Archives: Solution Manual

8-48 SOLUTION EXHIBIT 8-39 Actual Costs Incurred: Actual Input Quantity Actual Input Quantity  Budgeted Price Flexible Budget: Budgeted Input Quantity Allowed for Actual Output × Actual Rate Purchases Usage × Budgeted Price Direct Materials (25,000  $5.20) $130,000 (25,000 […]

8-41 7. Fixed Setup Overhead Variance Analysis for Jo Nathan Publishing Company for 2012 Actual Static Budget Standard Hours 8. Rejecting an order may have implications for future orders (i.e., professors would be reluctant to order books from this publisher […]

8-31 Graph for planning and control purpose Graph for inventory costing purpose ($17 per machine-hour) Fixed Manufacturing Overhead Costs * Budgeted fixed manufacturing overhead rate per hour = Budgeted fixed manufacturing overhead Denominator level = $17,000,000/ 1,000,000 machine hours = […]

8-25 (40−50 min.) Total overhead, 3-variance analysis. 1. This problem has two major purposes: (a) to give experience with data allocated on a total overhead basis instead of on separate variable and fixed bases and (b) to reinforce distinctions between […]

8-11 Fixed Manufacturing Costs and Variances a. Fixed Manufacturing Overhead Control 20,550 Salaries Payable, Acc. Depreciation, various other accounts 20,550 To record actual fixed manufacturing overhead costs incurred. b. Work–in–Process Control 20,736 Fixed Manufacturing Overhead Allocated 20,736 To record fixed […]

8-1 CHAPTER 8 8-1 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, and 2. Planning to use the drivers of costs in […]

7-40 (30 min.) Comprehensive variance analysis. 1. Computing unit selling prices and unit costs of inputs: Actual selling price = $2,502,500 ÷ 275,000 = $9.10 Budgeting selling price = $2,700,000 ÷ 300,000 = $9.00 Selling-price variance = ( ) Actual […]

7-31 2. Direct Materials Price Variance (time of purchase = time of use) Direct Materials Control 10,640 Direct Materials Price Variance 304 Accounts Payable Control or Cash 10,336 Direct Materials Efficiency Variance Work in Process Control 9,870 Direct Materials Efficiency […]

7-21 1. This is a problem of two equations & two unknowns. The two equations relate to the number of cars detailed and the labor costs (the wages paid to the employees). X = number of cars detailed by the […]

7-11 2. May 2012 Actual Results Price Variance Actual Quantity  Budgeted Price Efficiency Variance Flexible Budget (1) (2) = (1) – (3) (3) (4) = (3) – (5) (5) Units 550 550 Direct materials $11,828.36a $1,156.16 U $10,672.20b $772.20 […]

7-1 CHAPTER 7 7-1 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 identify areas not operating as expected. The larger the […]

6-40 11. Nonmanufacturing Costs Budget For the Year Ending December 31, 2011 Variable Fixed Total Marketing $14,100 $60,000 $74,100 Distribution 0 780 780 Total $14,100 $60,780 $74,880 12. Budgeted Income Statement For the Year Ending December 31, 2011 Revenue $352,000 […]

6-31 6-36 (30 min.) Cash budgeting, chapter appendix. 1. Projected Sales May June July August September October Sales in units 80 120 200 100 60 40 Revenues (Sales in units × $450) $36,000 $54,000 $90,000 $45,000 $27,000 Collections of Receivables […]

6-21 4. Scarborough Corporation Direct Materials Purchases Budget (in dollars) for 2012 Budgeted Expected Purchases Purchase (Units) Price per unit Total Direct material A 469,000 $12 $5,628,000 Direct material B 256,000 5 1,280,000 Direct material C 42,000 3 126,000 Budgeted […]

6-11 6-26 (15 min.) Responsibility and controllability. 1. (a) Production manager (b) Purchasing Manager 2. (a) Production Manager (b) External Forces In the case of the utility rate hike the production manager would be responsible for the costs, but they […]

6-1 6-1 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 reference, […]

5-47 The following table documents how the two job orders differ in the way they use each of the five activity areas included in indirect manufacturing costs: Usage Based on Analysis of Activity Area Cost Drivers Usage Assumed with Direct […]

