Questions and Answers of Cornerstones Cost Management

What is the difference between a step-fixed cost and a step-variable cost?
What is an activity rate?
Describe how the scatterplot method breaks out the fixed and variable costs from a mixed cost. Now describe how the high-low method works. How do the two methods differ?
What is meant by the best-fitting line?
Is the best-fitting line necessarily a good-fitting line?Explain.
Explain the meaning of the coefficient of determina¬tion. Describe what is meant by goodness of fit.
What is the difference between the coefficient of de¬termination and the coefficient of correlation? Which of the two measures of goodness of fit do you prefer?Why?
What is the purpose of a confidence interval?
Carson Company manufactures digital thermometers. Based on past experience, Carson has found that its total maintenance costs can be represented by the following formula; Main¬tenance cost =
Smith Concrete Company owns^n ieady-mix trucks. Each truck can deliver (on average)—-10,000 cubic yards of concrete per year (considering the truck's capacity, weather, and dis¬tance to each job).
For the activities and their associated resources listed next, identify the following: (1) a cost driver, (2) flexible resources, and (3) committed resources. Also, label each resource as one of the
Alva Community Hospital has five laboratory technicians responsible for doing a series of standard blood tests. Each technician is paid a salary of $30,000 and is capable of process¬ing 4,000 tests
Bellati, Inc. produces large industrial machinery. Bellati has a machining department and a group of direct laborers called machinists. Each machinist is paid $36,000 and can machine up to 500 units
Luisa Crimini has been operating a beauty shop in a college town for the past ten years. Re¬cently, Luisa rented space next to her shop and opened a tanning salon. She had anticipated that the costs
Refer to the data in 3-7.Required:1. Compute the cost formula for tanning services using the method of least squares.2. Using the formula computed in Requirement 1, what is the predicted cost of
During the past year, the high and low levels of resource usage occurred in May and No¬vember for three different resources associated with the machining activity. Machine hours is the activity
A company used the method of least squares to develop a cost equation to predict the cost of receiving. There were eighty data points for the regression, and the following computer output was
Zikmund, Inc., a manufacturer of heavy machinery, is interested in improving its factorysafety record. Sybil Dane, Zikmund's controller, has investigated the past three years of in¬dustrial
The graphs on page 99 represent cost behavior patterns that might occur in a company'scost structure. The vertical axis represents total cost and the horizontal axis represents activity
Rolertyme Company manufactures roller skates. With the exception of the rollers, all parts of the skates are produced internally. Neeta Booth, president of Rolertyme, has decided to make the rollers
Monson Medical Clinic offers a number of specialized medical services, one of which is can¬cer care. Because of the reputation the clinic's oncologists have developed over the years, demand for
Farnsworth Company has gathered data on its overhead activities and associated costs forthe past ten months. Tracy Heppler, a member of the controller's department, has con¬vinced management that
DeMarco Company is developing a cost formula for its packing activity. Discussion with the workers in the packing department has revealed that packing costs are associated with the number of customer
Weber Valley Regional Hospital has collected data on all of its activities for the past sixteen months. Data for cardiac nursing care follow:Required:1. Using the high-low method, calculate the
Loving Toys Company is attempting to determine cost behavior of its overhead activities for its Kansas City plant. One of the major activities is the setup activity. Two possible ac¬tivity drivers
Randy Harris, controller, has been given the charge to implement an advanced cost man¬agement system. As part of this process, he needs to identify activity drivers for the activi¬ties of the firm.
The Lockit Company manufactures door knobs for residential homes and apartments. Lockit is considering the use of simple (single-driver) and multiple regression analysis to forecast annual sales
Bill Lewis, manager of the Thomas Electronics Division, called a meeting with his controller, Brindon Peterson, CMA, and his marketing manager, Patty Fritz. The following is a tran¬script of the
Compute two different unit costs for each of the cable service division's products. What managerial objectives are being served by these unit cost computations?
Three different cost categories are provided by the cable service division: direct attribu¬tion, driver tracing, and allocation. Discuss the meaning of each. Based on how costs are assigned, do you
Discuss the differences between the cable service division's products and the phone di¬vision's products.
Prepare an income statement for the cable service division for March.
Prepare an income statement for the phone division for March. Include a supporting cost of goods manufactured statement.
