 min.) Considerations other than cost in pricing decisions. 1. Guest nights on weeknights: 18 weeknights 100 rooms 70% = 1,260 Guest nights on weekend nights: 12 weekend nights 100 rooms 90% = 1,080Total guest nights in June = 1,260 + 1,080 = 2,340Breakfasts served:1,260 weeknight guest nights 2 = 2,5201,080 weekend guest

SOLUTION (20 mins.) Anti-trust laws and pricing. 1. The company is not practicing price discrimination because all customers are being offered the same prices. The offer is simply restricting the times and locations that the promotion is available but not the individual customers to whom the promotion applies. The offer of low prices is

SOLUTION (25 min.) Cost-plus, target return on investment pricing. 1. Target operating income = Return on capital in dollars = $10,000,00012% = $1,200,000 1. Target operating income = Return on capital in dollars = $10,000,00012% = $1,200,000 1. Target operating income = Return on capital in dollars = $10,000,000 12% = $1,200,000 2. Revenues* $4,800,000Variable costs

CHAPTER 14 COST ALLOCATION, CUSTOMER-PROFITABILITY ANALYSIS, AND SALES-VARIANCE ANALYSIS 14-1 Im going to focus on the customers of my business and leave cost-allocation issues to my accountant. Do you agree with this comment by a division president? Explain. Disagree. Cost accounting data plays a key role in many management planning and control decisions. The

Customer-Level Operating Income $126,45 0 $81,225 $1,050 $(15,300) $(25,050) -$60,00 0 -$30,00 0 $ 0 $30,00 0 $60,00 0 $90,00 0 $120,00 0 $150,00 0 Customers Custo mer-Le vel Opera ting Incom e Grainger Avery Okie Duran Wizard SOLUTION (2030 min.) Customer profitability, service company. 1. Avery Okie Wizard Grainger Duran Revenues $390,000 $300,000 $483,000 $183,000 $318,000 Technician and equipment cost 273,000 262,500 337,500 160,500 267,000Gross margin 117,000 37,500 145,500 22,500 51,000Service call handling ($85 225; 360; 60; 180; 270) 19,125 30,600 5,100 15,300 22,950Web-based parts ordering

SOLUTION (25 min.) Cost allocation to divisions. Percentages for various allocation bases (old and new): Pulp Paper Fibers Total (1) Division margin percentages $6,000,000; $14,600,000; $19,400,000 $40,000,000 15.0%36.5% 48.5% 100.0%(2) Share of employees 600; 300; 1,100 2,000 $40,000,000 15.0%36.5% 48.5% 100.0%(2) Share of employees 600; 300; 1,100 2,000 $40,000,000 15.0% 36.5% 48.5%

SOLUTION (20 min.)Market-share and market-size variances (continuation of 14-27). In some editions of the text, the last sentence before Required reads However, actual total sales volume in the western region was 1.5 million cartons. The word western should be replaced by Midwest. Actual Budgeted Midwest region 1.5 million 1.25 millionEmcee Bakery

CHAPTER 15 ALLOCATION OF SUPPORT-DEPARTMENT COSTS, COMMON COSTS, AND REVENUES 15-1 Distinguish between the single-rate and the dual-rate methods. The single-rate (cost-allocation) method makes no distinction between fixed costs and variable costs in the cost pool. It allocates costs in each cost pool to cost objects using the same rate perunit of the

SOLUTION (20 min.) Revenue allocation, bundled products. 1a. Under the stand-alone revenue-allocation method based on selling price, Smarty will be allocated 40% of all revenues, or $36 of the bundled selling price, and Sublime will be allocated 60% of all revenues, or $54 of the bundled selling price, as shown below. Stand-alone method, based

SOLUTION (50 min.) Support-department cost allocation, reciprocal method (continuation of 15-19). 1a. Support Departments Operating Departments AS I S Govt. Corp. Costs $600,000 $2,400,000Alloc. of AS costs (0.25, 0.40, 0.35) (861,538) 215,385 $ 344,615 $ 301,538Alloc. of IS costs (0.10, 0.30, 0.60) 261,538 (2,615,385) 784,616 1,569,231 $ 0 $ 0 $1,129,231 $1,870,769 Costs $600,000

SOLUTION (20 min.) Fixed cost allocation. 1. i) Allocation using actual usage. Department (1) Actual Usage (2) Percentage of Total Usage (3) = (2) 130,000 Allocation (4) = (3) $2,000,000a Executive 29,900 0.23 $ 460,000Accounting 54,600 0.42 840,000Human Resources 45 ,500 0.35 700,000Total 130 ,000 $2,000,000 a$40,000,000 building cost/20 years straight-line depreciation = $2,000,000 annual depreciation

SOLUTION (20-25 mins.) Stand-alone revenue allocation 1. Allocation using individual selling price per unit. Computer Hardware Component Individual Selling Price per Unit Percentage of Total Price Allocation % $1,500 PC tower $1,150 0.575 $ 862.50Monitor 250 0.125 187.50Color laser printer 600 0.30 450.00Total $2 ,000 $1 ,500.00 PC tower $1,150 0.575 $ 862.50Monitor 250 0.125 187.50Color laser printer 600 0.30 450.00Total $2 ,000

SOLUTION (20 min.) Support-department cost allocations: direct, step-down, and reciprocal methods. 1 a. Allocate the total Support Department costs to the operating departments under the Direct Allocation Method: Eastern Department Western Department Departmental Overhead Costs $650,000 $ 920,000 From: Engineering($50,000/$140,000) $300,000 107,143($90,000/$140,000) $300,000 192,857 Engineering($50,000/$140,000) $300,000 107,143($90,000/$140,000) $300,000 192,857 Engineering ($50,000/$140,000) $300,000 107,143 ($90,000/$140,000) $300,000 192,857 Information Technology (1,500/2,550) $250,000 147,059(1,050/2,550) $250,000 _______

CHAPTER 16 COST ALLOCATION: JOINT PRODUCTS AND BYPRODUCTS 16-1 Give two examples of industries in which joint costs are found. For each example, what are the individual products at the splitoff point? Exhibit 16-1 presents many examples of joint products from four different general industries. These include: Industry Separable Products at the Splitoff Point Food Processing:

SOLUTION (30 min.) Joint-cost allocation, sales value, physical measure, NRV methods. 1a. PANEL A: Allocation of Joint Costs using Sales Value at Splitoff Method Special B/ Beef Ramen Special S/ Shrimp Ramen Total Sales value of total production at splitoff point (9,000 tons $15 per ton; 11,000 $35 per ton) $135,000 $385,000 $520,000Weighting ($135,000; $385,000 $520,000) 0.26

SOLUTION (25 min.) Methods of joint-cost allocation, ending inventory. 1. Net realizable value of human product: (2,500 gallons $600) $130,000 = $1,370,000 (2,500 gallons $600) $130,000 = $1,370,000 (2,500 gallons $600) $130,000 = $1,370,000 Net realizable value of veterinarian product: 500 gallons ($450 $20) = $215,000 500 gallons ($450 $20) = $215,000 500 gallons ($450 $20) = $215,000 Joint

SOLUTION(40 min.) Joint-cost allocation, process further or sell. 1. a. Physical-measure method Red Rock White Rock Gravel Total Physical measure of production (given)8,000 12,000 20,000 40,000Weighting 8,000; 12,000; 20,000 / 40,000.20 .30 .50 1.00Joint Costs Allocated$38,000 $57,000 $95,000 $190,000 Physical measure of production (given)8,000 12,000 20,000 40,000Weighting 8,000; 12,000; 20,000 / 40,000.20 .30 .50

