Questions and Answers of Cornerstones Cost Management

Raddington Industries produces tool and die machinery for manufacturers. The company expanded vertically in 1998 by acquiring one of its suppliers of alloy steel plates, Reigis Steel Company. To
Kauffman, Inc., has acquired two new companies, one in consumer products and the other in financial services. Kauffman's top management believes that the executives of the two newly acquired
The following selected data pertain to Beck Company's Beam Division for 2001:Required:1. How much is the residual income?2. How much is the return on investment? (CPA adapted) Sales $1,000,000
Casey Bertholt graduated from State U with a major in accounting five years ago. She ob¬tained a position with a well-known public accounting firm upon graduation and has be¬come one of their
Sandia, Inc., manufactures radios, televisions, and VCRs in its four divisions: Radio, TV, VCR, and Components. The Components Division produces electronic components that can be used by the other
Robinson Company has a decentralized organization with a divisional structure. Each di¬visional manager is evaluated on the basis of ROI.The Plastics Division produces a plastic container that the
Greg Peterson has recently been appointed vice president of operations for Webster Cor¬poration. Peterson has a manufacturing background and previously served as operations manager of Webster's
Renslen, Inc., a truck manufacturing conglomerate, has recently purchased two divisions:Meyers Service Company and Wellington Products, Inc. Meyers provides maintenance ser¬vice on large truck cabs
Jump Start Company (JSC), a subsidiary of Mason Industries, manufactures go-carts and other recreational vehicles. Family recreational centers that.feature go-cart tracks along with miniature golf,
Lynsar Corporation started as a single plant that produced the major components assem¬bled into electric motors—the company's main product. Lynsar later expanded by devel¬oping outside markets
Explain the role of the accountant in the international environment.
Discuss the varying levels of involvement that firms can take in international trade.
Explain the ways accountants can manage foreign currency risk.
Explain why multinational firms choose to decentralize.
Explain how environmental factors can affect performance evaluation in the multinational firm.
Discuss the role of transfer pricing in the multinational firm.
Discuss ethical issues that affect firms operating in the international environment.
How do international issues affect the role of the ac¬countant?
What are joint ventures, and why do companies en¬gage in them?
What are maquiladoras? Why have so many U.S. firms joined forces with maquiladoras?
What is an exchange rate for currency? What is the dif¬ference between a spot rate and future rate?
Define currency appreciation. What impact does cur¬rency appreciation have on a company's ability to im¬port goods?
What impact does currency appreciation have on a company's ability to export its goods?
What is transaction risk? Economic risk? Translation risk?
What is hedging? If a company imports raw materials, payable in full in 90 days in the foreign currency, why might the company want to hedge?
The performance of the subsidiary manager is equiv¬alent to the performance of a subsidiary. Do you agree?Explain.
What environmental factors may affect divisional per¬formance in a multinational firm?
Explain how unit standards are set and why standard cost systems are adopted.
Explain the purpose of a standard cost sheet.
Describe the basic concepts underlying variance analysis, and explain when variances should be investigated.
Compute and journalize the materials and labor variances, and explain how they are used for control.
Compute overhead variances three different ways, and explain overhead accounting.
Calculate mix and yield variances for materials and labor.
Should standards be set by engineering studies? Why or why not?
Discuss the differences between actual costing, normal costing, and standard costing.
The materials usage variance is always the responsi¬bility of the production supeiAusor. Do you agree or disagree? Why?
Explain why standard cost systems are adopted.
Explain how the two-variance, three-variance, and four-variance overhead analyses are related.
Quincy Farms is a producer of items made from farm products that are distributed to su¬permarkets. For many years, Quincy's products have had strong regional sales on the basis of brand recognition.
