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management cost accounting

Questions and Answers of Management Cost Accounting

Swang Company has a more than adequate supply of labor, but only one machine to finish the products after direct labor workers complete their tasks. There is sufficient market demand for their
Annual sales for automobiles produced by Meador, Inc., are in the range of $40-$50 million;annual sales increases for the past four years have averaged 6 percent. More than 800 persons are employed
Relate what you have learned from Whist operations in C5-16 about recognizing the weakest link by applying this theory to personal characteristics. Assume the goal of the following fictitious
Explain if all variable costs are direct costs and if all direct costs are variable.
Explain how you could use job order costing in a nonmanufacturing firm or industry.
Contrast job order and process costing systems. What factors dictate whether a job order or process cost system is more appropriate?
How does a dentist or veterinarian use the job cost sheets that you personally see?
What could cause a difference between the time reported on a time card and that shown on a job time ticket? How should this difference be reported?
If the total material cost of 100 units is $200 and a 10 percent increase in material cost is expected at the same time that an increase of 50 percent in volume of production is planned, what is next
What is the source document for the distribution of direct labor costs to Work in Process Inventory and indirect labor costs to Factory Overhead Control?
What methods and documents are used to control materials inventories?
What form does the subsidiary ledger for a Work in Process Control account in a job order costing system take?
Pineapple Corporation has asked you to record the following data relating to factory labor and overhead for one period during the year. Before operations began, management estimated direct labor
In 19X1, Jett Company began work on Job No. 218, incurring a direct materials cost of $1,200 and a direct labor cost of $4,209 representing an actual labor rate of $6.10. The factory overhead
The following information regarding one unit of product has been abstracted from the records for the year ending March 31, 19X2, of Donnell Manufacturing Company:Management is formulating a strategy
One product line is manufactured by Bond Company with sales of this product line for 19X1 expected to be $300,000. The following data indicate the cost of goods sold:Company management expects costs
Management of Peru, Inc., desires to have 1,800 units in ending inventory of finished goods at the end of 19X3; production is assumed to occur evenly throughout the year. Direct materials and work in
Barton Company’s cost of goods manufactured and income statement for the year ended December 31, 19X1, follow. Beside the cost figures is an indication of whether they are variable(V) or/and fixed
Discuss the characteristics of the production process which determine whether to use job order costing or process costing.
Define equivalent units. Why is it necessary to compute equivalent units and how are they used?
Why is it suggested that the product unit under process costing may be visualized as a snowball as it travels from one department to another?
On the quantity schedule for a department, 1,000 units are indicated as finished and transferred; does this necessarily mean that the unit is in a finished stage ready for- sale to a customer?
When would you advise using estimated factory overhead application rates in a process costing system?
Contrast how the costs of beginning inventory are treated in the weighted-average and FIFO costing approaches used in process costing.
What information about beginning inventory is needed for FIFO costing that is not needed to compute the unit costs under weighted-average costing?
Why is the FIFO method of accounting for beginning inventory costs sometimes referred to as the modified or departmental FIFO method? Why not use strict FIFO costing?
Why should the accountant be concerned about determining when material is issued into the production process?
What changes in job order and process costing systems do you expect will become more prevalent because of increased usage of flexible manufacturing and automation?
Analysis of the records of the Burnett Company revealed the following:Required:a. Calculate equivalent units for FIFO costing.b. Calculate equivalent units for weighted-average costing. Beginning
You are able to obtain only limited data from Steele Company before having to prepare cost sections of the production report. The ending balance in Work in Process for the previous month shows 500
Hastings Company places material in production at the beginning of operations. In September, material costs totaled $6,240; direct labor, $10,500; and factory overhead, $5,724. On September 1, there
Determine finished equivalents for the following process of Watch Company:Workers issued materials at the beginning of the process in this second department of operations.Required:a. Determine the
Courtney Company places material in production at the beginning of operations. In April, material costs totaled $16,660; direct labor, $20,560; and factory overhead, $7,139. On April 1, there were
The following computations are for Creite’s, Inc.’s cost of production report. The 200 units in beginning inventory have a total cost of $500.Required:a. Explain why you know that this is not the
Department One of Bacon, Inc., provides the following limited data for May:The ending inventory contains 600 units having 30 percent of material and 40 percent conversion cost. Due to a change in
Because you are such an industrious cost accountant, you decide to return to the office tonight and finish the cost of production report you started during regular working hours. However, to your
Assume inspection is made at the beginning of operations in processing departments except the first department.a. What cost is assigned to the lost units?b. How would you allocate the cost of normal
Why are the units lost through either normal or abnormal causes included in computing equivalent units?