SOLUTION EXHIBIT 16-23 (all numbers are in thousands) 16-24 Alternative joint-cost-allocation methods, further-process decision. The Tempura Spirits Company produces two productsmethanol (wood alcohol) and turpentineby a joint process. Joint costs amount to $124,000 per batch of output. Each batch totals 9,500 gallons: 25% methanol and 75% turpentine. Both products are processed further

CHAPTER 17 PROCESS COSTING 17-1 Give three examples of industries that use process-costing systems. Industries using process costing in their manufacturing area include chemical processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,beverages, and breakfast cereals. refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor chips,beverages, and breakfast cereals. refining, pharmaceuticals, plastics, brick

SOLUTIO (10 min.) Journal entries (continuation of 17-36). 1. Work in ProcessAssembly Department 4,635,000 Accounts Payable 4,635,000 Direct materials purchased and used in production in October.2. Work in ProcessAssembly Department 2,575,125Various accounts 2,575,125Conversion costs incurred in October.3. Work in ProcessTesting Department 8,554,000Work in ProcessAssembly Department 8,554,000Cost of goods completed and transferred out in

SOLUTION (20 min.) Operation costing. 1. Calculate the conversion cost rates for each department: Relax Refresh Total Budgeted containers 24,000 18,000 42,000Budgeted labor-hours 1,200a - 1,200Budgeted machine-hours 200b 150c 350a 24,000 3.0 minutes 60 minutes/hour = 1,200 hours b 24,000 0.5 minutes 60 minutes/hour = 200 hours c 18,000 0.5 minutes

SOLUTION EXHIBIT 17-44B Summarize the Total Costs to Account For, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed and Units in Ending Work-in-Process Inventory; FIFO Method of Process Costing, Stitching Department of Spelling Sports for March 2017. Total Production Costs Transferred-in Costs Direct Materials (Step 3) Work in process, beginning (given)

SOLUTION EXHIBIT 17-29B Summarize the Total Costs to Account For, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed and Units in Ending Work-in-Process Inventory; Weighted-Average Method of Process Costing for ZanyBrainy Corporation for October 2017. Total Production Costs Direct Materials Conversion Costs (Step 3) Work in process, beginning (given) $ 21,000 $ 5,760 $ 14,825 Costs

CHAPTER 18 SPOILAGE, REWORK, AND SCRAP 18-1 Why is there an unmistakable trend in manufacturing to improve quality? Managers have found that improved quality and intolerance for high spoilage have loweredoverall costs and increased sales. Managers have found that improved quality and intolerance for high spoilage have loweredoverall costs and increased sales. Managers

SOLUTION (2025 min.) Physical units, inspection at various stages of completion Inspection Inspection Inspection at 20% at 45% at 100% Work in process, beginning (25%)* Started during March To account for32 ,50032 ,50032 ,500Good units completed and transferred outNormal spoilage28,500a 1,124b 28,500a 1,224c 28,500a 1,140d Abnormal spoilage (1,900 Normal spoilage)Work in process, ending (70%)*Accounted

2. The cost per equivalent unit of beginning inventory and of work done in the current period differ substantially: Beginning Inventory Work Done in Current Period Direct materialsConversion costsTotal cost per unit$139.74 ($125,766 900 equiv. units) 38.40 ($ 10,368 270 equiv. units)$178.14 $225 .00 86 .00$311.00 Direct materialsConversion costsTotal cost per unit$139.74 ($125,766 900

SOLUTION (35 min.) Weighted-average method, Shipping Department (continuation of 18-36). For the Shipping Department, Solution Exhibit 18-37 summarizes total costs to account for, calculates the equivalent units of work done to date for each cost category, and assigns costs to units completed (including normal spoilage), to abnormal spoilage, and to units in ending

SOLUTION EXHIBIT 18-24 Summarize the Total Costs to Account For, Compute the Cost per Equivalent Unit, and Assign Costs to the Units Completed, Spoiled Units, and Units in Ending Work-in-Process Inventory; FIFO Method of Process Costing, MacLean Manufacturing Company, November 2017. Total Production Costs Direct Materials Conversion Costs (Step 3) Work in process, beginning (given) Costs added in current period (given) Total costs

SCHAPTER 19 BALANCED SCORECARD: QUALITY AND TIME 19-1 Describe two benefits of improving quality. Quality costs (including the opportunity cost of lost sales because of poor quality) can be as much as 10% to 20% of sales revenues of many organizations. Quality-improvement programscan result in substantial cost savings and higher revenues and market

SOLUTION (25 min.) Nonfinancial measures of quality and time. 1. 2016 2017 Percentage of defective units shipped2,50010,000Customer complaints as a percentage of units shipped190 = 7.6% 2,500 250 = 2.5% 10,000 Percentage of units reworked during production150 = 6% 2,500 700 = 7% 10,000 Manufacturing cycle time as a percentage of

SOLUTION (25 min.) Costs of quality, quality improvements. 1. iCovers managers plan to increase spending on design changes and process engineering to improve product quality. These are prevention activities. iCovers managers plan to increase prevention costs to improve quality. This is consistent with much of the research on quality.Preventing defects from occurring in

SOLUTION (3035 min.) Ethics and quality. 1. Total Revenue $5,100,000 Costs of Quality Cost Percentage of Total Revenue Prevention Costs Testing of purchased materials $ 48,000Quality control training for production staff 7,500Quality design engineering 72 ,000 Testing of purchased materials $ 48,000Quality control training for production staff 7,500Quality design engineering 72 ,000 Testing of purchased materials $ 48,000 Quality control

SOLUTION (2530 min.) Waiting times, manufacturing cycle times. 1a. Average waiting time for an order of Z35 ( ) ( ) ( ) 2 Annual average number Manufacturing time of orders of Z35 per order of Z35 Annual machine Annual average number Manufacturing time 2 capacity of orders of Z35 per order of Z35 x - 2 [60 (100)

CHAPTER 2 AN INTRODUCTION TO COST TERMS AND PURPOSES 2-1 Define cost object and give three examples. A cost object is anything for which a separate measurement of costs is desired. Examples includea product, a service, a project, a customer, a brand category, an activity, and a department. A cost object is anything

SOLUTION (1520 min.) Classification of costs, merchandising sector. Cost object: DVDs sold in movie section of store Cost variability: With respect to changes in the number of DVDs sold There may be some debate over classifications of individual items, especially with regard to cost variability. Cost Item D or I V or F A D F B

SOLUTION (20 min.) Total costs and unit costs Number of attendees 0 50 100 175 200 Variable cost per attendee (Materials $35 + Food, $75 + Setup/Cleanup, $25) $135 $135 $135 $135 $135 + Setup/Cleanup, $25) $135 $135 $135 $135 $135 + Setup/Cleanup, $25) $135 $135 $135 $135 $135 Fixed Costs

SOLUTION (20 min.) Flow of Inventoriable Costs. (All numbers below are in millions). 1. Direct materials inventory 10/1/2017 $ 105 Direct materials purchased 365 Direct materials available for production 470 Direct materials purchased 365 Direct materials available for production 470 Direct materials purchased 365 Direct materials available for production 470 Direct materials

