Curtis Rich, the cost accountant for Hi-Power Mower Company, recently installed activitybased costing at Hi-Power’s St. Louis lawn tractor (riding mower) plant where three models—the 8-horsepower Bladerunner, the 12-horsepower Quickcut, and the 18-horsepower Supercut—are manufactured. Curtis’s new product costs for these three models show that the company’s traditional costing system had been significantly undercosting the 18-horsepower Supercut. This was due primarily to the lower sales volume of the Supercut compared to the Bladerunner and the Quickcut. Before completing his analysis and reporting these results to management, Curtis is approached by his friend Ed Gray, who is the production manager for the 18-horsepower Supercut model. Ed has heard from one of Curtis’s staff about the new product costs and is upset and worried for his job because the new costs show the Supercut to be losing, rather than making, money. At first, Ed condemns the new cost system, whereupon Curtis explains the practice of activity based costing and why it is more accurate than the company’s present system. Even more worried now, Ed begs Curtis, “Massage the figures just enough to save the line from being discontinued. You don’t want me to lose my job, do you? Anyway, nobody will know.” Curtis holds firm but agrees to recompute all his calculations for accuracy before submitting his costs to management. Instructions: (a) Who are the stakeholders in this situation? (b) What, if any, are the ethical considerations in this situation? (c) What are Curtis’s ethical obligations to the company? To his friend?
> Keppel Corporation manufactures and sells three different models of exterior doors. Although the doors vary in terms of quality and features, all are good sellers. Keppel is currently operating at full capacity with limited machine time. Sales and produc
> Huber Corporation has collected the following information after its first year of sales. Sales were $1,000,000 on 40,000 units; selling expenses $200,000 (30% variable and 70% fixed); direct materials $327,000; direct labor $190,000; administrative expen
> McCure Corporation had a bad year in 2013, operating at a loss for the first time in its history. The company’s income statement showed the following results from selling 200,000 units of product: net sales $2,400,000; total costs and e
> Mega Electronix carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2014, Mega’s break-even point was $2.4 million. On sales
> Isaac Corporation has collected the following information after its first year of sales. Sales were $1,800,000 on 100,000 units; selling expenses $400,000 (30% variable and 70% fixed); direct materials $456,000; direct labor $250,000; administrative expe
> Production costs chargeable to the Finishing Department in May at Kim Company are materials $8,000, labor $20,000, overhead $18,000, and transferred-in costs $67,000. Equivalent units of production are materials 20,000 and conversion costs 19,000. Kim us
> Alma Ortiz is the advertising manager for CostLess Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $18,000 in fixed costs to the $
> Olgivie Company had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 60,000 units of product: sales $1,800,000; total costs and expens
> The Sasoon Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,000 per month. The other barbers are paid $1,500 per month. In addition, each barber is paid a commission of $3 per haircut. Other monthly cos
> Smith and Jones is a law firm that serves both individuals and corporations. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignme
> Merando Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 600,000 gallon jugs per year of a low-cost, high-volume product called Valley Fresh. Merando also produces and sells roughly 2
> Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2014 are as follows. Overhead Cost Pools
> VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format progressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model’s
> Swinn Company manufactures bicycles. Materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Production and cost data for the month of May are as follows. Instructions: (a) Calculate the following. (
> Luxman Company has several processing departments. Costs charged to the Assembly Department for October 2014 totaled $1,298,400 as follows. Production records show that 25,000 units were in beginning work in process 40% complete as to conversion cost,
> Borman Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly. Production and cost data for the first process in making two
> Using the data in BE16-10, prepare the cost section of the production cost report for Sanderson Company. Data in BE16-10: Sanderson Company has the following production data for March: no beginning work in process, units started and completed 30,000, an
> Steiner Corporation manufactures water skis through two processes: Molding and Packaging. In the Molding Department, fiberglass is heated and shaped into the form of a ski. In the Packaging Department, the skis are placed in cartons and sent to the finis
> Wilbury Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2014, inventories consisted of Raw Materials $5,000, Work in Process—
> Holiday Company manufactures basketballs and soccer balls. For both products, materials are added at the beginning of the production process and conversion costs are incurred uniformly. Holiday uses the FIFO method to compute equivalent units. Production
