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Version 1 1 Student name:__________ 1) Dobosh Corporation has provided the following information: Cost per Unit Cost per Period Direct materials $ 7.05 Direct labor $ 3.65 Variable manufacturing overhead $ 1.60 Fixed manufacturing overhead $ 113,400 Sales commissions $ […]

Chapter 1 Managerial Accounting and Cost Concepts Questions 1-1 The three major types of product costs in a manufacturing company are direct materials, direct labor, and manufacturing overhead. 1-2 a. Direct materials are an integral part of a finished product […]

Problem 1-19 (continued) The fixed selling expense shown above ($30,000) is computed as follows: Contribution margin (a) ……………………… $60,000 Net operating income (b) ……………………. $18,000 Total fixed costs (a) ‒ (b) ……………………. $42,000 Total fixed costs (a) …………………………… $42,000 Fixed […]

Exercise 1-8 (continued) 3. Direct materials ……………………………………. $ 7.00 Direct labor …………………………………………. 4.00 Variable manufacturing overhead …………….. 1.50 Variable manufacturing cost per unit ………… $12.50 Variable manufacturing cost per unit (a) ……. $12.50 Number of units produced (b) …………………. 22,000 […]

Version 1 1 Student name:__________ 1) The following standards have been established for a raw material used to make product O84: Standard quantity of the material per unit of output 8.3 meters Standard price of the material $ 19.50 per […]

Problem 10-13 (continued) 3. Both the labor efficiency and variable overhead efficiency variances are affected by inefficient use of labor time. Excess of actual over standard cost per unit ……. $0.08 U Less portion attributable to labor inefficiency: Labor efficiency […]

Chapter 10 Standard Costs and Variances Solutions to Questions 10-1 A quantity standard indicates how much of an input should be used to make a unit of output. A price standard indicates how much the input should cost. 10-2 Separating […]

Exercise 10-6 (continued) 2. Actual Hours of Input, at the Actual Rate Actual Hours of Input, at the Standard Rate Standard Hours Allowed for Output, at the Standard Rate (AH × AR) (AH × SR) (SH × SR) 750 hours […]

Exercise 10A–4 (10 minutes) Company A: This company has a favorable volume variance because the standard hours allowed for the actual production are greater than the denominator hours. Company B: This company has an unfavorable volume variance because the standard […]

Problem 10A–12 (45 minutes) 1. and 2. Per Direct Labor-Hour Variable Fixed Total Denominator of 30,000 DLHs: $135,000 ÷ 30,000 DLHs …………….. $4.50 $ 4.50 $270,000 ÷ 30,000 DLHs …………….. $9.00 9.00 Total predetermined rate ……………….. $13.50 Denominator of 40,000 […]

Version 1 1 Student name:__________ 1) Holl Corporation has provided the following data for November. Denominator level of activity 5,600 machine-hours Budgeted fixed manufacturing overhead costs $ 70,560 Standard machine-hours allowed for the actual output 5,900 machine-hours Actual fixed manufacturing […]

Version 1 1 Student name:__________ 1) Arellanes Corporation manufactures one product. It does not maintain any beginning or ending Work in Process inventories. The company uses a standard cost system in which inventories are recorded at their standard costs and […]

Version 1 1 Student name:__________ 1) Gabbe Industries is a division of a major corporation. Last year the division had total sales of $24,048,000, net operating income of $2,765,520, and average operating assets of $6,012,000. The company’s minimum required rate […]

Chapter 11 Responsibility Accounting Systems Solutions to Questions 11-1 In a decentralized organization, decision-making authority isn’t confined to a few top executives; instead, decision-making authority is spread throughout the organization. 11-2 The benefits of decentralization include: (1) by delegating day-to–day […]

Problem 11–20 (continued) Profits in the Carton Division will remain unchanged because it will be paying the same price internally as it is now paying externally. 3. The Pulp Division has idle capacity, so transfers from the Pulp Division to […]

