3-35 Predicting Costs
Given the following four cost behaviors and expected levels of cost-driver activity, predict total costs:
1. Fuel costs of driving vehicles, $0.20 per mile, driven 17,000 miles per month
2. Equipment rental cost, $6,000 per piece of equipment per month for seven pieces for three
months
3. Ambulance and EMT personnel cost for a soccer tournament, $1,200 for each 250 tournament participants; the tournament is expecting 2,400 participants
4. Purchasing department cost, $7,500 per month plus $4 per material order processed at 4,000 orders in one month
Click here for the solution: Given the following four cost behaviors and expected levels of cost-driver activity, predict total costs
Showing posts with label costs. Show all posts
Showing posts with label costs. Show all posts
Friday, April 15, 2016
Wednesday, April 13, 2016
For each of the following costs, identify whether the item is:
For each of the following costs, identify whether the item is:
A variable or fixed cost?
Direct or indirect cost?
Controllable or uncontrollable cost?
For example: Plant Utilities would be a variable, indirect, and controllable cost.
Not all items will fit into each category. Items that do not fit a category should be labeled as not applicable.
Raw materials.
Staples used to secure packed boxes of the product.
Plant janitor’s wages.
Order processing clerk’s wages.
Advertising expenses.
Production worker’s wages.
Production supervisor’s salaries.
Sales force commissions.
Maintenance supplies used.
President’s salary.
Electricity cost for the office building.
Real estate taxes for the plant.
Production-run setup costs.
Depreciation of plant equipment.
Outbound shipping costs.
Use a table format to complete this assignment.
Click here for the solution: For each of the following costs, identify whether the item is:
A variable or fixed cost?
Direct or indirect cost?
Controllable or uncontrollable cost?
For example: Plant Utilities would be a variable, indirect, and controllable cost.
Not all items will fit into each category. Items that do not fit a category should be labeled as not applicable.
Raw materials.
Staples used to secure packed boxes of the product.
Plant janitor’s wages.
Order processing clerk’s wages.
Advertising expenses.
Production worker’s wages.
Production supervisor’s salaries.
Sales force commissions.
Maintenance supplies used.
President’s salary.
Electricity cost for the office building.
Real estate taxes for the plant.
Production-run setup costs.
Depreciation of plant equipment.
Outbound shipping costs.
Use a table format to complete this assignment.
Click here for the solution: For each of the following costs, identify whether the item is:
Nancy Company has budgeted sales of $300,000 with the following budgeted costs
Nancy Company has budgeted sales of $300,000 with the following budgeted costs:
Direct materials $60,000
Direct manufacturing labor 40,000
Factory overhead
Variable 30,000
Fixed 50,000
Selling and administrative expenses
Variable 20,000
Fixed 30,000
Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product (5 points)
Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost of the product (5 points)
Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing costs (5 points)
Click here for the solution: Nancy Company has budgeted sales of $300,000 with the following budgeted costs
Direct materials $60,000
Direct manufacturing labor 40,000
Factory overhead
Variable 30,000
Fixed 50,000
Selling and administrative expenses
Variable 20,000
Fixed 30,000
Question 1: Compute the average markup percentage for setting prices as a percentage of the full cost of the product (5 points)
Question 2: Compute the average markup percentage for setting prices as a percentage of the variable cost of the product (5 points)
Question 3: Compute the average markup percentage for setting prices as a percentage of the variable manufacturing costs (5 points)
Click here for the solution: Nancy Company has budgeted sales of $300,000 with the following budgeted costs
Bjerg Corporation incurred several costs
E2-7 Bjerg Corporation incurred several costs. Prepare entries for manufacturing costs. Journalize the following transactions.
1. Purchased raw materials on account $46,300
2. Raw Materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicates that $6,800 was classified as indirect materials.
3. Factory labor costs incurred were $53,900, of which $49,000 pertained to factory wages payable and $4,900 pertained to employer payroll taxes payable.
4. Time tickets indicated that $48,000 was direct labor and $5,900 was indirect labor.
5. Overhead costs incurred on account were $80,500.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $88,000 were completed and transferred to finished goods.
8. Finished goods costing $75,000 to manufacture were sold on account for $103,000
Click here for the solution: Bjerg Corporation incurred several costs
1. Purchased raw materials on account $46,300
2. Raw Materials of $36,000 were requisitioned to the factory. An analysis of the materials requisition slips indicates that $6,800 was classified as indirect materials.
3. Factory labor costs incurred were $53,900, of which $49,000 pertained to factory wages payable and $4,900 pertained to employer payroll taxes payable.
4. Time tickets indicated that $48,000 was direct labor and $5,900 was indirect labor.
5. Overhead costs incurred on account were $80,500.
6. Manufacturing overhead was applied at the rate of 150% of direct labor cost.
7. Goods costing $88,000 were completed and transferred to finished goods.
8. Finished goods costing $75,000 to manufacture were sold on account for $103,000
Click here for the solution: Bjerg Corporation incurred several costs
(Identify the costs below as variable, fixed, or mixed) Moctezuma Furniture Corporation incurred the following costs
Identify the costs below as variable, fixed, or mixed.
E5-4 Moctezuma Furniture Corporation incurred the following costs.
1. Wood used in the production of furniture.
2. Fuel used in delivery trucks.
3. Straight-line depreciation on factory building.
4. Screws used in the production of furniture.
5. Sales staff salaries.
6. Sales commissions.
7. Property taxes.
8. Insurance on buildings
9. Hourly wages of furniture craftsmen.
10. Salaries of factory supervisors.
11. Utilities expense.
Click here for the solution: (Identify the costs below as variable, fixed, or mixed) Moctezuma Furniture Corporation incurred the following costs
E5-4 Moctezuma Furniture Corporation incurred the following costs.
