Questions and Answers of Horngrens Cost Accounting

(Appendix) Carolina Textiles makes three items: pants, shorts and shirts. The contribution margins are $3.25, $2.05, and $2.60 per unit, respectively. The manager must decide what mix of clothes to
(Appendix) The variable costs for four different products are $0.65, $0.93, $1.39, and $0.72. State the objective function in equation form to minimize the variable costs.
(Appendix) The contribution margins for three different products are $9.50,$5.00, and $1.50. State the objective function in equation form to maximize the contribution margin.
(Sales mix) One of the products produced and sold by Industrial Supply Co.is a 90-quart cold drink cooler. The company’s projections for this product for 2002 follow:Sales price per unit $36
(Sales mix) Wild Hound provides two types of services to dog owners: grooming and training. All company personnel can perform either service equally well. To expand sales and market share, the Wild
(Sales mix)India’s domestic airlines have battled antiquated airports, high fuel prices and government rules that force them to fly unprofitable routes.In 1999, they were wounding one another with
(Special order) Touch-O-Class produces high-quality wooden commemorative plaques. Each plaque is hand-made and hand-finished using the finest materials available. The firm has been operating at
(Special order) Quality Fencing produces 18-gauge barbed wire that is retailed through farm supply companies. Presently, the company has the capacity to produce 42,000 tons of wire per year. The firm
(Allocation of scarce resources) Jill Rose received her accounting degree in 1972. Since receiving her degree, Ms. Rose has obtained significant experience in a variety of job settings. Her skills
(Allocation of scarce resources) Because the employees of one of its plants are out on strike, Allentown Electronics has found itself operating at peak capacity.The firm makes two electronic
(Outsourcing) The Air Ride Shoe Company manufactures various types of shoes for sports and recreational use. Several types of shoes require a built-in air pump. Presently, the company makes all of
(Outsourcing) Greenburg Automotive produces pickup truck bumpers that are sold on a wholesale basis to new car retailers. The average sales price of a bumper is $150. Normal annual sales volume is
(Outsourcing) Mountain Technologies manufactures fiberglass housings for portable generators. One of the parts required to manufacture a housing is a metal latch. Currently the company produces all
(Asset replacement) Modern Products Co. purchased new computer scheduling software on April 1, 2001, for $120,000 to manage its production. On May 15, 2001, a representative of a computerized
(Asset replacement) Certain production equipment used in Flatburg’s Canadian plant has become obsolete relative to current technology. The company is considering whether it should keep its existing
(Relevant costs)An analysis of GM’s labor costs at its parts plant in Dayton, Ohio, provided evidence of one source of the firm’s competitive problems. Its UAW employees are provided fringe
(Relevant vs. sunk costs) Your friend, Bill Hawkins, purchased a new, combination phone and answering machine just prior to the start of this school term.He paid $95 for the equipment. Shortly after
(Relevant costs) Because of a monumental error committed by its purchasing department, John’s Super Grocery received 50,000 heads of lettuce rather than the 500 that were actually ordered. The
(Relevant costs) Assume that you are about to graduate from your university.You are trying to decide whether to apply for graduate school or enter the job market. To help make the decision you have
(Time and relevant costs) The following are costs associated with a product line of Johnson Safety Systems. The costs reflect capacity-level production of 45,000 units per year.Variable production
(Relevant costs)Businesses in Chattanooga, Tenn., will be asked to give up a bit of their independence to cut costs and help clean up the environment.The Chattanooga Institute, a nonprofit advocate
(Appendix) What is the difference between a slack variable and a surplus variable?Can each exist in the same linear programming problem? If so, discuss how; if not, discuss why.
(Appendix) “Resource constraints are always inequalities.” Is this statement true or false? Why?
(Appendix) What is the difference between a feasible solution and an optimal solution?
(Appendix) What are nonnegativity constraints in the linear programming model? Why is it not necessary that they be specified for every linear programming problem?
(Appendix) What are two typical objective function expressions that are stated in terms of accounting information?
(Appendix) Why is linear programming used in business organizations?
What are the differences among avoidable fixed costs, unavoidable direct fixed costs, and common fixed costs? Which are relevant and which are irrelevant in the decision to keep or eliminate a
What is the special order decision? What typical circumstances lead to the need to make this type of decision?
