Refer to Exercise 9-50. Until now, Meadow Logistics, Inc. (MLI) has used a commercial vendor to ship orders. The manager of Distribution believes the system described in Exercise 9-50 is too simple in two ways. First, if a retailer is ordering from MLI for the first time, Distribution has to take time to verify the retailer details (shipping address, credit, and so on). The manager estimates this additional time to total 20 minutes. In addition, some orders are quite complex. This happens when a retailer orders many different items in one order. The manager estimates that a complex order takes an additional 30 minutes to pick, on average. Required a. Write out the time equation for taking an order. b. Write out the time equation for picking an order. c. Using the data from Exercise 9-50 and the additional data here, compute the cost of filling a complex order from a new retailer. Assume that all of the items in the order are in stock and that the retailer will not pick the order up at the MLI loading dock. Exercise 9-50: Meadow Logistics, Inc. (MLI) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. MLI has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the MLI loading dock. Distribution has 20 employees who are responsible for the activities, and all 20 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 18 percent of the employees’ time for training and other administrative tasks. The total costs of distribution for the coming year are estimated to be $885,600. When asked, the manager of Distribution estimated the following times for each of the three activities: ∙ Taking orders: 8 minutes. ∙ Picking orders: 12 minutes. ∙ Packaging orders: 15 minutes. During the year, Distribution received 42,000 orders. Because of out-of-stock events, pickers had to pick 49,000 orders; 39,500 orders were packaged. Required: a. What is the cost per minute for activities in Distribution? b. What is the cost of an order that requires all three activities? c. How many minutes of unused capacity did Distribution have for the year? d. What was the cost of the unused capacity in Distribution?
> Refer to the data in Exercise 8-32. Required Compute the cost per equivalent unit for materials and conversion costs using the FIFO method. Exercise 8-32:
> Beverly Plastics produces a part used in precision machining. The part is produced in two departments: Mixing and Refining. The raw material is introduced into the process in the Mixing Department. The cost of the material fluctuates significantly month
> The following information about the work-in-process inventory pertains to the Remington Plant for the month of July (all materials are added at the beginning of the process): The Remington Plant started 216,000 units and transferred out 200,000 in July.
> Terminal Industries (TI) produces a product using three departments: Mixing, Processing, and Filtering. New material is added only in the Mixing Department. The following information is given for the Processing Department for August. TI uses process cost
> Refer to the data in Exercise 8-45. Required a. Compute the cost of goods transferred out and the cost of ending inventory for March using the FIFO method. b. Is the ending inventory higher or lower under the weighted-average method compared to FIFO? Why
> Refer to the data in Exercise 8-45. Compute the cost per equivalent unit for direct materials and for conversion costs for March using the FIFO method. Exercise 8-45: Bellevue Chemicals had beginning work-in-process inventory of $239,910 on March 1. Of
> Refer to the data in Exercise 8-45. Compute the costs of goods transferred out and the ending inventory for March using the weighted-average method. Exercise 8-45: Bellevue Chemicals had beginning work-in-process inventory of $239,910 on March 1. Of thi
> Bellevue Chemicals had beginning work-in-process inventory of $239,910 on March 1. Of this amount, $101,280 was the cost of direct materials and $138,630 was the cost of conversion. The 24,000 units in the beginning inventory were 45 percent complete wit
> Refer to the data in Exercises 8-41 and 8-43. Compute the cost of goods transferred out and the ending inventory for February using the FIFO method. Exercise 8-41:
> What is a limitation of the direct method of allocating service department costs? The step method?
> At the beginning of the month, Daniel’s Business Services had two incomplete consulting engagements (jobs) that had the following costs assigned from previous months. During the month, Jobs DBS-32 and DBS-35 were completed but not bille
> Refer to the data in Exercise 8-41. Compute the cost of goods transferred out and the ending inventory for February using the weighted-average method. Exercise 8-41:
> Annin Laboratories uses the weighted-average method to account for its work-in-process inventories. The accounting records show the following information for February: Quantity information is obtained from the manufacturing records and includes the follo
> Refer to the data in Exercise 8-37. Compute the cost of goods transferred out and the ending inventory for July using the FIFO method. Exercise 8-37:
> Refer to Exercise 8-37. Compute the cost per equivalent unit for direct materials and for conversion costs for July using the FIFO method. Exercise 8-37:
> What is the basic difference between the allocation of joint costs to (a) joint products and (b) by-products?
