Question: Mark Corporation estimates its manufacturing

> The business school dean has asked the accounting club to help with a product costing analysis for the school. How would we define the products? What questions would we ask the dean before we accept the task?

> The administrative offices and manufacturing plant of Oakdale Tool & Die share the same building. The following information (in $000s) appears in the accounting records for last year: Administrative costs . . . . . . . . . . . . . . . . . . . . . . . .

> Chuck Moore supervises two consulting jobs for the firm of Price and Waters, LLP, which is a consulting firm that helps organizations become more efficient. One of the consulting jobs is for the U.S. Department of Defense and the other is for General Mot

> Multiple regression results from the data of Adriana Corporation (Exercise 5-30) are as follows: Equation: Overhead = $124,570 + ($31.93 × Labor-hours) + ($41.10 × Machine-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . .

> Butte Components produces a variety of hardware products, primarily for the do-it-yourself (DIY) market. As part of your job interview as a summer intern at Butte, the cost accountant provides you with the following (fictitious) data for the year: Requ

> Pioneer Parts, a manufacturer of windows for commercial buildings, reports the following account information for last year (all costs are in thousands of dollars): Information on January 1 (Beginning): Direct materials inventory . . . . . . . . . . . . .

> Why does the accountant use a linear representation of cost and revenue behavior in CVP analysis? How is this justified?

> Sell Block prepares three types of simple tax returns: individual, partnerships, and (small) corporations. The tax returns have the following characteristics: The total fixed costs per year for the company are $3,690,000. Required a. What is the antic

> “The assumptions of CVP analysis are so simplistic that no firm would make a decision based on CVP alone. Therefore, there is no reason to learn CVP analysis.” Comment.

> The controller at Emporia Precision Parts asks for your help in sorting out some cost information. She is called to a meeting, but hands you the following information for June: Prime costs, June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 60,000 units for $30 per unit. The variable production costs are $15, and fixed costs amount to $700,000. Production engineers have ad

> Is “cost-of-goods sold” an expense?

> Three entrepreneurs were looking to start a new brewpub near Sacramento, California, called Roseville Brewing Company (RBC). Brewpubs provide two products to customers—food from the restaurant segment and freshly brewed beer from the be

> Simple regression results from the data of Adriana Corporation are as follows: Equation: Overhead = $206,469 + ($45.83 × Machine-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . . . . . . . . . . .962 R2 . . . . . . . . .

> The following balances are from the accounts of Todd Machining Company: Direct materials purchased during the year amount to $598,000, and the cost of goods sold for the year was $2,172,400. Required Reconstruct a cost of goods sold statement and fill

> Lead! Inc. offers executive coaching services to small business owners. Lead!’s operating profits average 20 percent of revenues and its marketing and administrative costs average 25 percent of the cost of services sold. Required Lead! Inc. expects reve

> The following data are available for Jupiter Consultants for the year just ended: Gross margin ................................... $4,050,000 Operating profit .................................. 1,525,000 Revenues .........................................

> Where2 Services is a small service firm that advises high school students on college opportunities. Joseph Kapp, the founder and president, has collected the following information for March: Required Prepare an income statement for March for Where2 Ser

> Paul’s Limo Service has the following information for June: Required a. Using the traditional income statement format, prepare a value income statement. b. What value would there be to Paul from preparing the same information in July?

> Direct labor-hours and direct labor dollars are the most common allocation bases used in the United States (indeed, throughout the world). Why do you suppose they are used more than others?

> What are characteristics of companies that are likely to use a job cost system?

> Consider Question 7-15. What are some of the allocation bases you considered? Why did you choose the one you used? Question 7-15 Assume that you have been asked to paint the inside walls of an apartment. State specifically how you would estimate the cos

> In one of its divisions, an aircraft components manufacturer produces experimental navigational equipment for spacecraft and for private transportation companies. Although the products are essentially identical, they carry different product numbers. The

> Is a criminal trial a “job” for costing purposes?

> When is the basic cost flow model used? Give an example.

> Why might the operating profit calculated by CVP analysis differ from the net income reported in financial statements for external reporting?

> Would a dentist, an architect, a landscaper, and a lawyer use job costing or process costing? Explain.

