Each of the following cost items pertains to one of the following companies: Toyota (a manufacturing-sector company), Sobeys (a merchandising-sector company), and Google (a service-sector company): 1. Spring water purchased by Sobeys for sale to its customers. 2. Electricity used to provide lighting for assembly-line workers at a Toyota truck-assembly plant. 3. Depreciation on computer equipment at Google used to update directories of websites. 4. Electricity used to provide lighting for Sobeys store aisles. 5. Depreciation on computer equipment at Toyota used for quality testing of truck components during the assembly process. 6. Salaries of Sobeys marketing personnel planning local newspaper advertising campaigns. 7. Spring water purchased by Google for consumption by its software engineers. 8. Salaries of Google marketing personnel selling banner advertising. Required: Classify each of the (1–8) cost items as an inventoriable cost or a period cost. Explain your answers.
> Ames Wholesalers sells furniture items to four department store chains. Sharon Ames commented, “We apply ABC to determine profit line profitability. The same ideas apply to customer profitability, and we should find out our customer pro
> PEI Potatoes processes potatoes into potato cuts at its highly automated plant. For many years, it processed potatoes for only the retail consumer market where it had a superb reputation for quality. Recently, it started selling potato cuts to the instit
> The Medal Plus Company manufactures medals for winners of athletic events and other contests. Its manufacturing plant has the capacity to produce 12,000 medals each month; current production and sales are 9,000 medals per month. The company normally char
> Heights Academy, a private school, serves 500 students: 200 in the middle school (Grades 6 to 8) and 300 in the high school (Grades 9 to 12). Each school group has its own assistant principal, and there is one principal, Brian Smith, for the academy. For
> Niagara Winery makes two different grades of wine—regular wines and specialty wines. Recently, Niagara has shown small profits on its regular wines and large profits on its specialty wines. As a result, management is considering getting out of the regula
> The Wolfson Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate), and (b) support services (at 30% of the direct professional costs billed). The three professionals in WG and their
> Noble Industries manufactures two models of tiffany-style lamps: a table-top model and a floor model. Summary data for the two products for the most recent fiscal year showed the following: Under the company’s current costing, manufac
> Car Parts (CP) designs, manufactures, and sells automotive parts. Actual variable manufacturing overhead costs for 2015 were $308,600. CP’s simple costing system allocates variable manufacturing overhead to its three customers based on
> Management accounting deals only with costs.” Do you agree?
> Huey Parker produces mathematical and financial calculators. Data related to the two products are presented below Both products pass through Department 1 and Department 2. The departments’ combined manufacturing overhead costs are: C
> The following outlines a number of activities related to operations at Nordan Manufacturing Ltd.: a. Engineers design new products. b. Production workers set up machines. c. Completed goods are inspected for quality assurance. d. Direct materials are mov
> Teledor Inc. manufactures boomboxes (music systems with radio, MP3, and compact disc players) for different well-known companies. The boomboxes differ significantly in their complexity and the batch sizes in which they are manufactured. The following cos
> Select the terms from the above list to complete the following sentences. One common _____________to a traditional or _ ____________costing system is called an_____________ . The single MOH cost pool is separated into different_____________distinguished
> The Ride-On-Water (ROW) Company produces a line of non-motorized boats. ROW uses a normal job-costing system and allocates manufacturing overhead costs using direct manufacturing labour cost. The following data are available for 2015: Budgeted manufactu
> Consider the following selected cost data for KYM Inc. for 2016: Budgeted manufacturing overhead (MOH) ……………………………….$4,180,000 Budgeted machine-hours (MH)…………………………………………………….. 190,000 Actual manufacturing overhead (MOH) ending balance ……………..$4,230,000
> Production Company produces gadgets for the coveted small appliance market. The following data reflect activity for the most recent year, 2015: Costs incurred Purchases of direct materials (net) on account ……&acir
> (J. Watson) Rochester Ltd. has budgeted $435,000 for manufacturing overhead for the upcoming year. It forecast that 72,500 machine-hours will be used in the factory, and budgeted direct labour-hours were 17,400. The average direct labour rate is budgeted
> Coakwell Company worked on only two jobs during May. Information on the jobs is given below: At the beginning of the year, annual manufacturing overhead (MOH) was budgeted at $3,780,000 and Coakwell budgeted 35,000 DMLH per month. Job A701 was complete
> Duchess Ltd. manufactures and installs kitchen cabinetry. It uses normal job costing with two direct cost categories (direct materials and direct manufacturing labour) and one indirect cost pool for manufacturing overhead (MOH), applied on the basis of m
> Explain the term supply chain and its importance to cost management.
