Balfore Office makes metal five-drawer desks and, occasionally, takes custom orders. The company’s overhead costs for a month in which no custom desks are produced are as follows: Purchasing Department for raw material and supplies (20 purchase orders per month) ………………………………………$10,000 Setting up machines for production runs (4 times per month after maintenance checks)…………………………………………………………2,480 Utilities (based on 6,400 machine hours) ………………………………..320 Supervisor salaries …………………..……………………………………….16,000 Machine and building depreciation (fixed) ………………………….11,000 Quality control and inspections performed on random Selection of desks each day; one quality control worker ……….5,000 Total overhead costs ……………………………………………………..$44,800 Factory operations are highly automated, and overhead is allocated to products based on machine hours. In July 2010, six orders were filled for custom desks. Selling prices were based on charges for actual direct material, actual direct labor, and the overhead rate per machine hour. During July, the following costs were incurred for 6,400 hours of machine time: Purchasing Department for raw material and supplies (44 purchase orders per month)………………………$12,400 Setting up machines for production runs (18 times) ……………………3,280 Utilities (based on 6,400 machine hours) …………………………………….320 Supervisor salaries ………………………………………………………………..16,000 Machine and building depreciation (fixed) ………………………………11,000 Quality control and inspections performed on random selection of desks each day; one quality control worker ……………………………....5,960 Engineering design and specifi cation costs …………………………….6,000 Total overhead costs ……………………………………………………………$54,960 a. How much of the purchasing department cost is variable and how much is fixed? What types of purchasing costs would fit into each of these categories? b. Why might the number of machine setups have increased from 4 to 18 when only six custom orders were received? c. Why might the cost of quality control and inspections have increased? d. Why were engineering design and specification costs included during July? e. If Balfore Office were to adopt activity-based costing, what would you suggest as the cost drivers for each of the overhead cost items? f. What is the current predetermined overhead rate based on machine hours? Do you think the custom orders should have been priced using this rate per machine hour? Explain the reasoning for your answer.
> What is international entrepreneurship? Why is it important?
> What is an entrepreneur, and what is an entrepreneurial mind-set?
> What are invention, innovation, and imitation? How are these concepts interrelated?
> Jamie Dimon, CEO of J.P. Morgan Chase survived the Great Recession quite well. However, in 2012, the company suffered losses of more than $6 billion due to excessive risk taking by traders in its London operations. Some of the loss was attributed to poo
> What is entrepreneurship, and what are entrepreneurial opportunities? Why are they important for all aspects of the strategic management process?
> What is strategic entrepreneurship? What is corporate entrepreneurship?
> As a strategic leader, what actions could you take to establish and emphasize ethical practices in your firm?
> What must strategic leaders do to develop and sustain an effective organizational culture?
> How do strategic leaders effectively manage their firm’s resource portfolio to exploit its core competencies and leverage the human capital and social capital to achieve a competitive advantage?)
> What is the effect of strategic leadership on determining the firm’s strategic direction?
> What is the managerial succession process? How important are the internal and external managerial labor markets to this process.
> What is a top management team, and how does it affect a firm’s performance and its abilities to innovate and design and implement effective strategic changes?
> What is strategic leadership? Why are top-level managers considered important resources for an organization?
> Why are strategic controls and financial controls important aspects of the strategic management process?