Exercise 11-11 (20 minutes) 1. (b) (c) Net Average (a) Operating Operating ROI Sales Income* Assets (b) ÷ (c) $2,500,000 $475,000 $1,000,000 47.5% $2,600,000 $500,000 $1,000,000 50.0% $2,700,000 $525,000 $1,000,000 52.5% $2,800,000 $550,000 $1,000,000 55.0% $2,900,000 $575,000 $1,000,000 57.5% $3,000,000 […]

Version 1 1 Student name:__________ 1) Galaviz Company’s quality cost report is to be based on the following data: Net cost of spoilage $ 86,000 Test and inspection of in-process goods $ 32,000 Supplies used in testing and inspection $ […]

Problem 12–16 (continued) 4. The hypotheses underlying the balanced scorecard are indicated by the arrows in the diagram. Reading from the bottom of the balanced scorecard, the hypotheses are: ° If the number of employees trained to support the flexibility […]

Chapter 12 Strategic Performance Measurement Solutions to Questions 12-1 The four categories are learning and growth, internal business process, customer, and financial. 12-2 The four types of quality costs are prevention costs, appraisal costs, internal failure costs, and external failure […]

Exercise 12-9 (continued) 2. Company A: The focus on new product design suggests an emphasis on product innovation and a product leadership customer value proposition. Company B: The focus on patent approval, patent protected sales, and an interest in the […]

Case 13-29 (45 minutes) 1. As much yarn as possible should be processed into sweaters. Products should be processed further so long as the added revenues from further processing are greater than the added costs. In this case, the added […]

Chapter 13 Differential Analysis: The Key to Decision Making Solutions to Questions 13-1 A relevant cost is a cost that differs in total between the alternatives in a decision. 13-2 An incremental cost (or benefit) is the change in cost […]

Problem 13-20 (15 minutes) 1. Per 16-Ounce T-Bone Sales from further processing: Sales price of one filet mignon (6 ounces × $12.00 per pound ÷ 16 ounces per pound) … $4.50 Sales price of one New York cut (8 ounces […]

Problem 13A-10 (continued) 4. continued The net operating income at a sales volume of 10,000 units is computed as follows: Sales (10,000 units × $20.25 per unit) ………… $202,500 Cost of goods sold (10,000 units × $14.60 per unit)…………………………………………………… 146,000 […]

Exercise 13A-5 (30 minutes) 1. The profit at a price of $24.00 is computed as follows: Profit = (P – V) × Q − Fixed expenses Profit = ($24.00 − $13.00) × 84,000 − $800,000 Profit = $11.00 × 84,000 […]

Exercise 13-5 (continued) 5. The Fishing Guard product has the largest unit contribution margin, but it is not the most profitable use of the constrained resource in either case above. This happens because the Fishing Guard uses more of the […]

Version 1 1 Student name:__________ 1) Costs associated with two alternatives, code-named Q and R, being considered by Albiston Corporation are listed below: Alternative Q Alternative R Supplies costs $ 68,000 $ 68,000 Power costs $ 31,500 $ 30,300 Inspection […]

Version 1 1 Student name:__________ 1) The management of Truelove Corporation is considering a project that would require an initial investment of $349,000 and would last for 7 years. The annual net operating income from the project would be $29,400, […]

Problem 14-21 (continued) 3. Which ranking is best will depend on Revco Products’ opportunities for reinvesting funds as they are released from the project. The internal rate of return method assumes that any released funds are reinvested at the internal […]

Exercise 14-8 (15 minutes) 1. Computation of the annual cash inflow associated with the new electronic games: Net operating income …………………………………… $40,000 Add noncash deduction for depreciation …………… 35,000 Annual net cash inflow………………………………….. $75,000 The payback computation would be: Investment […]

Case 14-31 (45 minutes) 1. Rachel Arnett’s revision of her first proposal can be considered a violation of the IMA’s Statement of Ethical Professional Practice. She discarded her reasonable projections and estimates after she was questioned by William Earle. She […]