5-41 4. Backpacks Purses Total Direct materials $412,920 $379,290 $ 792,210 Direct manufacturing labor 120,000 98,000 218,000 Setup ($347 × 130; 60 batches) 45,110 20,820 65,930 Shipping ($389 × 130; 60 batches) 50,570 23,340 73,910 Design ($41,500 × 2; 2 […]

5-32 (50 min.) Plantwide, department, and activity-cost rates. 1. Plant-wide costing rate Fighters Cargo Total Direct materials Assembly $2.50 $3.75 $6.25 Painting 0.50 1.00 1.50 Total $3.00 $4.75 $7.75 Direct Labor Assembly $3.50 $2.00 $5.50 Painting 2.25 1.50 3.75 Total […]

SOLUTION EXHIBIT 5-24 Product-Costing Overviews of Family Supermarkets PANEL A: SIMPLE COSTING SYSTEM COST OBJECT: PRODUCT LINE Indirect Costs Direct Costs Store Support COGS COGS INDIRECT COST POOL COST ALLOCATION BASE     DIRECT COST PANEL B: ABC […]

5-11 1. Trophies Plaques Total Direct materials Forming $13,000 $11,250 Assembly 2,600 9,375 Total 15,600 20,625 Direct Labor Forming 15,600 9,000 Assembly 7,800 10,500 Total 23,400 19,500 Total direct costs $39,000 $40,125 $79,125 Budgeted overhead rate = ($12,000 $10,386 $23,000 […]

5-1 CHAPTER 5 ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT 5-1 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 resources 5-2 Overcosting may result in […]

4-39 1. Adjusting entry for 12/31 payroll. (a) Work-in–Process Control 3,850 Manufacturing Department Overhead Control 950 Wages Payable Control 4,800 To recognize payroll costs (b) Work-in–Process Control 4,620 Manufacturing Overhead Allocated 4,620 To allocate manufacturing overhead at 120%  $3,850 […]

4-33 (25–30 min.) Service industry, job costing, two direct– and indirect-cost categories, law firm (continuation of 4-32). Although not required, the following overview diagram is helpful to understand Keating’s job– costing system. Professional Labor-Hours General Support COST OBJECT: JOB FOR […]

4-21 The posting of entries to T-accounts is as follows: Materials Control Work-in–Process Control Bal 12 (2) 145 Bal. 2 (2) 145 (4) 90 (8) 63 (9) 294 (1) 150 (3) 10 Bal. 7 Bal. 6 Finished Goods Control Cost […]

4-11 1. Quarter 1 2 3 4 Annual (1) Pools sold 700 500 150 150 1,500 (2) Direct manufacturing labor hours (0.5  Row 1) 350 250 75 75 750 (3) Fixed manufacturing overhead costs $10,500 $10,500 $10,500 $10,500 $42,000 […]

4-1 CHAPTER 4 JOB COSTING 4-1 Cost pool––a grouping of individual indirect cost items. Cost tracing––the assigning of direct costs to the chosen cost object. 4-2 In a job-costing system, costs are assigned to a distinct unit, batch, or lot […]

3-41 0.40R = $11,700,000 R = $11,700,000  0.40 = $29,250,000 3-44 (15–25 min.) Sales mix, three products. 1. Sales of A, B, and C are in ratio 20,000 : 100,000 : 80,000. So for every 1 unit of A, […]

3-31 Sales revenue 5,000  1.20  $60 $360,000 Variable costs 5,000  1.20  $25 × (1 – 0.20) 120,000 Operating income $ 95,000 The point of this problem is that managers always need to consider broader rather than […]

3-21 Breakeven point in units = Net fixed costs Contribution margin per concert = $1,000 $74,000 = 74 concerts Check Donations $ 40,000 Revenue ($2,500 × 74) 185,000 Total revenue 225,000 Less variable costs Guest performers ($1,000 × 74) $74,000 […]

3-11 1. Breakeven point revenues = percentagemargin on Contributi costs Fixed Contribution margin percentage = = 0.60 or 60% $660,000 $1,100,000 2. Contribution margin percentage = price Selling unit per cost Variable price Selling − 0.60 = SP $16 SP […]

3-1 CHAPTER 3 COST-VOLUME-PROFIT ANALYSIS 3-1 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 per unit, or fixed costs of a product. 3-2 […]

23-28 effects of these factors provides better information about a manager’s performance. What is critical, however, for benchmarking and relative performance evaluation to be effective is that similar noncontrollable factors affect each division. It is not clear that the same […]