> Venuchi Cleaner Company uses a weighted-average process cost system and manufactures a single product—an all-purpose liquid cleaner. The manufacturing activity for the month of March has just been completed. A partially completed produc
> Bell Company’s fiscal year ends on June 30. The following accounts are found in its job order cost accounting system for the first month of the new fiscal year. Other data: 1. On July 1, two jobs were in process: Job No. 4085 and Job
> Net Play Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct labor hours in Department B, and machine hours in Department
> Robert Perez is a contractor specializing in custom-built jacuzzis. On May 1, 2014, his ledger contains the following data. Raw Materials Inventory ……………
> For the year ended December 31, 2014, the job cost sheets of Dosey Company contained the following data. Other data: 1. Raw materials inventory totaled $20,000 on January 1. During the year, $100,000 of raw materials were purchased on account. 2. Finis
> Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2014, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct mat
> Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $30 per unit. Nyota Uthura is the div
> Sanderson Company has the following production data for March: no beginning work in process, units started and completed 30,000, and ending work in process 5,000 units that are 100% complete for materials and 40% complete for conversion costs. Sanderson
> Gardner Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2013, the first year of operations, Gardner produced 4,000 tons of plastic and sold 2,500 tons. In 2014, the production and sales results
> Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2014, is as follows. The company is consid
> The following CVP income statements are available for Viejo Company and Nuevo Company. Instructions: (a) Compute the break-even point in dollars and the margin of safety ratio for each company. (b) Compute the degree of operating leverage for each comp
> The Hillside Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Phil Weld, the manager of Hillside, has determined that during the last 2 years the sales mix and contribution margin ratio of i
> Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. S
> Lorge Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative expe
> Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expe
> Kaiser Industries carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2014, Kaiser’s break-even point was $1.3 million. On sa
> Mozena Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative exp
> Dousmann Corp.’s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 500,000 units of product: sales $2,500,00
> Peine Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its three product lines is birthday candles 30%, standard tapered candles 50%, and large scented candles 20%. The contribution margin ratio of each candle type is
> Telly Savalas owns the Bonita Barber Shop. He employs four barbers and pays each a base rate of $1,000 per month. One of the barbers serves as the manager and receives an extra $500 per month. In addition to the base rate, each barber also receives a com
> Polk and Stoneman is a public accounting firm that offers two primary services, auditing and tax-return preparation. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line
> Benton Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called CoolDay. It sells this in 600,000 5-liter jugs. Benton also
> Thakin Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails) permit installation of stairways of varying lengths and widths. All are of white oak wood.
> Morse Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2014 are as follows. Instructions: (a) Calculate the foll
> Rivera Company has several processing departments. Costs charged to the Assembly Department for November 2014 totaled $2,280,000 as follows. Production records show that 35,000 units were in beginning work in process 30% complete as to conversion costs
> Seagren Industries Inc. manufactures in separate processes furniture for homes. In each process, materials are entered at the beginning, and conversion costs are incurred uniformly. Production and cost data for the first process in making two products in
> Rosenthal Company manufactures bowling balls through two processes: Molding and Packaging. In the Molding Department, the urethane, rubber, plastics, and other materials are molded into bowling balls. In the Packaging Department, the balls are placed in
> Conwell Company manufactures its product, Vitadrink, through two manufacturing processes: Mixing and Packaging. All materials are entered at the beginning of each process. On October 1, 2014, inventories consisted of Raw Materials $26,000, Work in Proces
> Rondeli Company manufactures bicycles and tricycles. For both products, materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Rondeli Company uses the FIFO method to compute equivalent units. Product
> Hamilton Processing Company uses a weighted-average process cost system and manufactures a single product—a premium rug shampoo and cleaner. The manufacturing activity for the month of October has just been completed. A partially comple
> Rodman Corporation’s fiscal year ends on November 30. The following accounts are found in its job order cost accounting system for the first month of the new fiscal year. Other data: 1. On December 1, two jobs were in process: Job No.
> Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K
> Stellar Inc. is a construction company specializing in custom patios. The patios are constructed of concrete, brick, fiberglass, and lumber, depending upon customer preference. On June 1, 2014, the general ledger for Stellar Inc. contains the following d
> For the year ended December 31, 2014, the job cost sheets of Cinta Company contained the following data Other data: 1. Raw materials inventory totaled $15,000 on January 1. During the year, $140,000 of raw materials were purchased on account. 2. Finis
> Degelman Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2014, Job No. 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct mat
> The June 8, 2009, edition of the Wall Street Journal has an article by JoAnn Lublin entitled “Smart Balance Keeps Tight Focus on Creativity.” Instructions: Read the article and answer the following questions. (a) Describe Smart Balance’s approach to emp
> The external financial statements published by publicly traded companies are based on absorption cost accounting. As a consequence, it is very difficult to gain an understanding of the relative composition of the companies’ fixed and variable costs. It i
> In a recent report, the Del Monte Foods Company reported three separate operating segments: consumer products (which includes a variety of canned foods including tuna, fruit, and vegetables); pet products (which includes pet food and snacks and veterinar
> For nearly 20 years, Specialized Coatings has provided painting and galvanizing services for manufacturers in its region. Manufacturers of various metal products have relied on the quality and quick turnaround time provided by Specialized Coatings and it
> Hamby Inc. has sales of $2,000,000 for the first quarter of 2014. In making the sales, the company incurred the following costs and expenses. Prepare a CVP income statement for the quarter ended March 31, 2014. Variable Fixed Cost of goods sold Sel
> E-Z Seats manufactures swivel seats for customized vans. It currently manufactures 10,000 seats per year, which it sells for $500 per seat. It incurs variable costs of $200 per seat and fixed costs of $2,000,000. It is considering automating the upholste
> Current Designs manufactures two different types of kayaks, rotomolded kayaks and composite kayaks. The following information is available for each product line. The company’s fixed costs are $820,000. An analysis of the sales mix identifies that rotomol
> The May 21, 2010, edition of the Wall Street Journal includes an article by Jeffrey Trachtenberg entitled “E-Books Rewrite Bookselling.” Instructions: Read the article and answer the following questions. (a) What aspect of Barnes and Noble’s current str
> The Coca-Cola Company hardly needs an introduction. A line taken from the cover of a recent annual report says it all: If you measured time in servings of Coca-Cola, “a billion CocaCola’s ago was yesterday morning.” On average, every U.S. citizen drinks
> The condensed income statement for the Peri and Paul partnership for 2014 is as follows. A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expense
> Creative Ideas Company has decided to introduce a new product. The new product can be manufactured by either a capital-intensive method or a labor-intensive method. The manufacturing method will not affect the quality of the product. The estimated manufa
> Bill Johnson, sales manager, and Diane Buswell, controller, at Current Designs are beginning to analyze the cost considerations for one of the composite models of the kayak division. They have provided the following production and operational costs neces
> Activity-based costing methods are constantly being improved upon, and many websites discuss suggestions for improvement. The article in this activity outlines an alternative perspective on activity-based costing. Address: http://hbswk.hbs.edu/item/4587.
> An article in Cost Management, by Kocakulah, Bartlett, and Albin entitled “ABC for Calculating Mortgage Loan Servicing Expenses” (July/August 2009, p. 36), discusses a use of ABC in the financial services industry. Instructions: Read the article and ans
> Ideal Manufacturing Company of Sycamore, Illinois, has supported a research and development (R&D) department that has for many years been the sole contributor to the company’s new farm machinery products. The R&D activity is an
> Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Compute the activity-based overhead rates using the following budgeted data for each of the activity cost pools. Expected Use o
> East Valley Hospital is a primary medical care facility and trauma center that serves 11 small, rural midwestern communities within a 40-mile radius. The hospital offers all the medical/surgical services of a typical small hospital. It has a staff of 18
> As you learned in previous chapters, Current Designs has two main product lines— composite kayaks, which are handmade and very labor-intensive, and rotomolded kayaks, which require less labor but employ more expensive equipment. Current
> Paintball is now played around the world. The process of making paintballs is actually quite similar to the process used to make certain medical pills. In fact, paintballs were previously often made at the same factories that made pharmaceuticals. Addres
> Harris Furniture Company manufactures living room furniture through two departments: Framing and Upholstering. Materials are entered at the beginning of each process. For May, the following cost data are obtained from the two work in process accounts.