The phone division has been using the same cost accounting system for over ten years.Explain why their cost accounting system may be outmoded. What factors determine when a new cost accounting system
Using the method of least squares, calculate two cost formulas: one for overhead using direct labor cost as the driver, and one for material-handling cost using number of moves as the driver. Comment
How would you describe the cost behavior of the inspection activity? Assume that the quality control manager implements a program that reduces the number of defective units by 50%. Because of the
Go to the website of the Institute of Management Accountants (www.imanet.org) and describe the exam content of each of the two parts. Identify the requirements that must be met to take the CMA
On the Internet, access the homepages of several enterprise resource planning (ERP) vendors such as http://www.infor.com; http://www.ca.com; http://www.oracle.com; and http://www .sap.com. (Hint:
Check the Boeing website at http://www.boeing.com, and go to commercial aircraft orders. (Find “Products,” “Commercial Airplanes,” then “Orders and Deliveries.”) Boeing gives the number
Interview an accountant who works for a service organization that uses job-order costing. For a small firm, you may need to talk to an owner/manager. Examples are a funeral home, insurance firm,
A number of companies are involved in creating Internet solutions to medical recordkeeping. Given that clinics and doctors’ offices use a job-order costing system, discuss how software may improve
Understanding the nature of process manufacturing helps to understand the nature of process costing. Using an Internet search, find the home pages of one or more cement companies where the processes
Explain why either normal or peak capacity of the producing (or user) departments should be used to allocate the fixed costs of support departments.
Have each student find the websites of four companies—two service companies and two manufacturing companies. By reviewing the description of each company’s operations, determine what types of
Search the Internet for five companies in different industries. Then, see what clues are given on the websites as to factors affecting sales budgeting for each company. Write a brief, one-page
1. Relevant information for direct labor is as follows:Actual hours worked…………840Actual wage………………….$15.25Standard hours allowed……820Standard wage…………….$15.50What
Standard costing concepts can also be applied to services. Standard service costs are similar in concept to standard product costs. In the medical field, costs of caring for a patient have been
Using an Internet search engine, find the home page for the firm that registered the EVA trademark. When did this happen? Write a one- to two-page paper giving your opinion of this action. What are
The second stage of customer-based activity-based costing entails the assignment of:a. Resource costs to sales departments.b. Resources costs to distribution channels.c. Customer-related activity
Supply chain management can be a major source of cost savings for manufacturing and service firms. A firm can reduce its costs by understanding the linkages it has with its suppliers and customers. A
The objective of benchmarking is to improve performance by identifying, understanding, and adopting outstanding best practices from others. If this process is carried out inside the organization,
Search the Internet to find a complete description of a company that has implemented the Balanced Scorecard. Possible sources include the following: Palladium Executive Strategy
Many companies are now preparing corporate sustainability reports. Many such reports are found at http://www.sustainability-reports.com. Other reports can be found at the websites of individual
Lean manufacturing and lean accounting promise significant benefits to an organization. Yet, the initial effect of lean manufacturing is often an initial drop in profits reported on the financial
Find five companies with home pages on the Internet. Be sure that there is at least one company from each of the following categories: manufacturing, service, and wholesale-retail. Determine how each
For years, companies have been announcing outsourcing decisions and plant closings. Check the recent business news (e.g., http://www.wsj.com or http://www.businessweek.com) for this type of
1. Which of the following markets is characterized by the following: many buyers and sellers, a homogeneous product, easy entry into and exit from the industry, and all firms are price takers?a.
View the website for SAP at http://www.sap.com/usa/industries/index.epx to see how the company helps other companies improve profitability. Write a brief paper on the companies featured on the SAP
1. Thomas Company is investing $10,000 in a project that has a two-year life with an internal rate of return (IRR) of 10%. The project yields a net cash flow of $7,260 for Year 2.The present value
Capital budgeting for environmental projects offers an interesting area for additional study. The Environmental Protection Agency (EPA) has partnered with Tellus Institute (www. tellus.org) to
Please answer each of the following:Required: 1. Go to http://www.goldratt.com, and locate the list of cases detailing successful use of the
Refer to Exercise 12.14. Suppose that for 20x2, Sanford, Inc., has chosen suppliers that provide higher-quality parts and redesigned its plant layout to reduce material movement. Additionally,
What is ecoefficiency?
1. Which of the following describes the economic order quantity (EOQ)?a. It is associated with a pull inventory system.b. It is the heart of a JIT purchasing system.c. It minimizes total ordering
A company is spending $70,000 per year for inspecting, $60,000 per year for purchasing, and $56,000 per year for reworking products. What is a good estimate of non-value-added costs?a. $126,000b.