SOLUTION (1520 min.) Terminology, interpretation of statements (continuation of 2-36). 1. Direct materials used $118 million Direct manufacturing labor costs 40 millionPrime costs $158 millionDirect manufacturing labor costs $ 40 millionIndirect manufacturing costs 61 millionConversion costs $101 million Direct manufacturing labor costs 40 millionPrime costs $158 millionDirect manufacturing labor costs $ 40 millionIndirect

CHAPTER 3 COSTVOLUMEPROFIT ANALYSIS NOTATION USED IN CHAPTER 3 SOLUTIONS SP: Selling price VCU: Variable cost per unit CMU: Contribution margin per unit FC: Fixed costs TOI: Target operating income 3-1 Define costvolumeprofit analysis. Cost-volume-profit (CVP) analysis examines the behavior of total revenues, total costs, and operating income as changes occur in the units sold, selling price, variable cost

SOLUTION (20 min.) CVP exercises. Revenues Variable Costs Contribution Margin Fixed Costs Budgeted Operating Income Orig. $11,000,000G$7,500,000G$3,500,000 $3,000,000G$500,000 1. 11,000,000 7,150,000 3,850,000a3,000,000 850,000 2. 11,000,000 7,850,000 3,150,000b3,000,000 150,000 3. 11,000,000 7,500,000 3,500,000 3,150,000c350,000 4. 11,000,000 7,500,000 3,500,000 2,850,000d650,000 5. 11,550,000e7,875,000f3,675,000 3,000,000 675,000 6. 10,450,000g7,125,000h3,325,000 3,000,000 325,000 7. 12,100,000i8,250,000j3,850,000 3,300,000k550,000 8. 11,000,000 7,125,000l3,875,000 3,150,000m725,000 Gstands for given. a$3,500,000 1.10; b$3,500,000 0.90; c$3,000,000

SOLUTION (15 min.) CVP analysis, international cost structure differences. Variable Variable Sales Price Annual Manufacturing Marketing and Contribution Operating Income to Retail Fixed Cost per Distribution Cost Margin Breakeven Breakeven for Budgeted Sales Country Outlets Costs Rug per Rug Per Rug Units Revenues of 80,000 Rugs (1) (2) (3) (4) (5) = (1) (3)

SOLUTION (15 min.) Contribution margin, decision making. 1. Revenues $600,000 Deduct variable costs: Cost of goods sold $300,000Sales commissions 72,000Other operating costs 30,000 402,000Contribution margin $198,000 Cost of goods sold $300,000Sales commissions 72,000Other operating costs 30,000 402,000Contribution margin $198,000 Cost of goods sold $300,000 Sales commissions 72,000 Other operating costs 30,000 402,000 Contribution margin $198,000 2. Contribution margin percentage

SOLUTION (3040 min.) CVP analysis, income taxes. 1. Revenues Variable costs Fixed costs = rateTax 1 incomenet Target Let X = Net income for 201722,000($35.00) 22,000($18.50) $214,500 = X1 0.40- $770,000 $407,000 $214,500 = X0.60 $462,000 $244,200 $128,700 = X X = $89,100 Let X = Net income for 201722,000($35.00) 22,000($18.50) $214,500 =

SOLUTION (20-30 min.) CVP, alternative cost structures. 1. Variable cost per unit = $10 Contribution margin per unit = Selling price Variable cost per unit = $30 $10 = $20 = $30 $10 = $20 = $30 $10 = $20 Fixed Costs: Managers salary ($72,000 0.5) 12 $3,000 per monthRent 1,000 per monthHourly

SOLUTION (20 min.) Gross margin and contribution margin. 1. Ticket sales ($24 525 attendees) $12,600 Variable cost of dinner ($12a 525 attendees) $6,300Variable invitations and paperwork ($1b 525) 525 6,825Contribution margin 5,775Fixed cost of dinner 9,000Fixed cost of invitations and paperwork 1,975 10,975Operating profit (loss) $ (5,200)a $6,300/525 attendees = $12/attendee

CHAPTER 4 JOB COSTING 4-1 Define cost pool, cost tracing, cost allocation, and cost-allocation base. Cost poola grouping of individual indirect cost items. Cost tracingthe assigning of direct costs to the chosen cost object. Cost allocationthe assigning of indirect costs to the chosen cost object. Cost-allocation basea factor that links in

SOLUTION (20 -30 min.) Job costing, normal and actual costing. 1. Budgeted indirect- cost rate = Budgeted indirect costs (assembly support) Budgeted direct labor-hours = $8,800,000 220,000 hours = $40 per direct labor-hour Actual indirect- cost rate = Actual indirect costs (assembly support) Actual direct labor-hours = $8,400,000 200,000 hours = $42 per direct labor-hour These rates differ because both the numerator and the denominator in

SOLUTION (1015 min.) Accounting for manufacturing overhead. 1. Budgeted manufacturing overhead rate = $4,140,000 180,000 labor-hours = $23 per direct labor-hour 2. Work-in-Process Control 4,347,000 Manufacturing Overhead Allocated 4,347,000(189,000 direct labor-hours $23 per direct labor-hour = $4,347,000) Manufacturing Overhead Allocated 4,347,000(189,000 direct labor-hours $23 per direct labor-hour = $4,347,000) Manufacturing Overhead Allocated 4,347,000 (189,000 direct

SOLUTION (15 min.) Job costing, unit cost, ending work in progress. 1. Direct manufacturing labor rate per hour $25 Manufacturing overhead cost allocated per manufacturing labor-hour $22 Job M1 Job M2 Direct manufacturing labor costs $275,000 $209,000Direct manufacturing labor-hours ($275,000$25; $209,000$25) Direct manufacturing labor costs $275,000 $209,000Direct manufacturing labor-hours ($275,000$25; $209,000$25) Direct

SOLUTION (1520 min.) Service industry, job costing, law firm. 1. Profession al La bor-Hou rs Lega l Support COST OBJECT: JOB FOR CLIENT INDIRECT COST POOL COST ALLOCATION BASE } DIRECT COST Ind irect Costs Direct Costs Professional Labor 2. Budgeted professional labor-hour direct cost rate = Budgeted direct labor compensation per professional Budgeted direct labor-hours per professional = $97,500 1,500 hours = $65 per professional labor-hour Note that the budgeted professional labor-hour direct-cost rate can also be calculated by dividing total

Work in process inventory on = $82,000 + $148,000 + $285,000 + $380,000 $705,000 = $190,000 on = $82,000 + $148,000 + $285,000 + $380,000 $705,000 = $190,000 on = $82,000 + $148,000 + $285,000 + $380,000 $705,000 = $190,000 12/31/2017 12/31/2017 12/31/2017 SOLUTION (35 min.) General ledger relationships, under- and overallocation. The solution assumes all materials used

1/1/201 7 25,00 0 630,00 0 1/1/201 7 280,00 0 2,900,00 0 1/1/201 7 320,00 0 2,930,00 0 650,00 0 Dir. Man.Lbr 880,00 0 2,900,00 0 12/31/201 7 45,00 0 Dir. Matls. 630,00 0 12/31/201 7 290,00 0 OH Alloc. 1,408,00 0 12/31/201 7 298,00 0 Direct Materials Control Work-in-Process Control Finished Goods Control WIP Control 298,00 0 $ 8.5% $108,000 = $

CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT 5-1 What is broad averaging, and what consequences can it have on costs? Broad averaging (or peanut-butter costing) describes a costing approach that uses broad averages for assigning (or spreading, as in spreading peanut butter) the cost of resourcesuniformly to cost objects when the individual products