1. Wood used in the production of furniture.
2. Fuel used in delivery trucks.
3. Straight-line depreciation on factory building.
4. Screws used in the production of furniture.
5. Sales staff salaries.
6. Sales commissions.
7. Property taxes.
8. Insurance on buildings
9. Hourly wages of furniture craftsmen.
10. Salaries of factory supervisors.
11. Utilities expense.
Click here for the solution: (Identify the costs below as variable, fixed, or mixed) Moctezuma Furniture Corporation incurred the following costs
1. Since overhead costs are indirect costs, _______. (Points : 1)
1. Since overhead costs are indirect costs, _______. (Points : 1)
2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)
3. One reason annual overhead application rates are used is ______. (Points : 1)
4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)
5. In the formula y = a + bX, y represents _______. (Points : 1)
6. If the level of activity increases, _______. (Points : 1)
7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)
8. Reno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points : 1)
9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)
How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points : 1)
10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points : 1)
11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month Machine hours Indirect labor costs
1 300 $20,000
2 400 $24,000
3 240 $17,000
4 370 $22,000
5 200 $13,000
6 225 $14,000
In a high-low model, which months' observations would be used to compute the model's parameters? (Points : 1)
12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)
14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)
15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)
17. The costing system that classifies costs by functional group only is _______. (Points : 1)
18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)
19. Another name for variable costing is _______. (Points : 1)
20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)
Click here for the solution: 1. Since overhead costs are indirect costs, _______. (Points : 1)
2. An actual cost system differs from a normal cost system in that an actual cost system ______. (Points : 1)
3. One reason annual overhead application rates are used is ______. (Points : 1)
4. When a manufacturing company has a highly automated manufacturing plant producing many different products, which of the following is the more appropriate basis of applying manufacturing overhead costs to work in process? (Points : 1)
5. In the formula y = a + bX, y represents _______. (Points : 1)
6. If the level of activity increases, _______. (Points : 1)
7. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a _______. (Points : 1)
8. Reno Corporation uses a predetermined overhead application rate of $.30 per direct labor hour. During the year it incurred $345,000 dollars of actual overhead, but it planned to incur $360,000 of overhead. The company applied $363,000 of overhead during the year. How many direct labor hours did the company plan to incur? (Points : 1)
9. Gary Corporation has developed the following flexible budget formula for monthly overhead:
For output of less than 200,000 units: $36,600 + $.80(units)
For output of 200,000 units or more: $43,000 + $.80(units)
How much overhead should Gary expect if the firm plans to produce 200,000 units? (Points : 1)
10. Aztec Company is relocating its facilities. The company estimates that it will take three trucks to move office contents. If the per truck rental charge is $1,000 plus 25 cents per mile, what is the expected cost to move 800 miles? (Points : 1)
11. Aquatic Motor Company is exploring different prediction models that can be used to forecast indirect labor costs. One independent variable under consideration is machine hours. Following are matching observations on indirect labor costs and machine hours for the past six months:
Month Machine hours Indirect labor costs
1 300 $20,000
2 400 $24,000
3 240 $17,000
4 370 $22,000
5 200 $13,000
6 225 $14,000
In a high-low model, which months' observations would be used to compute the model's parameters? (Points : 1)
12. If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in _______. (Points : 1)
13. Under absorption costing, fixed manufacturing overhead could be found in all of the following except the _______. (Points : 1)
14. The FASB requires which of the following to be used in preparation of external financial statements? (Points : 1)
15. An ending inventory valuation on an absorption costing balance sheet would _______. (Points : 1)
16. Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated? (Points : 1)
17. The costing system that classifies costs by functional group only is _______. (Points : 1)
18. The costing system that classifies costs by both functional group and behavior is _______. (Points : 1)
19. Another name for variable costing is _______. (Points : 1)
20. If a firm uses variable costing, fixed manufacturing overhead will be included _______. (Points : 1)
Click here for the solution: 1. Since overhead costs are indirect costs, _______. (Points : 1)
Wednesday, November 11, 2015
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
13-52 Choice of Cost-Allocation Bases in Accounting Firm
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor. In this way, the firm will be able to justify billings to clients.
Last year’s costs were
Direct-professional labor $ 5,000,000
Overhead 10,000,000
Total costs $15,000,000
The following costs were included in overhead:
Computer time $ 750,000
Secretarial cost 700,000
Photocopying 250,000
Fringe benefits to direct labor 800,000
Phone call time with clients (estimated but not tabulated) 500,000
Total $3,000,000
The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs. As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.
Two job records showed the following:
Engagement
Eagledale Company First Valley Bank
Direct-professional labor $15,000 $15,000
Fringe benefits to direct labor 3,000 3,000
Phone call time with clients 1,500 500
Computer time 3,000 700
Secretarial costs 2,000 1,500
Photocopying 500 300
Total direct costs $25,000 $21,000
1. Compute the overhead application rate based on last year’s costs.
2. Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.
3. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.
4. Suppose that client billing was based on a 30% markup of total job costs. Compute the billings that would be forthcoming in number 3.
5. Which method of costing and overhead application do you favor? Explain.
Click here for the solution: Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor. In this way, the firm will be able to justify billings to clients.
Last year’s costs were
Direct-professional labor $ 5,000,000
Overhead 10,000,000
Total costs $15,000,000
The following costs were included in overhead:
Computer time $ 750,000
Secretarial cost 700,000
Photocopying 250,000
Fringe benefits to direct labor 800,000
Phone call time with clients (estimated but not tabulated) 500,000
Total $3,000,000
The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs. As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.
Two job records showed the following:
Engagement
Eagledale Company First Valley Bank
Direct-professional labor $15,000 $15,000
Fringe benefits to direct labor 3,000 3,000
Phone call time with clients 1,500 500
Computer time 3,000 700
Secretarial costs 2,000 1,500
Photocopying 500 300
Total direct costs $25,000 $21,000
1. Compute the overhead application rate based on last year’s costs.
2. Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.
3. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.
4. Suppose that client billing was based on a 30% markup of total job costs. Compute the billings that would be forthcoming in number 3.