23-21 23-29 (40–50 min.) ROI, measurement alternatives for performance measures 1. ROI = Operating income ÷ Net book value of total assets Denver ROI = $723,000 ÷ ($4,500,000 – $3,300,000 + 999,800) = $723,000 ÷ $2,199,800 = 60.25% Seattle ROI […]

23-11 1. Bleefl would be better off if the machine is replaced. Its cost of capital is 6% and the IRR of the investment is 11%, indicating that this is a positive net present value project. 2. The ROIs for […]

23-1 CHAPTER 23 23-1 Examples of financial and nonfinancial measures of performance are: Financial: ROI, residual income, economic value added, and return on sales. Nonfinancial: Customer perspective: Market share, customer satisfaction. Internal-business-processes perspective: Manufacturing lead time, yield, on-time performance, number […]

22-32 (40 min.) Multinational transfer pricing, global tax minimization. This is a two-country two-division transfer-pricing problem with two alternative transfer-pricing methods. Summary data in U.S. dollars are: South Africa Mining Division Variable costs: 600 ZAR ÷ 6 = $100 per […]

22-21 2. If (a) A has excess capacity, (b) there is intermediate external demand for only 800 units at $200, and (c) the $200 price is to be maintained, then the opportunity costs per unit to the supplying division are […]

22-11 2. Bonus paid to division managers at 1% of division operating income will be as follows: Method A Internal Transfers at Market Prices Method B Internal Transfers at 110% of Full Costs Mining Division manager’s bonus (1%  $6,000,000; […]

22-1 CHAPTER 22 22-1 A management control system is a means of gathering and using information to aid and coordinate the planning and control decisions throughout an organization and to guide the behavior of its managers and employees. The goal […]

21-41 21-35 (40-45 min.) Recognizing cash flows for capital investment projects, NPV. 1. Net initial investment Initial equipment investment $(2,575,000) Initial working-capital investment (25,000) Net initial investment $(2,600,000) Cash flow from operations Annual after-tax cash flow from operations (excl. deprn. […]

21-31 1. Net Present Value of project: Period 0 1 – 10 Cash inflows $28,000 Cash outflows $(62,000) (18,000) Net cash flows $(62,000) $ 10,000 Annual net cash inflows $ 10,000 Present value factor for annuity, 10 periods, 8% × […]

SOLUTION EXHIBIT 21-25 Total Present Value Present Value Discount Factors At 10% Sketch of Relevant After-Tax Cash Flows 0 1 2 3 4 5 1a. Initial motor investment $(75,000) 1.000 $(75,000) 1b. Initial working capital investment 0 1.000 $0 2a. […]

21-11 21-21 (30 min.) Comparison of projects, no income taxes. 1. Total Present Value Year Present Discount Value Factors at 10% 0 1 2 3 Plan I $ (100,000) 1.000 $ (100,000) 2. Plan III has the lowest net present […]

21-1 21-1 No. Capital budgeting focuses on an individual investment project throughout its life, recognizing the time value of money. The life of a project is often longer than a year. Accrual accounting focuses on a particular accounting period, often […]

20-18 SOLUTION EXHIBIT 20-30 Annual Relevant Costs of Current Purchasing Policy and JIT Purchasing Policy for Margro Corporation Relevant Costs under Current Purchasing Policy Relevant Costs under JIT Purchasing Policy Required return on investment 20% per year  $600,000 of […]

20-11 1. (a). Record purchases of direct materials Inventory Control Accounts Payable Control 2,754,000 2,754,000 (b) Record conversion costs incurred Conversion Costs Control Various Accounts (such as 723,600 Wages Payable Control) 723,600 (c) Record cost of good finished units completed […]

20-1 CHAPTER 20 20-1 Cost of goods sold (in retail organizations) or direct materials costs (in organizations with a manufacturing function) as a percentage of sales frequently exceeds net income as a percentage of sales by many orders of magnitude. […]

2-21 2-35 (15–20 min.) Interpretation of statements (continuation of 2-32). 1. The schedule in 2-34 can become a Schedule of Cost of Goods Manufactured and Sold simply by including the beginning and ending finished goods inventory figures in the supporting […]

2-26 (20 min.) Total costs and unit costs 1. Number of attendees 0 100 200 300 400 500 600 Variable cost per person ($9 caterer charge – $5 student door fee) $4 $4 $4 $4 $4 $4 $4 Fixed Costs […]