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Reporting in Action — BTN 20-1
1. These costs are part of getting the products that Apple sells to its
2. These costs would either be expensed as cost of sales or as selling
and administrative expenses. Thus, net income will not be affected.
3. Answers will vary depending on information obtained.
Comparative Analysis — BTN 20-2
1.
Apple Google
($ millions) Current Year Prior Year Current Year Prior Year
Expenses
Cost of goods sold....... $106,606 $ 87,846 $25,858 $20,634
2. Apple had a higher ratio in both the current year and the prior year.
Ethics Challenge — BTN 20-3
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
Instructor note: The student’s solution will vary depending on the industry, product, and process
chosen. It will also depend on the sources obtained.
The memorandum should initially identify an industry (say, steel), a product
(say, cans), and a process (say, forming).
(1) First, the professional should read a quality trade journal in the selected
(2) The second step is to join an industry organization, such as a local
(3) The third step is to learn as much as one can from the management and
Communicating in Practice — BTN 20-4
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
The main focus of this memorandum should be to explain the difference
between determining direct and indirect costs in a job order versus a
process cost accounting system since this appears to be the primary
source of confusion. In addition to the memorandum’s content, the
instructor should look for a student’s ability to be diplomatic in the
communication.
Points the memorandum should make include:
1. The reason for the assistant’s confusion. Given the assistant’s
2. Since your company does not limit production to specific batches of
3. It is important to recognize that the cost object is the process, not the
4. In job order cost accounting, materials and labor used exclusively on
5. A process cost accounting system uses the concepts of direct and
6. Some costs classified as manufacturing overhead in a job order system
Taking It to the Net — BTN 20-5
There are several ways that such software is helpful to a business.
This software allows companies to create process maps so they can
analyze and communicate processes and workflows.
Teamwork in Action — BTN 20-6
Each member of the team should participate in the activity to improve and
reinforce his/her understanding of the entries that correspond to Exhibit
20.14. (Note: The entries below are pro forma entries since information for
amounts are not provided in this activity.)
1. Raw Materials Inventory...............................................#
2. Work in Process Inventory...........................................#
3. Factory Overhead.........................................................#
Teamwork in Action (concluded)
4. No journal entry required
5. Work in Process Inventory...........................................#
6. Factory Overhead.........................................................#
7. Factory Overhead ........................................................#
Prepaid Insurance .................................................. #
8. Work in Process Inventory...........................................#
9a. Work in Process Inventory-Blending...........................#
9b. Finished Goods Inventory............................................#
Work in Process Inventory-Blending..................... #
10. Accounts Receivable....................................................#
Entrepreneurial Decision — BTN 20-7
1. Using separate process cost summary reports for each process
enables managers to better understand costs and make decisions.
For example, Kar’s Nuts adds nuts in its first process and other
2. If a business unnecessarily holds materials, it will be less profitable
than a company that maintains appropriate raw materials inventory
Even if inventory items are not immediately used in production, they
can impact profits. The company will have spent cash on items sitting
3. A hybrid system combines features of both process and job order
operations. Kar’s Nuts resembles a process operation in that each
Hitting The Road — BTN 20-8
Instructor note: This assignment is designed to help students identify
specific costs in a service process costing system. The answers are likely
to be unique for each student. Below are a few suggestions. This problem
is also a review of cost classifications.
Cost
Description
Direct
Material
Direct
Labor Overhead
Variable
Cost
Fixed
Cost
Manual
sorting
X X
Heating and
cooling
X X
Overhead allocation suggestions:
Not all components should be allocated the same. Some examples:
Heating cost can be allocated on square footage.
Rent cost on the value of floor space occupied.
Global Decision — BTN 20-9
1. Ratio of Cost of Goods Sold to Total Expenses
( billions)₩Current Year Prior Year
₩126,651.9 /
(From BTN 20-2)
($ millions) Current Year Prior Year
$87,846 /
($ millions) Current Year Prior Year
$20,634 /
2. As a percentage of total expenses, Apple spends less on selling and
administrative expenses (and more on cost of goods sold) than does
