a.
PROBLEM 24.9B
NINNA COMPANY
250 shelves × 4 square feet per shelf = 1,000 square feet.
45 Minutes, Medium
Since the direct materials quantity variance is $0, the actual quantity of materials used per
shelf must equal the budgeted quantity per shelf. Thus the total quantity purchased and
used is:
SOLUTIONS TO CRITICAL THINKING CASE
S
CASE 24.1
IT’S NOT MY FAUL
T
CABINETS, INC.
a.
25 Minutes, Strong
The basic problem is that the production manager is being unfairly charged with cost
overruns that should be assigned to the sales department. If we assume that filling the large
a.
Since the wage rate increased by 10% early in the year, the standard unit cost for direct
labor for Tough-Coat should be increased from $0.80 to $0.88. The fact that the
CASE 24.2
The president is not correct in arguing that the standard costs for Tough-Coat should not
be revised for purposes of valuing the inventory at the end of the year. The standards set
for material X-1 and direct labor for future periods, however, depend on anticipated prices
and operating conditions. But the issue in this problem is not future standards; the issue is
50 Minutes, Strong
ARMSTRONG CHEMICAL
the basis of the $1.00 standard cost for material X-1, the inventory would be overstated
because it would include a fictitious cost element. A fundamental accounting principle is
that inventories should be valued at actual cost.
CASE 24.2
c.
As the schedule above indicates, the ending inventory would be reduced from $560,000
to $538,000, a reduction of $22,000. This reduction in the valuation of ending inventory
would have the effect of reducing operating income by 44% (from $50,000 to $28,000).
ARMSTRONG CHEMICAL (concluded)
30 Minutes, Medium CASE 24.3
TRAVELOCITY.COM
INTERNET
a.
The spending variance will equal the difference between five times the price obtained and
30 Minutes, Medium CASE 24.
4
STANDARD COST SYSTEM
A
ND INVENTORY MISSTATEMEN
T
JAMS AND JELLIES, INC.
a.
•
Buck appears to be attempting to increase the factory’s profit by closing the material favorable
do not resolve the ethical conflict, Sheila should consider the following courses of action:
Sheila should discuss the issue with her immediate supervisor except when it appears that the
supervisor is involved. In that case, present the issue to the next level. If she cannot achieve a
satisfactory resolution, she should submit the issue to a higher management level. If her
immediate superior is the chief executive officer or equivalent, the acceptable reviewing