Question: Bullions Enterprises Inc. (BEI) makes gold, silver,
Bullions Enterprises Inc. (BEI) makes gold, silver, and bronze medals used to recognize outstanding athletic performance in regional and national sporting events. The per-unit direct costs of producing the medals follow. 
During the year, BEI made 1,200 units of each type of medal for a total of 3,600 (1,200 × 3) medals. All medals are created through the same production process, and they are packaged and shipped in identical containers. Indirect overhead costs amounted to $324,000. BEI currently uses the number of units as the cost driver for the allocation of overhead cost. As a result, BEI allocated $90 ($324,000 ÷ 3,600 units) of overhead cost to each medal produced. Required The president of the company has questioned the wisdom of assigning the same amount of overhead to each type of medal. He believes that overhead should be assigned on the basis of the cost to produce the medals. In other words, more overhead should be charged to expensive gold medals, less to silver, and even less to bronze. Assume that you are BEI’s chief financial officer. Write a memo responding to the president’s suggestion.
> Steele Bicycle Manufacturing Company currently produces the handlebars used in manufacturing its bicycles, which are high-quality racing bikes with limited sales. Steele produces and sells only 10,000 bikes each year. Due to the low volume of activity, S
> Gayla Ojeda is trying to decide which of two different kinds of candy to sell in her retail candy store. One type is a name-brand candy that will practically sell itself. The other candy is cheaper to purchase but does not carry an identifiable brand nam
> Sheridan Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Deluxe textbooks are made with the finest-quality paper, six-color printing, a
> Vaulker Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity c
> Use the information in Exercise 5-6A to complete the following requirements. Assume that before shifting to activity-based costing, Snowden Industries allocated all overhead costs based on direct labor hours. Direct labor data pertaining to the two decod
> Hydraulic Hoses, Inc., produces specialized industrial hoses for applications such as high-pressure hydraulics and the transference of highly corrosive materials. The company has recently implemented an ABC system for three of its products, and is intere
> Snowden Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requires more programming and testing than does Decoder Q. Because of these product differences, the company wants to use activity-based costing to allocate
> Evert Company makes two types of circuit boards. One is a high-caliber board designed to accomplish the most demanding tasks; the other is a low-caliber board designed to provide limited service at an affordable price. During its most recent accounting p
> Describe a set of circumstances in which the cost of painting could be classified as a unit-level, a batch-level, a product-level, or a facility-level cost.
> Anniston Manufacturing incurred the following costs during Year 2 to produce its high-quality precision instruments. The company used an activity-based costing system and identified the following activities: 1. Depreciation on manufacturing equipment. 2.
> Provide at least one example of an appropriate cost driver (allocation base) for each of the following activities: 1. Engineering drawings are produced for design changes. 2. Purchase orders are issued. 3. Products are labeled, packaged, and shipped. 4.
> The preceding graph depicts the relationships among the components of total quality cost. 1. Label the lines identified as A, B, and C. 2. Explain the relationships depicted in the graph.
> Blevins Boards produces two kinds of skateboards. Selected unit data for the two boards for the last quarter follow. Blevins allocates production overhead using activity-based costing. It allocates delivery expense and sales commissions, which amount to
> Wu Manufacturing produces two keyboards, one for laptop computers and the other for desktop computers. The production process is automated, and the company has found activity-based costing useful in assigning overhead costs to its products. The company h
> Tanner Manufacturing is developing an activity-based costing system to improve overhead cost allocation. One of the first steps in developing the system is to classify the costs of performing production activities into activity cost pools. Required Using
> Production workers for Chadwick Manufacturing Company provided 3,200 hours of labor in January and 2,800 hours in February. The company, whose operation is labor intensive, expects to use 48,000 hours of labor during the year. Chadwick paid a $120,000 an
> Phillips Paints manufactures three types of paint in a joint process: rubberized paint, rust-proofing paint, and aluminum paint. In a standard batch of 500,000 gallons of raw material, the outputs are 240,000 gallons of rubberized paint, 80,000 gallons o
> Production workers for Essa Manufacturing Company provided 300 hours of labor in January and 600 hours in February. Essa expects to use 5,000 hours of labor during the year. The rental fee for the manufacturing facility is $6,000 per month. Required Expl
> Fanya Construction Company expects to build three new homes during a specific accounting period. The estimated direct materials and labor costs are as follows. Assume Fanya needs to allocate two major overhead costs ($80,000 of employee fringe benefits a