> Interview the manager of a construction company (for example, a company that does house construction, remodeling, landscaping, or street or highway construction) about how the company bids on prospective jobs. Does it use cost information from former job

> Currently, generally accepted accounting principles (GAAP) in the United States require firms to expense research and development (R&D) costs as period costs. Therefore, when the resulting product is sold, R&D costs are not part of reported product costs

> Greg’s Diner has the following information for year 2, when several new employees were added to the waitstaff: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,000,000 Cost of food serveda . . . . . . . . . . . .

> “Worrying about the choice of an overhead allocation base is a waste of time. In the end, all the overhead is charged to production.” Do you agree? Why?

> What are the costs of a product using normal costing?

> TechMaster is an information technology (IT) consulting company offering services to small firms. TechMaster bills clients for its various services based on the hours its professionals spend. In August, IT professionals billed 875 hours to clients and wo

> Chuck’s Brokerage Service (CBS) is a discount financial services firm offering clients investment advice, trading services, and a variety of mutual funds for investment. Chuck has collected the following information for October: Requi

> Allocation Busters (AB) is a dispute mediation firm offering services to firms in disputes about cost allocations with government agencies. For March, AB worked 440 hours for Massive Airframes and 660 hours for Gigantic Drydocks. AB bills clients at the

> For August, Royal Consulting and Mediation Practice (RCMP) worked 900 hours for Alberta Company and 2,100 hours for Ontario Corporation. RCMP bills clients at the rate of $400 per hour; labor cost for its consulting staff is $200 per hour. The total numb

> When designing a cost system, what points should you consider before starting the design?

> IYF Corporation manufactures miscellaneous parts for building construction and maintenance. IYF uses a normal job costing system. The system applies manufacturing overhead on the basis of direct labor cost. For managerial purposes, over- or underapplied

> Ross Enterprises maintains a fleet of agricultural equipment for rental to local farmers. Ross maintains all its equipment in a company-owned facility. Data on maintenance costs and operating hours of the equipment have been collected for the past 24 mon

> At the beginning of the month, Arthur’s Olde Consulting Corporation had two jobs in process that had the following costs assigned from previous months: During the month, Jobs SY-400 and SY-403 were completed but not billed to customer

> Carmen Beverages reports the following information for July: Units produced and sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,800 Per unit revenue and costs: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Tony’s Textiles uses a predetermined factory overhead rate based on machine-hours. For May, Tony’s budgeted overhead was $210,000 based on a budgeted volume of 35,000 machine-hours. Actual overhead amounted to $227,500 with actual machine-hours totaling

> Turco Products uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for September: Turco applies overhead to production at a predetermined rate of 120 percent based on direct labor cost. Job 9-27, the only

> Mary’s Landscaping uses a job order cost system. The following debits (credits) appeared in Work-in-Process Inventory for August: Mary’s applies overhead to production at a predetermined rate of 80 percent based on d

> Prepare a scattergraph based on the overhead and labor-hour data in Exercise 5-30. In Exercise 5-30 Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overhea

> Refer to the information in Exercise 7-27. Prepare an entry to allocate over- or underapplied overhead to: a. Work in Process. b. Finished Goods. c. Cost of Goods Sold. In Exercise 7-27 Aspen Company estimates its manufacturing overhead to be $625,000 a

> Aspen Company estimates its manufacturing overhead to be $625,000 and its direct labor costs to be $500,000 for year 2. Aspen worked on three jobs for the year. Job 2-1, which was sold during year 2, had actual direct labor costs of $195,000. Job 2-2, wh

> Refer to the information in Exercise 7-25. Prepare an entry to allocate the under- or overapplied overhead. Overhead applied in each of the inventory accounts is as follows: Work-in-process inventory . . . . . . . . . . . . . $10,125 Finished goods inven

> “Cost allocation is arbitrary, so there is nothing gained by it. We should report only the costs that we know are direct.” Do you agree? Why?

> The following balances are from the accounts of Hill Components: Direct materials used during the year amount to $59,800, and the cost of goods sold for the year was $68,900. Required Find the following by completing a cost of goods sold statement: a.

> Old Port Shipyards does work for both the U.S. Navy and private shipping companies. Old Port’s major business is renovating ships, which it does at one of two company dry docks referred to by the names of the local towns: Olde Town and

> It is your first day at a new job and you talk about the themes of cost system design. One of your new colleagues asks, “If different cost information is used for different purposes, does that mean we do not know what something costs? I thought that was

> What is the difference between product costs and period costs?