Why is the effect of a sales price change on volume partly determined by the elasticity of demand for the product?
Suggest possible alternatives to basing sales commissions on the sales revenue generated by each salesperson. What would be the benefits and drawbacks of your methods to the salesperson and to the
What is a scarce resource? Why will the resource that is most scarce in an organization be likely to change from time to time?
Kelly O’Riley, owner of Juanita’s Mexican Cafe, is trying to decide whether to make tortillas or buy them from a supplier, Ricardo’s Super Mercado. Kelly has come to you for advice. What
You are considering the sale of your old stereo system. According to your records, you paid $500 for the stereo system. The current market value of the stereo is $150. A new stereo of the same make
Are sunk costs ever relevant in decision making? If so, give one or more examples.
Can a particular cost be relevant for one purpose, but not for other purposes?Give three examples in which this would be the case.
Which are more important in decision making: quantitative or qualitative factors?Why? How can qualitative factors be explicitly considered in making a decision?
What is an opportunity cost? In an outsourcing decision, what opportunity cost might be associated with the production facilities?
What are the characteristics of a relevant cost? Why are future costs not always relevant? Are all relevant costs found in accounting records? Explain.
Define a relevant cost. For a hospital considering the purchase of a new X-ray machine, what are examples of the relevant costs of the purchase decision?What would be one of the alternatives to
Green Thumb Industries produces a variety of equipment used by professional gardeners.The key machine in the company’s product lineup is a riding lawnmower.Each lawnmower produced requires two
(Appendix) How does a budget manual facilitate the budgeting process?
What benefits are provided by a budget?
Why is the cash budget so important in the master budgeting process?
How are the various schedules in a master budget prepared and how do they relate to one another?
What is the starting point of a master budget and why?
How is strategic planning related to budgeting?
Why is budgeting important?
(Appendix) How is a linear programming problem formulated?
How is segment margin used to determine whether a product line should be retained or eliminated?
How are special prices set and when are they used?
How does sales mix pertain to relevant costing problems?
How can management make the best use of a scarce resource?
What are the relevant financial considerations in outsourcing?
What are sunk costs and why are they not relevant in making decisions?
How do opportunity costs affect decision making?
What factors are relevant in making decisions and why?
50. Search the Internet for associations that promote the sale of beef or pork products.One or more of the associations will provide information on the many applications of beef and pork by-products.
49. Find the Web site for Buckhead Beef on the Internet. On its Web site, the company provides much information regarding its philosophies, product lines, strategy, production, and distribution
48. Some waste, scrap, or by-product materials have little value. In fact, many such materials represent liabilities for companies because the materials require companies to incur significant
47. Use the Internet to find five examples of businesses that engage in joint processes.For each of these businesses, describe the following:a. The various outputs classified as joint products,
46. (Ending inventory valuation; joint cost allocation) Gainesville Meat Packers experienced the operating statistics in the following table for its joint meat cutting process during March 2000, its
45. (By-product/joint product journal entries) Missouri Grain Agriculture is a 5,000-acre wheat farm. The growing process yields two principal products: wheat and straw. Wheat is sold for $3.50 per
44. (Joint cost allocation; by-product) The Farmers’ Delight Company produces tomato paste and tomato sauce from a joint process. In addition, second-stage processing of the tomato sauce creates a
43. (Process costing; joint cost allocation; by-product) Romano’s Hair Salon provides hair styling services and sells a variety of cosmetic and hair-care products.The firm also generates some
42. (Joint products; by-product) Valley Mangoes runs a fruit-packing business in southern California. The firm buys mangoes by the truckload in season. The fruit is then separated into three
41. (Joint cost allocation; scrap) Washington Filaments produces cloth products for hotels. The company buys the fabric in 60-inch-wide bolts. In the first process, the fabric is set up, cut, and
40. (Joint cost allocation; by-product; income determination) St. Louis Bank & Trust has two main service lines: commercial checking and credit cards. As a byproduct of these two main services, the
39. (Journal entries) Madeleine Products uses a joint process to make two main products:Elegance (a perfume) and Sooosoft (a skin lotion). Two departments, Mixing and Cooking, are used, but the
38. (Not-for-profit, program, and support cost allocation) The Grand Rapids Opera Company is preparing a small pamphlet that will provide information on the types of opera, opera terminology, and
