Question: Klumper Corporation is a diversified manufacturer

> On June 30, 2018, Kimberly Farms purchased custom-made harvesting equipment from a local producer. In payment, Kimberly signed a noninterest-bearing note requiring the payment of $60,000 in two years. The fair value of the equipment is not known, but an

> LeMay Department Store uses the retail inventory method to estimate ending inventory for its monthly financial statements. The following data pertain to one of its largest departments for the month of March 2018: Sales are recorded net of employee disc

> Esquire Inc. uses the LIFO method to value its inventory. Inventory at January 1, 2018, was $500,000 (20,000 units at $25 each). During 2018, 80,000 units were purchased, all at the same price of $30 per unit. 85,000 units were sold during 2018. Esquire

> What is the main difference between a perpetual inventory system and a periodic inventory system?

> Pro-tech Software acquired all of the outstanding stock of Reliable Software for $14 million. The book value of Reliable’s net assets (assets minus liabilities) was $8.3 million. The fair values of Reliable’s assets and liabilities equaled their book val

> Refer to the situation described in BE 10–4. What is the book value of the asset retirement liability at the end of one year? Assuming that the actual restoration costs incurred after extraction is completed are $596,000, what amount of gain or loss will

> Smithson Mining operates a silver mine in Nevada. Acquisition, exploration, and development costs totaled $5.6 million. After the silver is extracted in approximately five years, Smithson is obligated to restore the land to its original condition, includ

> Refer to the situation described in BE 10–2. Assume that Fullerton decides to use the warehouse rather than demolish it. An independent appraisal estimates the fair values of the land and warehouse at $420,000 and $280,000, respectively. Determine the am

> Fullerton Waste Management purchased land and a warehouse for $600,000. In addition to the purchase price, Fullerton made the following expenditures related to the acquisition: broker’s commission, $30,000; title insurance, $3,000; miscellaneous closing

> Beaverton Lumber purchased a milling machine for $35,000. In addition to the purchase price, Beaverton made the following expenditures: freight, $1,500; installation, $3,000; testing, $2,000; personal property tax on the machine for the first year, $500.

> In the current year, Big Burgers, Inc., expanded its fast food operations by opening several new stores in Texas. The company incurred the following costs in the current year: market appraisal ($50,000), consulting fees ($72,000), advertising ($47,000),

> Maltese Laboratories incurred the following research and developments costs related to its pharmaceutical business: Internal projects (salaries, supplies, overhead for R&D facilities) ……………………………..…………… $620,000 Payment to acquire R&D from a third party

> On February 26 a hurricane destroyed the entire inventory stored in a warehouse owned by the Rockford Corporation. The following information is available from the records of the company’s periodic inventory system: beginning inventory, $220,000; purchase

> This exercise is a continuation of BE 9–11. During 2019, purchases at cost and retail were $168,000 and $301,000, respectively. Net markups, net markdowns, and net sales for the year were $3,000, $4,000, and $280,000, respectively. The

> On January 1, 2018, Sanderson Variety Store adopted the dollar-value LIFO retail inventory method. Accounting records provided the following information: Estimate ending inventory using the dollar-value LIFO retail method. Cost Retail $ 40,800 $ 68

> Roberson Corporation uses a periodic inventory system and the retail inventory method. Accounting records provided the following information for the 2018 fiscal year: The company records sales to employees net of discounts. These discounts totaled $15,

> Explain why proponents of LIFO argue that it provides a better match of revenue and expenses. In what situation would it not provide a better match?

> Describe the three types of inventory of a manufacturing company.

> Why is the activity-based costing described in this chapter unacceptable for external financial reports?

> How can the activity rates (i.e., cost per activity) for the various activities be used to target process improvements?

> Mercer Asbestos Removal Company removes potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company’s estimator and the work supervisors. The on-site supervisors

> When activity-based costing is used, why do manufacturing overhead costs often shift from high-volume products to low-volume products?