a. Contrast the treatment for normal and abnormal loss in a process costing system.b. When would you allocate abnormal loss to cost of units produced under a process costing system?
Under an actual cost system, indicate reasons why the total unit cost determined in the first department under process costing could differ from the preceding department unit cost computed in the
What is the FIFO equivalent unit calculation for material, labor, and overhead if material is added in processing at the beginning of operations and 12,800 units were started in production? Beginning
What factors would you consider in deciding at what points in the manufacturing operations to make inspections? Why is there a trade-off in selecting more frequent inspection points?
a. Assuming the company has units in beginning and ending inventory, indicate the equivalent unit computation for the preceding department cost when the units received from the preceding department
Assume a process introduces one-half of the material needed at the beginning of operations with the remaining one-half material entering at the 60 percent stage of operation. If inspection is at the
Assume inspection is made at the midpoint of operations in a department subsequent to the first department and material is introduced at the beginning of operations. What cost is assigned to any lost
What are the equivalent units for material, labor, and overhead using the weightedaverage method of product costing if: 1,200 units were started in process, 200 units were lost, and ending inventory
What is the weakness in a system in which workers are continually compensating for others’ perceived errors?
Blackmon Company introduces material at the beginning of operations in its process while adding conversion costs evenly throughout production. The following data is available for one period:A total
Immediately after the third department of Bennett, Inc., receives an 8,000 gallon batch of liquid from the second department, the mixture is diluted. At the end of operations in the third department,
In the fourth department of David, Inc., inspection occurs at the 25 percent stage of processing.Material X is introduced at the beginning of operations while Material Y is added at the end of
Judi Company experiences loss in the manufacture of its product. Inspection is at the 60 percent stage of production. Labor and overhead costs are added evenly up to the inspection point.Material is
Why should managers be alert for market developments affecting their by-products and joint products?
(a) Contrast scrap, by-products, and joint products. (b) Under which conditions should a product be treated as a by-product rather than as a joint product?
Discuss the basic difference between the methods of accounting for by-products and for joint products.
When would it be appropriate to allocate all producing costs to the joint products and treat the recovery value of by-products as other income?
Which of the two major approaches to accounting for by-products usually results in a lower valuation of joint (main) product inventories?
Discuss the methods available for accounting for joint products and describe the advantages and weaknesses of each method.
(a) Why do the joint cost allocation methods illustrated in the chapter have limited usefulness in cost control and planning? (b) What type of cost analysis would yield results that management can
Define the relationship between the split-off point and separable costs.
Compare common costs with joint costs.
Since the choice of which joint allocation method to use often is arbitrary, why are these approximations necessary?
Sugar Farmers grows sugar beets; these large beets have a high natural sugar content that the company refines to produce commercial sugar. The sugar processing factory accepts only topped beets,
Oury Company’s Chemicals X12 and YR8 are joint products; 20,000 gallons of X12 and 40,000 gallons of YR8 were produced. Their cost for April up to the point of separation was$350,000. No costs were
Cinnamon Refining Company produces three different chemicals. A batch costing $23,750 produces the following:Required:a. Using the net market (realizable) value method for allocating joint costs,
Texco Company manufactures three products, R, S, and T, from a particular joint process.Each product may be sold at split-off or may be processed further. Joint production costs for the period were
Freedman Corporation uses a joint process to manufacture Products A, B, and C. Each product may be sold at its split-off point or processed further. Additional processing costs are entirely variable
Assume that to gain better insight into budgeting methods used in practice, you interview a number of business executives. You ask if they have a flexible budgeting approach and are surprised to find
Why is it important to have available the budget formula for a company’s fixed and variable cost behavior?