During the year, Gelstrop Company produced 98,000 valves used in truck engines. Gelstrop's material and labor standards areRequired:1. Compute the standard pounds of materials allowed for the
Riquisimo Company produces a popular candy bSr called cocolate. The candy is produced in Guatemala and exported to the United States. Recently the company adopted the fol¬lowing standards for one 5
Pratt, Inc., uses a standard cost system and develops its overhead rates from the current an¬nual budget. The budget is based on an expected annual output of 100,000 units requiring 500,000 direct
Refer to the data in 9-4.Required:1. Compute overhead variances using a two-way analysis.2. Compute overhead variances using a three-way analysis.3. Illustrate how the two- and three-way analyses are
Chemcobre, Inc., produces chemical compounds for industrial use. Two liquid organic chem¬icals, Liq-1 and Liq-2, are mixed and heated to produce a liquid compound that is sold to copper companies
Refer to the data in 9-6. Chemcobre, Inc., also uses two different types of labor in produc¬ing the copper-leaching compound; mixing and drum-filling labor. For each batch of 10,000 gallons of
Franklin Company uses the following rule to determine whether labor efficiency variances ought to be investigated. A labor efficiency variance will be investigated anytime the amormt exceeds the
Zapato Corporation produces leather boots. The company uses a standard cost system and has set the following standards for materials and labor (for one pair of boofs):During the year, Zapato produced
Iverson Company produces microwave ovens. Iverson's plant in Buffalo uses a standard cost system. The standard cost system relies on direct labor hours to assign overhead costs to production. The
The Bartlesville plant of Iverson Company produces an industrial chemical. At the beginning of the year, the Bartlesville plant had the following standard cost sheet:The Bartlesville plant computes
Marvel Company uses a standard cost system. During the past quarter, the following variances were computed:Marvel applies variable overhead using a standard rate of $2 per direct labor hour
The Emerson Division of Golding Company produces small kitchen appliances. The com¬pany uses a standard cost system for production costing and control. The standard cost sheet for its most popular
Business Specialty, Inc., manufactures two staplers, small and regular. The standard quantities of labor and materials per unit for the year areThe standard price paid per pound of direct materials
Energy Products Company produces a gasoline additive. Gas Gain. This product increases engine efficiency and improves gasoline mileage by creating a more complete burn in the combustion
Broder Company produces a single product. Broder employs a standard cost system and uses a flexible budget to predict overhead costs at various levels of activity. For the most recent year, Broder
During the year, 30,000 units were produced and sold. The following actual costs were incurred:Direct materials $320,000 Direct labor 220,000 Variable overhead 125,000 Fixed overhead 89,000 There
As part of its cost control program. Tracer Company uses a standard cost system for all man¬ufactured items. The standard cost for each item is established at the beginning of the fis¬cal year, and
Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, $0.90,
Define responsibility accounting and describe the four types of responsibility centers.
Compute and explain return on investment (ROI), residual income (Rl), and economic value added (EVA).
Discuss methods of evaluating and rewarding managerial performance.
Explain the role of transfer pricing in a decentralized firm.
Discuss the methods of setting transfer prices.
Bebida Company has three process departments: Cooking, Blending, and Canning. At the beginning of the year (July 1) there were no work in process or finished goods inventories.The following data are
A local barbershop cuts the hair of one thousand customers per month. The clients are men and the barbers offer no special styling. During the month of March, one thousand cus¬ tomers were serviced.
Ireland Company uses JIT manufacturing. There are several manufacturing cells set up within one of its factories. One of the cells makes space heaters. The cost of production for the month of March
Compomets, Inc., produces a standard gear for trenchers. The gears are produced in two de¬partments: Machining and Finishing. The data for the Machining Department are as follows:Required:1. Prepare
Wantler Company manufactures a household detergent. The Mixing Department, the first process department, mixes the chemicals required for the detergent. The following data are for 2001:Materials are
Amarid Company manufactures a product that passes through two processes: fabrication and assembly. The following information was obtained for the Fabrication Department for April:1. All materials are
Baden Company uses FIFO to account for the costs of production. For Grinding, the first processing department, the following equivalent unit schedule has been prepared:The cost of beginning work in
The following are data for four independent process costing departments. Inputs are added continuously.Required:Compute the equivalent units of production for each of the preceding departments using
Using the data from 5-8, compute the equivalent units of production for each of the four de¬partments using the FIFO method.