> Willey Company makes three products in its factory: plastic cups, plastic tablecloths, and plastic bottles. The expected overhead costs for the next fiscal year include the following. Factory manager’s salary $ 210,000 Factory utility cost 70,000 Factory
> Tyson Hats Corporation manufactures three different models of hats: Vogue, Beauty, and Glamour. Tyson expects to incur $480,000 of overhead cost during the next fiscal year. Other budget information follows. Required 1. Use direct labor hours as the cost
> Ware Manufacturing Company produced 2,000 units of inventory in January Year 2. It expects to produce an additional 14,000 units during the remaining 11 months of the year. In other words, total production for Year 2 is estimated to be 16,000 units. Dire
> Rasmussen Corporation expects to incur indirect overhead costs of $80,000 per month and direct manufacturing costs of $12 per unit. The expected production activity for the first four months of the year are as follows. Required 1. Calculate a predetermin
> Beasley Services Company (BSC) has 50 employees, 28 of whom are assigned to Division A and 22 to Division B. BSC incurred $450,000 of fringe benefits cost during Year 2. Required Determine the amount of the fringe benefits cost to be allocated to Divisio
> Quinlan Trust Corporation has two service departments: actuary and economic analysis. Quinlan also has three operating departments: annuity, fund management, and employee benefit services. The annual costs of operating the service departments are $480,00
> Kirby Health Care Center Inc. has three clinics servicing the Seattle metropolitan area. The company’s legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the legal
> Conrad Corporation’s computer services department assists two operating departments in using the company’s information system effectively. The annual cost of computer services is $600,000. The production department employs 38 employees, and the sales dep
> Brook Health Care Center Inc. has three clinics servicing the Birmingham metropolitan area. The company’s legal services department supports the clinics. Moreover, its computer services department supports all of the clinics and the leg
> Miriana Clinics provides medical care in three departments: internal medicine (IM), pediatrics (PD), and obstetrics gynecology (OB). The estimated costs to run each department follow. Miriana expects to incur $450,000 of indirect (overhead) costs in the
> Ferrier Chemical Company makes three products, B7, K6, and X9, which are joint products from the same materials. In a standard batch of 150,000 pounds of raw materials, the company generates 35,000 pounds of B7, 75,000 pounds of K6, and 40,000 pounds of
> Arrow Manufacturing Co. expects to make 50,000 chairs during the Year 1 accounting period. The company made 3,000 chairs in January. Materials and labor costs for January were $36,000 and $48,000, respectively. Arrow produced 4,000 chairs in February. Ma
> Erickson Air is a large airline company that pays a customer relations representative $8,000 per month. The representative, who processed 3,000 customer complaints in January and 2,500 complaints in February, is expected to process 40,000 customer compla
> Ludmilla Construction Company is composed of two divisions: (1) Home Construction and (2) Commercial Construction. The Home Construction Division is in the process of building 12 houses and the Commercial Construction Division is working on three project
> Askew Enterprises produces a product with fixed costs of $200,000 and variable cost of $9 per unit. The company desires to earn a $100,000 profit and believes it can sell 20,000 units of the product. Required 1. Based on this information, determine the t
> The marketing manager of Griffin Corporation has determined that a market exists for a telephone with a sales price of $36 per unit. The production manager estimates the annual fixed costs of producing between 40,000 and 80,000 telephones would be $450,0
> Stone Corporation is a manufacturing company that makes small electric motors it sells for $45 per unit. The variable costs of production are $25 per motor, and annual fixed costs of production are $800,000. Required 1. How many units of product must Sto
> Fowler Company produces a product that sells for $200 per unit and has a variable cost of $125 per unit. Fowler incurs annual fixed costs of $450,000. Required 1. Determine the sales volume in units and dollars required to break even. 2. Calculate the br
> Information concerning a product produced by Hansen Company appears as follows. Sales price per unit $ 180 Variable cost per unit $100 Total annual fixed manufacturing and operating costs $720,000 Required Determine the following: 1. Contribution margin
> The American Acupuncture Association offers continuing professional education courses for its members at its annual meeting. Instructors are paid a fee for each student attending their courses but are charged a fee for overhead costs that is deducted fro
> Barclay Corporation produced 250,000 watches that it sold for $32 each during Year 2. The company determined that fixed manufacturing cost per unit was $16 per watch. The company reported a $2,400,000 gross margin on its Year 2 financial statements. Requ
> Santiago Company incurs annual fixed costs of $66,000. Variable costs for Santiago’s product are $34 per unit, and the sales price is $50 per unit. Santiago desires to earn an annual profit of $34,000. Required Use the contribution margin ratio approach
> Chang Corporation sells products for $120 each that have variable costs of $80 per unit. Chang’s annual fixed cost is $720,000. Required Use the per-unit contribution margin approach to determine the break-even point in units and dollars.