What abilities does a budget director need to perform effectively?
Discuss the budgets a company should prepare as part of a master budget plan; discuss their interrelationships to each other.
Discuss several advantages and limitations of budgets, both for internal and external purposes.
How are predetermined overhead rates useful in the development of budgets?
What factors should be evaluated in deciding to purchase enough materials to maintain a large ending inventory?
If a company’s policy is that each month’s units of ending inventory sh
As a newly hired cost accountant for a manufacturing firm, you find that a fixed budgeting system is being used. You immediately suggest a flexible budgeting approach. Your supervisor’s reply is,
Assume Cost Center A produces 1,000 units in January 19X1, incurring the following actual costs:Required:a. Using the flexible budget formula given in Exhibit 10-2, determine variances for each line
Budgeted data for the Puryear Company indicates that 40,000 pounds of sugar are needed to remain in the ending inventory for processing its cola drink. Beginning sugar inventory is expected to
Managers use budgets for planning and establishing goals for the future. Budgets also help managers evaluate past performance.Required:a. What areas of conflict are there between these two purposes
Based on an average unit selling price of $100, monthly sales during 19X1 were as follows for the Lark Company:Since the company is faced with increasing labor cost, management plans to increase the
Georgia, Inc., manufactures baby bottles and uses marketing research to estimate future sales. Research has shown that an average of 20 bottles is purchased per birth and that generally all 20 are
Webber, Inc., recently developed a new glass casserole dish. Webber promotes the dish as being not only highly attractive but also able to withstand intense oven heat for extended periods. In
Skelly, Inc., has provided the following actual cost data for your use in determining variable factory overhead costs and fixed factory overhead costs for budgeting purposes:Required:Determine an
Discuss how the calculation of overhead rates is used in cost control evaluation.
Determine the budgeted fixed overhead and the variable overhead rate for indirect labor if the two budgets are: 1,000 units—$4,000; 3,000 units—$8,000. Can you compute the fixed overhead
A company wants to realize a profit of $150,000. Its salespeople plan to sell 100,000 units of a product for $15 each; fixed costs are $250,000. To realize this desired profit, what would variable
Understanding cost behavior is vital to all organizations, but it is crucial to hospitals because their patterns of cost differ from most manufacturing firms. Discuss why you think the cost structure
Is depreciation cost a fixed or variable cost? Indicate the factor determining whether the cost is fixed or variable.
In analyzing cost behavior, why must the accountant guard against feeding large amounts of data to the computer and letting a regression program find a relationship among the variables?
What factors cause costs to vary?
If total costs for Ban Company are $280,000 for 600,000 machine-hours and $310,000
for 700,000 machine-hours, what are the budgeted fixed costs for the year?
State why you agree or disagree with this statement: The basic concept in cost estimation is to estimate the relation between costs and the variables affecting costs.What is likely to be determined
Fairleigh, Inc., makes children’s toys. The company uses a chain of merchandisers for retail distribution. Even though sales and production increase dramatically near the end of the year,
Bartell, Inc., wishes to determine the fixed portion of its semivariable expense, electricity, as measured against direct labor-hours, for the first three months of the year. Information for this
You have plotted the data points below and are now ready to begin a regression analysis.Required:a. Do you see anything that should be done before running the regression?b. What could have caused any
Stallings Company provides you with a summary of its total budgeted production costs at three production levels:Required:a. Indicate the cost behavior for Costs A through D.b. What would the total
The controller for Stern, Inc., prepared this regression diagram drawing a line of best fit (trend line) for factory overhead and wages. The line of best fit in this diagram is described by the
The total monthly overhead budget for Deb Corporation is given for two volume levels:Required:a. Management asks you for an approximate fundamental measure of fixed and variable cost behavior using
. In the graphs shown, assume that total costs for the Greer Company are measured on the vertical axis while the horizontal axis measures the volume or activity level.Required:Indicate the graph that
The data for six bimonthly cost observations of the Steve Douglass Company follow:Required:a. Plot a statistical scattergraph from the data to obtain the fixed and variable cost elements.b. Use the

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