> Cisco has perfected the art of acquisition strategy. The technology firm seeks to provide hardware for connectivity, from the internet to mobile networks to entertainment services. The next stage of Cisco’s evolution appears to be “the Internet of everyt
> This case is about how Amazon started to compete in the tablet market from the perspective of its founder Jeff Bezos. It provides an overview of the strategic entrepreneurship process under his vision, emphasizing the entrepreneur mind-set and innovation
> San Angelo Corp. uses a job order costing system for client contracts related to custom-manufactured pulley systems. Elmore Mechanical recently ordered 20,000 pulleys, and the job was assigned #BA468. Information for Job #BA468 revealed the following: Di
> Companies use time sheets for two primary reasons: to know how many hours an employee works and, in a job order production situation, to trace work hours to products. An article (“Altering of Worker Time Cards Spurs Growing Number of Suits” by Steven Gre
> Juneau Container makes steel storage canisters for various chemical products. The company uses a job order costing system and obtains jobs based on competitive bidding. For each project, a budget is developed. One of the firm’s products
> Attorney Maria Conroe uses a job order costing system to collect costs of client engagements. Conroe is currently working on a case for Stacie Olivgra. During the first three months of 2010, Conroe logged 95 hours on the Olivgra case. In addition to dire
> Bonivo Inc. manufactures computers from commodity components to client specifications. The company has historically tracked only the cost of components to computers, and computer selling prices, or bids, have been based solely on the cost of components p
> Harvey Inc. uses a standard cost system for labor. Standard costs for material cannot be used because customers require unique materials and all jobs are different sizes. One of the company’s jobs experienced the following results related to direct labor
> Weingold Inc. engages in routine and customer print jobs for customers. In November 2010, a client specified the use of one of the company’s standard papers for a large job, but asked for a high level of customization relative to the print design. Thus,
> Routine maintenance services are provided by Latamore Industries to oil and gas firms in their production facilities. Although many of the client services are relatively unique, some services are repetitive. The firm individually negotiates prices with e
> Country Products manufactures quilt racks. Pine is introduced in Department 1, where the raw material is cut and assembled. In Department 2, completed racks are stained and packaged for shipment. Department 1 applies overhead on the basis of machine hour
> Rio Valde Co. uses a normal cost, job order costing system. In the Mixing Department, overhead is applied using machine hours; in Paving, overhead is applied using direct labor hours. In December 2009, the company estimated the following data for its two
> Tennessee Tack manufactures horse blankets. In 2010, fixed overhead was applied to products at the rate of $8 per unit. Variable cost per unit remained constant throughout the year. In July 2010, income under variable costing was $188,000. July’s beginni
> Mystic Inc. uses a job order costing system and applies overhead to jobs at a predetermined rate of $4.25 per direct labor dollar. During April 2010, the company spent $29,600 on direct material and $3,900 on direct labor for Job #344. Budgeted factory o
> The law firm of Taub & Lawson, LLP, currently has four cases in process. Following is information related to those cases as of the end of March 2010: Taub & Lawson allocates overhead to cases based on a predetermined rate of $150 per estimated co
> For each of the following firms, determine whether it is more likely to use job order or process costing. This firm a. provides legal services. b. is a health-care clinic. c. manufactures shampoo. d. makes custom jewelry. e. is an automobile repair shop.
> Following are specific types of information that can be located in a particular account (such as WIP Inventory) or on a particular document (such as an employee time card). For each item listed, identify the account or document that would provide the rel
> In a televised football game, what activities are value-added? What activities are nonvalue-added? Would everyone agree with your choices? Why or why not?
> Why are value-added activities defined from a customer viewpoint?
> What is activity analysis, and how is it used with cost driver analysis to manage costs?
> What is activity-based management (ABM), and what specific management tools are used in ABM?
> Significant hurdles, including a large time commitment, are often encountered in adopting ABC. What specific activities associated with ABC adoption require large investments of time?
> Are all companies likely to benefit to an equal extent from adopting ABC? Discuss.
> Ollie’s Olive Oil began business in 2010, during which it produced 104,000 quarts of olive oil. In 2010, the company sold 100,000 quarts of olive oil. Costs incurred during the year were as follows: Ingredients used …………………………………….$228,800 Direct labor …
> Once an activity-based costing system has been developed and implemented in a company, will that system be appropriate for the long term? Why or why not?
> Why do more traditional methods of overhead assignment “overload” standard high volume products with overhead costs. How does ABC improve overhead assignments?
> Do cost drivers exist in a traditional accounting system? Are they designated as such? How, if at all, does the use of cost drivers in a traditional accounting system differ from those in an activity-based costing system?
> If five people from the same organization calculated manufacturing cycle efficiency for one specific process, would each compute the same MCE? Why or why not?