5. Which method of costing and overhead application do you favor? Explain.
Click here for the solution: Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs
The Central Railroad allocates all central corporate overhead costs to its divisions
12-A3 Allocation of Central Costs
The Central Railroad allocates all central corporate overhead costs to its divisions. Some costs, such as specified internal auditing and legal costs are identified on the basis of time spent. However, other costs are harder to allocate so the revenue achieved by each division is used as an allocation base. Examples of such costs are executive salaries, travel, secretarial, utilities, rent, depreciation, donations, corporate planning, and general marketing costs.
Allocations on the basis of revenue for 20X7 were (in millions):
Division Revenue Allocated Costs
Northern $120 $ 6
Midwest 240 12
Texas-Oklahoma 240 12
Total $600 $30
In 20X8, Northern’s revenue remained unchanged. However, Texas-Oklahoma’s revenue soared to $280 million because of unusually large imports from Mexico. The latter are troublesome to forecast because of variations in world markets. Midwest had expected a sharp rise in revenue, but severe competitive conditions resulted in a decline to $200 million. The total cost allocated on the basis of revenue was again $30 million, despite rises in other costs. The president was pleased that central costs did not rise for the year.
1. Compute the allocations of costs to each division for 20X8.
2. How would each division manager probably feel about the cost allocation in 20X8 as compared with 20X7? What are the weaknesses of using revenue as a basis for cost allocation?
3. Suppose the budgeted revenues for 2002 were $120 million, $240, and $280, respectively, and the budgeted revenues were used as a cost driver for allocation. Compute the allocations of costs to each division for 20X8. Do you prefer this method to the one used in requirement 1? Why?
4. Many accountants and managers oppose allocating any central costs. Why?
Click here for the solution: The Central Railroad allocates all central corporate overhead costs to its divisions
The Central Railroad allocates all central corporate overhead costs to its divisions. Some costs, such as specified internal auditing and legal costs are identified on the basis of time spent. However, other costs are harder to allocate so the revenue achieved by each division is used as an allocation base. Examples of such costs are executive salaries, travel, secretarial, utilities, rent, depreciation, donations, corporate planning, and general marketing costs.
Allocations on the basis of revenue for 20X7 were (in millions):
Division Revenue Allocated Costs
Northern $120 $ 6
Midwest 240 12
Texas-Oklahoma 240 12
Total $600 $30
In 20X8, Northern’s revenue remained unchanged. However, Texas-Oklahoma’s revenue soared to $280 million because of unusually large imports from Mexico. The latter are troublesome to forecast because of variations in world markets. Midwest had expected a sharp rise in revenue, but severe competitive conditions resulted in a decline to $200 million. The total cost allocated on the basis of revenue was again $30 million, despite rises in other costs. The president was pleased that central costs did not rise for the year.
1. Compute the allocations of costs to each division for 20X8.
2. How would each division manager probably feel about the cost allocation in 20X8 as compared with 20X7? What are the weaknesses of using revenue as a basis for cost allocation?
3. Suppose the budgeted revenues for 2002 were $120 million, $240, and $280, respectively, and the budgeted revenues were used as a cost driver for allocation. Compute the allocations of costs to each division for 20X8. Do you prefer this method to the one used in requirement 1? Why?
4. Many accountants and managers oppose allocating any central costs. Why?
Click here for the solution: The Central Railroad allocates all central corporate overhead costs to its divisions
Tuesday, November 10, 2015
The standard cost card contains quantities and costs for
MULTIPLE CHOICE
1. The standard cost card contains quantities and costs for _______. (Points : 1)
2. A total variance is best defined as the difference between total _______. (Points : 1)
3. The term standard hours allowed measures _______. (Points : 1)
4. Which of the following factors should not be considered when deciding whether to investigate a variance? (Points : 1)
5. A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when ______. (Points : 1)
6. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard. (Points : 1)
7. Gallagher Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance _______. (Points : 1)
8. A variable overhead spending variance is caused by ________. (Points : 1)
9. McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar).
Standards:
Material 3.5 pounds per unit @ $4.50 per pound
Labor 5.0 hours per unit @ $10.25 per hour
Actual:
Material purchased 12,300 pounds @ $4.25
Material used 11,750 pounds
17,300 direct labor hours @ $10.20 per hour
What is the labor rate variance? (Points : 1)
10. McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar).
Standards:
Material 3.5 pounds per unit @ $4.50 per pound
Labor 5.0 hours per unit @ $10.25 per hour
Actual:
Material purchased 12,300 pounds @ $4.25
Material used 11,750 pounds
17,300 direct labor hours @ $10.20 per hour
What is the labor efficiency variance? (Points : 1)
11. Joint costs are useful for _______. (Points : 1)
12. Each of the following is a method to allocate joint costs except _______. (Points : 1)
13. When allocating joint process cost based on tons of output, all products will _______. (Points : 1)
14. Scrap is defined as a _______. (Points : 1)
15. Waste created by a production process is _______. (Points : 1)
16. In a lumber mill, which of the following would most likely be considered a primary product? (Points : 1)
17. Fisher Company produces three products from a joint process. The products can be sold at split-off or processed further. In deciding whether to sell at split-off or process further, management should _______. (Points : 1)
18. The split-off point is the point at which _______. (Points : 1)
19. A product may be processed beyond the split-off point if management believes that _______. (Points : 1)
20. Which of the following is a commonly used joint cost allocation method? (Points : 1)
Click here for the solution: The standard cost card contains quantities and costs for
1. The standard cost card contains quantities and costs for _______. (Points : 1)
2. A total variance is best defined as the difference between total _______. (Points : 1)
3. The term standard hours allowed measures _______. (Points : 1)
4. Which of the following factors should not be considered when deciding whether to investigate a variance? (Points : 1)
5. A company wishing to isolate variances at the point closest to the point of responsibility will determine its material price variance when ______. (Points : 1)
6. The standard predominantly used in Western cultures for motivational purposes is a(n) ____ standard. (Points : 1)
7. Gallagher Corporation. incurred 2,300 direct labor hours to produce 600 units of product. Each unit should take 4 direct labor hours. Gallagher Corporation applies variable overhead to production on a direct labor hour basis. The variable overhead efficiency variance _______. (Points : 1)
8. A variable overhead spending variance is caused by ________. (Points : 1)
9. McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar).
Standards:
Material 3.5 pounds per unit @ $4.50 per pound
Labor 5.0 hours per unit @ $10.25 per hour
Actual:
Material purchased 12,300 pounds @ $4.25
Material used 11,750 pounds
17,300 direct labor hours @ $10.20 per hour
What is the labor rate variance? (Points : 1)
10. McCoy Company has the following information available for October when 3,500 units were produced (round answers to the nearest dollar).