SOLUTION (20 min.) Plantwide, department, and ABC indirect cost rates. 1. Actual plantwide variable MOH rate based on machine hours, $280,000 5,000 $56 per machine hour Southern Motors Caesar Motors Jupiter Auto Total Variable manufacturing overhead, allocated based on machine hours ($56 300; $56 3,700; $56 1,000) $16,800 $207,2000 $280,000 $16,800 $207,2000 $280,000 $16,800 $207,200 0 $280,000 $56,00 2. Departme nt MOH in 2017 Total Driver Units

SOLUTION (30 min.) Activity-based costing, service company. 1. Total indirect costs = $75,000 + $45,000 + $18,000 + $20,000 + $19,500 + $24,000 = $201,500Total machine-hours = (400 10) + (200 10) = 6,000Indirect cost rate per machine-hour = $201,500 6,000= $33.583 per machine-hour = $201,500Total machine-hours = (400 10) + (200

SOLUTION (50 min.) Activity-based costing. 1. Overhead allocation using a simple job-costing system, where overhead is allocated based on machine hours: Overhead allocation rate = $196,200 10,000 machine-hours = $19.62 per machine-hour Overhead allocation rate = $196,200 10,000 machine-hours = $19.62 per machine-hour Overhead allocation rate = $196,200 10,000 machine-hours = $19.62 per machine-hour Job 220

SOLUTION (40 min.) ABC, health care. 1a. Medical supplies rate = years-patient ofnumber Total costs supplies Medical = $242,000 110 = $2,200 per patient-year = $2,200 per patient-year = $2,200 per patient-year = space offeet square ofamount Total costs maint. clinic andRent = $138,600 21,000 = $6.60 per square foot = years-patient ofnumber Total laundry food, charts, patient manage tocosts

SOLUTION (50 min.) ABC, implementation, ethics. 1. Plum Electronics should not emphasize the Maximum model and should not phase out the Mammoth model. Under activity-based costing, the Maximum model has an operating income percentage of less than 3%, while the Mammoth model has an operating income percentage of nearly 43%. Cost driver

CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING 6-1 What are the four elements of the budgeting cycle? The budgeting cycle includes the following elements: a. Planning the performance of the company as a whole as well as planning the performance of its subunits. Management agrees on what is expected.b. Providing a frame of

SOLUTION (30 min.) Revenues and production budget. 1. Selling Price Units Sold Total Revenues 12-ounce bottles $0.30 6,000,000a$1,800,000 1-gallon units 1.60 1,560,000b 2,496,000$4,296,000a 500,000 12 months = 6,000,000 b 130,000 12 months = 1,560,000 1-gallon units 1.60 1,560,000b 2,496,000$4,296,000a 500,000 12 months = 6,000,000 b 130,000 12 months = 1,560,000 1-gallon units 1.60 1,560,000b 2,496,000 $4,296,000 a 500,000 12 months

SOLUTION (2030 min.) Kaizen approach to activity-based budgeting (continuation of 6-30). 1. Budgeted Cost-Driver Rates Activity Cost Hierarchy January February March Ordering DeliveryShelf-stockingCustomer supportBatch-levelOutput-unit-levelOutput-unit-level41.0010.500.0940.8360010.458000.0896440.6726610.416170.08928a$45 0.996 = $44.82000; b$44.82000 0.996 = $44.64072 DeliveryShelf-stockingCustomer supportBatch-levelOutput-unit-levelOutput-unit-level41.0010.500.0940.8360010.458000.0896440.6726610.416170.08928a$45 0.996 = $44.82000; b$44.82000 0.996 = $44.64072 Delivery Shelf-stocking Customer support Batch-level Output-unit-level Output-unit-level 41.00 10.50 0.09 40.83600 10.45800 0.08964 40.67266 10.41617 0.08928 a$45 0.996 = $44.82000; b$44.82000 0.996 = $44.64072 Batch-level $45.00 $44.82000a $44.64072b The March 2018

SOLUTION (40 min.) Budget schedules for a manufacturer. 1a. Revenues Budget Broncos Blankets Rams Blankets Total Units sold 140 195Selling price $305 $378Budgeted revenues $42,700 $73,710 $116,410 Units sold 140 195Selling price $305 $378Budgeted revenues $42,700 $73,710 $116,410 Units sold 140 195 Selling price $305 $378 Budgeted revenues $42,700 $73,710 $116,410 b. Production Budget in Units Broncos Blankets Rams Blankets Budgeted unit sales 140 195Add

SOLUTION (15 min.) Responsibility of purchasing agent. The cost of the biscuits is usually the responsibility of the purchasing agent, and usually controllable by the Central Warehouse. However, in this scenario, Betty the cook has taken the responsibility for the cost of the replacement biscuits from the purchasing agent by making apurchasing decision.

4. Schedule 4: Direct Manufacturing Labor Budget for January 2018 Labor Category Cost Driver Units DML Hours per Driver Unit Total Hours Wage Rate Total Manufacturing labor 2,600 5.00 13,000 $29.00 $377,000 Manufacturing labor 2,600 5.00 13,000 $29.00 $377,000 Manufacturing labor 2,600 5.00 13,000 $29.00 $377,000 5. Schedule 5: Manufacturing Overhead Budget for January 2018 At Budgeted Level

SOLUTION (60 min.) Comprehensive budgeting problem; activity-based costing, operating and financial budgets. 1a. Revenues Budget For the Month of June, 2018 Units Selling Price Total Revenues Regular 2,000 $120 $240,000 Deluxe 3,000 195 585,000Total $825,000 Deluxe 3,000 195 585,000Total $825,000 Deluxe 3,000 195 585,000 Total $825,000 b. Production Budget For the Month of June, 2018 Product Regular Deluxe Budgeted unit sales

CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROL 7-1 What is the relationship between management by exception and variance analysis? Management by exception is the practice of concentrating on areas not operating as expected and giving less attention to areas operating as expected. Variance analysis helps managers identifyareas not operating as

SOLUTION (2530 min.) Flexible-budget preparation and analysis. 1. Variance Analysis for Bank Management Printers for September 2017 Level 1 Analysis Actual Results (1) Static-Budget Variances (2) = (1) (3) Static Budget (3) Units sold Revenue$252,000a $ 48,000 U$300,000c Variable costs 84 ,000d 36 ,000 F 120 ,000f Contribution marginFixed costsOperating income168,000 150 ,000$ 18 ,00012,000 U 5 ,000 U$ 17 ,000 U180,000 145

SOLUTION (30 min.) Price and efficiency variances, journal entries. 1. Direct materials and direct manufacturing labor are analyzed in turn: Actual Costs Incurred (Actual Input Qty. Actual Price) Actual Input Qty. Budgeted Price Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price) Direct Materials (100,000 $4.65a) $465,000 Purchases Usage (100,000 $4.50) (98,055 $4.50) $450,000 $441,248 (9,850 10 $4.50) $443,250 $15,000 U $2,002 FPrice

SOLUTION (45 min.) Static and flexible budgets, service sector. 1. Static Budget Revenue (8,200 0.8% $145,000) $9,512,000 Variable costs: Professional labor (8 $45 8,200) 2,952,000 Credit verification ($100 8,200) 820,000Federal documentation fees ($120 8,200) 984,000Courier services ($50 8,200) 410,000 Total variable costs 5,166,000Contribution margin 4,346,000Fixed administrative costs 800,000 Fixed technology costs 1,300,000Operating income $2,246,000 Credit verification ($100