> The Blanket Company (TBC) manufactures two types of blankets. One is made of nylon. The other is made of wool. The budgeted per-unit contribution margin for each product follows. TBC expects to incur annual fixed costs of $716,000. The relative sales mi
> Riku Company manufactures two products. The budgeted per-unit contribution margin for each product follows. Riku expects to incur annual fixed costs of $540,000. The relative sales mix of the products is 70 percent for Super and 30 percent for Supreme. R
> Malone Company produces a product that has a variable cost of $54 per unit and a sales price of $79 per unit. The company’s annual fixed costs total $750,000. It had net income of $250,000 in the previous year. In an effort to increase the company’s mark
> Cobb Company currently produces and sells 9,000 units annually of a product that has a variable cost of $20 per unit and annual fixed costs of $195,000. The company currently earns a $228,000 annual profit. Assume that Cobb has the opportunity to invest
> Use Exhibit 3.3 in this chapter to answer the following questions. Required 1. Determine the sales volume, fixed cost, and variable cost per unit at the break-even point. 2. Determine the expected profit if Bright Day projects the following data for Dela
> Owen Company makes a product that sells for $61 per unit. The company pays $37 per unit for the variable costs of the product and incurs annual fixed costs of $360,000. Owen expects to sell 20,000 units of product. Required Determine Owen’s margin of saf
> Match the numbers shown in the graph with the following items: 1. Fixed cost line 2. Total cost line 3. Break-even point 4. Area of profit 5. Revenue line 6. Area of loss
> Dannica Corporation produces products that it sells for $40 each. Variable costs per unit are $25, and annual fixed costs are $360,000. Dannica desires to earn a profit of $150,000. Required 1. Use the equation method to determine the break-even point in
> The following graph setups depict the dollar amount of fixed cost on the vertical axes and the level of activity on the horizontal axes. Required 1. Draw a line that depicts the relationship between total fixed cost and the level of activity. 2. Draw a l
> Bell Entertainment sells souvenir T-shirts at each rock concert that it sponsors. The shirts cost $7 each. Any excess shirts can be returned to the manufacturer for a full refund of the purchase price. The sales price is $16 per shirt. Required 1. What a
> Bell Entertainment sponsors rock concerts. The company is considering a contract to hire a band at a cost of $84,000 per concert. Required 1. What are the total band cost and the cost per person if concert attendance is 2,000, 2,500, 3,000, 3,500, or 4,0
> Leach Trophies makes and sells trophies it distributes to little league ballplayers. The company normally produces and sells between 6,000 and 12,000 trophies per year. The following cost data apply to various activity levels. Number of Trophies 6,000 8,
> Tanaka Company’s cost and production data for two recent months included the following. Required 1. Separately calculate the rental cost per unit and the utilities cost per unit for both March and April. 2. Identify which cost is variab
> The following variable production costs apply to goods made by O’Brien Manufacturing Corporation. Required Determine the total variable production cost, assuming that O’Brien makes 4,000, 8,000, or 12,000 units.
> Fanning Corporation incurs the following annual fixed costs. Required Determine the total fixed cost per unit of production, assuming that Fanning produces 4,000, 4,500, or 5,000 units.
> At the various activity levels shown, Harper Company incurred the following costs. Required Identify each of these costs as fixed, variable, or mixed.