Chapter 14 Capital Budgeting Decisions Solutions to Questions 14-1 A capital budgeting screening decision is concerned with whether a proposed investment project passes a preset hurdle, such as a 15% rate of return. A capital budgeting preference decision is concerned […]

Version 1 1 Student name:__________ 1) Burns Corporation’s net income last year was $97,400. Changes in the company’s balance sheet accounts for the year appear below: Increases (Decreases) Asset and Contra-Asset Accounts: Cash and cash equivalents $ 22,700 Accounts receivable […]

Problem 15-13 (continued) The decrease in the long-term investments account ($20,000) equals the cost of the long-term investment sold; therefore, Rusco did not purchase any long-term investments during the year. The proceeds from the sale of the long-term investment ($30,000) […]

Problem 15-8 (20 minutes) Transaction Operating Investing Financing Cash Inflow Cash Outflow a. Paid suppliers for inventory purchases …. X X b. Bought equipment for cash ……………….. X X c. Paid cash to repurchase its own stock ….. X X […]

Chapter 15 Statement of Cash Flows Solutions to Questions 15-1 The statement of cash flows highlights the major activities that impact cash flows and hence affect the overall cash balance. 15-2 Cash equivalents are short-term, highly liquid investments such as […]

Version 1 1 Student name:__________ 1) Comparative balance sheets and the income statements for Ellis Corporation are presented below: Comparative Balance Sheet Ending Balance Beginning Balance Assets: Current assets: Cash and cash equivalents $ 45,900 $ 31,500 Accounts receivable 38,800 […]

Version 1 1 Student name:__________ 1) Excerpts from Candle Corporation’s most recent balance sheet (in thousands of dollars) appear below: Year 2 Year 1 Current assets: Cash $ 170 $ 100 Accounts receivable, net 200 200 Inventory 150 140 Prepaid […]

Problem 16-18 (continued) 2. a. Sabin Electronics Common-Size Balance Sheets This Year Last Year Current assets: Cash ……………………………………………… 2.3 % 6.1 % Marketable securities ………………………… 0.0 0.7 Accounts receivable, net ……………………. 16.0 12.2 Inventory ……………………………………….. 31.7 24.4 Prepaid expenses …………………………….. […]

Chapter 16 Financial Statement Analysis Solutions to Questions 16-1 Horizontal analysis examines how a particular item on a financial statement such as sales or cost of goods sold behaves over time. Vertical analysis involves analysis of items on an income […]

Problem 16-13 (45 minutes) Effect on Ratio Reason for Increase, Decrease, or No Effect 1. Decrease The current ratio is obtained by dividing current assets by current liabilities. Declaring a cash dividend will increase current liabilities, but have no effect […]

Version 1 1 Student name:__________ 1) Linnear Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours […]

Problem 2-17 (20 minutes) 1. The predetermined plantwide overhead rate is computed as follows: Estimated manufacturing overhead (a) ……. $1,400,000 Estimated total direct labor-hours (b) ……… 80,000 DLHs Predetermined overhead rate (a) ÷ (b) ……. $17.50 per DLH The overhead […]

Problem 2A-4 (60 minutes) 1. a. When direct labor-hours are used to apply overhead cost to products, the company’s predetermined overhead rate would be: Manufacturing overhead cost Predetermined = overhead rate Direct labor-hours $1,800,000 = = $50 per DLH 36,000 […]

Exercise 2-5 (10 minutes) 1 and 2. The total direct labor-hours required in Finishing for Job 700: Finishing Direct labor cost (a) ………………………………. $128 Direct labor wage rate per hour (b) …………… $16 Total direct labor hours (a) ÷ (b) […]

Case 2A-6 (continued) ALTERNATIVE SOLUTION: Most students will compute the manufacturing overhead cost per pound of the two coffees as shown above. However, the per pound cost can also be computed as shown below. This alternative approach provides additional insight […]