Standards:
Material 3.5 pounds per unit @ $4.50 per pound
Labor 5.0 hours per unit @ $10.25 per hour
Actual:
Material purchased 12,300 pounds @ $4.25
Material used 11,750 pounds
17,300 direct labor hours @ $10.20 per hour
What is the labor efficiency variance? (Points : 1)
11. Joint costs are useful for _______. (Points : 1)
12. Each of the following is a method to allocate joint costs except _______. (Points : 1)
13. When allocating joint process cost based on tons of output, all products will _______. (Points : 1)
14. Scrap is defined as a _______. (Points : 1)
15. Waste created by a production process is _______. (Points : 1)
16. In a lumber mill, which of the following would most likely be considered a primary product? (Points : 1)
17. Fisher Company produces three products from a joint process. The products can be sold at split-off or processed further. In deciding whether to sell at split-off or process further, management should _______. (Points : 1)
18. The split-off point is the point at which _______. (Points : 1)
19. A product may be processed beyond the split-off point if management believes that _______. (Points : 1)
20. Which of the following is a commonly used joint cost allocation method? (Points : 1)
Click here for the solution: The standard cost card contains quantities and costs for
Monday, October 26, 2015
CVP analysis requires costs to be categorized as
MULTIPLE CHOICE
1. CVP analysis requires costs to be categorized as _______. (Points : 1)
2. According to CVP analysis, a company could never incur a loss that exceeded its total _______. (Points : 1)
3. CVP analysis is based on concepts from _______. (Points : 1)
4. Which of the following factors is involved in studying cost-volume-profit relationships? (Points : 1)
5. After the level of volume exceeds the break-even point _______. (Points : 1)
6. The method of cost accounting that lends itself to break-even analysis is _______. (Points : 1)
7. Given the following notation, what is the break-even sales level in units?
SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit
(Points : 1)
8. To compute the break-even point in units, which of the following formulas is used? (Points : 1)
9. Below is an income statement for Thompson Company. Based on the cost and revenue structure on the income statement, below, what was Thompson's break-even point in dollars?
Sales $400,000
Variable costs (125,000)
Contribution margin $275,000
Fixed costs (200,000)
Profit before taxes $ 75,000
(Points : 1)
10. Unique Company manufactures a single product. In the prior year, the company had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Unique expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year's net income by _______. (Points : 1)
11. Which of the following is not a characteristic of relevant costing information? It is _______. (Points : 1)
12. Relevant costs are _______. (Points : 1)
13. If a cost is irrelevant to a decision, the cost could not be _______. (Points : 1)
14. A cost is sunk if it _______. (Points : 1)
15. In deciding whether an organization will keep an old machine or purchase a new machine, a manager would ignore the _______. (Points : 1)
16. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is _______. (Points : 1)
17. In a make or buy decision, the opportunity cost of capacity could _______. (Points : 1)
18. When a scarce resource, such as space, exists in an organization, the criterion that should be used to determine production is _______. (Points : 1)
19. Fixed costs are ignored in allocating scarce resources because _______. (Points : 1)
20. The minimum selling price that should be acceptable in a special order situation is equal to total _______. (Points : 1)
Click here for the solution: CVP analysis requires costs to be categorized as
1. CVP analysis requires costs to be categorized as _______. (Points : 1)
2. According to CVP analysis, a company could never incur a loss that exceeded its total _______. (Points : 1)
3. CVP analysis is based on concepts from _______. (Points : 1)
4. Which of the following factors is involved in studying cost-volume-profit relationships? (Points : 1)
5. After the level of volume exceeds the break-even point _______. (Points : 1)
6. The method of cost accounting that lends itself to break-even analysis is _______. (Points : 1)
7. Given the following notation, what is the break-even sales level in units?
SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit
(Points : 1)
8. To compute the break-even point in units, which of the following formulas is used? (Points : 1)
9. Below is an income statement for Thompson Company. Based on the cost and revenue structure on the income statement, below, what was Thompson's break-even point in dollars?
Sales $400,000
Variable costs (125,000)
Contribution margin $275,000
Fixed costs (200,000)
Profit before taxes $ 75,000
(Points : 1)
10. Unique Company manufactures a single product. In the prior year, the company had sales of $90,000, variable costs of $50,000, and fixed costs of $30,000. Unique expects its cost structure and sales price per unit to remain the same in the current year, however total sales are expected to increase by 20 percent. If the current year projections are realized, net income should exceed the prior year's net income by _______. (Points : 1)
11. Which of the following is not a characteristic of relevant costing information? It is _______. (Points : 1)
12. Relevant costs are _______. (Points : 1)
13. If a cost is irrelevant to a decision, the cost could not be _______. (Points : 1)
14. A cost is sunk if it _______. (Points : 1)
15. In deciding whether an organization will keep an old machine or purchase a new machine, a manager would ignore the _______. (Points : 1)
16. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is _______. (Points : 1)
17. In a make or buy decision, the opportunity cost of capacity could _______. (Points : 1)
18. When a scarce resource, such as space, exists in an organization, the criterion that should be used to determine production is _______. (Points : 1)
19. Fixed costs are ignored in allocating scarce resources because _______. (Points : 1)
20. The minimum selling price that should be acceptable in a special order situation is equal to total _______. (Points : 1)
Click here for the solution: CVP analysis requires costs to be categorized as
Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
E2-13 Easy Decorating uses a job order costing system to collect the costs of its interior decorating business. Each client's consultation is treated as a separate job. Overhead is applied to each job based on the number of decorator hours incurred. Listed below are data for the current year.