> Moriarity Manufacturing produces two product models: Regular and Special. The following information was taken from the accounting records for the first quarter of 2010: Moriarity currently uses a traditional cost accounting system where total overhead co
> Bernie Lipscomb owns and manages a commercial cold-storage warehouse that has 100,000 cubic feet of storage capacity. Historically, he has charged customers a flat rate of $0.16 per pound per month for goods stored. In the past two years, Lipscomb has be
> West Virginia Concepts provides a wide range of engineering and architectural consulting services through its three offices in Charleston, Morgantown, and Martinsburg. The company allocates resources and bonuses to the three offices based on the net inco
> Casito Corp. manufactures multiple types of products; however, most of the company’s sales are from Product #347 and Product #658. Product #347 has been a standard in the industry for several years; the market for this product is compet
> Louisiana Leisure makes umbrellas, gazebos, and chaise lounges. The company uses a traditional overhead allocation scheme and assigns overhead to products at the rate of $30 per direct labor hour. The costs per unit for each product group in 2010 were as
> Illiad Inc. has a total of $2,362,500 in production overhead costs. The company’s products and related statistics follow. Additional data: The 330,000 pounds of material were purchased for $544,500. One direct labor hour costs $12. a. A
> Reese’s Tot Toy Boxes uses variable costing to manage its internal operations. The following data relate to the company’s first year of operation, when 25,000 units were produced and 21,000 units were sold. Variable costs per unit Direct material …………………
> Shirtz Community Hospital has been under increasing pressure to be accountable for its patient charges. The hospital’s current pricing system is ad hoc, based on pricing norms for the geographical area; only direct costs for surgery, me
> As the chief executive officer of a large corporation, you have decided after discussion with production and accounting personnel to implement activity-based management concepts. Your goal is to reduce cycle time and, in turn, costs. A primary way to acc
> Companies that want to be more globally competitive can consider the implementation of activity-based management (ABM). Such companies often have used other initiatives that involve higher efficiency, effectiveness, or output quality. These same initiati
> Strategic Supply is a world leader in the production of electronic test and measurement instruments. The company experienced almost uninterrupted growth through the 1990s, but in the 2000s, the low-priced end of its Portables Division’s product line was
> Treffle Molding Company manufactures two products: large jar covers and small bottle caps. Large jar covers require special handling. Each cover must be individually sanded on a special machine to remove excess material (referred to as “
> Clare’s Super Cake Company makes very elaborate wedding cakes to order. The company’s owner, Clare Cole, has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost
> Believing that its traditional cost system may be providing misleading information, Dover Corporation is considering an activity-based costing (ABC) approach. Dover Corporation employs a full-cost system and has been applying its manufacturing overhead o
> Hurley Corporation has identified the following overhead costs and cost drivers for the coming year: The following information was collected on three jobs that were completed during the year: Budgeted direct labor cost was $100,000, and budgeted direct m
> Elaydo Inc. makes flavored water and performs the following tasks in the beverage manufacturing process: Hours Receiving and transferring ingredients to storage …………………………….9.0 Storing ingredients ………………………………………………………………………270.0 Transferring the ingredi
> Pete’s Plant Stands manufactures wooden stands used by plant nurseries. In May 2010, the company manufactured 18,000 and sold 16,560 stands. The cost per unit for the 18,000 stands produced was as follows: Direct material ………………………………….$ 9.00 Direct labo
> Carpenter Inc. designs industrial tooling parts and makes the molds for those parts. The following activities take place when the company creates a new mold. Classify each cost as unit level (U), batch level (B), product/process level (P), or organizatio
> The following costs are incurred in a fast-food restaurant that relies on computer-controlled equipment to prepare customers’ food. Classify each cost as unit level (U), batch level (B), product/process level (P), or organizational level (O): a. Maintena
> Spice-a-licious produces creole seasoning using the following process for each batch: Function Time (Minutes) Receiving ingredients ………………………………………………....60 Moving ingredients to stockroom …………………………………80
> Log Cabins Unlimited constructs vacation houses in the North Carolina mountains. The company has developed the following value chart: Operations Average Number of Days Receiving materials ……………………………………………….2 Storing materials ………………………………………
> Farrah Westin plans to build a concrete walkway for her home during her vacation. The following schedule shows how project time will be allocated: Hours Purchase materials …………………………………………………....5 Obtain rental equipment …………………………………………….2 Remove sod an
> The Raleigh plant manager of Allentown Corp. has noticed the plant frequently changes the schedule on its production line. He has gathered the following information on the activities, estimated times, and average costs required for a single schedule chan
> The following activities take place in Usher’s Department Store. Upon receipt, Usher’s discounts all products 25 percent from the manufacturer’s suggested retail price. Only after the goods have been in stock for 90 days will additional discounts be give
> Many manufacturers are deciding to service only customers that buy $10,000 or more of products from the manufacturers annually. Manufacturers defend such policies by stating that they can provide better service to customers that handle more volume and mo
> The cost systems at many companies selling multiple products have become less than adequate in today’s global competition. Managers often make important product decisions based on distorted cost information because the cost systems have been primarily de