Chapter 2 Job-Order Costing: Calculating Unit Product Costs Questions 2-1 Job-order costing is used in situations where many different products, each with individ- ual and unique features, are produced each pe- riod. 2-2 In absorption costing, all manufacturing costs, both […]

Version 1 1 Student name:__________ 1) Werger Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs). The company has two products, W82R and […]

Version 1 1 Student name:__________ 1) The management of Michaeli Corporation would like to investigate the possibility of basing its predetermined overhead rate on activity at capacity rather than on the estimated amount of activity for the year. The company’s […]

Version 1 1 Student name:__________ 1) The Simkins Corporation uses a job-order costing system. The following activities took place during the month of May: a.Raw materials purchased $40,000 b.Raw materials (all direct) used in production $35,000 c.Salaries and wages costs: […]

Problem 3-15 (continued) 4. Manufacturing Overhead ……………………… 5,000 Cost of Goods Sold ………………………… 5,000 Schedule of cost of goods sold: Beginning finished goods inventory ……… $ 60,000 Add: Cost of goods manufactured ……….. 770,000 Cost of goods available for sale […]

0 Total manufacturing costs added to production …….. 920,000 Total manufacturing costs to account for …………….. 960,000 Deduct: Ending work in process inventory …………… 70,000 Cost of goods manufactured …………………………….. $890,000 Copyright 2021 © McGraw-Hill Education. All rights reserved. No […]

Appendix 3A Job-Order Costing: A Microsoft Excel-Based Approach Exercise 3A-1 (20 minutes) The transactions are recorded as follows: Transaction Cash Raw Materials Work in Process Finished Goods Manufacturing Overhead Retained Earnings a. $(56,000) $56,000 = b. $(40,000) $40,000 = c. […]

Chapter 3 Job-Order Costing: Cost Flows and External Reporting Questions 3-1 The link that connects these two sched- ules is the cost of goods manufactured. It is cal- culated within a schedule of cost of goods manu- factured and then […]

Version 1 1 Student name:__________ 1) Venzke Corporation uses a job-order costing system to assign manufacturing costs to jobs. At the end of the month it closes out any overapplied or underapplied manufacturing overhead to Cost of Goods Sold. Its […]

Version 1 1 Student name:__________ 1) Bayas Corporation uses process costing. A number of transactions that occurred in June are listed below. 1. (1) Raw materials that cost $40,500 are withdrawn from the storeroom for use in the Mixing Department. […]

Case 4-20 (continued) 3. (continued) Computation of the Cost of Goods Sold: Transferred In Conversion Units completed and sold …………………. 200,000 200,000 Equivalent units in ending work in process inventory: Transferred in: 10,000 units x 100% complete ………. 10,000 Conversion: […]

Problem 4A-10 (continued) 3. and 4. Costs of Ending Work in Process Inventory and Units Transferred Out Materials Conversion Total Ending work in process inventory: Equivalent units …………………………………………………………… 20,000 8,000 Cost per equivalent unit ………………………………………………… $0.82 $1.48 Cost of ending […]

Exercise 4-8 (30 minutes) Weighted-Average Method 1. Materials Conversion Units transferred to the next production department …………………………………………. 175,000 175,000 Equivalent units in ending work in process inventory: Materials: 10,000 units × 100% complete ….. 10,000 Conversion: 10,000 units × 30% […]

Chapter 4 Process Costing Solutions to Questions 4-1 A process costing system should be used in situations where a homogeneous product is produced on a continuous basis in large quantities. 4-2 Job-order and processing costing are similar in the following […]

Version 1 1 Student name:__________ 1) Lenning Corporation uses the first-in, first-out method in its process costing. The following data pertain to its Assembly Department for August. Percent Complete Units Materials Conversion Work in process, August 1 950 40% 30% […]

Version 1 1 Student name:__________ 1) Cerce Corporation uses the direct method to allocate service department costs to operating departments. The company has two service departments, Administrative and Facilities, and two operating departments, Assembly and Finishing. Service Department Operating Department […]

