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introduction to managerial accounting

Questions and Answers of Introduction To Managerial Accounting

5–12. What is the role of activity dictionary in an ABC project?
5–13. Explain why a new product-costing system may be needed when line managers suggest that an apparently profitable product be dropped.
5–14. Explain why a manufacturer with diverse product lines may benefit from an ABC system.
5–15. Are activity-based costing systems appropriate for the service industry? Explain.
5–16. Explain why maintaining their medical-services provider network is treated as a product-sustaining-level activity by Blue Cross Blue Shield.
5–17. How could the administration at Immunity Medical Center’s Primary Care Unit use the information developed by the TDABC project team?
5–18. Explain a key difference in the interpretation of the ABC data in Exhibit 5-7 (Patio Grill Company) and the TDABC data in Exhibit 5-16 (Immunity Medical Center).
5–19. Explain the concept of two-dimensional ABC. Support your explanation with a diagram.
5–20. What is meant by the term activity analysis? Give three criteria for determining whether an activity adds value.
5–21. Distinguish between an activity’s trigger and its root cause. Give an example of each.
5–22. What is meant by customer-profitability analysis? Give an example of an activity that might be performed more commonly for one customer than for another.
5–23. Explain the relationship between customer profitability analysis and activity-based costing.
5–24. What is a customer profitability profile?
5–25. Describe the use of practical capacity in a TDABC system.
Urban Elite Cosmetics has used a traditional cost accounting system to apply quality-control costs uniformly to all products at a rate of 14.5 percent of direct-labor cost. Monthly direct-labor cost
Kentaro Corporation manufactures Digital Video Recorders (DVRs) in its Tokyo plant. The following costs are budgeted for January. (Yen is the Japanese monetary unit.)Required: Divide these costs into
Categorizing Activity Cost Pools(LO 5-2, 5-3) Refer to the information given in the preceding exercise. For each of the activity cost pools identified, indicate whether it represents a unit-level,
Activity-Based Costing in a Government Agency; Use of Internet(LO 5-2, 5-7, 5-10) Visit the website of a city, state, or Canadian province of your choosing (e.g., the City of Charlotte, N.C.,
Finger Lakes Winery is a small, family-run operation in upstate New York. The winery produces two varieties of wine: riesling and chardonnay. Among the activities engaged in by the winery are the
Redwood Company sells craft kits and supplies to retail outlets and through its catalog. Some of the items are manufactured by Redwood, while others are purchased for resale. For the products it
As a group, discuss the activities of your college or university (e.g., admission, registration, etc.). List as many activities as you can.Required: Make a presentation to your class that includes
Big Apple Design Company specializes in designing commercial office space in Chicago. The firm’s president recently reviewed the following income statement and noticed that operating profits were
Ontario, Inc. manufactures two products, Standard and Enhanced, and applies overhead on the basis of direct-labor hours. Anticipated overhead and direct-labor time for the upcoming accounting period
Kitchen King’s Toledo plant manufactures three product lines, all multi-burner, ceramic cook tops. The plant’s three product models are the Regular (REG), the Advanced (ADV), and the Gourmet
The controller for Tulsa Medical Supply Company has established the following activity cost pools and cost drivers.An order for 1,000 boxes of medical-testing agent has the following production
Refer to the original data given in the preceding problem for Tulsa Medical Supply Company.Required:1. Calculate the unit cost of a production order for 100 specially coated plates used in cancer
Montreal Electronics Company manufactures two large-screen television models: the Nova, which has been produced for 10 years and sells for $900, and the Royal, a new model introduced in early 20x0,
Knickknack, Inc. manufactures two products: Odds and Ends. The firm uses a single, plantwide overhead rate based on direct-labor hours. Production and product-costing data are as follows:Knickknack,
Northwest Aircraft Industries (NAI) was founded 45 years ago by Jay Preston as a small machine shop producing machined parts for the aircraft industry, which is prominent in the Seattle/Tacoma area
Marconi Manufacturing produces two items in its Trumbull Plant: Tuff Stuff and Ruff Stuff. Since inception, Marconi has used only one manufacturing-overhead cost pool to accumulate costs. Overhead
Gigabyte, Inc. manufactures three products for the computer industry:Gismos (product G): annual sales, 8,000 units Thingamajigs (product T): annual sales, 15,000 units Whatchamacallits (product W):
Fresno Fiber Optics, Inc. manufactures fiber optic cables for the computer and telecommunications industries. At the request of the company vice president of marketing, the cost management staff has
Refer to the information given in the preceding problem for Fresno Fiber Optics and two of its customers, Trace Telecom and Caltex Computer. Additional information for six of Fresno’s other
Whitestone Company produces two subassemblies, JR-14 and RM-13, used in manufacturing trucks.The company is currently using an absorption costing system that applies overhead based on directlabor
Morelli Electric Motor Corporation manufactures electric motors for commercial use. The company produces three models, designated as standard, deluxe, and heavy-duty. The company uses a job-order
Cost Distortion; Continuation of Preceding Case(LO 5-2, 5-5)Traditional system undercosts Deluxe Model by $222.75 per unitRefer to the product costs developed in requirement (2) of the preceding
3-1 Discuss the role of product and service costing in manufacturing and non-manufacturing firms.
