Questions and Answers of Horngrens Cost Accounting

40. (Comprehensive; WA and FIFO) Andaman Company mines salt in southern Florida. Approximately 30 percent of the mined salt is processed into table salt.Andaman Company uses a process costing system
41. (Defective units and rework) Hoffus Corporation produces plastic pipe and accounts for its production process using weighted average process costing.Material is added at the beginning of
42. (Job order costing; rework) Argonne Rigging manufactures pulley systems to customer specifications and uses a job order system. A recent order from Michaels Company was for 10,000 pulleys, and
43. (Normal and abnormal spoilage; WA) Grand Monde Company manufactures various lines of bicycles. Because of the high volume of each type of product, the company employs a process cost system using
45. (Pareto analysis) Leading Edge Computers has identified the following failure costs during 2000:c. Focusing on the models identified in part (b), prepare a table using Pareto analysis to identify
23. (Processing beyond split-off and cost allocations) Planetary Products has a joint process that makes three products. Joint cost for the process is $30,000.Sun, Moon, and Mars weigh 10 pounds, 6
31. (Normal and abnormal discrete spoilage; WA) Brendan Tools manufactures one of its products in a two-department process. A separate Work in Process account is maintained for each department, and
Distinguish among direct, step-down, and reciprocal methods of allocating sup- port department costs
Understand how the risks managers face are affected by the choice between budgeted versus actual cost-allocation rates
Differentiate the single-rate cost-allocation method from the dual-rate cost-allocation method
Guide cost-allocation decisions using appropriate criteria
Present the four perspectives of the balanced scorecard
Identify key aspects of reengineering
Use life-cycle product budgeting and costing when making pricing decisions
Price products using the cost-plus approach
Price products using the target costing approach
Use the five-step decision process to make decisions
Exploin the two assumptions frequently used in cost-behavior estimation
Describe the various denominator-level capacity concepts that can be used i absorption costing
Prepare income statements under absorption costing and variable costing
Show how the 4-variance analysis approach reconciles the actual overhead in- curred with the overhead amounts allocated during the period
Compute the budgeted fixed overhead rate
Compute variable overhead spending and efficiency variances
Identify the key features of a standard costing system
Integrate continuous improvement into variance analysis
Use computer-based financial planning models in sensitivity analysis
Prepare the operating budget and its supporting schedules
Describe the management accountant's role in helping organizations provide better incentives
Contrast current-cost and historical-cost asset measurement methods
Use the residual-income (RI) measure and recognize its advantages
Analyze profitability using the DuPont method
Design an accounting-based performance measure
Measure performance from a financial and nonfinancial perspective
Incorporate income tax considerations in multinational transfer pricing
Construct a general guideline for determining a minimum transfer price
Avoid making suboptimal decisions when transfer prices are based on full cost plus a markup
Calculate transfer prices using three different general methods
Explain transfer prices and four criteria used to evaluate them
Incorporate depreciation deductions into the computation of after-tax cash flows in capital budgeting
Identify and reduce conflicts from using DCF for capital budgeting decisions and accrual accounting for performance evaluation
Understand the six stages of capital budgeting for a project
Adopt the project-by-project orientation of capital budgeting when evaluating projects spanning multiple years
Describe different ways blackflush costing can simplify traditional job-costing systems
Identify and reduce conflicts that can arise between the EOQ decision model and models used for performance evaluation
Manage bottlenecks
Implement three main measures in the theory of constraints
Describe customer-response time and on-time performance, and explain the rea- sons for and the cost of delays
Use both financial and nonfinancial measures of quality
Use three methods to identify quality problems
Explain four cost categories in a costs of quality program
Account for scrap
Account for rework in job costing
Account for spoilage in job costing
Account for spoilage in process costing using the standard-costing method
Account for spoilage in process costing using the first-in, first-out method
Why should the accountant distinguish between transferred-in costs and additional direct materials costs for a particular department?
Name the three amemory methods commonly associated with process costing.
Apply process-costing methods to cases with transferred-in costs
Prepare a customer-profitability report
Explain what information is pivotal to the reliability of market-share and market- size variances
Give examples of the bundling of products that gives rise to revenue-allocation issues
69. Global Tool & Die Maker is bidding on a contract with the government of Manatuka. The contract is a cost-plus situation, with an add-on profit margin of 50 percent. Direct material and direct
68. Frequently, corporations issue forecasts of earnings for the upcoming year. Such forecasts require estimations of both costs and revenues. Search the Internet for a discussion of a revision in
67. Outsourcing is a frequently used method of cost cutting or of eliminating organizational activities that are not viewed as core competencies. However, outsourcing also creates new costs and,
66. An extremely important and expensive variable cost per employee is health care provided by the employer. This cost is expected to rise each year as more and more expensive technology is used on
65. (Missing data) The Hurlstone Company suffered major losses in a fire on April 18, 2000. In addition to destroying several buildings, the blaze destroyed the company’s work in process for an
64. (Plant vs. department OH rates) Bass Fine Furniture has two departments: Fabrication and Finishing. Fabrication is composed of 2 workers and 25 machines, and Finishing has 25 workers and 3
63. (CGM and CGS) Catherine’s Collectibles produces objets d’art. The company’s Raw Materials Inventory account includes the costs of both direct and indirect materials. Account balances for
62. (Product and period costs, CGM and CGS) At the beginning of August 2001, Brennan Corporation had the following account balances:Raw Materials Inventory (both direct and indirect) $ 8,000 Work in
61. (CGM and CGS) VitalStrength Inc. began business in October 2000. The firm makes an exercise machine for home and gym use. Below are data taken from the firm’s accounting records that pertain to
60. (Journal entries) Mundell Company applies overhead at the rate of $4 per direct labor hour. The following transactions occurred during April 2000:1. Direct material issued to production,
59. (Journal entries) Ballyhoo Rags makes evening dresses. The following information has been gathered from the company records for 2001, the first year of company operations. Work in Process
58. (Mixed costs and predetermined overhead rates; two bases) King-O’Brien Enterprises makes fiberglass swimming pools in a two-department process: Production and Installation. Production is highly
57. (High-low; least squares regression) Andrews Company manufactures insulated windows. The firm has encountered a problem in budgeting repairs and maintenance.The cost is apparently a mixed cost
56. (Analyzing mixed costs) Frances’ Dairy determined that the total overhead rate for costing purposes is $6.70 per cow per day (referred to as an “animal day”).Of this, $6.30 is the variable
55. (Cost classifications) Donald Trumpett is a house painter who incurred the following costs during June 2001 when he painted four houses. He spent $1,000 on paint, $50 on mineral spirits, and $100
53. (Cost behavior) Officestuff Ink makes stationery sets. In an average month, the firm produces 200,000 boxes of stationery; each box contains 50 pages of stationery and 40 envelope sets.