> Sterling Boat Company makes inexpensive aluminum fishing boats. Production is seasonal, with considerable activity occurring in the spring and summer. Sales and production tend to decline in the fall and winter months. During Year 2, the high point in ac
> Use the 2019 Form 10-K (year ended on December 31, 2019) for Coca-Cola Bottling Co. Consolidated to complete the following requirements. Be aware that Coca-Cola Bottling Co. Consolidated (COKE) is a separate company from The Coca-Cola Company (KO), so do
> Mountain Camps, Inc., leases the land on which it builds camp sites. Mountain is considering opening a new site on land that requires $2,500 of rental payment per month. The variable cost of providing service is expected to be $6 per camper. The followin
> The following income statement applies to Kawai Company for the current year. Required 1. Use the contribution margin approach to calculate the magnitude of operating leverage. 2. Use the operating leverage measure computed in Requirement a to determine
> The following income statement was drawn from the records of Joel Company, a merchandising firm. JOEL COMPANY Income Statement For the Year Ended December 31, Year 1 Required 1. Reconstruct the income statement using the contribution margin format. 2. Ca
> The following income statements illustrate different cost structures for two competing ­companies. Required 1. Reconstruct Hill’s income statement, assuming that it serves 400 customers when it lures 200 customers away from C
> Solomon Corporation paid one of its sales representatives $4,000 during the month of March. The rep is paid a base salary plus $10 per unit of product sold. During March, the rep sold 300 units. Required Calculate the total monthly cost of the sales repr
> The following graph setups depict the dollar amount of variable cost on the vertical axes and the level of activity on the horizontal axes. Required 1. Draw a line that depicts the relationship between total variable cost and the level of activity. 2. Dr
> Rachael’s Restaurant, a fast-food restaurant company, operates a chain of restaurants across the nation. Each restaurant employs eight people; one is a manager paid a salary plus a bonus equal to 4 percent of sales. Other employees, two cooks, one dishwa
> Soundwave Company manufactures and sells high-quality audio speakers. The speakers are encased in solid walnut cabinets supplied by Walton Cabinet, Inc. Walton packages the speakers in durable moisture-proof boxes and ships them by truck to Soundwave’s m
> In February 2006, former senator Warren Rudman of New Hampshire completed a 17-month investigation of an $11 billion accounting scandal at Fannie Mae (a major enterprise involved in home mortgage financing). The Rudman investigation concluded that Fannie
> The CFO of the Jordan Microscope Corporation intentionally misclassified a downstream transportation expense in the amount of $575,000 as a product cost in an accounting period when the company made 5,000 microscopes and sold 4,000 microscopes. Jordan re
> Vulcan College School of Business is divided into three departments: accounting, marketing, and management. Relevant information for each of the departments follows. Vulcan is a private school that expects each department to generate a profit. It rewards
> Gwen Pet Supplies purchases its inventory from a variety of suppliers, some of which require a six-week lead time before delivering the goods. To ensure that she has a sufficient supply of goods on hand, Ms. Leblanc, the owner, must maintain a large supp
> Becky Shelton, a marketing coordinator for Douglass Enterprises, is in charge of ordering the T-shirts to be sold for the company’s annual fund-raising project. The T-shirts are printed with a special Douglass Enterprises logo. In some years, the supply
> After reviewing the financial statements of Perez Company, Lou Brewer concluded that the company was a service company. Mr. Brewer based his conclusion on the fact that Perez’s financial statements displayed no inventory accounts. Required Explain how Pe
> The following financial statements model shows the effects of recognizing depreciation in two different circumstances. One circumstance represents recognizing depreciation on equipment used in a factory. The other circumstance recognizes depreciation on
> Anne Wood was talking to another accounting student, Don Kirby. Upon discovering that the accounting department offered an upper-level course in cost measurement, Anne remarked to Don, “How difficult can it be? My parents own a toy store. All you have to
> During Year 1, Rooney Manufacturing Company incurred $8,000,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the entire R&D cost was recognized as an expense in Year 1. Manu
> Identify each of the items shown in the left column of the following table as being an upstream, a midstream, or a downstream cost by placing an X in the one of the columns to the right of the items column. The first item is shown as an example. Item: Di
> Mustafa Manufacturing Company began operations on January 1. During the year, it started and completed 3,000 units of product. The financial statements are prepared in accordance with GAAP. The company incurred the following costs: 1. Raw materials purch