> Kim’s Asphalt does driveway and parking lot resurfacing work for large commercial clients as well as small residential clients. An inventory of materials and equipment is on hand at all times so that work can start as quickly as possibl

> Tappan, Inc., manufactures one product and accounts for costs using a job cost system. You have obtained the following information from the corporation’s books and records for the year ended December 31, Year 1: • Total manufacturing cost during the year

> Partially completed T-accounts and additional information for Pine Ridge Corporation for the month of February follow: Additional information for February follows: • Labor wage rate was $25 per hour. • During the mon

> Selected information from the Blake Corporation accounting records for June follows: Additional information for July follows: • Labor wage rate was $35 per hour. • During the month, sales revenue was $1,020,000, and

> Partially completed T-accounts and additional information for Cardinals, Inc., for the month of November appear on the following page: Additional information for November follows: • Labor wage rate was $30 per hour. â€&cent

> The following transactions occurred in January at Tarnsdale Fabricators, a manufacturer of custom tools: 1. Purchased $17,000 of materials. 2. Issued $16,800 in direct materials to the production department. 3. Issued $1,200 of supplies from the material

> Prepare a scattergraph based on the overhead and machine-hour data in Exercise 5-30. In Exercise 5-30 Adriana Corporation manufactures football equipment. In planning for next year, the managers want to understand the relation between activity and overh

> Apple, Inc. is developing a new product (the iWhatever). Managers at Apple are interested in estimating the impact of learning on the cost of producing the iWhatever. They plan to use data from previous products, such as the iPod and the iPad, to estimat

> Brighton Services repairs locomotive engines. It employs 100 full-time workers at $20 per hour. Despite operating at capacity, last year’s performance was a great disappointment to the managers. In total, 10 jobs were accepted and compl

> The following data are from the accounting records of Fremont Products for year 2: Units produced and sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,500 Total revenues and costs Sales revenue . . . . . . . . . . . . . . . . . . . . . .

> On September 1, two jobs were in process at Pete’s Patios. Details of the jobs follow: Materials Inventory on September 1 totaled $11,040, and $1,392 worth of materials was purchased during the month. Indirect materials of $192 were w

> For the month of January, Bay Accountants worked 2,000 hours for Lake Lumber, 600 hours for Marty’s Marina, and 1,000 hours for the State Prison System. Bay bills clients at $160 an hour; its labor costs are $60 an hour. A total of 4,000 hours were worke

> What are some important assumptions commonly made in CVP analysis. Do these assumptions impose serious limitations on the analysis? Why or why not?

> Youth Athletic Services (YAS) provides adult supervision for organized youth athletics. It has a president, William Mayes, and five employees. He and one of the other five employees manage all marketing and administrative duties. The remaining four emplo

> A new computer virus (AcctBGone) destroyed most of the company records at Backups RntUs. The computer experts at the company could recover only a few fragments of the company’s factory ledger for February as follows: Further investiga

> UCD Company uses a job costing accounting system for its production costs. A predetermined overhead rate based on direct labor-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the cur

> The following transactions occurred in June at Fast Wheels, Inc., a custom bicycle manufacturer: 1. Purchased $20,000 of materials. 2. Issued $1,000 of supplies from the materials inventory. 3. Purchased $25,000 of materials. 4. Paid for the materials pu

> Kansas Company uses a job costing accounting system for its production costs. The company uses a predetermined overhead rate based on direct labor-hours to apply overhead to individual jobs. The company prepared an estimate of overhead costs at different

> The following T-accounts represent November activity: Additional Data • Materials of $113,600 were purchased during the month, and the balance in the Materials Inventory account increased by $11,000. • Overhead is ap

> What is each component of the basic cost flow model? Describe each component.

> Simple regression results from the data of Adriana Corporation (Exercise 5-30) are as follows: Equation: Overhead = $217,610 + ($88.61 × Labor-hours) Statistical data Correlation coefficient . . . . . . . . . . . . . . . . . . . . . . . . . . .610 R2 .