Budgeted overhead $960,000
Actual overhead $982,800
Budgeted decorator hours 40,000
Actual decorator hours 40,500
The company uses Operating Overhead in place of Manufacturing Overhead.
Required:
a) Compute the predetermined overhead rate.
b) Prepare the entry to apply the overhead for the year.
c) Determine whether the overhead was under- or overapplied and by how much.
Click here for the solution: Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
Budgeted overhead $960,000
Actual overhead $982,800
Budgeted decorator hours 40,000
Actual decorator hours 40,500
The company uses Operating Overhead in place of Manufacturing Overhead.
Required:
a) Compute the predetermined overhead rate.
b) Prepare the entry to apply the overhead for the year.
c) Determine whether the overhead was under- or overapplied and by how much.
Click here for the solution: Easy Decorating uses a job order costing system to collect the costs of its interior decorating business
Caroline Company reports the following costs and expenses in May
ACC 560 Week 2 Assignment
E1-4 Caroline Company reports the following costs and expenses in May.
Factory utilities $ 11,500 Direct labor $69,100
Depreciation on factory equipment 12,650 Sales salaries 46,400
Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 80,800 Factory repairs 2,000
Direct materials used 137,600 Advertising 18,000
Factory manager's salary 8,000 Office supplies used 2,640
From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs.
Click here for the solution: Caroline Company reports the following costs and expenses in May
E1-4 Caroline Company reports the following costs and expenses in May.
Factory utilities $ 11,500 Direct labor $69,100
Depreciation on factory equipment 12,650 Sales salaries 46,400
Depreciation on delivery trucks 3,800 Property taxes on factory building 2,500
Indirect factory labor 48,900 Repairs to office equipment 1,300
Indirect materials 80,800 Factory repairs 2,000
Direct materials used 137,600 Advertising 18,000
Factory manager's salary 8,000 Office supplies used 2,640
From the information, determine the total amount of: (a) Manufacturing overhead. (b) Product costs. (c) Period costs.
Click here for the solution: Caroline Company reports the following costs and expenses in May
Sunday, September 27, 2015
Cost-based pricing assumes costs
1. Cost-based pricing assumes costs:
2. The last price a consumer paid or what they expect to pay is their:
3. Marketers of new and innovative products or services are more likely to use a price skimming strategy if:
4. While the manufacturers of the first electric cars charged relatively high prices to innovators and early adopters, they had to use a price skimming strategy because of:
5. The ____________ occurs when firms find the unit cost drops as increased volume is sold.
6. The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and:
7. Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using:
8. Retailers might offer targeted coupons to loyal customers using kiosk-type technology and ____________.
9. If a telecommunications company drastically cut their price for cellular phone service in order to eliminate local competitors, the company could be charged with:
10. It is the responsibility of ___________________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.
11. For a price skimming strategy to work, the product or service must:
12. In addition to merchandise and payments, information flows throughout a supply chain. Which of the following is NOT a good characterization of the flow of information in a supply chain?
13. International supply chains add layers of complexity to the flow of information, merchandise and payments. Neiman Marcus has been able to develop expedited shipments through customs, which gives it an advantage in having the most up-to-date merchandise, by _____________________.
14. Today, when a customer orders merchandise from an online vendor, he or she immediately receives a confirmation message by e-mail. Usually within a day or two, a second message arrives stating that the order is in the mail. This is a type of a(n):
15. If two companies use an electronic data interchange (EDI) to negotiate prices, specify product details, display pictures of new products, and offer sales promotions, the EDI is being used for the ____________ function in the four P's of marketing.
16. An effective CPFR system manages:
17. _______________ have dramatically reduced the time and labor associated with checking and receiving merchandise.
18. At the BMW plant in Spartanburg, South Carolina, suppliers deliver parts every four hours when the plant is in operation and are responsible for removing any packaging or pallets used to deliver their products. BMW uses a ______________ inventory control system.
19. After installing a(n)_______________ in their JIT system, Chocolate Tree, a retail chocolate store, was able to reduce lead time between the recognition that an order needed to be placed and the arrival of the needed merchandise.
20. With more frequent shipments associated with QR systems, a retailer is:
21. RFID offers the participants in the supply chain a powerful tool for tracking inventories and reducing handling. The main reason why it has NOT BEEN more widely adopted is:
22. One of retailers' most fundamental activities is providing the right mix of merchandise and services.
A) True
B) False
23. Retailers like Wal-Mart, Home Depot, and Kroger dictate to their suppliers all of the following EXCEPT:
24. Some companies want to get its products into as many outlets as possible, understanding that the more exposure it gets, the more of its products it will sell. If this is consistent with the company's overall strategy, it will choose __________________.
25. Retailers that offer a broad variety of merchandise, limited services and low prices are known as ______________________.
26. Category killers are also known as:
27. Many retail golf stores have driving ranges, some with visual imaging of famous golf courses. These driving ranges allow:
28. Which of the following retail stores would emphasize personal selling the most as part of the firm's promotional efforts?
29. Traditionally, retailers treated all their customers:
30. Jordan directs her salespeople to increase their "share of wallet." Jordan is directing her salespeople to:
31. Because the Internet offers little opportunity to touch, feel or try on merchandise before purchasing it, on-line retailers must addresses customers' need by ______________.
32. ______________________ is the term used to describe when retailers use some combination of stores, catalogs and the Internet to sell merchandise.
33. Which of the following is NOT one of the reasons a firm might employ electronic channels in multichannel retailing?
34. As the old cliché claims, the three most import things in retailing are:
35. Though a picture may be worth a thousand words, the most important facet of encoding is not what is received but what is sent.