SOLUTION (60 min.) Comprehensive variance analysis review Actual Results Units sold (90% 700,000) 630,000 Selling price per unit $8.20 Revenues (630,000 $8.20) $5,166,000 Revenues (630,000 $8.20) $5,166,000 Revenues (630,000 $8.20) $5,166,000 Direct materials purchased and used: Direct materials per unit $3.90Total direct materials cost (630,000 $3.90) $2,457,000 Direct materials per unit $3.90Total direct materials cost (630,000 $3.90) $2,457,000 Direct materials

SOLUTION (2030 min.) Direct materials and manufacturing labor variances, solving unknowns. All given items are designated by an asterisk. Actual Costs Incurred (Actual Input Qty. Actual Price) (1,890 $21)$39,690ManufacturingLabor(1,890 $20*)$37,800(4,000* 0.5* $20*)$40,000 (1,890 $21)$39,690ManufacturingLabor(1,890 $20*)$37,800(4,000* 0.5* $20*)$40,000 (1,890 $21) $39,690 Manufacturing Labor (1,890 $20*) $37,800 (4,000* 0.5* $20*) $40,000 Actual Input Qty. Budgeted Price Flexible Budget (Budgeted Input Qty. Allowed for Actual Output Budgeted Price)

SOLUTION (30 min.) Direct-cost and selling price variances. 1. Computing unit selling prices and unit costs of inputs: Actual selling price = $3,626,700 462,000 = $7.85Budgeting selling price = $3,360,000 420,000= $8.00= = ($7.85/unit $8.00/unit) 462,000 units= $69,300 U = $7.85Budgeting selling price = $3,360,000 420,000= $8.00= = ($7.85/unit $8.00/unit) 462,000 units= $69,300 U =

SOLUTION (30 min.) Fixed manufacturing overhead variance analysis (continuation of 8-23). 1. Budgeted standard direct manufacturing labor used = 0.02 per baguette Budgeted output = 3,100,000 baguettes Budgeted standard direct manufacturing labor-hours = 3,100,000 0.02 = 62,000 hours = 3,100,000 0.02 = 62,000 hours = 3,100,000 0.02 = 62,000 hours Budgeted fixed manufacturing overhead

SOLUTION (20 min.) Activity-based costing, batch-level variance analysis 1. Static budget number of crates = Budgeted pairs shipped / Budgeted pairs per crate = 225,000/15 = 15,000 crates = 225,000/15 = 15,000 crates = 225,000/15 = 15,000 crates 2. Flexible budget number of crates = Actual pairs shipped / Budgeted pairs per

SOLUTION (20 min.) Overhead variances, service setting. 1. and 2. Variable and Fixed Technology Overhead Variance Analysis for Carlyle Capital Company for the first quarter of 2017 Actual Costs Incurred Actual Input Qty. Budgeted Rate Flexible Budget: Budgeted Input Qty. Allowed for Actual Output Budgeted Rate Allocated: (Budgeted Input Qty. Allowed for Actual Output Budgeted Rate) Variable Technology Overhead $11,200 (5,500 $2) $11,000 (13,600 0.4

SOLUTION (3050 min.) Review of Chapters 7 and 8, 3-variance analysis. 1. Total standard production costs are based on 7,600 units of output. Direct materials, 7,600 $20.00 7,600 5 lbs. $4.00 (or 38,000 lbs. $4.00) $ 152,000 7,600 5 lbs. $4.00 (or 38,000 lbs. $4.00) $ 152,000 7,600 5 lbs. $4.00 (or 38,000 lbs. $4.00)

SOLUTION (3040 min.) Straightforward coverage of manufacturing overhead, standard-costing system. 1. Solution Exhibit 8-28 shows the computations. Summary details are: Actual Flexible Budget Output units 66,500 66,500 Allocation base (machine-hours) 75,700 79,800a Allocation base per output unit 1.14b1.2 Variable MOH $537,470 $558,600cVariable MOH per hour $7.10d$7.00 Fixed MOH $146,101 $136,000Fixed MOH per hour $1.93e a 66,500 1.2

SOLUTION EXHIBIT 8-36 Variable Manufacturing Overhead Actual Costs Incurred (1) Actual Input Qty. Budgeted Rate (2) Flexible Budget: Budgeted Input Qty. Allowed for Actual Output Budgeted Rate (3) Allocated: Budgeted Input Qty. Allowed for Actual Output Budgeted Rate (4) (1,632 $44) $71,808 (1,632 $42) $68,544 (1,920 $42) $80,640 (1,920 $42) $80,640 Fixed Manufacturing Overhead Actual Costs Incurred (1) Same Budgeted Lump Sum (as in Static Budget) Regardless Of Output Level (2) Flexible Budget: Same Budgeted Lump Sum (as in Static Budget) Regardless of Output

CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 9-1 Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain. No. Differences in operating income between variable costing and absorption costing are due toaccounting for fixed manufacturing costs. Under variable costing only variable

SOLUTION (20 min.) Throughput costing (continuation of Exercise 9-21). 1. April 2017 May 2017 Revenuesa$8,400,000 $12,480,000 Revenuesa$8,400,000 $12,480,000 Revenuesa$8,400,000 $12,480,000 Direct material cost of goods sold Beginning inventory Direct materials in goods manufacturedb $ 0 3 ,350,000$1,005,000 2 ,680,000Cost of goods available for saleDeduct ending inventoryc 3,350,000 (1 ,005,000)3,685,000 (201 ,000) Total direct

SOLUTION (40 min.) Variable costing versus absorption costing. 2017 Production = Sales + Ending Inventory Beginning Inventory = 1,080,000 + 80,000 60,000 = 1,100,000 = 1,080,000 + 80,000 60,000 = 1,100,000 = 1,080,000 + 80,000 60,000 = 1,100,000 1. Absorption Costing: Garvis Company Income Statement For the Year Ended December 31, 2017 Revenues (1,080,000 $10.00)

SOLUTION (10 min.) Absorption and variable costing. The answers are 1(a) and 2(c). Computations: 1. Absorption Costing: Revenuesa Cost of goods sold: Variable manufacturing costsb Allocated fixed manufacturing costsc Gross margin$3,230,000 510,000 3 ,740,0003,230,000 Variable manufacturing costsb Allocated fixed manufacturing costsc Gross margin$3,230,000 510,000 3 ,740,0003,230,000 Variable manufacturing costsb Allocated fixed manufacturing costsc Gross margin $3,230,000

SOLUTION (25 min.) Cost allocation, downward demand spiral. SOLUTION EXHIBIT 9-45 2017 Master Budget (1) Practical Capacity (2) 2018 Master Budget (3) Budgeted fixed costs $1,533,000 $1,533,000 $1,533,000Denominator level 1,050,000 1,460,000 912,500 Budgeted fixed costs $1,533,000 $1,533,000 $1,533,000Denominator level 1,050,000 1,460,000 912,500 Budgeted fixed costs $1,533,000 $1,533,000 $1,533,000 Denominator level 1,050,000 1,460,000 912,500 Budgeted fixed cost per meal Budgeted fixed costs Denominator

SOLUTION (60 min.) Variable and absorption costing and breakeven points 1. 2017 Variable-Costing Based Operating Income Statement Revenues (1,300 boards $800 per board) $1,040,000 $1,040,000 $1,040,000 Variable costs: Beginning inventory (240 boards $375 per board) $ 90,000 $ 90,000 $ 90,000 Variable manufacturing costs (1,200 boards $375 per board) 450 ,000