52. (Appendix–Least squares) Tom’s Charters operates a fleet of powerboats in Fort Myers, Florida. Tom wants to develop a cost formula for labor costs (a mixed cost). He has gathered the
51. (Appendix–Least squares) Below are data on number of shipments received and the cost of receiving reports for Pacific Supply Company for the first seven weeks of 2000:Number of Cost of
50. (Financial statement classifications) Cajun Airboats purchased a plastics extruding machine for $100,000 to make boat hulls. During its first operating year, the machine produced 5,000 units and
49. (CGM and CGS) Cathy’s Custom Clocks’ August 2001 cost of goods sold was$2,300,000. August 31 work in process was 40 percent of the August 1 work in process. Overhead was 225 percent of direct
48. (Cost of services rendered) The following information is related to the Perrrfect Veterinary Clinic for April 2001, the firm’s first month in operation:Veterinarian salaries for April $12,000
47. (CGM and CGS) Holiday Products Company had the following inventory balances at the beginning and end of March 2000:March 1, 2000 March 31, 2000 Raw Materials Inventory $12,000 $16,000 Work in
46. (Underapplied or overapplied overhead) Hume Company uses a normal cost system. At year-end, the balance in the manufacturing overhead control account is a $50,000 debit. Information concerning
45. (Underapplied or overapplied overhead) At the end of 2000, Schmitt Corporation has the following account balances:Manufacturing Overhead (credit) $ 20,000 Work in Process Inventory 128,000
44. (Overhead application) Brooke & Associates applies overhead at a combined rate for fixed and variable overhead of 175 percent of professional labor costs.During the first three months of 2000,
43. (Predetermined overhead rate) Walton Company has developed a monthly overhead cost formula of $2,760 $4 per direct labor hour for 2000. The firm’s 2000 expected annual capacity is 24,000
42. (Essay) A portion of the costs incurred by business organizations is designated as direct labor cost. As used in practice, the term direct labor cost has a wide variety of meanings. Unless the
41. (Product and period costs) Alexander Company incurred the following costs in August 2000:• Paid a six-month premium for insurance of company headquarters, $12,000.• Paid three months of
40. (Labor cost classification) House & Home Inc. produces a variety of household products. The firm operates 24 hours per day with three daily work shifts. The first-shift workers receive “regular
39. (Direct vs. indirect costs) Midwestern State University’s College of Business has five departments: Accounting, Finance, Management, Marketing, and Decision Sciences. Each department
38. (Direct vs. indirect costs) Babin Cutlery Inc. manufactures kitchen knives. Following are some costs incurred in the factory in 2000 for knife production:Material Costs:Stainless steel $400,000
37. (Predictors and cost drivers; team activity) Accountants often use factors that change in a consistent pattern with costs to explain or predict cost behavior.a. As a team of three or four, select
36. (High-low method) The Evanstonian builds tabletop replicas of some of the most famous lighthouses in North America. The company is highly automated and, thus, maintenance cost is a significant
35. (High-low method) Information about Brightman Corporation’s utility cost for the first six months of 2001 follows. The company’s cost accountant wants to use the high-low method to develop a
34. (Total cost determination with mixed cost) Heathcliff Accounting Services pays$400 per month for a tax software license. In addition, variable charges average$15 for every tax return the firm
33. (Cost behavior) The Hudson Company manufactures high-pressure garden hoses. Costs incurred in the production process include a rubber material used to make the hoses, steel mesh used in the
32. (Cost behavior) O’Malley Company produces baseball caps. The company incurred the following costs to produce 2,000 caps last month:Cardboard for the bills $ 1,200 Cloth materials 2,000 Plastic
31. (Degrees of conversion) Indicate whether each of the following types of organizations is characterized by a high, low, or moderate degree of conversion.a. Bakery in a grocery storeb. Convenience
30. (Company type) Indicate whether each of the following terms is associated with a manufacturing (Mfg.), a retailing or merchandising (Mer.), or a service (Ser.)company. There can be more than one

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