A) True
B) False
36. If there is a difference between the message that is sent and the message that is received, it is probably due to noise.
A) True
B) False
37. Even the best marketing communication can be wasted if the sender does not gain the attention of the consumer.
A) True
B) False
38. "Top-of-mind awareness" is when consumers indicate they know the brand when the name is presented to them.
A) True
B) False
39. Commercial speech is defined as anything contained in a commercial.
A) True
B) False
40. Gerald knows which IMC communication channels are available and knows how he will measure the results of his IMC efforts. To implement his IMC efforts, Gerald also needs to:
41. The right communication channel to use in IMC is:
42. The sender of an IMC message hopes the receiver is:
43. National manufacturers and retailers pay a service company to monitor television ads around the country to ensure that their ads are seen in their entirety during the time frames that had been purchased. This service company helps avoid the IMC noise problem associated with:
44. Which of the following is NOT one of the steps in the AIDA model?
45. The IMC communications process:
46. Integrated marketing communications include all of the following except:
47. New technologies like PDAs, podcasts, and cell phones allow greater potential for ___________________ IMC efforts.
48. Companies can gain a competitive advantage using the Internet to:
49. Research has shown that IMC can make communications expenditures more effective and efficient by:
50. Competitive parity, percentage-of-sales, and affordable budget are types of ________________________ IMC budgeting.
Click here for the solution: Cost-based pricing assumes costs
2. The last price a consumer paid or what they expect to pay is their:
3. Marketers of new and innovative products or services are more likely to use a price skimming strategy if:
4. While the manufacturers of the first electric cars charged relatively high prices to innovators and early adopters, they had to use a price skimming strategy because of:
5. The ____________ occurs when firms find the unit cost drops as increased volume is sold.
6. The primary reasons manufacturers offer seasonal discounts to retailers are to more easily plan production schedules and:
7. Mona is selling her artwork at a local festival. Her art is selling well, but t-shirts she had made up with her artwork are not selling. She decides to offer a package price for her art with a t-shirt included. Mona is using:
8. Retailers might offer targeted coupons to loyal customers using kiosk-type technology and ____________.
9. If a telecommunications company drastically cut their price for cellular phone service in order to eliminate local competitors, the company could be charged with:
10. It is the responsibility of ___________________ to determine the ethical approach to setting prices so consumers find value and the firm can make a profit.
11. For a price skimming strategy to work, the product or service must:
12. In addition to merchandise and payments, information flows throughout a supply chain. Which of the following is NOT a good characterization of the flow of information in a supply chain?
13. International supply chains add layers of complexity to the flow of information, merchandise and payments. Neiman Marcus has been able to develop expedited shipments through customs, which gives it an advantage in having the most up-to-date merchandise, by _____________________.
14. Today, when a customer orders merchandise from an online vendor, he or she immediately receives a confirmation message by e-mail. Usually within a day or two, a second message arrives stating that the order is in the mail. This is a type of a(n):
15. If two companies use an electronic data interchange (EDI) to negotiate prices, specify product details, display pictures of new products, and offer sales promotions, the EDI is being used for the ____________ function in the four P's of marketing.
16. An effective CPFR system manages:
17. _______________ have dramatically reduced the time and labor associated with checking and receiving merchandise.
18. At the BMW plant in Spartanburg, South Carolina, suppliers deliver parts every four hours when the plant is in operation and are responsible for removing any packaging or pallets used to deliver their products. BMW uses a ______________ inventory control system.
19. After installing a(n)_______________ in their JIT system, Chocolate Tree, a retail chocolate store, was able to reduce lead time between the recognition that an order needed to be placed and the arrival of the needed merchandise.
20. With more frequent shipments associated with QR systems, a retailer is:
21. RFID offers the participants in the supply chain a powerful tool for tracking inventories and reducing handling. The main reason why it has NOT BEEN more widely adopted is:
22. One of retailers' most fundamental activities is providing the right mix of merchandise and services.
A) True
B) False
23. Retailers like Wal-Mart, Home Depot, and Kroger dictate to their suppliers all of the following EXCEPT:
24. Some companies want to get its products into as many outlets as possible, understanding that the more exposure it gets, the more of its products it will sell. If this is consistent with the company's overall strategy, it will choose __________________.
25. Retailers that offer a broad variety of merchandise, limited services and low prices are known as ______________________.
26. Category killers are also known as:
27. Many retail golf stores have driving ranges, some with visual imaging of famous golf courses. These driving ranges allow:
28. Which of the following retail stores would emphasize personal selling the most as part of the firm's promotional efforts?
29. Traditionally, retailers treated all their customers:
30. Jordan directs her salespeople to increase their "share of wallet." Jordan is directing her salespeople to:
31. Because the Internet offers little opportunity to touch, feel or try on merchandise before purchasing it, on-line retailers must addresses customers' need by ______________.
32. ______________________ is the term used to describe when retailers use some combination of stores, catalogs and the Internet to sell merchandise.
33. Which of the following is NOT one of the reasons a firm might employ electronic channels in multichannel retailing?
34. As the old cliché claims, the three most import things in retailing are:
35. Though a picture may be worth a thousand words, the most important facet of encoding is not what is received but what is sent.
A) True
B) False
36. If there is a difference between the message that is sent and the message that is received, it is probably due to noise.
A) True
B) False
37. Even the best marketing communication can be wasted if the sender does not gain the attention of the consumer.
A) True
B) False
38. "Top-of-mind awareness" is when consumers indicate they know the brand when the name is presented to them.