> Pixel Studio, Inc., is a small company that creates computer-generated animations for films and television. Much of the company’s work consists of short commercials for television, but the company also does realistic computer animations

> The operations vice president of Security Home Bank has been interested in investigating the efficiency of the bank’s operations. She has been particularly concerned about the costs of handling routine transactions at the bank and would

> Durban Metal Products, Ltd., of the Republic of South Africa makes specialty metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses an activity-based costing system for i

> Various activities at Ming Corporation, a manufacturing company, are listed below. Each activity has been classified as a unit-level, batch-level, product-level, or customer-level activity. Required: Complete the table by providing an example of an acti

> Fogerty Company makes two products, titanium Hubs and Sprockets. Data regarding the two products follow: Additional information about the company follows: a. Hubs require $32 in direct materials per unit, and Sprockets require $18. b. The direct labor w

> Stillicum Corporation makes ultra-light-weight backpacking tents. Data concerning the company’s two product lines appear below: The company has a traditional costing system in which manufacturing overhead is applied to units based on d

> Ellix Company manufactures two models of ultra-high fi delity speakers, the X200 model and the X99 model. Data regarding the two products follow: Additional information about the company follows: a. Model X200 requires $72 in direct materials per unit,

> What is an activity variance and what does it mean?

> Hiram’s Lakeside is a popular restaurant located on Lake Washington in Seattle. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduct an activity-based costing

> Why is it difficult to interpret a difference between how much expense was budgeted and how much was actually spent?

> Why is the first stage of the allocation process in activity-based costing often based on interviews?

> What assumption is implicitly made about cost behavior when all of the items in a budget are adjusted in proportion to a change in activity? Why is this assumption questionable?

> Java Source, Inc. (JSI), is a processor and distributor of a variety of blends of coffee. The company buys coffee beans from around the world and roasts, blends, and packages them for resale. JSI offers a large variety of different coffees that it sells

> What assumption is implicitly made about cost behaviour when a budget is directly compared to actual results? Why is this assumption questionable?

> How does a flexible budget based on two cost drivers differ from a flexible budget based on a single cost driver?

> Thermal Rising, Inc., makes paragliders for sale through specialty sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has designed an activity-based costing system with the following

> What does a flexible budget performance report do that a simple comparison of budgeted to actual results does not do?

> What is a spending variance and what does it mean?

> What is a revenue variance and what does it mean?

> TipTop Flight School offers flying lessons at a small municipal airport. The school’s owner and manager has been attempting to evaluate performance and control costs using a variance report that compares the planning budget to actual re

> Exchange Corp. is a company that acts as a facilitator in tax-favored real estate swaps. Such swaps, know as 1031 exchanges, permit participants to avoid some or all of the capital gains taxes that would otherwise be due. The bookkeeper for the company h

> Refer to the data for Foam Products, Inc., in Exercise 8–12 and the following additional details concerning the activity rates in the activity-based costing system: Management has provided their ease of adjustment codes for the purpose

> Advanced Products Corporation has supplied the following data from its activity-based costing system: During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products durin

> Frank Weston, supervisor of the Freemont Corporation’s Machining Department, was visibly upset after being reprimanded for his department’s poor performance over the prior month. The department’s cost

> Milano Pizza is a small neighborhood pizzeria that has a small area for in-store dining as well as offering take-out and free home delivery services. The pizzeria’s owner has determined that the shop has two major cost driversâ&#1

> Several years ago, Westmont Corporation developed a comprehensive budgeting system for profit planning and control purposes. While departmental supervisors have been happy with the system, the factory manager has expressed considerable dissatisfaction wi

> Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: These products are customi

> The St. Lucia Blood Bank, a private charity partly supported by government grants, is located on the Caribbean island of St. Lucia. The blood bank has just finished its operations for September, which was a particularly busy month due to a powerful hurri

> Alyeski Tours operates day tours of coastal glaciers in Alaska on its tour boat the Blue Glacier. Management has identified two cost drivers—the number of cruises and the number of passengers—that it uses in its budget

> Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below: The company measures its activity in terms

> Quilcene Oysteria farms and sells oysters in the Pacific Northwest. The company harvested and sold 8,000 pounds of oysters in August. The company’s flexible budget for August appears below: The actual results for August appear below:

> What are unit-level, batch-level, product-level, customer-level, and organization-sustaining activities?

> Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company’s planning budget for July appears below: In July, 17,800 meals were actually served. The co

> Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s planning budget for May appears below: Required: During May, the company’

> Model X100 sells for $120 per unit whereas Model X200 offers advanced features and sells for $500 per unit. Management expects to sell 50,000 units of Model X100 and 5,000 units of Model X200 next year. The direct material cost per unit is $50 for Model

> Packaging Solutions Corporation manufactures and sells a wide variety of packaging products. Performance reports are prepared monthly for each department. The planning budget and flexible budget for the Production Department are based on the following fo

> The Gourmand Cooking School runs short cooking courses at its small campus. Management has identified two cost drivers that it uses in its budgeting and performance reports—the number of courses and the total number of students. For exa

> AirQual Test Corporation provides on-site air quality testing services. The company has provided the following data concerning its operations: The company uses the number of jobs as its measure of activity. For example, mobile lab operating expenses sho

> Green Thumb Gardening is a small gardening service that uses activity-based costing to estimate costs for pricing and other purposes. The proprietor of the company believes that costs are driven primarily by the size of customer lawns, the size of custom

> Via Gelato is a popular neighborhood gelato shop. The company has provided the following data concerning its operations: While gelato is sold by the cone or cup, the shop measures its activity in terms of the total number of liters of gelato sold. For e

> Refer to the data for Pixel Studio, Inc., in Problem 8–18. In addition, the company has provided the following details concerning its activity rates: Management has provided the following ease of adjustment codes for the various costs:

> Jake’s Roof Repair has provided the following data concerning its costs: For example, wages and salaries should be $23,200 plus $16.30 per repair-hour. The company expected to work 2,800 repair-hours in May, but actually worked 2,900 r

> Gallatin Carpet Cleaning is a small, family-owned business operating out of Bozeman, Montana. For its services, the company has always charged a flat fee per hundred square feet of carpet cleaned. The current fee is $28 per hundred square feet. However,

> Wyckam Manufacturing Inc. has provided the following information concerning its manufacturing costs: For example, utilities should be $1,400 per month plus $0.05 per machine-hour. The company expects to work 5,000 machine-hours in June. Note that the co

> Refer to the data for Lavage Rapide in Exercises 10–8 and 10–10. Data from Exercises 10–8 and 10–10. Required: Prepare a flexible budget performance report that shows the company&aci

> Refer to the data for Lavage Rapide in Exercises 10–8 and 10–10. Data from Exercises 10–8 and 10–10. Required: Prepare a report showing the company’s revenue and s

> Refer to the data for Lavage Rapide in Exercise 10–8. The actual operating results for August appear on the following page. Data from Exercise 10–8 Required: Prepare a report showing the company’s ac

> Foam Products, Inc., makes foam seat cushions for the automotive and aerospace industries. The company’s activity-based costing system has four activity cost pools, which are listed below along with their activity measures and activity

> Refer to the data for Lavage Rapide in Exercise 10–8. The company actually washed 8,800 cars in August. / For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to wash 9,000 cars in August and to col

> Lavage Rapide is a Canadian company that owns and operates a large automatic carwash facility near Montreal. The following table provides data concerning the company’s costs: For example, electricity costs are $1,200 per month plus $0.

> SecuriCorp operates a fleet of armored cars that make scheduled pickups and deliveries in the Los Angeles area. The company is implementing an activity-based costing system that has four activity cost pools: Travel, Pickup and Delivery, Customer Service,

> Refer to the data for The Terminator Inc. in Exercise 10–6. A management intern has suggested that the budgeted revenues and costs should be adjusted for the actual level of activity in April before they are compared to the actual reven

> The Terminator Inc. provides on-site residential pest extermination services. The company has several mobile teams who are dispatched from a central location in company-owned trucks. The company uses the number of jobs to measure activity. At the beginni