3-2 Diagram and explain the flow of costs through the manufacturing accounts used in product costing.
3-3 Distinguish between job-order costing and process costing.
3-4 Compute a predetermined overhead rate and explain its use in job-order costing for job-shop and batch-production environments.
3-5 Prepare journal entries to record the costs of direct material, direct labor, and manufacturing overhead in a job-order costing system.
3-6 Prepare a schedule of cost of goods manufactured, a schedule of cost of goods sold, and an income statement for a manufacturer.
3-7 Describe the two-stage allocation process used to assign manufacturing overhead costs to production jobs.
3-8 Describe the process of project costing used in service industry firms and nonprofit organizations.
Piedmont Paint Company uses a job-order costing system, and the company had two jobs in process at the beginning of the current year. Job JY65 currently has a cost of $134,400 assigned to it, and job
3–1. List and explain four purposes of product costing.
3–2. Explain the difference between job-order and process costing.
3–3. How is the concept of product costing applied in service industry firms?
3–4. What are the purposes of the following documents:(a) material requisition form, (b) labor time record, and(c) job-cost record.
3–5. Why is manufacturing overhead applied to products when product costs are used in making pricing decisions?
3–6. Explain the benefits of using a predetermined overhead rate instead of an actual overhead rate.
3–7. Describe one advantage and one disadvantage of prorating overapplied or underapplied overhead.
3–8. Describe an important cost-benefit issue involving accuracy versus timeliness in accounting for overhead.
3–9. Explain the difference between actual and normal costing.
3–11. Describe some costs and benefits of using multiple overhead rates instead of a plantwide overhead rate.
3–12. Describe the process of two-stage cost allocation in the development of departmental overhead rates.
3–13. Define each of the following terms, and explain the relationship among them: (a) overhead cost distribution,(b) service department cost allocation, and(c) overhead application.
3–14. Describe how job-order costing concepts are used in professional service firms, such as law practices and consulting firms.
3–15. What is meant by the term cost driver? What is a volume-based cost driver?
3–16. Describe the flow of costs through a product-costing system. What special accounts are involved, and how are they used?
3–17. Give an example of how a hospital, such as the Mayo Clinic, might use job-order costing concepts.
3–18. Why are some manufacturing firms switching from direct-labor hours to machine hours or throughput time as the basis for overhead application?
3–19. What is the cause of overapplied or underapplied overhead?
3–20. Briefly describe two ways of closing out overapplied or underapplied overhead at the end of an accounting period.
3–21. Describe how a large retailer such as Lowes would assign overhead costs to products.
3–22. Explain how a non-profit organization like Doctors Without Borders might assign overhead costs to their operations in a particular refugee camp
+ Job-Order versus Process Costing(LO 3-1, 3-3)For each of the following companies, indicate whether job-order or process costing is more appropriate.1. Manufacturer of swimming pool chemicals.2.