> When would a physical quantities method for allocation be preferred?
> Refer to the data in Exercise 8-37. Compute the cost of goods transferred out and the ending inventory for July using the weighted-average method. Exercise 8-37:
> What is the objective of joint cost allocation?
> What criterion should be used to determine the order of allocation from service departments when the step method is used? Explain why.
> What are the similarities and differences among the direct method, the step method, and the reciprocal method of allocating costs?
> Kingsley Products estimated that direct labor for the year would be 64,000 hours. The company also estimated that the fixed overhead cost for the year would be $160,000. They further estimated the variable overhead cost to be $4.00 per direct labor-hour.
> Kenmore Fabrication estimated that direct labor cost for the year would be $640,000. The company also estimated that fixed overhead would be $480,000 and variable overhead would be 35 percent of direct labor cost. Kenmore applies its overhead on the basi
> Louisiana Metals uses a job costing system. The company applies manufacturing overhead using a predetermined rate based on direct labor cost. The following debits (credits) appeared in the Workin- Process Inventory for June. Job LM-12, the only job still
> Bradby Automotive Restoration (BAR) has three service departments (S1, S2, and S3) and two operating departments (P1 and P2). Data on departmental usage of service departments follow: The direct costs for each department in the most recent period were as
> Rohns Manufacturing produces kitchen appliances at its North Roberts plant. The appliances go through two production departments: Fabrication and Assembly. The plant has three service departments: Information Systems Support (ISS), Training, and Administ
> Baldwin Enterprises has two service departments, Personnel and Legal, and two operating divisions, Eastern and Western. Personnel costs are allocated on the basis of employees and Legal costs are allocated on the basis of hours. A summary of Baldwin oper
> Hildale Manufacturing is organized with two service departments (Administration and Maintenance) and two production departments (Assembly and Finishing). The company uses the step method to allocate service department costs, allocating costs from Adminis
> Refer to the information in Exercise 7-36. Required Prepare an entry to allocate over- or underapplied overhead to a. Work in Process. b. Finished Goods. c. Cost of Goods Sold. Exercise 7-36: Marian Manufacturing (2M) applies manufacturing overhead to j
> Greendale Office Products has a warehouse that supplies office products to its store locations. The warehouse has two service departments, Human Resources (HR) and Information Technology (IT), and two operating departments, Packaging and Delivery. The fo
> Tennessee Company manufactures a specialized fitting for industrial machinery at the Stephens Street Facility. The facility has five departments. Two departments (Casting and Finishing) are production departments. The other three departments (Purchasing,
> Refer to the information and data in Problem 10-79. After working with the quality system for one year, the cost analyst revisits the relations for conformance and nonconformance costs. During the year, the quality team worked on lowering the cost of con
> Refer to the information in Problem 10-77. The organic cider business has two seasons, holidays and nonholidays. The holiday season lasts exactly four months (although it feels longer), and the nonholiday season lasts eight months. SOP orders the same am
> Remington Agricultural Products (RAP) produces organic cider with no preservatives. Any production must be sold within a few days, so producing for inventory is not an option. RAP’s single plant has the capacity to make 72,000 cases of cider annually. Cu
> Refer to Problems 10-74 and 10-75. The owner of Terry’s Bakery now believes that there are really three seasons instead of two, the third being the fall and spring (as a combined season). Each of the three seasons lasts exactly four mon
> Refer to the information in Problem 10-74. The pie business in this town has two seasons, summer and winter. Each season lasts exactly six months. Panama Food Mart orders 9,000 pies in the summer and 9,000 pies in the winter. East Street Coffee is closed
> Located in a small town in upstate New York, Terry’s Bakery operates a facility that makes pies for retail sale. The facility has the capacity to make 36,000 pies annually. The plant has only two customers, Panama Food Mart and East Street Coffee. Annual
> Barr Plastics makes parts for a variety of manufacturing applications. Sales last year totaled $3,060,000. Information regarding resources for the month follows. In addition, Barr spent $90,000 on 60 engineering changes with a cost-driver rate of $1,400,
> Consider the information in Problem 10-71. The sales manager of Granger Materials has proposed to the purchasing manager at Carrie Construction that Granger be given an exclusive contract to supply the aggregate. Assume that the total annual demand remai
> Marian Manufacturing (2M) applies manufacturing overhead to jobs based on direct labor costs. For Year 2, 2M estimates its manufacturing overhead to be $421,200 and its direct labor costs to be $810,000. 2M worked on three jobs for the year. Job 2M-1, wh