> Smoky Mountain Corporation makes two types of hiking boots—Xtreme and the Pathfinder. Data concerning these two product lines appear below: The company has a traditional costing system in which manufacturing overhead is applied to unit

> The Little Theatre is a nonprofit organization devoted to staging plays for children. The theater has a very small full-time professional administrative staff. Through a special arrangement with the actors’ union, actors and directors r

> Refer to the data for Advanced Products Corporation in Exercise 8–14. Data from in Exercise 8–14. Required: 1. Using Exhibit 8A–1 as a guide, prepare a report showing the first-stage allocations of o

> Boyne University offers an extensive continuing education program in many cities throughout the state. For the convenience of its faculty and administrative staff and to save costs, the university operates a motor pool. The motor pool operated with 20 ve

> Tom Kemper is the controller of the Wichita manufacturing facility of Prudhom Enterprises, Inc. The annual cost control report is one of the many reports that must be fi led with corporate headquarters and is due at corporate headquarters shortly after t

> The questions in this exercise are based on JetBlue Airways Corporation. To answer the questions, you will need to download JetBlue’s Form 10-K/A for the year ended December 31, 2004 at www.sec.gov/edgar/searchedgar/companysearch.html. Once at this websi

> Why are top management support and cross-functional involvement crucial when attempting to implement an activity-based costing system?

> CD Express, Inc., provides CD duplicating services to software companies. The customer provides a master CD from which CD Express makes copies. An order from a customer can be for a single copy or for thousands of copies. Most jobs are broken down into b

> Why is direct labor a poor base for allocating overhead in many companies?

> This exercise should be assigned in conjunction with Exercise 8–8. The results of the first-stage allocation of the activity-based costing system at Durban Metal Products, Ltd., in which the activity rates were computed, appear below:

> In what fundamental ways does activity-based costing differ from traditional costing methods such as those described in Chapters 2 and 3?

> The manager of the Westfield branch of Security Home Bank has provided the following data concerning the transactions of the branch during the past year: The lowest costs reported by other branches for these activities are displayed below: Required: 1.

> The following activities occur at Greenwich Corporation, a company that manufactures a variety of products. a. Receive raw materials from suppliers. b. Manage parts inventories. c. Do rough milling work on products. d. Interview and process new employees

> Fairway Golf Corporation produces private label golf clubs for pro shops throughout North America. The company uses activity-based costing to evaluate the profitability of serving its customers. This analysis is based on categorizing the companyâ&#

> Refer to the data in Exercise 7–1 for Ida Sidha Karya Company. The absorption costing income statement prepared by the company’s accountant for last year appears below (all currency values are in thousands of rupiahs):

> Ida Sidha Karya Company is a family-owned company located in the village of Gianyar on the island of Bali in Indonesia. The company produces a handcrafted Balinese musical instrument called a gamelan that is similar to a xylophone. The sounding bars are

> Parker Products Inc, a manufacturer, reported $123 million in sales and a loss of $18 million in its annual report to shareholders. According to a CVP analysis prepared for management, the company’s break-even point is $115 million in sales. Required: As

> Chuck Wagon Grills, Inc., makes a single product—a handmade specialty barbecue grill that it sells for $210. Data for last year’s operations follow: Required: 1. Assume that the company uses variable costing. Compute

> Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year appears below: The company’s selling and administrative expenses consist of $210,000 per

> Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations: During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the

> “These statements can’t be right,” said Ben Yoder, president of Rayco, Inc. “Our sales in the second quarter were up by 25% over the first quarter, yet these income statements show a

> Explain how a shift in the sales mix could result in both a higher break-even point and a lower net income.

> Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the compan

> The Shirt Works sells a large variety of tee shirts and sweatshirts. Steve Hooper, the owner, is thinking of expanding his sales by hiring local high school students, on a commission basis, to sell sweatshirts bearing the name and mascot of the local hig

> Morton Company’s contribution format income statement for last month is given below: The industry in which Morton Company operates is quite sensitive to cyclical movements in the economy. Thus, profits vary considerably from year to ye