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business
managerial accounting decision making

Questions and Answers of Managerial Accounting Decision Making

Aladdin Company manufactures a product that passes through two processes. The following Obj. 2 information was available for the first department for January:1. Beginning WIP consisted of 6,000
Blue Line Company makes two kinds of ink and uses a process costing system. The company's WIP inventory for blue ink on November 1 consisted of 10,000 units. An additional 8,000 units were entered
Holbert Company produces a product that passes through two departments, mixing and heat-ing. The following information relates to activities in the mixing department for June:Beginning WIP, June 1,
A varnish manufacturer uses process costing. Information concerning a recent production peObj. 3 riod is as follows:a. Compute the cost of the units completed and transferred out.b. Compute the cost
Company X produces organic fertilizer and uses process costing. At the end of \(2004,20,000\)Obj. 3 bags of fertilizer were completed. The total value of these completed units was \(\$ 12,000\), of
Smith Inc. produces plastic pellets. The following information refers to production activity obj. 3 during March:The value of the completed units was \(\$ 6,000\), of which \(\$ 4,500\) was direct
Perfect Bread Company makes bread in its midwestern plant. The production process is described as follows:Flour, milk, yeast, and salt are combined and mixed in a large vat. The resulting dough is
Chester Smith manufactures cheddar cheese. The manufacture of cheese requires one period of production and storage in huge vats and two periods of aging in a cellar. The company uses process costing
Metallic Company produces steel. At the end of \(2005,10,000\) tons of steel I-beams were completed. The total value of these completed I-beams was \(\$ 20,000,000\), of which \(\$ 17,000,000\)
Forever Green Co. manufactures artificial Christmas trees. In 2004, Forever Green only pro- duced one type of tree, the Merry Green Tree. However, in 2005 Forever Green introduced a new,
Call Me manufactures telephones. In 2004, Call Me introduced a stylish telephone with a clear plastic casing, allowing you to see the parts of the phone. The two products are manufactured in separate
Bella Cucina processes olive oil. Information regarding production during October is as follows:The oil in ending WIP was \(100 \%\) complete as to direct materials and \(50 \%\) complete as to
Pet Products manufactures dry dog food. The following information pertains to the month of February:Pet Products uses a process costing system to value its inventories.\section*{Required}A. Compute
Assume Music Makers has begun to produce blank CDs for its use and for sale to outside customers. Because the CDs are produced in a continuous process and are identical, management at Music Makers
In a process costing system, costs flow from finished goods to:a. work-in-process.b. raw materials inventory.c. cost of goods sold.d. None of the above is correct.2. In a process costing system,
Lux Electronics is completing a new plant that will begin manufacturing circuit boards within six months. Joan Keyes has just been appointed plant controller and must decide what type of cost
Troy Company is a small manufacturer of high-quality home gar- dening tools. Each tool in Troy's line is the product of years of ergonomic research and development. Troy's marketing manager is
Highlands Machining Company produces bicycle gears from high-quality stainless steel. Assume you are an assistant depart- ment manager helping to develop a new cost-allocation system. Because you
Athena Company produces high-quality hand tools for wood- working. The company is conducting an ABC study. You are a manager at Athena, and you have been given the following
The volume-based method of allocating costs to products was developed at a time when overhead costs were a relatively small portion of product costs.a. The method uses a single activity base and a
With the growing importance of overhead costs has come a need for greater accuracy in the allocation of those costs.a. The traditional method ignores volume diversity; it makes no allowance for
Cooper's hierarchy of costs is based on allocation by activity rather than volume.a. Unit-level costs are like variable costs; they are constant per unit but change in total with the number of units
Activity-based costing allocates overhead costs on the basis of the activities that are necessary to produce a product.a. In the first stage of the allocation process, a company assigns overhead
Activity-based costing gives managers of manufacturing and service companies the accurate cost information they need to make planning decisions.
Last month when his father, Nathan, retired, Norm Gregory became president of his family's Obj. 2 manufacturing business. The company produces camping and mountain-climbing equipment that is sold in
Quantro Enterprises has invested heavily in automated equipment over the past 10 years. In that time Quantro has installed materials handling systems and automated flexible manufacturing systems. All
Denver Materials Company operates a recycling center that separates metals and then sells Objs. 2, 3 them to steel mills. The company uses large machinery to sort, move, and crush the metals.
T-Bar Industries, Inc., manufactures radios and compact disc players. For years T-Bar's proObjs. 2, 3 duction process has been labor-intensive; its primary production cost has been the wages of many
Leslie Dunn is the controller of Demarco Company. Demarco produces six separate product Obj. 3 lines in a single plant. Each line has a product manager who is accountable for the production costs of
Minor Medical Company is a manufacturer of blood pressure monitors, catheters, surgical inObj. 4 struments, and other medical products. In each of the past five years, Minor has added approximately
Alice Glidden is the chief financial officer of Brown Ribbon Industries, Inc., a manufacturer Obj. 4 of gift wraps, ribbons, and party supplies. A local certified management accountant has suggested
Jose Glass had a car accident last month and spent a night in the hospital. The bill came yesObjs. 1, 5 terday, and when he looked it over he noted that he had been charged \(\$ 7\) for a single
The law firm of Menard and Baker specializes in civil litigation. The overhead costs of operObjs. 2, 5 ating the office are charged to clients as an administrative surcharge. The surcharge is based
Apply the concepts of activity-based costing to an airline flight in which each passenger is a Objs. 4, 5 "unit of product." Give examples of unit-, batch-, product-, and facility-level costs.
Write a short definition of the terms listed in the Terms and Concepts Defined in this Chapter section.