> Carrie Construction (CC) is a company specializing in building airport runways and major highways. As a part of its business, it receives supplies of aggregate (stone, sand, gravel, and so on) from two suppliers: Austin Aggregate and Granger Materials. T
> Consider the information in Problem 10-69. The sales manager of Woodlawn Petroleum has proposed to the purchasing manager at Atwater that Woodlawn be given an exclusive contract to supply the lubricant. If it receives the contract, Woodlawn will guarante
> Huber Supply is a distribution company specializing in providing paper and soap products for institutions such as hospitals, colleges, and so on. Customers place orders online with Huber. Once an order is received, the warehouse verifies the purchaser&ac
> Stark Remodeling Center (SRC) is a home renovation showroom that caters primarily to contractors. Customers place orders at SRC, either in person or online, and the merchandise is packaged in standard-sized boxes and delivered to the home or job site. (T
> Grand Online Mall (GOM) is an online retailer that sells many different products. GOM offers its customers two options for shipping. First, the “Regular” program charges a flat fee of $9.90 per order within its shippin
> Kresge Lodging has an elite program for its card members. There are three levels, based on total nights stayed: Diamond (50 nights or more); Platinum (25 nights or more); and Base (fewer than 25 nights). In order to facilitate reservations and answer cus
> Lozier Catering and Events (LCE) offers a variety of services from small gatherings to large weddings and corporate retreats. Sales for year 1 totaled $877,500. Information regarding resources for the year includes the following: Required Management has
> Refer to Exercise 10-50. Sales revenue for Hosmer Industries is $720,000. Required a. Prepare a traditional income statement like the one in Exhibit 10.11. b. Prepare an activity-based income statement like the one in Exhibit 10.12. c. Prepare a short re
> Refer to the information in Exercise 9-52. The manager of the Personnel Department decides that the estimate of the activities might be too simple in two ways. First, the time to interview depends on the level of the position for which a candidate is sou
> Refer to the information in Exercise 7-34. The amount of overhead applied in each of the inventory accounts at the end of Year 1 is as follows. Required Prepare an entry to allocate the over- or underapplied overhead. Exercise 7-34: Linzee Liners estima
> Commonwealth Devices makes three wearable fitness devices at its Lake Plant: CFit-1, CFit-2, and CFit-Xtra. The company has for many years allocated overhead to products using machine-hours. Last year, the Lake Plant produced and shipped 8,000 units of C
> Chadwick Industries has several manufacturing facilities that make a wide variety of industrial and consumer products. Two of the plants, River North and River South, make components for road construction equipment. The River North plant was built when t
> Montana Precision Products (MPP) produces parts for small machine tools. The typical product goes through two processes, machining and finishing, before being packaged and shipped to the customer. All jobs at MMP are produced to order, and the company ho
> Miller Manufacturing (2M) makes a variety of components for mechanized agricultural equipment. The products are similar but not identical, and all go through many of the same processes. 2M sells products worldwide and has to comply with various regulatio
> Burgess Business School has two degree programs, BBA and MBA. The school uses an ABC system to cost the three support services it provides to students from both programs: Career Center, Events, and Library. Following are the costs of these three activiti
> Refer to Problem 9-63. The study team decides to look more closely at the assembly activity and determines that it can be broken down into two activities: production and engineering. Production covers the costs of ongoing manufacturing, while engineering
> Lauder Company manufactures and distributes various fixtures used primarily in new building construction. At the company’s Bayside plant, Lauder produces two models of one widely used fixture designated by model names LC-20 and LC-50. C
> Kensington Electronics (KE) is a wholly owned subsidiary of CWD Enterprises, a global manufacturing company. Unlike most CWD companies, KE uses a traditional costing system to compute product costs. After the last review by CWD staff, the financial manag
> Warren Furniture produces three models of desk chairs: Basic, Ergo, and Exec. The cost system at the Warren production facility allocates overhead cost on the basis of direct labor hours. The company is considering updating its cost system to an activity
> Nall Products manufactures a wide variety of products in several facilities. It produces three models of mobility scooters in its St. Claire plant: models NP-10, NP-20, and NPX-70. The machine and labor times for the three models are similar. The differe
> Linzee Liners estimates that its manufacturing overhead will be $1,725,000 in Year 1. It further estimates that direct labor costs will amount to $750,000. During March, Linzee worked on four jobs with actual direct labor costs of $35,000 for Job 0301, $
> What is the cost hierarchy?