> Weib Manufacturing experienced the following events during its first accounting period: 1. Recognized revenue from cash sale of products. 2. Recognized cost of goods sold from sale referenced in Event 1. 3. Acquired cash by issuing common stock. 4. Paid
> A review of the accounting records of Baird Manufacturing indicated that the company incurred the following payroll costs during the month of March. Assume the company’s financial statements are prepared in accordance with GAAP. 1. Salary of the company
> Encompass Health Corporation (formerly HealthSouth Corporation) claims to be “a leading provider of integrated healthcare services, offering both facility-based and home-based patient care through our network of inpatient rehabilitation hospitals, home h
> Driscoll Industries recognized the annual cost of depreciation on its December 31, Year 2, financial statements. Using the following horizontal financial statements model, indicate how this event affected the company’s GAAP-based financ
> On January 1, Year 1, Bacco Company had a balance of $72,350 in its Delivery Equipment account. During Year 1, Bacco purchased delivery equipment that cost $22,100. The balance in the Delivery Equipment account on December 31, Year 1, was $69,400. The Ye
> On January 1, Year 1, Shelton Company had a balance of $325,000 in its Land account. During Year 1, Shelton sold land that had cost $106,500 for $132,000 cash. The balance in the Land account on December 31, Year 1, was $285,000. Required 1. Determine th
> The following accounts and corresponding balances were drawn from Jogger Company’s Year 2 and Year 1 year-end balance sheets. The Year 2 income statement is shown as follows. Required 1. Prepare the operating activities section of the s
> Expert Electronics Inc. (EEI) recognized $3,800 of sales revenue on account and collected $2,100 of cash from accounts receivable. Further, EEI recognized $900 of operating expenses on account and paid $700 cash as partial settlement of accounts payable.
> The following accounts and corresponding balances were drawn from Marinelli Company’s Year 2 and Year 1 year-end balance sheets. The Year 2 income statement is shown as follows. Required 1. Use the direct method to compute the amount of
> The following accounts and corresponding balances were drawn from Avia Company’s Year 2 and Year 1 year-end balance sheets. During the year, $46,000 of unearned revenue was recognized as having been earned. Rent expense for Year 2 was $
> Shim Company presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Shim’s Year 2 and Year 1 year-end balance sheets. The income statement reported a $1,500 gain
> Alfonza Incorporated presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from the company’s Year 2 and Year 1 year-end balance sheets. The Year 2 income statement
> The following accounts and corresponding balances were drawn from Dexter Company’s Year 2 and Year 1 year-end balance sheets. Other information drawn from the accounting records: 1. Dividends paid during the period amounted to $50,000.
> Build the spreadsheet pictured in Exhibit 3.3. Be sure to use formulas that will automatically calculate profitability if fixed cost, variable cost, or sales volume is changed. Data from Exhibit 3-3: Table Summary: Summary Spreadsheet Report to Facilita
> On January 1, Year 1, Hardy Company had a balance of $150,000 in its Common Stock account. During Year 1, Hardy paid $20,000 to purchase treasury stock. Treasury stock is accounted for using the cost method. The balance in the Common Stock account on Dec
> On January 1, Year 1, DIBA Company had a balance of $450,000 in its Bonds Payable account. During Year 1, DIBA issued bonds with a $200,000 face value. There was no premium or discount associated with the bond issue. The balance in the Bonds Payable acco
> The following accounts and corresponding balances were drawn from Delsey Company’s Year 2 and Year 1 year-end balance sheets. Other information drawn from the accounting records: 1. Delsey incurred a $6,000 loss on the sale of investmen
> An accountant for Southern Manufacturing Companies (SMC) computed the following information by making comparisons between SMC’s Year 1 and Year 2 balance sheets. Further information was determined by examining the company’s Year 2 income statement. 1. Th
> The December 31, Year 4, balance sheet for Burdette Corporation is presented here. These are the only accounts on Burdette’s balance sheet. Amounts indicated by question marks (?) can be calculated using the following additional informa
> The balance sheet for Shankland Corporation follows. Required Compute the following and round ratios to one decimal point. Working capital? Current ratio? Debt-to-assets ratio? Debt-to-equity ratio?
> On June 30, Year 3, Franza Company’s total current assets were $900,000 and its total current liabilities were $360,000. On July 1, Year 3, Franza issued a long-term note to a bank for $72,000 cash. Required Round computations to one decimal point. 1.Com