> Ronowski Company has three product lines of belts, A, B, and C, with contribution margins of $3.60, $2.40, and $1.20 respectively. The president forecasts sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, a
> Mike Rotundo, the president of Tax Assist, is examining alternative ways to compute indirect cost rates. He collects the following information from the budget for 2016: Budgeted variable indirect costs: $12 per hour of professional labour time Budgeted f
> Lytton Ltd. uses a normal job-costing system with two direct cost categories (direct materials and direct labour) and one indirect cost pool. It allocates manufacturing overhead to jobs using a predetermined overhead rate based on direct labour-hours. At
> Lynn Company uses a job-costing system at its Mississauga plant. The plant has a Machining Department and an Assembly Department. Its job-costing system has two direct cost categories (direct materials and direct manufacturing labour) and two manufacturi
> Trenton Ltd. uses a normal job-costing system and applies manufacturing overhead to products on the basis of machine-hours. At the beginning of 2015, the company controller budgeted annual overhead at $1,500,000. She also forecast that machine-hours woul
> New Fashions Inc. manufactures shirts for retail chains. Andy Jorgenson, the controller, is becoming increasingly disenchanted with New Fashions’ standard costing system. The budgeted and actual amounts for direct materials and direct m
> Rashid Daley is the manager of the athletic shoe division of Raider Products. Raider is a European-based company that has just purchased Fastfoot, a leading European shoe company. Fastfoot has long-term production contracts with suppliers in two East Eur
> David Tax is the athletics director of Maritime University (MU). He has been director for more than 10 years. MU is a men’s football and basketball powerhouse. The women’s athletics program, however, has had less succe
> Yummi-Lik makes really big lollipops in two sizes, large and giant. Yummi-Lik sells these lollipops to convenience stores, at fairs, and to schools for fundraisers, and in bulk on the internet. Summer is approaching and Yummi-Lik is preparing its budget
> Activity-based costing (ABC) systems are useful in helping companies make better decisions about pricing, product mix, and cost management related to product design and efficiency. In fact, General Mills used ABC to identify and analyze the costs associa
> How can management accountants help formulate strategy?
> Michael Scott books tours for new bands, and arranges to print T-shirts and produce demo CDs to sell on the tour. Scott’s agency uses a normal costing system with two direct cost pools, labour and materials, and one indirect cost pool,
> (J. Watson) Pearson Ltd. uses a normal job-costing system and applies overhead on the basis of direct labour-hours. At the beginning of the year, the company estimated that total overhead costs for the year would be $180,000, and it budgeted total labour
> Sam Nash is the head of new product development of Forever Young (FY). Nash is currently considering Enhance, which would be FY’s next major product in its beauty/cosmetics line and its estimated unit cost is currently $144. Enhance represents a new dire
> Kamal Diamond is the owner of the Galaxy chain of four-star prestige hotels. These hotels are in Chicago, London, Los Angeles, Montreal, New York, Seattle, Tokyo, and Vancouver. Diamond is currently struggling to set weekend rates for the Vancouver hotel
> XKY Manufacturing has recently opened a plant in Costa Melon in order to take advantage of certain tax benefits. In order to qualify for these tax benefits, the company’s direct manufacturing labour costs must be at least 20% of total manufacturing costs
> An auditor for Canada Revenue Agency is trying to reconstruct some partially destroyed records of two taxpayers. For each case in the accompanying list, find the unknowns designated by capital letters (figures are in thousands). Case 1 Case 2 Accoun
> Durdon Snowboards sells two models of snowboards: the Men’s Dominator and the Ladies’ Luxury. Information on the two models of snowboards follows: Durdon’s total sales, 70% are for the Menâ&#
> Saunders’ Electronics had the following results for the year just ended: Jeff Saunders, the owner of the store, is unhappy with the operating results. An analysis of other operating costs reveals that it includes $36,000 variable co
> Charles Rothman is an importer of silver cuff bracelets from Mexico. He has a three-month agreement with the local coffee shop, Dellano’s, to set up a booth to exhibit the jewellery. Rothman is under no obligation to keep any unsold items and can return
> Beans Unlimited sells specialty coffees in 1-kilogram packages. Fixed costs are budgeted at $730,000 per year. For the upcoming year, revenues are forecasted to be $3,240,000 (selling price is $36 per kilogram) and the company has an average contribution
> Management accounting should not fit the straitjacket of financial accounting.” Explain and give an example.