> Terracotta, Inc., provides you with the following data for their single product: Sales price per unit ......................................................................................... $ 25 Fixed costs (per month): Selling, general, and administra

> The following T-accounts represent September activity: Required Compute the missing amounts indicated by the letters (a) through (i). Materials Inventory Work-in-Process Inventory BB (9/1) BB (9/1) 22,300 180,500 121,000 94,000 8,000 (a) 4,300 (b)

> The accounting records for Frankie’s Fixtures report the following production costs for the past year: Direct materials . . . . . . . . . . . . . . . . . . . . . $420,000 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000 Variable o

> Valley Corporation estimated that direct labor for the year would be 58,500 hours. Valley’s overhead (all fixed) is applied on the basis of direct labor-hours. The company estimates its overhead costs at $234,000. During the year, all overhead costs were

> Write out the profit equation and describe each term.

> Sydney Corporation estimated that machine-hours for the year would be 20,000 hours and overhead (all fixed) would be $80,000. Sydney applies its overhead on the basis of machine-hours. During the year, all overhead costs were exactly as planned ($80,000)

> Describe the predetermined overhead rate. What is the role of the predetermined overhead rate in product costing?

> What are the three criteria for the design of cost management systems?

> Is it possible for a company to have a two-stage allocation system but use, for example, direct labor-hours to allocate costs from all pools in the second stage? Will the resulting product costs be the same as if it used a single-stage system?

> The following transactions occurred in October at Pawnee Workshops, a custom manufacturer of furniture: 1. Purchased $16,000 of materials. 2. Issued $800 of supplies from the materials inventory. 3. Purchased $11,200 of materials. 4. Paid for the materia

> Refer to Exercise 2-44. In Exercise 2-44 Larcker Manufacturing’s cost accountant has provided you with the following information for January operations: Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21 per unit Fixed

> Place the number of the appropriate definition in the blank next to each concept. Concept ____ Period cost ____ Indirect cost ____ Fixed cost ____ Opportunity cost ____ Outlay cost ____ Direct cost ____ Expense ____ Cost ____ Variable cost ____ Full abs

> Identify a particular support function in a business school (the library, for example). Discuss possible allocation bases that might be used to allocate costs in the function to programs (degrees) or students.

> What is continuous flow processing? Give at least three examples of products that might use continuous flow processing.

> Ideally, what does an allocation base reflect between the overhead cost and the activity (production of a product, for example)?

> Old Tyme Soda produces one flavor of a popular local soft drink. It had no work in process on October 31 in its only inventory account. During November, Old Tyme started 10,000 barrels. Work in process on November 30 is 1,200 barrels. The production supe

> The following data apply to the provision of psychological testing services: Sales price per unit (1 unit = 1 test plus feedback to client) ...................... $ 600 Fixed costs (per month): Selling and administration .................................

> What is the purpose of having two manufacturing overhead accounts, the Manufacturing Overhead Control and Applied Manufacturing Overhead?

> Cray-Z Consultants provides management accounting advice to not-for-profit firms. It employs three levels of consultants, based on experience and education: partner, senior, and associate. When Cray-Z considers bidding on jobs, it estimates the costs usi

> Kim & Smith Refiners starts business on March 1. The following operations data are available for March for the one lubricant it produces: _________________________________Gallons Beginning inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Big City Bank processes the checks its customers write at Riverdale Operations Center (ROC). ROC processed 2,800,000 checks in September. It takes only seconds to process a check, so none are left unprocessed at the end of the day. ROC cost data from Sep

> The typical cost-volume-profit graph assumes that profi ts increase continually as volume increases. What are some of the factors that might prevent the increasing profits that are indicated when linear CVP analysis is employed?

> Pogue’s Pops produces a popular beverage. Operating data for October follow: Materials . . . . . . . . . . . . . . . . . . . $ 650,000 Labor . . . . . . . . . . . . . . . . . . . . . . . . . 110,000 Manufacturing overhead . . . . . . 2,940,000 Pogue pro

> Why is control of materials important from a managerial planning perspective?

> Enviro Corporation manufactures a special liquid cleaner at its Green plant. Operating data for June follow: Materials . . . . . . . . . . . . . . . . . . . . $714,000 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . 61,200 Manufacturing overhea

> ABC Consultants works for only two clients: a large, for-profit corporation and a small environmental not-for-profit agency. The fee charged for work is based on cost. In deciding how to allocate overhead, the CFO of ABC decides to use the base that allo