> Starshine Company is in the process of analyzing and updating its cost information and pricing practices. Since the company’s product line changed from general paints to specialized marine coatings, there has been tremendous overhead growth, including co
> Tom’s Shoe Repair provides a variety of shoe and repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies: y = $0 + $4.00X Production supervision and dir
> Rice Inc. manufactures lawn mowers and garden tractors. Lawn mowers are relatively simple to produce and are made in large quantities. Garden tractors are customized to individual wholesale customer specifications. The company sells 300,000 lawn mowers a
> Briones Books is concerned about the profitability of its regular dictionaries. Company managers are considering producing only the top-quality, hand-sewn dictionaries with gold-edged pages. Briones is currently assigning the $2,000,000 of overhead costs
> Regis Place is a health-care facility that has been allocating its overhead costs to patients based on number of patient days. The facility’s overhead costs total $3,620,400 per year and the facility (which operates monthly at capacity)
> Wyeth Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department’s primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or cust
> Leopold & Olney LLP has 5 partners and 12 staff accountants. The partners each work 2,100 hours per year and earn $350,000 annually. The staff accountants each work 2,600 hours per year and earn $80,000 annually. The firm’s total annual budget for profes
> Three clients (A, B, and C) use Kingsley Call Service’s call center. During October, Kingsley initiated four new equipment advancements. The following information indicates the cost and benefits of each service: a. If the total cost of
> DaSilva Co. has a casting machine that is used for three of the company’s products. Each setup of the machine costs was $18,760 and the casting machine was set up in June for six different production runs. The following information show
> For each of the following costs commonly incurred in a manufacturing company, identify a cost driver and explain why it is an appropriate choice. a. Machine setup cost b. Computer operations c. Freight costs for materials d. Material handling e. Material
> For each of the following cost pools in a temporary employment agency, identify a cost driver and explain why it is appropriate. a. Accounts receivable department b. Payroll department c. Advertising cost d. Information technology e. Utilities f. Propert
> Lin Products manufactures special-order office cubicle systems. Production time is two days, but the average cycle time for any order is three weeks. The company president has asked you, as the new controller, to discuss missed delivery dates. Prepare an
> The Sioux City Storage System’s plant prepared the following flexible overhead budget for three levels of activity within the plant’s relevant range. After discussion with the home office, the plant managers planned to
> Why would regression analysis provide a more accurate cost formula than the high– low method for a mixed cost?
> Why are departmental predetermined OH rates more useful for managerial decision making than plantwide OH rates? Why do firms use separate variable and fixed rates rather than total rates?
> Discuss the reasons a company would use a predetermined overhead rate rather than actual overhead to determine cost of products or services.
> The high–low method of analyzing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not?
> What is the difference between variable and mixed costs, considering that both change in total with changes in activity levels?
> What are the income relationships between absorption and variable costing when production volume differs from sales volume? What causes these relationships to occur?
> Why does variable costing provide more useful information than absorption costing for making internal decisions?
> La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available fro
> Wyoming Wholesale has gathered the following data on the number of shipments received and the cost of receiving reports for the first seven weeks of 2010. Number of Weekly Cost of Shipments Received Receiving Reports 50 ………………………..………………………
> Information about Indiana Industrial’s utility cost for the last six months of 2010 follows. The high–low method will be used to develop a cost formula to predict 2011 utility charges, and the number of machine hours h
> Alberton Electronics makes inexpensive GPS navigation devices and uses a normal cost system that applies overhead based on machine hours. The following 2010 budgeted data are available: Variable factory overhead at 100,000 machine hours $1,250,000 Variab
> For 2010, Milltown Iron Manufacturing has estimated its production capacities as follows: Theoretical capacity ………………………………400,000 units Practical capacity ………………………………….300,000 units Normal capacity ……………………………………260,000 units Expected capacity ……………………
> At year-end 2010, Dub’s Wind Generator Co. had a $40,000 debit balance in its Manufacturing Overhead Control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year-end follows:
> Davidson’s Dolls had the following information in its Work in Process Inventory account for June 2010: All workers are paid the same rate per hour. Factory overhead is applied to Work in Process Inventory on the basis of direct labor ho
> At the end of 2010, Jackson Tank Company’s accounts showed a $66,000 credit balance in Manufacturing Overhead Control. In addition, the company had the following account balances: Work in Process Inventory $384,000 Finished Goods Inventory 96,000 Cost of
> Roddickton Manufacturing Co. has gathered the following information to develop predetermined OH rates for 2010. The company produces a wide variety of energy-saving products that are processed through two departments, Assembly (automated) and Finishing (
> Is variable or absorption costing generally required for external reporting? Why is this method preferred to the alternative?
> Langston Automotive Accessories applies overhead using a combined rate for fixed and variable overhead. The rate is 250 percent of direct labor cost. During the first three months of the current year, actual costs incurred were as follows: a. What amount
> For 2010, Omaha Mechanical has a monthly overhead cost formula of $42,900+$6 per direct labor hour. The firm’s 2010 expected annual capacity is 78,000 direct labor hours, to be incurred evenly each month. Making one unit of the company’s product requires