A) True
B) False
39. Commercial speech is defined as anything contained in a commercial.
A) True
B) False
40. Gerald knows which IMC communication channels are available and knows how he will measure the results of his IMC efforts. To implement his IMC efforts, Gerald also needs to:
41. The right communication channel to use in IMC is:
42. The sender of an IMC message hopes the receiver is:
43. National manufacturers and retailers pay a service company to monitor television ads around the country to ensure that their ads are seen in their entirety during the time frames that had been purchased. This service company helps avoid the IMC noise problem associated with:
44. Which of the following is NOT one of the steps in the AIDA model?
45. The IMC communications process:
46. Integrated marketing communications include all of the following except:
47. New technologies like PDAs, podcasts, and cell phones allow greater potential for ___________________ IMC efforts.
48. Companies can gain a competitive advantage using the Internet to:
49. Research has shown that IMC can make communications expenditures more effective and efficient by:
50. Competitive parity, percentage-of-sales, and affordable budget are types of ________________________ IMC budgeting.
Click here for the solution: Cost-based pricing assumes costs
Friday, September 25, 2015
Zelmer Company uses budgets in controlling costs
ACC 560 Week 6 Assignment
P10-3A Zelmer Company uses budgets in controlling costs. The August 2008 budget report for the company's Assembling Department is as follows.
ZELMER COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2008
Difference
Favorable F
Manufacturing Costs Budget Actual Unfavorable U
Variable costs
Direct materials $ 48,000 $ 47,000 $1,000 F
Direct labor 54,000 51,300 2,700 F
Indirect materials 24,000 24,200 200 U
Indirect labor 18,000 17,500 500 F
Utilities 15,000 14,900 100 F
Maintenance 9,000 9,200 200 U
Total variable 168,000 164,100 3,900 F
Fixed costs
Rent 12,000 12,000 -0-
Supervision 17,000 17,000 -0-
Depreciation 7,000 7,000 -0-
Total fixed 36,000 36,000 -0-
Total costs $204,000 $200,100 $3,900 F
The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August, because only 58,000 units were produced.
Instructions
(a) State the total budgeted cost formula.
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better basis for evaluating performance than the report based on static budget data?
(c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.
Click here for the solution: Zelmer Company uses budgets in controlling costs
P10-3A Zelmer Company uses budgets in controlling costs. The August 2008 budget report for the company's Assembling Department is as follows.
ZELMER COMPANY
Budget Report
Assembling Department
For the Month Ended August 31, 2008
Difference
Favorable F
Manufacturing Costs Budget Actual Unfavorable U
Variable costs
Direct materials $ 48,000 $ 47,000 $1,000 F
Direct labor 54,000 51,300 2,700 F
Indirect materials 24,000 24,200 200 U
Indirect labor 18,000 17,500 500 F
Utilities 15,000 14,900 100 F
Maintenance 9,000 9,200 200 U
Total variable 168,000 164,100 3,900 F
Fixed costs
Rent 12,000 12,000 -0-
Supervision 17,000 17,000 -0-
Depreciation 7,000 7,000 -0-
Total fixed 36,000 36,000 -0-
Total costs $204,000 $200,100 $3,900 F
The monthly budget amounts in the report were based on an expected production of 60,000 units per month or 720,000 units per year. The Assembling Department manager is pleased with the report and expects a raise, or at least praise for a job well done. The company president, however, is unhappy with the results for August, because only 58,000 units were produced.
Instructions
(a) State the total budgeted cost formula.
(b) Prepare a budget report for August using flexible budget data. Why does this report provide a better basis for evaluating performance than the report based on static budget data?
(c) In September, 64,000 units were produced. Prepare the budget report using flexible budget data, assuming (1) each variable cost was 10% higher than its actual cost in August, and (2) fixed costs were the same in September as in August.
Click here for the solution: Zelmer Company uses budgets in controlling costs
Wednesday, September 23, 2015
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
2-19 Basic Concepts
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v) and whether they are most likely period costs (p) or product cost (m) and under full absorption costing.
1. Energy to run machines producing units of output in the factory.
2. Depreciation on the building for administrative staff offices.
3. Bonuses of top executives in the company.
4. Overtime pay for assembly workers.
5. Transportation-in costs on materials purchased.
6. Assembly line workers’ wages.
7. Sales commissions for sales personnel.
8. Administrative support for sales supervisors.
9. Controller’s office rental.
10. Cafeteria costs for the factory.
Click here for the solution: For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v) and whether they are most likely period costs (p) or product cost (m) and under full absorption costing.
1. Energy to run machines producing units of output in the factory.
2. Depreciation on the building for administrative staff offices.
3. Bonuses of top executives in the company.
4. Overtime pay for assembly workers.
5. Transportation-in costs on materials purchased.
6. Assembly line workers’ wages.
7. Sales commissions for sales personnel.
8. Administrative support for sales supervisors.
9. Controller’s office rental.
10. Cafeteria costs for the factory.
Click here for the solution: For each of the following costs incurred in a manufacturing firm, indicate whether the costs are most likely fixed (f) or variable (v)
Sunday, September 20, 2015
Webber Fabricating estimated the following annual costs (MT 425)
MT 425
Chapter 2, Exercise 2-12 Allocating Manufacturing Overhead to Jobs [LO 6, 7] Webber Fabricating estimated the following annual costs.
Expected annual direct labor hours 40,000
Expected annual direct labor cost 625,000
Expected machine hours 20,000
Expected material cost for the year 800,000
Expected manufacturing overhead$1,000,000
Required
a. Calculate overhead allocation rates using each of the four possible allocation bases provided.
b. Determine the cost of the following job (number 253) using each of the four overhead allocation rates.
Click here for the solution: Webber Fabricating estimated the following annual costs (MT 425)
Chapter 2, Exercise 2-12 Allocating Manufacturing Overhead to Jobs [LO 6, 7] Webber Fabricating estimated the following annual costs.
Expected annual direct labor hours 40,000
Expected annual direct labor cost 625,000
Expected machine hours 20,000
Expected material cost for the year 800,000
Expected manufacturing overhead$1,000,000
Required
a. Calculate overhead allocation rates using each of the four possible allocation bases provided.
b. Determine the cost of the following job (number 253) using each of the four overhead allocation rates.