1. Anders Company provided the following information:Turnover……………………………………..1.4Average operating assets…..$120,000Operating income…………………$6,720What is
1. Which of the following describes the order in which the four types of budgets must be prepared?a. Production, sales, direct materials purchases, cash received on accountb. Sales, production,
1. A CPA would recommend changing from plantwide overhead rate application to departmental rates under which of the following circumstances?a. The plant produces one product.b. The plant produces
Pacheco, Inc., produces two products, overs and unders, in a single process. The joint costs of this process were $50,000, and 14,000 units of overs and 36,000 units of unders were produced.
Why must support service costs be assigned to products for purposes of inventory valuation?
1. As goods are transferred from a prior process to a subsequent process, the following entry to record the cost of abnormal spoilage would be made:a. debit Work in Process (subsequent department)
1. Under either weighted average or FIFO, when materials are added at the beginning of a process, rather than being added uniformly throughout the process, a unit cost should be calculated for thea.
K-Briggs Company uses the FIFO method to account for the costs of production. For Crushing, the first processing department, the following equivalent units schedule has been prepared:The cost per
What are transferred-in costs?
1. A CPA would recommend using plantwide overhead application rates under which of the following circumstances?a. The client is a multi-product manufacturer with predominantly indirect costs.b. The
CleanCom Company specializes in cleaning commercial buildings and construction sites. Each building and site is different, requiring amounts and types of supplies and labor for each job. CleanCom
When using normal costing, how are jobs charged with overhead?
1. Plata Company has identified the following overhead activities, costs, and activity drivers for the coming year:Plata produces two models of microwave ovens with the following activity demands:The
1.Cushing, Inc., costs products using a normal costing system. The following data are available for last year:Budgeted:Overhead………………………$357,000Machine
Gee Manufacturing produces two models of camshafts used in the production of automobile engines: Regular and High Performance. Gee currently uses an ABC system to assign costs to the two products.
Electan Company produces two types of printers. The company uses ABC, and all activity drivers are duration drivers. Electan Company is considering using DBC and has gathered the following data to
What is activity-based product costing?
Cost Behavior, Flexible and Committed Resources State University’s football team just received a bowl game invitation, and the students and alumni are excited. Holiday Travel Agency, located close
1. An investment of $2,000 produces a net cash flow of $800 in the first year, and $2,000 in the second year. What is the payback period?a. 1.60 yearsb. 1.25 yearsc. 0.50 yearsd. 1.10 years2. Which
1. A company is considering a special order for 1,000 units to be priced at $8.90 (the normal price would be $11.50). The order would require specialized materials costing $4.00 per unit. Direct
Describe a tactical decision you personally have had to make. Apply the tactical decisionmaking model to your decision. How did it turn out? (Hint: You could discuss buying a car, choosing a college,
1. Junior Company has a breakeven point of 34,600 units and is selling 35,000 units. If unit variable costs increase, the margin of safety willa. increaseb. decreasec. remain the samed. it is
1. Jester Company had unit contribution margin on $3.60 and fixed costs of $29,664. Income was $2,520. What was the margin of safety in units?a. 630b. 700c. 8,940d. 7,5402. Loessing Company produced
In 20x1, Fleming Chemicals used the following input combination to produce 55,000 gallons of an industrial
Helix, Inc., formed the following matrix for its five products:Required:Using the information in the matrix, identify the value streams. Production Activities/Processes Subassembly 47A Cell Packaging
In 20x2, Choctaw Company implements a new process affecting labor and materials. The following reported data are provided to evaluate the effect on the company€™s productivity:Required:1.
What is the price-recovery component?
At the beginning of the last quarter of 20x1, Youngston, Inc., a consumer products firm, hired Maria Carrillo to take over one of its divisions. The division manufactured small home appliances and
Which of the following objectives would be associated with the process perspective?a. Increasing information system capabilitiesb. Increasing service qualityc. Decreasing unit product costd.
At the end of 20x1, Mejorar Company implemented a low-cost strategy to improve its competitive position. Its objective was to become the low-cost producer in its industry. A Balanced Scorecard was
Refer to Problem 14.43. In 20x3, Jack Carter, president of Kartel, requested that environmental costs be assigned to the two major products produced by the company. He felt that knowledge of the
The following environmental cost reports for 20x3, 20x4, and 20x5 (year end December 31) are for the Communications Products Division of Kartel, a telecommunications company. In 2011, Kartel
1. Alard Manufacturing Company has a billing department staffed by four billing clerks. Each clerk is paid $32,000 per year and is able to process 8,000 bills. Last year, 27,360 bills were processed
What does full environmental costing mean? Full private costing?
Kang Company reported sales of $3,240,000 in 20x5. At the end of the calendar year, the following quality costs were reported:Design

Showing 700 - 800 of 809