SOLUTION (3035 min.) Comparison of variable costing and absorption costing. 1. Since production volume variance is unfavorable, the budgeted fixed manufacturing overhead must be larger than the fixed manufacturing overhead allocated. = $405,000 = $1,350,000 AllocatedAllocated = $945,000, which is 70% of $1,350,000If 70% of the budgeted fixed costs were allocated, the

The amount of productive capacity available over and above the productive capacity employed to meet customer demand in the current period is the unused capacity. TRUE TRUE TRUE The constant gross-margin percentage NRV method makes the simplifying assumption of treating the joint products as though they comprise a single product. TRUE TRUE

Woodruff Flowering Plants provides the following information for the month of May: What is the budgeted contribution margin per composite unit for the actual mix? (Round any intermediary calculations two decimal places.) A) $21.22 B) $21.00 C) $20.50 D) $20.20 DExplanation: Budgeted contribution margin per composite unit for the actual mix= [$21 (19,000) / (19,000

Manufacturing Cycle Efficiency (MCE) = Value-added Manufacturing Time divided by Manufacturing Cycle Time. TRUE TRUE TRUE Practical capacity is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time and shutdowns for holidays. TRUE TRUE TRUE Using practical capacity as the denominator level sets

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations. FALSEExplanation: Such decisions are best made at a centralized level as corporate managers have better information about financing terms in different markets and can obtain the best terms.

All of the following are factors affecting direct versus indirect cost classification except: A) materiality of the cost B) cost accuracy C) information technology's ability to trace costs in an economically feasible way D) design of operations B B B Which of the following information is needed to prepare a flexible budget? A) actual units sold B)

A flexible-budget variance pertaining to revenues is often called a sales-volume variance. FALSEExplanation: A flexible-budget variance for revenues is called the selling-price variance because it arises solely from the difference between the actual selling price and the budgeted selling price. FALSEExplanation: A flexible-budget variance for revenues is called the selling-price variance

Which of the following are true regarding long-run pricing decisions? A) they result in maximizing return on investment B) they include adjusting product mix in a competitive environment C) the price needs to be sufficient enough to break-even D) use prices that include a reasonable return on invested capital D D D The American West

The following information pertains to the Ruby Corp: What is cost of goods sold? A) $1,210,000 B) $1,165,000 C) $1,157,000 D) $1,239,000 BExplanation: Cost of goods sold = $172,000 + $1,202,000 $209,000 = $1,165,000 BExplanation: Cost of goods sold = $172,000 + $1,202,000 $209,000 = $1,165,000 B Explanation: Cost of goods sold = $172,000 + $1,202,000

Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to allocate variable manufacturing overhead. The following information relates to the company's manufacturing overhead data: What is the amount of the budgeted variable manufacturing overhead cost per unit? (Do not round any intermediary calculations. Round your final answer to the nearest

Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client services for the business consulting division. Estate Planning, a new service, incurred $150,000 in development costs and employee training. The direct costs of providing this service, which is all labor, averages $31 per hour. Other costs

Real Wood Structures Company has invested $1,040,000 in a plant to build small tool sheds. The target operating income desired from the plant is $156,000 annually. The company plans annual sales of 1200 sheds at a selling price of $1100 each. What is the target rate of return on investment for

Costs of activities related to a group of units sold to a customer is termed as customer batch-level costs. TRUE TRUE TRUE All costs other than direct materials and direct manufacturing labor are classified as indirect costs. TRUE TRUE TRUE Strategy describes how an organization matches its own capabilities with the opportunities

Henry Chapman Manufacturing Inc. incurred the following expenses during 2017: What will be the breakeven point in units if absorption costing is used? (Round your final answer up to the next whole unit.) A) 997 units B) 934 units C) 810 units D) 524 units CExplanation: Breakeven units N = [($110,000 + $86,000) + ($50

Intrinsic motivation comes from being given greater responsibility, doing interesting and creative work, and having pride in doing that work. TRUE TRUE TRUE Successful implementation of a JIT production system and effective accomplishments of its goals should result in a decrease in the inventory turnover ratio and a decrease in the

Shiffon Electronics manufactures music player. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department, the Programming department, and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly throughout production.

Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly

Expert Manufacturing reported the following: What is Expert's operating income? A) $346,400 B) $218,200 C) $204,200 D) $200,200 DExplanation: $460,000 ($45,000 + $97,800 $41,000) $158,000 = $200,200 DExplanation: $460,000 ($45,000 + $97,800 $41,000) $158,000 = $200,200 D Explanation: $460,000 ($45,000 + $97,800 $41,000) $158,000 = $200,200 Which of the following is another term for required rate

In the banking industry, depositing a customer's check into the wrong bank account is an example of quality of design failure. FALSEExplanation: This is an example of conformance quality failure. FALSEExplanation: This is an example of conformance quality failure. FALSE Explanation: This is an example of conformance quality failure. With disregard to

The fundamental cost objects of ABC are ________. A) activities B) cost drivers C) products D) services A A A Which of the following is a direct manufacturing cost? A) plant maintenance B) plant rent C) fringe benefits paid to machine operators D) property taxes on plant C C C Management by exception is a practice whereby managers focus more

Units spoiled due to machine breakdowns and operator errors are normal spoilage. FALSEExplanation: Units spoiled due to machine breakdowns and operator errors are abnormal spoilage. FALSEExplanation: Units spoiled due to machine breakdowns and operator errors are abnormal spoilage. FALSE Explanation: Units spoiled due to machine breakdowns and operator errors are abnormal spoilage.

The Big Tool Company has budgeted sales of $300,000 with the following budgeted costs: Compute the average markup percentage for setting prices as a percentage of: a. The full cost of the product b. The variable cost of the product c. Variable manufacturing costs d. Total manufacturing costs a. $60,000 + $35,000 + $30,000 +

ABC systems help managers to ________. A) value ending inventory more accurately B) identify new designs to reduce costs C) evaluate direct material costs more efficiently D) improve the inventory turnaround time B B B In a perfectly competitive market, which of the following is a primary factor influencing pricing decisions? A) cost of production B) availability

Advocates of throughput costing argue that ________. A) fixed manufacturing costs must be included as inventoriable costs and provide less incentive than absorption costing to build-up inventory to increase profits B) direct manufacturing labor is relatively fixed and therefore should not be included in inventory costs C) direct materials costs are a cost of

In the graph method of CVP analysis, the horizontal line above the x-axis represents the total cost line. FALSEExplanation: In the graph method of CVP analysis, the horizontal line above the x-axis represents the fixed cost line. FALSEExplanation: In the graph method of CVP analysis, the horizontal line above the x-axis represents

The accuracy of the completion estimate of conversion costs depends on the care, skill, and experience of the estimator and also the nature of the conversion process. TRUE TRUE TRUE The degree of operating leverage at a specific level of sales helps the managers calculate the effect that potential changes in

The accrual accounting rate-of-return method has a significant weakness for use in making capital budgeting decisions because it does NOT track cash flows and it ignores the time value of money. TRUE TRUE TRUE Under the proration approach, the sum of the amounts shown in the subsidiary ledgers will not match the

First Class, Inc., expects to sell 26,000 pool cues for $14 each. Direct materials costs are $2, direct manufacturing labor is $4, and manufacturing overhead is $0.89 per pool cue. The following inventory levels apply to 2019: On the 2019 budgeted income statement, what amount will be reported for cost of

Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: Model X Model Y Model Z Selling price $55 $69 $78 Direct materials 10 10 10 Direct labor ($15 per hour) 15 15 30 Variable support costs ($7

In a job-costing system the cost object is an individual unit, batch, or lot of a distinct product or service. TRUE TRUE TRUE Fluctuations in exchange rates between different countries' currencies affect costs and pricing decisions of a company. TRUE TRUE TRUE In each period, job costing divides the total cost of

Carriage Incorporated manufactures horse carriages. The company has two divisions, Wheels and Assembly. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2018: ASSETS INCOME The company is currently using a 12% required rate of return. What are Wheels's and Assembly's

A locked-in cost is a(n) ________. A) opportunity cost that is fixed in the short run B) cost that can be changed in the short run C) cost that has not yet been incurred, but based on decisions that have already been made, will be incurred in the future D) cost that has been

Which of the following is a measure of the balanced scorecard's customer perspective? A) Number of client complaints B) Defect rates C) Number of process improvements D) Revenue growth A A A Which of the following is an internal-business-process measure to study the output during bottleneck situations? A) manufacturing cycle efficiency for key processes B) carrying cost

The net present value of all cash flows over the life of an investment equals the net present value of the operating incomes. FALSEExplanation: The net present value of all cash flows over the life of an investment equals the net present value of the residual incomes. FALSEExplanation: The net present

The benefits of implementing a more-complex cost allocation system are relatively easy to quantify for application of the cost-benefit approach. FALSEExplanation: The benefits of implementing a more-complex cost allocation system are difficult to measure. FALSEExplanation: The benefits of implementing a more-complex cost allocation system are difficult to measure. FALSE Explanation: The benefits of

Price dumping occurs when a domestic company is trying to get rid of out-of-style products at a substantially reduced price. FALSEExplanation: Price dumping occurs when a non-U.S. company sells a product in the UnitedStates at a price below the market value where it is produced and this action threatens to injure

Companies that overcost products risk becoming less effective on pricing and losing market share when competition utilizes more accurate cost systems. TRUE TRUE TRUE The process of preparing a budget encourages coordination and communication throughout the company. TRUE TRUE TRUE If variable costs per unit increase, then the breakeven point will decrease. FALSEExplanation:

Use of practical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of capacity. FALSEExplanation: Use of theoretical capacity results in an unrealistically small fixed manufacturing cost per unit because it is based on an idealistic and unattainable level of

Which of the following statements is true of sell-or-process-further decisions in joint costing? A) Joint costs incurred before the split-off point are relevant in deciding whether to process the product further. B) All separable costs in joint-cost allocations are incremental costs. C) Separable costs incurred before the split-off point are irrelevant in deciding

Deducting depreciation from operating cash flows would result in counting the initial investment twice in a discounted cash flow analysis. TRUE TRUE TRUE Costs of quality (COQ) reports usually consider opportunity costs. FALSEExplanation: Costs of quality (COQ) reports usually do not consider opportunity costs. FALSEExplanation: Costs of quality (COQ) reports usually do

Mendel Company makes the following journal entry: Which of the following statements is true of the given journal entry? A) A variable manufacturing overhead cost of $179,000 is written-off. B) An unfavorable spending variance of $57,000 is recorded. C) A favorable efficiency variance of $7,000 is recorded. D) A favorable flexible-budget variance of $50,000 is

Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance? A) Static-budget amount Flexible-budget amount B) Actual costs incurred Flexible-budget amount C) Static-budget amount Fixed overhead allocated for actual output D) Flexible-budget amount Fixed overhead allocated for actual output B B B Contract disputes regarding cost allocation can be

The vertical difference, called the residual term, measures the distance between actual cost of one period and estimated cost of the next period. FALSEExplanation: The vertical difference, called the residual term, measures the distance between actual cost and estimated cost for each observation of the cost driver. FALSEExplanation: The vertical difference,

Increasing the capacity of a bottleneck resource increases manufacturing cycle times and delays. FALSEExplanation: Increasing the capacity of a bottleneck resource reduces manufacturing cycle times and delays. FALSEExplanation: Increasing the capacity of a bottleneck resource reduces manufacturing cycle times and delays. FALSE Explanation: Increasing the capacity of a bottleneck resource reduces manufacturing

An unfavorable production-volume variance always infers that management made a bad planning decision regarding the plant capacity. FALSEExplanation: An unfavorable production-volume variance does not always infer that management made a bad planning decision regarding the plant capacity. FALSEExplanation: An unfavorable production-volume variance does not always infer that management made a bad planning

Which f the following methods focuses on reducing costs during the manufacturing stage? A) Target costing B) Kaizen costing C) Cost-plus pricing D) Life-cycle costing B B B Which of the following is a component of operating budgets? A) production budget B) budgeted statement of cash flows C) capital expenditures budget D) budgeted balance sheet A A A Which of

Casey Corporation produces a special line of basketball hoops. Casey Corporation produces the hoops in batches. To manufacture a batch of the basketball hoops, Casey Corporation must set up the machines and molds. Setup costs are batch-level costs because they are associated with batches rather than individual units of products.

Lean accounting is much simpler than traditional product costing because ________. A) it compares value stream costs against costs that include costs of all purchased materials B) it computes the cost of individual products C) calculating actual product costs by value streams requires less overhead allocation D) adding a larger markup on value stream

The breakeven point is the activity level where ________. A) revenues equal fixed costs B) revenues equal variable costs C) contribution margin equals total costs D) revenues equal the sum of variable and fixed costs DExplanation: Revenue - Variable Costs - Fixed Costs = Operating income, thus;Revenue = Variable Costs + Fixed Costs DExplanation: Revenue

Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: Model X Model Y Model Z Selling price $50 $66 $80 Direct materials 10 10 10 Direct labor ($15 per hour) 15 15 30 Variable support costs ($5

In relevant-cost analysis, managers should not consider all variable as relevant and all fixed costs as irrelevant. TRUE TRUE TRUE For short-run product-mix decisions, managers should focus on minimizing total fixed costs. FALSEExplanation: For short-run product mix decisions, managers should focus on maximizing total contribution margin. FALSEExplanation: For short-run product mix decisions,

A local accounting firm employs 24 full-time professionals. The budgeted annual compensation per employee is $45,000. The average chargeable time is 420 hours per client annually. All professional labor costs are included in a single direct-cost category and are allocated to jobs on a per-hour basis. Other costs are included in

Joint costs are incurred beyond the split-off point and are assignable to individual products. FALSEExplanation: Joint costs are incurred prior to the split-off point. FALSEExplanation: Joint costs are incurred prior to the split-off point. FALSE Explanation: Joint costs are incurred prior to the split-off point. IMA's overarching ethical principles include: Honesty, Fairness,

Wilde Corporation budgeted the following costs for the production of its one and only product for the next fiscal year: Wilde has an annual target operating income of $920,000. The markup percentage for setting prices as a percentage of variable manufacturing costs is ________. A) 52.83% B) 89.73% C) 65.31% D) 21.17% B B B DesMoines

A responsibility center is a part, segment, or subunit of an organization whose manager is accountable for a specified set of activities. TRUE TRUE TRUE Negotiated transfer prices are often employed when market prices are stable. FALSEExplanation: Negotiated transfer prices are often employed when market prices are volatile. FALSEExplanation: Negotiated transfer prices