37. (Net realizable value versus realized value) Indicate whether each item listed below is associated with the (1) realized value approach or (2) the net realizable value approach.a. Has the
36. (Scrap, job order costing) Escambia Architects offers a variety of architectural services for its commercial construction clients. For each major job, architectural models of the completed
35. (Accounting for scrap) Elegant Mosaics restores antique stained glass windows.Regardless of the job, there is always some breakage or improper cuts. This scrap can be sold to amateur stained
34. (Accounting for by-products) Thompson EDP provides computing services for its commercial clients. Records for clients are maintained on both computer files and paper files. After 7 years, the
33. (Accounting for by-products) A by-product produced from processing potatoes into the joint products of frozen potato patties and potatoes for dehydration is potato skins. Potato skins can be sold
32. (Accounting for by-products) Clark Textiles Company manufactures various wood products that yield sawdust as a by-product. The only costs associated with the sawdust are selling costs of $6 per
31. (By-products and cost allocation) Bergen Productions produced two different movies from the same original footage (joint products). The company also generated revenue from admissions paid by fans
30. (Sell or process further) Midwest Clothing produces three products (precut fabrics for hats, shirts, and pants) from a joint process. Joint cost is allocated on the basis of relative sales value
29. (By-products and cost allocation) Bayshore Manufacturing has a joint process that yields three products: M, N, and O. The company allocates the joint cost to the products on the basis of pounds
28. (Monetary measure allocation) Marianna Realty has two operating divisions:Leasing and Sales. In March 2001, the firm spent $100,000 for general company promotions (as opposed to advertisements
27. (By-product accounting method selection) Your company engages in joint processes that produce significant quantities and types of by-products. You have been requested by the chairman of your
26. (Net realizable value method) Ankara Processing produces three seafood products in a single process. The joint cost is $32,000.Product Units Produced Unit Costs at Split-Off Selling Price X 9,000
25. (Processing beyond split-off) Crews Cannery makes three products in a single joint process. For 2000, the firm processed all three products beyond the splitoff point. The following data are
24. (Sell or process further) A certain joint process yields two joint products, A and B. The joint cost for May 2001 is $20,000, and the sales value of the output at split-off is $120,000 for
22. (Approximated net realizable value method) Avignon Parfum Compagnie makes three products that can either be sold, or processed further and then sold. The cost associated with the Avignon joint
21. (Net realizable value allocation) Galaxy Communications is a broadband network and television company. The firm has three service groups: Communications, News, and Entertainment. Joint production
20. (Sales value allocation) Elsie Dairy produces milk and sour cream from a joint process. During May, the company produced 120,000 quarts of milk and 160,000 pints of sour cream. Sales value at
19. (Allocation of joint cost) Nova Scotia Fish Processors produces three products from a common input: fish, fish oil, and fish meal. For June 2001, the firm produced the following average
18. (Physical measure allocation) Patterson Chemical Company uses a joint process to manufacture two chemicals. During October 2000, the company incurred$12,000,000 of joint production cost in
17. (Physical and sales value allocations) Scott Community College runs two noncredit evening programs. During 2000, the following operating data were generated:Small Business Management Introduction
16. (Joint process decision making) Andrew Berwick has been asked by his aged aunt to take over the family butcher shop. Andrew has learned that you are majoring in accounting—he majored in
15. (Terminology) Match the following lettered terms on the left with the appropriate numbered description on the right.a. Approximated sales value at 1. Proration of joint cost on split-off method
14. Go to the Internet and find a discussion about the number of potential outputs of a peanut crop. Report your findings along with examples. Examine the relationship of your findings to accounting
13. Why must not-for-profit organizations allocate joint costs among fundraising, program, and administrative activities?
12. When are by-product or scrap costs considered in setting the predetermined overhead rate in a job order costing system? When are they not considered?
11. Describe two common approaches used to account for by-products. Which do you think is best and why?
10. Why is it sometimes necessary to use approximated rather than actual net realizable values at split-off to allocate joint cost? How is this approximated value calculated?
9. What are the two primary methods used to allocate joint cost to joint products?Compare the advantages and disadvantages of each.
8. What is cost allocation and why is it necessary in a joint process? Can you think of any other situations in which accountants allocate costs?
7. What are the decision points associated with multiple products? By what criteria would management assess whether to proceed at each point?

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