Basic Journal Entries in Job-Order Costing(LO 3-5) Finley Educational Products started and finished job number B67 during June. The job required $4,600 of direct material and 40 hours of direct labor
Visit the website of a film producer, such as Disney, MGM, or Warner Brothers.Required: Read about one of the company’s recent (or upcoming) film releases. Then discuss why or why not job-order
Bodin Company manufactures finger splints for kids who get tendonitis from playing video games. The firm had the following inventories at the beginning and end of the month of January.The following
McAllister, Inc. employs a normal costing system. The following information pertains to the year just ended.• Total manufacturing costs were $2,500,000.• Cost of goods manufactured was
Garrett Toy Company incurred the following costs in April to produce job number TB78, which consisted of 1,000 teddy bears that can walk, talk, and play cards.Direct Material:4/1/20x0 Requisition
Crunchem Cereal Company incurred the following actual costs during 20x1.The firm’s predetermined overhead rate is 210 percent of direct-labor cost. The January 1 inventory balances were as
Reimel Furniture Company, Inc. incurred the following costs during 20x2.During 20x2, products costing $120,000 were finished, and products costing $132,000 were sold on account for $195,000. There
Sweet Tooth Confectionary incurred $157,000 of manufacturing overhead costs during the year just ended. However, only $141,000 of overhead was applied to production. At the conclusion of the year,
The following information pertains to Trenton Glass Works for the year just ended.Budgeted direct-labor cost: 75,000 hours (practical capacity) at $16 per hour Actual direct-labor cost: 80,000 hours
The following data pertain to the Oneida Restaurant Supply Company for the year just ended.Required:1. Compute the firm’s predetermined overhead rate for the year using each of the following common
Design Arts Associates is an interior decorating firm in Berlin. The following costs were incurred in the firm’s contract to redecorate the mayor’s offices.The firm’s budget for the year
Choice of a Cost Driver for Overhead Application(LO 3-1, 3-4) Suppose you are the controller for a company that produces handmade glassware.1. Choose a volume-based cost driver upon which to base the
The following data refer to Twisto Pretzel Company for the year 20x1.Required:1. Prepare Twisto Pretzel Company’s schedule of cost of goods manufactured for 20x1.2. Prepare the company’s schedule
Stellar Sound, Inc. which uses a job-order costing system, had two jobs in process at the start of 20x1:job no. 64 ($84,000) and job no. 65 ($53,500). The following information is available:a. The
Marco Polo Map Company’s cost of goods sold for March was $345,000. March 31 work-in-process inventory was 90 percent of March 1 work-in-process inventory. Manufacturing overhead applied was 50
Midnight Sun Apparel Company uses normal costing, and manufacturing overhead is applied to workin-process on the basis of machine hours. On January 1 of the current year, there were no balances in
Tiana Shar, the controller for Bondi Furniture Company, is in the process of analyzing the overhead costs for the month of November. She has gathered the following data for the month.The firm’s
Scholastic Brass Corporation manufactures brass musical instruments for use by high school students.The company uses a normal costing system, in which manufacturing overhead is applied on the basis
Refer to the preceding problem regarding Scholastic Brass Corporation. Complete the following job-cost record for job number T81. (Assume that all of the direct-labor hours for job T81 occurred
Terri Ronsin had recently been transferred to the Home Security Systems Division of National Home Products. Shortly after taking over her new position as divisional controller, she was asked to
PROBLEM 3–17 Cost Flows; T-Accounts; Income Statement LO3–2, LO3–3, LO3–4 Supreme Videos, Inc., produces short musical videos for sale to retail outlets. The company’s balance sheet
PROBLEM 3–16 Comprehensive Problem LO3–1, LO3–2, LO3–4 Gold Nest Company of Guandong, China, is a family-owned enterprise that makes birdcages for the South China market. The company sells
PROBLEM 3–15 Journal Entries; T-Accounts;Financial Statements LO3–1, LO3–2, LO3–3, LO3–4 Froya Fabrikker A/S of Bergen, Norway, is a small company that manufactures specialty heavy
PROBLEM 3–14 Schedule of Cost of Goods Manufactured; Overhead Analysis LO3–3, LO3–4 Gitano Products operates a job-order costing system and applies overhead cost to jobs on the basis of direct
PROBLEM 3–13 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement LO3–3 Superior Company provided the following data for the year ended December 31 (all raw materials
PROBLEM 3–12 Predetermined Overhead Rate;Disposing of Underapplied or Overapplied Overhead LO3–4 Luzadis Company makes furniture using the latest automated technology. The company uses a
PROBLEM 3–11 T-Account Analysis of Cost Flows LO3–2, LO3–3, LO3–4 Selected T-accounts of Moore Company are given below for the just completed year:Required:1. What was the cost of raw
EXERCISE 3–10 Applying Overhead; Journal Entries;T-accounts LO3–1, LO3–2 Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing
EXERCISE 3–9 Applying Overhead; T-accounts;Journal Entries LO3–1, LO3–2, LO3–4 Harwood Company uses a job-order costing system that applies overhead cost to jobs on the basis of
EXERCISE 3–7 Applying Overhead; Cost of Goods Manufactured LO3–3, LO3–4 The following cost data relate to the manufacturing activities of Chang Company during the just completed
EXERCISE 3–6 Schedules of Cost of Goods Manufactured and Cost of Goods Sold; Income Statement LO3–3 The following data from the just completed year are taken from the accounting records of Mason
EXERCISE 3–5 Journal Entries and T-accounts LO3–1, LO3–2 The Polaris Company uses a job-order costing system. The following transactions occurred in October:a. Raw materials purchased on
EXERCISE 3–4 Underapplied and Overapplied Overhead LO3–4 Osborn Manufacturing uses a predetermined overhead rate of$18.20 per direct labor-hour. This predetermined rate was based on a cost

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