Click here for the solution: Webber Fabricating estimated the following annual costs (MT 425)
Eric Johnson (using data from Problem 1.6) determines his costs to be as follows
Problems 1.7 Eric Johnson (using data from Problem 1.6) determines his costs to be as follows:
• Labor: $10 per hour
• Resin: $5 per pound
• Capital expense: 1% per month of investment
• Energy: $.50 per BTU.
Show the percent change in productivity for one month last year versus one month this year, on a multifactor basis with dollars as the common denominator.
Data from Problem 1.6
Last Year Now
Units produced 1,000 1,000
Labor (hours) 300 275
Resin (pounds) 50 45
Capital invested ($) 10,000 11,000
Energy (BTU) 3,000 2,850
Click here for the solution: Eric Johnson (using data from Problem 1.6) determines his costs to be as follows
• Labor: $10 per hour
• Resin: $5 per pound
• Capital expense: 1% per month of investment
• Energy: $.50 per BTU.
Show the percent change in productivity for one month last year versus one month this year, on a multifactor basis with dollars as the common denominator.
Data from Problem 1.6
Last Year Now
Units produced 1,000 1,000
Labor (hours) 300 275
Resin (pounds) 50 45
Capital invested ($) 10,000 11,000
Energy (BTU) 3,000 2,850
Click here for the solution: Eric Johnson (using data from Problem 1.6) determines his costs to be as follows
Trudy Company incurred the following costs
ACC 291 Week 1 Assignment
E9-2 Trudy Company incurred the following costs.
1. Sales tax on factory machinery purchased $5,000
2. Painting of and lettering on truck immediately upon purchase 700
3. Installation and testing of factory machinery 2,000
4. Real estate broker’s commission on land purchased 3,500
5. Insurance premium paid for first year’s insurance on new truck 880
6. Cost of landscaping on property purchased 7,200
7. Cost of paving parking lot for new building constructed 17,900
8. Cost of clearing, draining, and filling land 13,300
9. Architect’s fees on self-constructed building 10,000
Indicate to which account Trudy would debit each of the costs.
Click here for the solution: Trudy Company incurred the following costs
E9-2 Trudy Company incurred the following costs.
1. Sales tax on factory machinery purchased $5,000
2. Painting of and lettering on truck immediately upon purchase 700
3. Installation and testing of factory machinery 2,000
4. Real estate broker’s commission on land purchased 3,500
5. Insurance premium paid for first year’s insurance on new truck 880
6. Cost of landscaping on property purchased 7,200
7. Cost of paving parking lot for new building constructed 17,900
8. Cost of clearing, draining, and filling land 13,300
9. Architect’s fees on self-constructed building 10,000
Indicate to which account Trudy would debit each of the costs.
Click here for the solution: Trudy Company incurred the following costs
Sunday, September 13, 2015
How do manufacturing costs flow through inventory accounts?
3. How do manufacturing costs flow through inventory accounts?
Click here for the solution: How do manufacturing costs flow through inventory accounts?
Click here for the solution: How do manufacturing costs flow through inventory accounts?
Tuesday, September 8, 2015
Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs
Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in-process on December 31, 20x1, consisted of one job (no. 2077), which was carried on the year-end balance sheet at $156,800. There was no finished-goods inventory on this date.
Finlon applies manufacturing overhead to production on the basis of direct-labor cost. (The budgeted direct-labor cost is the company's practical capacity, in terms of direct-labor hours, multiplied by the budgeted direct-labor rate.) Budgeted totals for 20x2 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year follow.
Direct Materials Used $5,600,000.00
Direct Labor $4,350,000.00
Indirect Material Used $65,000.00
Indirect Labor $2,860,000.00
Factory Depreciation $1,740,000.00
Factory Insurance $59,000.00
Factory Utilities $830,000.00
Selling and Administrative Expenses $2,160,000.00
Total $17,664,000.00
Job no. 2077 was completed in January 20x2; there was no work in process at year-end. All jobs produced during 20x2 were sold with the exception of job no. 2143, which contained direct material costs of $156,000 and direct-labor charges of $85,000. The company charges any under- or overapplied overhead to Cost of Goods Sold.
Directions:
1 Calculate the companies predetermined overhead application rate.
2.Calculate the additions to the work-in-process inventory account for the direct material used, direct labor and manufacturing overhead.
3.Calculate the finished goods inventory for the 12/31/x2 balance sheet.
4.Calculate the over-applied or under applied overhead at year end.
5.Explain if it is appropriate to include the selling and administrative expenses within cost of goods sold.
Click here for the solution: Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs
Finlon applies manufacturing overhead to production on the basis of direct-labor cost. (The budgeted direct-labor cost is the company's practical capacity, in terms of direct-labor hours, multiplied by the budgeted direct-labor rate.) Budgeted totals for 20x2 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year follow.
Direct Materials Used $5,600,000.00
Direct Labor $4,350,000.00
Indirect Material Used $65,000.00
Indirect Labor $2,860,000.00
Factory Depreciation $1,740,000.00
Factory Insurance $59,000.00
Factory Utilities $830,000.00
Selling and Administrative Expenses $2,160,000.00
Total $17,664,000.00
Job no. 2077 was completed in January 20x2; there was no work in process at year-end. All jobs produced during 20x2 were sold with the exception of job no. 2143, which contained direct material costs of $156,000 and direct-labor charges of $85,000. The company charges any under- or overapplied overhead to Cost of Goods Sold.
Directions:
1 Calculate the companies predetermined overhead application rate.
2.Calculate the additions to the work-in-process inventory account for the direct material used, direct labor and manufacturing overhead.
3.Calculate the finished goods inventory for the 12/31/x2 balance sheet.
4.Calculate the over-applied or under applied overhead at year end.
5.Explain if it is appropriate to include the selling and administrative expenses within cost of goods sold.
Click here for the solution: Finlon Upholstery, Inc. uses a job-order costing system to accumulate manufacturing costs
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