Version 1 1 Student name:__________ 1) Giannini Incorporated, which produces and sells a single product, has provided the following contribution format income statement for March: Sales (5,000 units) $ 285,000 Variable expenses 150,000 Contribution margin 135,000 Fixed expenses 104,000 Net […]

Problem 5-25 (continued) Contribution margin that must be realized on outsourced units to earn target profit (a) …… $15,000 Contribution margin per unit from supplier (b) . $1.25 Unit sales needed from supplier to earn target profit (a) ÷ (b) […]

Problem 5-31 (continued) 2. a. Line 3: Remain unchanged. Line 9: Have a steeper slope. Break-even point: Decrease. b. Line 3: Have a flatter slope. Line 9: Remain unchanged. Break-even point: Decrease. c. Line 3: Shift upward. Line 9: Remain […]

Chapter 5 Cost-Volume-Profit Relationships Solutions to Questions 5-1 The contribution margin (CM) ratio is the ratio of the total contribution margin to total sales revenue. It can also be expressed as the ratio of the contribution margin per unit to […]

Exercise 5-4 (10 minutes) 1. The company’s contribution margin (CM) ratio is: Total sales ………………………. $200,000 Total variable expenses ……… 120,000 Total contribution margin (a) . $ 80,000 Total contribution margin (a) . $80,000 Total sales (b) ………………….. $200,000 CM […]

Exercise 5-18 (continued) 4. Margin of safety in dollar terms: Margin of safety = Total sales – Break-even sales in dollars = $450,000 – $360,000 = $90,000 Margin of safety in percentage terms: Margin of safety in dollars Margin of […]

Problem 5A-7 (45 minutes) 1. Cost of goods sold ………………. Variable Advertising expense ……………. Fixed Shipping expense ……………….. Mixed Salaries and commissions …….. Mixed Insurance expense ……………… Fixed Depreciation expense ………….. Fixed 2. Analysis of the mixed expenses: Units Shipping […]

Version 1 1 Student name:__________ 1) Arlo’s T-shirt Shop only has three costs: T-shirt cost, rent cost on the shop, and utilities cost. Arlo’s sells the T-shirts for $14.50 each. Management has prepared the following cost information for next month: […]

Version 1 1 Student name:__________ 1) Boylston Corporation has provided the following data for its two most recent years of operation. The company makes a product that it sells for $75 per unit. It began Year 1 with no units […]

Case 6-30 (continued) Division Association Total Membership Magazine Subscriptions Books & Reports Continuing Education Sales: Membership dues………………………. $2,000,000 $1,600,000 $400,000 Non-member magazine subscriptions ………………………….. 75,000 75,000 Advertising ………………………………. 100,000 100,000 Reports and texts ……………………… 700,000 $700,000 Continuing education courses ………. […]

Chapter 6 Variable Costing and Segment Reporting: Tools for Management Solutions to Questions 6-1 Absorption and variable costing differ in how they handle fixed manufacturing overhead. Under absorption costing, fixed manufacturing overhead is treated as a product cost and hence […]

Problem 6-26 (continued) 3. Total Company West Central East Sales ………………………………. $2,000,000 100.0 $450,000 100 $800,000 100 $750,000 100 Variable expenses: Cost of goods sold …………… 819,400 41.0 162,900 36 280,000 35 376,500 50 Shipping expense ……………. 77,600 3.9 17,100 […]

Exercise 6-5 (10 minutes) 1. The companywide break-even point is computed as follows: Dollar sales for company to break even = Traceable fixed expenses + Common fixed expenses Overall CM ratio = $120,000 + $50,000 $240,000 ÷ $600,000 = $170,000 […]

Problem 6-18 (continued) 3. b. The absorption costing income statements appear below: Year 1 Year 2 Year 3 Sales ……………………………………………… $3,480,000 $2,900,000 $3,770,000 Cost of goods sold ……………………………. 3,120,000 2,440,000 3,620,000 Gross margin …………………………………… 360,000 460,000 150,000 Selling and administrative […]