> The Chorus Company manufactures and sells pens. Present sales output is 5,000,000 units per year at a selling price of $0.60 per unit. Fixed costs are $1,080,000 per year. Variable costs are $0.36 per unit. Required: (Consider each case separately.) 1.
> Mirabel Cosmetics manufactures and sells a face cream to small family-run stores in the greater Montreal area. It presents the monthly operating statement of comprehensive income shown here to François Laval, a potential investor in the busi
> Sunshine Tours is a travel agency specializing in cruises between Miami and Jamaica. It books passengers on Carib Cruises. Sunshine’s fixed costs are $22,000 per month. Carib charges passengers $1,000 per round trip ticket. Required: Calculate the numbe
> Huron University is committed to improving access to higher education. Each year it makes $4,500,000 available for scholarships for students based on financial needs and academic achievement. The scholarship covers the full annual tuition (based on a ful
> The National Symphony is preparing for its annual appreciation dinner for contributing members. Last year, 500 members attended the dinner. Tickets for the dinner were $20 per attendee. Last year’s statement of comprehensive income was as follows: Ticke
> The Rapid Meal has two restaurants that are open 24 hours a day. Fixed costs for the two restaurants together total $450,000 per year. Service varies from a cup of coffee to full meals. The average sales bill per customer is $8.00. The average cost of fo
> Buger Research (BR) is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $50 per session to provide comments on new products. These focus groups meet in hotels and ar
> In June 2016, the government of Vartan invited bids for the construction of a cellular telephone network. ZenTel, an experienced communications company, was eager to enter the growing field of cellular telephone networks in countries with poor infrastruc
> The data below are for Marvin Department Store. The account balances (in thousands) are for 2016. Marketing, distribution, and customer-service costs …………….$ 37,000 Merchandise inventory, January 1, 2016 …………………………………27,000 Utilities17,000General and ad
> Define cost smoothing and describe the consequences it can have on costs.
> The following are account balances relating to 2016 (in thousands): Property tax on plant building ……………………………………………..$4,200 Marketing, distribution, and customer-service costs …………….44,400 Finished goods inventory, January 1, 2016 …………………………….37,400 Pl
> The following are account balances relating to 2016 (in thousands): Property tax on plant building………………………………………………..$ 3,800 Marketing, distribution, and customer-service costs ………………44,400 Finished goods inventory, January 1, 2016 ………………………………32,400 P
> Rhonda Heninger is a well-known software engineer. Her specialty is writing software code used in maintaining the security of credit card information. Heninger is approached by the Electronic Commerce Group (ECG). They offer to pay her $120,000 for the r
> What are the two major types of organizational elements that managers focus on in companies using job costing?
> CVP is both simple and simplistic. If you want realistic analysis to underpin your decisions, look beyond CVP.” Do you agree? Explain.
> Do service-sector companies have inventoriable costs? Explain.
> Name three factors that affect the classification of a cost as direct or indirect.
> Yumball Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 5,000 per month. The machine costs $6,000 and is depreciated using straight-line depreciation over 10 yea
> Define cost object and give three examples.
> Distinguish between processes where the inputs are non-substitutable and where they are substitutable.
> Describe why direct materials rate variance and direct materials efficiency variance may be computed with reference to different points in time.
> Distinguish between a favourable variance and an unfavourable variance .
> What is the relationship between management by exception and variance analysis ?
> ABC systems apply only to manufacturing companies.” Do you agree? Explain.