> Ellis Equipment (EE) manufactures three models of lawn tractor: EE-1000, EE-1800, and EE-2800. Because of the different materials used, production processes for each model differ significantly in terms of machine types and time requirements. Once parts a
> Delaware Electronics makes three models of a controller for measurement and testing equipment: Models X-100, X-200, and X-500. The three models differ in their capabilities and also in the materials they use. The X-100 model is a low-technology, standard
> Clairepoint Medical Devices, Inc. (CMDI) makes three types of a diagnostic device. For internal purposes, these models are referred to as Alpha, Beta, and Gamma, respectively. Although they are designed to provide the same information, the models differ
> Fisher Fixtures manufactures three types of lighting fixtures, with model names of Silver, Gold, and Platinum. It applies all indirect costs according to an annual predetermined rate based on direct labor-hours. The plant controller has recommended that
> Refer to Problem 9-54. Assume that you have prepared financial statements that show the operating profit for each of the two models manufactured by Thatcher Supply. Further assume that under the activity-based costing approach (requirement [b] in Problem
> Thatcher Supply manufactures and sells two types of pet doors—Standard and Hi-Tech. The Standard model is a basic opening installed in a door. The Hi-Tech model is automated and includes several safety features using electronics. The Hi
> Normandy Office Products (NOP) makes two types of office desks, Manager and Executive. The Executive model is adjustable using electric motors and is made with upgraded materials. The manufacturing process for the Executive model is more complex than tha
> Refer to the data in Exercise 8-56 (Hedwig Optical). Information for January is copied here. There are never any work-in-process inventories. The plant controller believes that keeping track of the three models and separating costs in the Assembly and Ca
> Drew Implements makes four models of utility and light construction tractors. The model names are DI-1400, DI-3800, DI-5000, and DI-8000. Drew manufactures the tractors in two departments— Fabrication and Detailing. All four models are
> Chateaufort Craft (CC) makes three models of sea kayaks: CC-100, CC-200, and CC-500. CC manufactures the boats in two departments: Department A (Assembly) and Department B (Finishing). All three models are processed initially in Department A, where all m
> Refer to the information in Exercise 7-32. Overhead applied in each of the inventory accounts is as follows. Required Prepare an entry to allocate the under- or overapplied overhead. Exercise 7-32: Antoine Machining estimated its manufacturing overhead
> Saratoga Systems produces a single product. The production process requires all material to be brought to the shop floor before any work begins. The material is then processed and assembled and then transferred to finished goods inventory. Every unit is
> For each of the following independent cases, determine the units or equivalent units requested (assuming weighted-average costing). a. Beginning inventory consisted of 64,000 units with a direct materials cost of $113,600. The equivalent work represented
> For each of the following independent cases, use FIFO costing to determine the information requested. a. At the start of the period, 7,000 units were in the work-in-process inventory; 5,250 units were in the ending inventory. During the period, 16,625 un
> Refer to the information in Problem 8-67. The Mixing Department at the Stadium Plant uses FIFO process costing to account for production. In May, beginning work-in-process inventory consisted of 150,000 units, 40 percent complete with respect to conversi
> Howell Food Products (HFP) produces the most popular of its canned soup varieties at the Stadium Plant. The Stadium Plant has two departments: Mixing and Canning. Raw materials are added at two points in the production of the soup. First, vegetables are
> The Erskine Inc. Metals Division manufactures an industrial compound used in metal working at the division’s only plant. The production process uses two materials. The first is a lubricant produced by the Chemicals Division of Erskine. The Chemicals Divi
> Ambassador Lubricants (AL) produces various oil and synthetic-based products. One of the products is produced at the company’s Bridge Plant in a single department. Two materials are used in the production process. Material A is introduc
> Refer to the facts in Problem 8-59. Required a. Prepare a production cost report using FIFO. b. Answer requirement (b) in Problem 8-59. Problem 8-59: Required a. Prepare a production cost report for September using the weighted-average method. b. Manage