Watson Products, Inc., produces plastic cases used for video cameras. The product passes through three departments. For May, the following equivalent unit schedule was prepared for the first
White Company produces men's shorts and uses FIFO to account for its manufacturing costs.The product White makes passes through two processes: Cutting and Sewing. During April, White's controller
Manford Company has a product that passes through two processes: Mixing and Cooking.During October, the Mixing Department transferred 10,000 units to the Cooking Department.The cost of the units
Using the same data found in 5-12, assume the company uses the FIFO method.Required:Prepare a schedule of equivalent units, and compute the unit cost for the month of October.
Norton Parts, Inc., manufactures fenders (plastic or metal, depending on the plant) for au¬tomobiles. Each fender passes through three processes; Molding, Drilling, and Painting. In July, the
Refer to the data m 5-15. Assume that the FIFO method is used.Required:1. Prepare a physical flow schedule.2. Calculate equivalent imits of production for direct materials and conversion cost.3.
Tasty Bread makes and supplies bread throughout the state of Kansas. There are three types of bread produced: loaves, rolls, and buns. Seven operations describe the produc¬tion process.a. Mixing:
Jacson Company produces two brands of a popular pain medication; regular strength and extra strength. Regular strength is produced in tablet form and extra strength is produced in capsule form. All
Petterson Company produces a product that passes through three processes; Fabrication, Assembly, and Finishing. All manufacturing costs are added uniformly for both processes.The following
Refer to the data in 5-19.Required:Prepare a cost of production report for the Assembly Department for April using the FIFO method of costing.
Loadmear Chemicals produces an agricultural pesticide that passes through three processes:blending, drying, and bagging. The weighted average method is used to account for the costs of production.
Wallace, Inc., produces a product that goes through three departments: Machining, Assem¬bly, and Polishing. Materials are added at the beginning of the machining operation; labor and overhead are
Lemmons Company manufactures a product that passes through three departments: Mix¬ing, Cooking, and Bottling. In the Cooking Department, materials are added at the end of the process. Conversion
Jenny, Inc., produces a drink extract that passes through three processes: mixing, blending, and bottling. During the second quarter, the Blending Department received 20,000 gallons of liquid from
Refer to 5-25.Required:Prepare a cost of production report for the Blending Department using the weighted aver¬age method.
Muskoge Company uses a process costing system. The company manufactures a product that is processed in two departments: Molding and Assembly. In the Molding Department, materials are added at the
Refer to the data in 5-27.Required:Repeat the requirements in 5-27 using the FIFO method.
Healthway uses a process costing system to compute the unit costs of the minerals that it produces. It has three departments: Picking, Encapsulating, and Bottling. In Picking, the in¬gredients for
Refer to the data in 5-29.Required:Prepare a cost of production report for each department using the FIFO method.
Consider the following conversation between Gary Means, manager of a division that pro¬duces industrial machinery, and his controller, Donna Simpson, a CMA and CPA:GARY: Donna, we have a real
Larkin Company produces leather strips for western belts using three processes: cutting, de¬sign and coloring, and punching. The weighted average method is used for all three de¬partments. The
Novel Toys, Inc., manufactures plastic water guns. Each gun's left and right frames are produced in the Molding Department. The left and right frames are then transferred to the Assembly Department
Describe the difference between support departments and producing departments.
Explain five reasons why support costs may be assigned to producing departments.
Calculate charging rates, and distinguish between single and dual charging rates.
Allocate support center costs to producing departments using the direct method, the sequential method, and the reciprocal method.
Calculate departmental overhead rates.
Explain how allocating support service costs can be helpful m pricing decisions.
Explain how allocation of support service costs is use¬ful for planning and control.

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