Following a strategy of product differentiation, Izzy's Limited Company makes a high-end Appliance, XT15. Izzy's Limited presents the following data for the years 2017 and 2018: Izzy's Limited produces no defective units but it wants to reduce direct materials usage per unit of XT15. Manufacturing conversion costs in each year depend on

Which of the following statements is true of an abnormal spoilage? A) It is a spoilage which is inherent in a particular production process. B) It arises even when the process is carried out in an efficient manner. C) It is usually regarded as avoidable and controllable. D) The costs of abnormal spoilage are

Feedback regarding previous actions may affect ________. A) future predictions B) implementation of the decision C) the decision model D) All of these answers are correct. D D D The preparation of all the budgets in the master budget forces managers to think about their business operations and to formulate plans, while: A) detecting inaccurate historical

Chief Manufacturing is a small textile manufacturer using machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Somerset High School Science Olympiad Jacket job. Required: a. For

If a company is planning to reduce the selling price, they must believe that ________. A) variable costs will decline as well B) the fixed costs will cover the lower sales price C) more units will be sold D) increased collections will increase income CExplanation: Correct - management must believe a lower price will increase

The costs that result when a company runs out of a particular item for which there is a customer demand are ________. A) shrinkage costs B) shortage costs C) stockout costs D) EOQ estimation costs C C C Spoilage, rework, scrap, and machine repairs are all examples of ________. A) prevention costs B) appraisal costs C) internal failure

Francis Kenney is paid $26 an hour for straight-time and $31 an hour for overtime. One week she worked 46 hours, which included 6 hours of overtime. What is the overtime premium incurred to the company? A) $186 B) $72 C) $31 D) $432 A A A Knowledge Transfer Associates is in the process of evaluating

After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $240. The annual target sales volume for interior doors is 21,000. Magnificent has

In cost allocation, R&D costs are used to ________. A) provide information for economic decisions B) report to external parties when using generally accepted accounting principles C) calculate costs of a government contract D) calculate prime cost of a product A A A Advanced Productivity Company provided the following information: Budgeted input 73,000 gallons Actual input 91,000

Discontinuing an unprofitable customer should be solely done on the basis of profitability. FALSEExplanation: There may be strategic reasons to retain unprofitable customers and and managers must use caution when allocating fixed costs to unprofitable customers. In addition., some customers might be dropped, not because of profits but because they mightbe

In comparing the three basic approaches to transfer pricing, which of the following statements would be true? A) A cost-based approach preserves subunit autonomy while negotiated transfer prices do not. B) Market-based transfer pricing motivates managers but negotiated prices do not. C) Cost-based transfer pricing systems are more difficult to implement and often

Which of the following true of nonfinancial measures of quality? A) They direct attention to financial processes that help managers identify the precise problem areas that need improvement. B) They focus managers' attention on how poor quality affects operating income. C) They assist in problem solving by comparing costs and benefits of different

Activity based costing system differs from traditional costing systems in the treatment of ________. A) direct labor costs B) direct material costs C) prime costs D) indirect costs D D D Budgeted production equals ________. A) beginning finished goods inventory + budgeted unit sales - targeted ending finished goods inventory B) targeted ending finished goods inventory +

11. Nonmanufacturing Costs Budget For the Year Ending December 31, 2018 Variable Fixed Total Marketing $21,150 $90,000 $111,150 Distribution 0 1,170 1,170Total $21,150 $91,170 $112,320 Distribution 0 1,170 1,170Total $21,150 $91,170 $112,320 Distribution 0 1,170 1,170 Total $21,150 $91,170 $112,320 12. Budgeted Income Statement For the Year Ending December 31, 2018 Revenue $528,000 Cost of goods sold 396,240 Gross margin 131,760Operating (nonmanufacturing)

CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COST VARIANCES, AND MANAGEMENT CONTROL 8-1 How do managers plan for variable overhead costs? Effective planning of variable overhead costs involves: 1. Planning to undertake only those variable overhead activities that add value for customers using the product or service, and2. Planning to use the drivers of costs in

Under the cause and effect criterion, reasonableness is a matter of judgment rather than an operational criterion. FALSEExplanation: Under the fairness or equity criterion, reasonableness is a matter of judgment rather than an operational criterion. FALSEExplanation: Under the fairness or equity criterion, reasonableness is a matter of judgment rather than an operational

Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing system uses two cost categories, direct materials and conversion costs. Each product must pass through the Assembly Department and the Testing Department. Direct materials are added at the beginning of the production process. Conversion costs are allocated evenly

A direct cost of one cost object cannot be an indirect cost of another cost object. FALSEExplanation: A direct cost of one cost object can be an indirect cost of another cost object. For example, department A might perform some part of the processing of a product B. The costs incurred

Process-costing systems using standard costs record standard direct material costs in Direct Materials Control and standard conversion costs in Conversion Costs Control. FALSEExplanation: Process-costing systems using standard costs record actual direct material costs in Direct Materials Control and actual conversion costs in Conversion Costs Control. FALSEExplanation: Process-costing systems using standard costs

Differential revenue is the difference in total revenue between two alternatives. TRUE TRUE TRUE Costs in beginning inventory are pooled with costs in the current period when determining the costs of good units under the weighted-average method of process costing. TRUE TRUE TRUE If the incremental users are newly formed companies or

Which of the following statements is true of contribution-margin format of the income statement? A) It is used for absorption costing. B) It distinguishes between variable and fixed costs in its format. C) It distinguishes manufacturing costs from nonmanufacturing costs. D) It calculates gross margin. B B B The budgeted direct-labor cost rate includes ________. A)

Additional insight can be gained by dividing the sales-volume variance into the sales-mix variance and the sales-quantity variance. TRUE TRUE TRUE Higher selling prices, rather than unique products or services, provide a competitive advantage for the cost leader companies. FALSEExplanation: Lower selling prices, rather than unique products or services, provide a competitive

Greentree Incorporated manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $120 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Greentree's policy to add a 30% markup to full costs. a. Greentree Incorporated is invited to bid

A cost is a resource sacrificed or forgone to achieve a specific objective. TRUEExplanation: A cost object could be anything management wishes to determine the cost of, for example, a department. TRUEExplanation: A cost object could be anything management wishes to determine the cost of, for example, a department. TRUE Explanation: A

For short-run product-mix decisions, maximizing contribution margin will also result in maximizing operating income. TRUE TRUE TRUE A "push-through" system, often described as a materials requirement planning system, focuses first on the forecasted amount and timing of finished goods and then determines the demand for materials components and subassemblies at each of the

The top management at Amore Corp, a manufacturer of computer games, is attempting to recover from a flood that destroyed some of their accounting records. The main computer system was also severely damaged. The following information was salvaged: What were the sales for the Beta Division (a)? A) $7,777,778 B) $154,000 C) $12,727,273 D) $252,000

Prorated allocation of production-volume variance has the effect of approximating the allocation of fixed costs based on actual costs and actual output. TRUE TRUE TRUE In calculating the net initial investment cash flows, any increase in working capital required for the project should be included. TRUE TRUE TRUE Computing standard costs at

The weighted-average method merges unit costs from different accounting periods, obscuring period-to-period comparisons. TRUE TRUE TRUE When the dollar amount of scrap is immaterial, the simplest accounting is to record the physical quantity of scrap returned to the storeroom and to regard scrap sales as a separate line item in the

Which of the following is required to arrive at the budgeted units to be produced in a year? A) estimated direct materials inventory required at the end of the year B) estimated finished goods inventory required at the end of the year C) amount of direct materials to be used during the year D)