> Refer to the data in Exercise 8-56 and Problem 8-74 (Hedwig Optical). The marketing manager cannot believe that the controller wants to treat all binocular models the same. The marketing manager says that in order to understand where to target marketing
> Spokane, Inc. is a manufacturing company that produces parts both for inventory and to custom specifications. Parts produced for inventory are sold at prices determined in the market. Custom parts are sold at a price equal to production cost plus a profi
> Antoine Machining estimated its manufacturing overhead to be $279,000 and its direct materials costs to be $450,000 in Year 1. Three of the jobs that Antoine Machining worked on in Year 1 had actual direct materials costs of $15,000 for Job AM002, $55,00
> Buelow, LLP, is a consulting firm that helps organizations become more efficient. A supervisor on two consulting jobs discusses an issue that arose recently. One of the consulting jobs is for a large technology firm, and the other is for a major automobi
> Jerome Shipyards does work for both the U.S. Navy and private shipping companies. Jerome’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: Casgrain and Lyndo
> Plainview Paving Contractors (PPC) is a rapidly growing, recently established company that has not been profitable despite increases in sales. It has hired you as a consultant to find ways to improve profitability. You believe that the problem results fr
> Accounting records for Antoinette Designs (AD) for November show the following (each entry is the total of the actual entries for the account for the month): The Work-in-Process Inventory ending account balance on November 30 was 125 percent of the begin
> Mechanic Implements manufactures miscellaneous parts for building construction and maintenance. The company uses a normal job costing system and overhead is applied on the basis of direct labor cost. Any over- or underapplied overhead is written off to C
> The following financial information about the manufacturing plant of Continental Company for the year-to-date and the month of July appears on the company’s records: A count of the inventories on hand July 31 shows the following: Interv
> Manor Painting is a commercial interior and exterior painting contractor specializing in commercial buildings. An inventory of materials and equipment is on hand at all times, so work can start as quickly as possible. Special equipment is ordered as requ
> Hyde Restorations rebuilds factory facilities. It employs 130 full-time workers at $25 per hour. Despite operating at capacity, last year’s performance was a great disappointment to the managers. In total, nine jobs were accepted and co
> Refer to the facts in Problem 8-64. Required The financial managers at Ambassador Lubricants are trying to decide between whether to continue using the weighted-average method or switch to FIFO. They tell you that the June results are fairly typical. Wha
> On April 1, two jobs were in process at Hartwell Contracting. Details of the jobs follow: The Materials Inventory account on April 1 totaled $7,900. Materials purchased during the month totaled $17,100. Indirect materials of $1,540 were issued from mater
> Cranshaw Business Services (CBS) operates an information technology (IT) consulting firm out of two offices: Detroit and Los Angeles. Corporate services, such as legal, finance, and personnel, are centralized at the main office, and the costs of these se
> The records of Tillman Corporation’s initial and unaudited accounts show the following ending inventory balances, which must be adjusted to actual costs: As the auditor, you have learned the following information. Ending work-in-process
> Rogell Academic Services (RAS) provides tutoring and test preparation services for children and young adults. Employees include a director and six facilitators. The director manages all marketing and administrative activities, sometimes with the help of
> Select the best answer for each of the following independent multiple-choice questions. a. Hillger Paints’s production cycle starts in Department A. The following information is available for April: Materials are added at the beginning
> Garvin, Inc. produces a specialized machine tool to order. Garvin uses a job costing system and applies overhead on the basis of direct labor-hours. Each unit varies according to customer specification, but for planning purposes, Garvin uses the followin
> Mercier Manufacturing produces a plastic part in three sequential departments: Extruding, Fabricating, and Packaging. Mercier uses the weighted-average process costing method to account for costs of production in all three departments. The following info