> How can the use of sensitivity analysis increase the benefits of budgeting?
> A number of terms are listed below: source document ………………………………………………..actual cost tracing ……………………………………..cost allocation rate proration ……………………………………………..opportunity cost cost pool Required: Select the terms from the above list to complete
> A number of terms are listed below: prime costs…………………………………………….fixed cost inventoriable costs………………………………period costs indirect………………………………………..conversion costs variable cost……………………………………….relevant cost Required: Select the terms from the above list
> Brite Exteriors is a firm that provides house painting services. Robert Brite, the owner, is trying to find new ways to increase revenues. Mr. Brite performs the following actions, not in the order listed. Required: Classify each action below according
> Consolidated Minerals (CM) owns the rights to extract minerals from beach sands on Fraser Island. CM has costs in three areas: a.Payment to a mining subcontractor who charges $80 per tonne of beach sand mined and returned to the beach (after being proces
> Honel Foods makes frozen dinners that it sells through grocery stores. Typical products include turkey dinners, pot roast, fried chicken, and meatloaf. The managers at Honel have recently introduced a line of frozen chicken pies. They take the following
> Conner Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given below. Required: For each action (1–5 below), state whether it is a planning decision or a control decision. 1. Conner asks its marketing
> A Canadian biopharmaceutical company incurs the following costs: 1. Cost of redesigning blister packs to make drug containers more tamper-proof. 2. Cost of videos sent to doctors to promote sales of a new drug. 3. Cost of a toll-free telephone line used
> Burger King, a hamburger fast food restaurant, incurs the following costs: 1. Cost of oil for the deep fryer. 2. Wages of the counter help who give customers the food they order. 3. Cost of the costume for the King on the Burger King television commercia
> A number of terms are listed below: timely ………………………………..management accounting ethical …………………………………guidelines cost–benefit technical ………………………………………………………control value chain ………………………………………………….reliable corporate social responsibility……………………… strategy
> Describe briefly why modern technology such as Electronic Data Interchange (EDI) is helpful to managers.
> Describe three different debit entries in the Work-in-Process Control general ledger T-account.
> Knowledge of technical issues such as computer technology is necessary but not sufficient to becoming a successful accountant.” Do you agree? Why?
> A number of terms are listed below: contribution margin ………………………cost–volume–profit analysis capital intensive …………………………………………..operating leverage gross margin …………………………………………………………….sales mix contribution margin percentage ………………………breakeven point ma
> The revenue budget is the cornerstone for budgeting.” Why?
> Maximum Office Products (MOP) produces three different paper products at its Vernon lumber plant—Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. MOP currently uses the following three-part
> If actual results do not match the budget, what should managers do?
> Define master budget.
> When governments reduce their funding to hospitals and universities, often the executives respond with a demand for an equal percentage reduction in costs by all business functions. Is this the best strategic approach?
> Comment on the following statement made by a plant supervisor: “Meetings with my plant accountant are frustrating. All he wants to do is pin the blame for the many variances he reports.
> Explain how the direct materials mix and direct materials yield variances provide additional information about the direct materials efficiency variance.
> Describe three reasons for an unfavourable direct manufacturing labour efficiency variance.
> List three causes of a favourable materials rate variance.
> What is the key difference between a static budget and a flexible budget ?
> How does static-budget variance analysis mislead those assessing actual performance against pro forma performance indicators?
> Explain how the choice of the responsibility centre type (cost, revenue, profit, or investment) affects budgeting.
> Graham’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $20 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $20,000 per period.
> Describe how non-output-based cost drivers can be incorporated into budgeting.
> Explain “padding” and why managers might be motivated to employ this negative budget behaviour. What are some of senior management’s options to address this behaviour?
> Define rolling budget. Give an example.
> How might a company benefit by sharing its own internal budget information with other companies?
> Strategy, plans, and budgets are unrelated to one another.” Do you agree? Explain.
> The controller of a retailer has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice-president involved in rejecting the request noted, “Given a choice, I will always prefer a $50,000 investment in improving things a
> Increasing the number of indirect cost pools is guaranteed to sizably increase the accuracy of product or service costs.” Do you agree? Why?