> Florida Beach Company manufactures suntan lotion, called Surtan, in 11-ounce plastic bottles. Surtan is sold in a competitive market. As a result, management is very cost-conscious. Surtan is manufactured through two processes: mixing and filling. Materi
> The Institute of Management Accountants sponsors a certification for management accountants, allowing them to obtain the title of Certified Management Accountant. Address: www.imanet.org, or go to www.wiley.com/college/kimmel Steps 1. Go to the site show
> Founded in 1970, Parlex Corporation is a world leader in the design and manufacture of flexible interconnect products. Utilizing proprietary and patented technologies, Parlex produces custom flexible interconnects including flexible circuits, polymer thi
> In the course of routine checking of all journal entries prior to preparing year-end reports, Betty Eller discovered several strange entries. She recalled that the president’s son Joe had come in to help out during an especially busy ti
> Khan Products Company uses a job order cost system. For a number of months, there has been an ongoing rift between the sales department and the production department concerning a special-order product, TC-1. TC-1 is a seasonal product that is manufacture
> Building a kayak using the composite method is a very labor-intensive process. In the fabrication department, the kayaks go through several steps as employees carefully place layers of Kevlar® in a mold and then use resin to fuse together the layers. The
> In Lopez Company, total material costs are $36,000, and total conversion costs are $54,000. Equivalent units of production are materials 10,000 and conversion costs 12,000. Compute the unit costs for materials, conversion costs, and total manufacturing c
> Kragan Clothing Company manufactures its own designed and labeled sports attire and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing in its manufacturing activities, it has always used tr
> Wilmington, Inc. manufactures five models of kitchen appliances at its Mesa plant. The company is installing activity-based costing and has identified the following activities performed at its Mesa plant. 1. Designing new models. 2. Purchasing raw materi
> Kostrivas Company has gathered the following information. Units in beginning work in process …………………………………………….–0– Units started into production …………………………………………………40,000 Units in ending work in process ………………………………………………6,000 Pe
> The Blending Department of Luongo Company has the following cost and production data for the month of April Costs: Work in process, April 1 Direct materials: 100% complete ………………………………………$100,000 Conversion costs: 20% complete …………………………………………..70,000 Co
> The Sanding Department of Richards Furniture Company has the following production and manufacturing cost data for March 2014, the first month of operation. Production: 9,000 units finished and transferred out; 3,000 units started that are 100% complete a
> The Cutting Department of Cassel Company has the following production and cost data for July. Materials are entered at the beginning of the process. Conversion costs are incurred uniformly during the process. Instructions: (a) Determine the equivalent
> Schrager Company has two production departments: Cutting and Assembly. July 1 inventories are Raw Materials $4,200, Work in Process—Cutting $2,900, Work in Process—Assembly $10,600, and Finished Goods $31,000. During July, the following transactions occu
> The ledger of Custer Company has the following work in process account. Production records show that there were 400 units in the beginning inventory, 30% complete, 1,400 units started, and 1,500 units transferred out. The beginning work in process had
> Harrelson Company manufactures pizza sauce through two production departments: Cooking and Canning. In each process, materials and conversion costs are incurred evenly throughout the process. For the month of April, the work in process accounts showthe f
> David Skaros has recently been promoted to production manager, and so he has just started to receive various managerial reports. One of the reports he has received is the production cost report that you prepared. It showed that his department had 2,000 e
> Bruno Company accumulates the following data concerning a mixed cost, using miles as the activity level Compute the variable- and fixed-cost elements using the high-low method. Miles Total Miles Total Driven Cost Driven Cost March 8,500 January Feb
> Easton Corporation makes two different boat anchors—a traditional fishing anchor and a high-end yacht anchor—using the same production machinery. The contribution margin of the yacht anchor is three times as high as that of the other product. The company
> Compute trend percentages for Andover Valley Sales & Services total revenue, and net income for the following fiveyear period, using year 0 as the base year. Round to the nearest full percent. Which grew faster during the period, total revenue or ne
> What were the dollar amount of change and the percentage of each change in Ricardo Lodges working capital during 2010 and 2009? Is this trend favorable or unfavorable? 2010 2009 2008 Total current assets $400,000 $300,000 $240,000 Total current liabi
> Compute trend percentages for Palm Valley Sales & Services total revenue, and net income for the following five-year period, using year 0 as the base year. Round to the nearest full percent. Which grew faster during the period, total revenue or net
> What were the dollar amount of change and the percentage of each change in Wilderness Lodges working capital during 2010 and 2009? Is this trend favorable or unfavorable? 2010 2009 2008 Total current assets $270,000 $320,000 $340,000 Total current li
> How many items enter the computation of Sheehans net cash provided by operating activities? a. 3 b. 2 c. 7 d. 5
> Click Camera Co. sold equipment with a cost of $21,000 and accumulated depreciation of $9,000 for an amount that resulted in a gain of $1,000. What amount should Click report on the statement of cash flows as proceeds from sale of plant assets ? a. $10,0