Version 1 1 Student name:__________ 1) Dattilio Corporation manufactures and sells one product. The following information pertains to the company’s first year of operations: Variable cost per unit: Direct materials $ 65 Fixed costs per year: Direct labor $ 1,495,200 […]

Version 1 1 Student name:__________ 1) Daher Corporation manufactures two products: Product A34R and Product E05V. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of […]

Chapter 7 Activity-Based Costing: A Tool to Aid Decision Making Solutions to Questions 7-1 Activity-based costing differs from traditional costing systems in a number of ways. In activity-based costing, nonmanufacturing as well as manufacturing costs may be assigned to products. […]

Problem 7-17 (45 minutes) 1. Under the traditional direct labor-hour based costing system, manufacturing overhead is applied to products using the predetermined overhead rate computed as follows: Estimated total manufacturing overhead cost Predetermined = overhead rate Estimated total direct labor […]

Exercise 7-5 (15 minutes) Sales ($1,850 per standard model glider × 20 standard model gliders + $2,400 per custom designed glider × 3 custom designed gliders) ….. $44,200 Costs: Direct materials ($564 per standard model glider × 20 standard model […]

Version 1 1 Student name:__________ 1) Gessford Corporation is conducting a time-driven activity-based costing study in its Order Fulfillment Department. The company has provided the following data to aid in that study: Gessford Corporation Order Fulfillment Department Data Inputs Resource […]

Version 1 1 Student name:__________ 1) At March 31 Streuling Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling $85,000. Sales, in units, have been budgeted as follows for the next four months: […]

Exercise 8-8 (10 minutes) Gig Harbor Boating Budgeted Income Statement Sales (460 units × $1,950 per unit) …………………. $897,000 Cost of goods sold (460 units × $1,575 per unit) … 724,500 Gross margin ………………………………………………. 172,500 Selling and administrative expenses* ……………….. […]

Problem 8-28 (continued) 3. Budgeted cash disbursements for selling and administrative expenses for next year: Quarter First Second Third Fourth Year Budgeted sales in dollars ………………. $300,000 $400,000 $500,000 $200,000 $1,400,000 Variable selling and administrative expense rate ……………………………. × 15% […]

Chapter 8 Master Budgeting Solutions to Questions 8-1 A budget is a detailed quantitative plan for the acquisition and use of financial and other resources over a given time period. Budgetary control involves using budgets to increase the likelihood that […]

Problem 8-19 (45 minutes) 1. Schedule of cash collections: Cash sales—May ……………………………………….. $ 60,000 Collections on account receivable: April 30 balance ………………………………………. 54,000 May sales (50% × ($200,000 – $60,000)) …….. 70,000 Total cash collections ………………………………….. $184,000 2. Schedule of […]

Version 1 1 Student name:__________ 1) Shiigi Urban Diner is a charity supported by donations that provides free meals to the homeless. The diner’s budget for May is to be based on 3,310 meals. The diner’s director has provided the […]

Chapter 9 Flexible Budgets and Performance Analysis Solutions to Questions 9-1 A planning budget is prepared before the period begins and is valid for only the planned level of activity. It is sometimes referred to as a static planning budget […]

Exercise 9-10 (15 minutes) Lavage Rapide Flexible Budget For the Month Ended August 31 Actual cars washed (q) ……………………………. 8,800 Revenue ($4.90q) …………………………………… $43,120 Expenses: Cleaning supplies ($0.80q) …………………….. 7,040 Electricity ($1,200 + $0.15q) ………………….. 2,520 Maintenance ($0.20q) …………………………… 1,760 […]

Problem 9-19 (30 minutes) 1. Milano Pizza Flexible Budget Performance Report For the Month Ended November 30 Actual Results Revenue and Spending Variances Flexible Budget Activity Variances Planning Budget Pizzas (q1) ……………………………….. 1,240 1,240 1,200 Deliveries (q2) …………………………… 174 174 […]