Average production costs representing three industries are as follows:a. Calculate the material, labor, and overhead costs as a percentage of total production costs.b. Explain how overhead costs
Traditional cost systems allocated overhead costs using a single allocation base, such as direct Obj. 1 labor hours, direct labor costs, or machine hours. These simple allocation systems were
Round Tire Company (RTC) uses a predetermined overhead rate to apply assembly overhead Obj. 1 to products. Tire assembly is a labor-intensive process that requires one person to build a tire from a
Auto Detail Company manufactures two basic types of products: vinyl and metallic adhesive backed striping used by automobile manufacturers. The company traditionally has allocated manufacturing
Birmingham Cycle Manufacturing Company uses three activity pools to assign costs to prodObjs. 1, 3, 4 ucts. Each activity pool has a unique cost driver, or activity base, used to apply overhead costs
Second-stage activity drivers in an activity-based costing system allocate costs from activity Objs. 1, 4 pools to products. Cost system designers often make choices among a variety of potential
Taylor Sweets, Inc., produces a popular brand of chocolate candies. The company's manuObjs. 1, 4 facturing process is labor-intensive: Chocolate, sugar, and other ingredients are measured by hand,
Complete the following sentences with the appropriate term(s) from the chapter.1. To calculate a single plant-wide \(\qquad\) , a company does not have to separate indirect manufacturing costs into
Classify the following activities as unit level, batch level, product level, or facility level acObj. 3 cording to the activity-based costing hierarchy developed by Cooper.- Machine setups between
Managers often make decisions about keeping or dropping a product after evaluating the profitability of each product in the product line. Bimini Products, Inc., recently completed an activity-based
U-Build-It produces carpentry tools for homeowners. The company recently completed an Obj. 4 activity-based costing study and is attempting to understand the results. The following table summarizes
Good Earth Bakery traditionally has allocated manufacturing overhead to its product line usObj. 4 ing raw material weight as a cost driver. Assume the dough and other ingredients for one loaf weigh
Data from the accounting and production records of Hasgrow Company are as follows:Managers wish to understand material, labor, and activity costs of each product to help guide their pricing
Refer to the facts as shown in E5-14. The cost system designers at Hasgrow selected the numObj. 4 ber of setups as a cost driver to allocate setup costs to products. As an alternative, they could
Gonzalez Manufacturing traced the following levels of activity to the products it manufacObj. 4 tured during the first quarter of this year:Determine the total overhead cost charged to each product
America Outback is a rapidly growing service company that offers wilderness backpacking, Obj. 5 canoeing, and rock-climbing expeditions at numerous locations across the United States. Management
Refer to the facts presented in E5-17.a. Identify each cost as a unit-level, batch-level, product-level, or facility-level overhead cost.b. Justify your answer.c. How might America Outback use more
Justin owns a small factory that produces buttons for the garment industry. He wants to buy a new machine and has applied to a bank for financing. The loan officer has asked for operating statements
Mallory Chemical Corporation produces two products: A and B. The company's expected factory overhead costs for the coming year are as follows:All labor costs \(\$ 10\) per hour; materials cost \(\$
Cast-Rite Company produces a variety of cast iron pipe products used by municipalities for water and sewer systems. Though many different product configurations are possible, products primarily
Refer to the facts presented in P5-3. The activity-based costing study revealed the following revised cost estimates:Predetermined overhead rate based on cost per ton \(\$ 300\) Cost to change molds
Auto-Plex produces windshields for a major international automobile manufacturer. The company is under increasing pressure to reduce costs. Thus, management authorized an activitybased costing study
Refer to the information provided in P5-5. Assume the company employs six individuals who set up the equipment between runs of different products. Setup crew members devote approximately \(90 \%\) of
Randall Foundry uses four activity pools to assign costs to its products. Each pool has its own cost driver, the activity base used to calculate and apply overhead costs. Last year Randall prepared
Dynamic Products, Inc., manufactures a wide variety of products in its plant in Macon, Georgia. Management has identified the following manufacturing and administrative activities:1. Special
Web-books.com is an Internet company that sells books on the World Wide Web. The president of the company authorized an activity-based costing study to understand the cost of various activities that
Refer to the information in P5-9. Assume the company employs three systems engineers at an annual salary of \(\$ 75,000\) each. The engineers devote \(85 \%\) of their time to Web site maintenance
Objs. 1, 4, 5 Franklin County Bank has a commercial loan department that makes loans to businesses that meet the bank's strict criteria. The department is staffed by eight loan officers. Each loan
The East State Veterinary Clinic provides veterinary services for small domestic animals. Three certified veterinarians and four technical assistants work at the clinic. The clinic has three separate
Objs. 3, 4, 5 The Clearwater SCUBA Shop, owned and operated by Floyd Ridges, offers three types of services: retail sales, SCUBA instruction, and dive boat charters. As with many service
Music Makers manufactures CDs for software and music companies. It classifies its products into two types: data CDs and music CDs. Because of the greater quality demands of music \(\mathrm{CDs}\),
Multiple-Choice Overview of the Chapter}1. Overhead allocation based on volume alone:a. is a key element of activity-based costing.b. systematically overcosts high-volume products and undercosts
C. Berry Manufacturing Company produces two guitar models. One is a standard acoustic guitar that sells for \(\$ 600\) and is constructed from medium-grade materials. The other model is a custom-made
Forest Industries Paper Company (FIPC) was a small, closely held paperboard manufacturer that produced a broad line of paperboard in large reels, termed parent rolls. These parent rolls were sold to
Marco Co. constructs commercial buildings. Marco must keep accurate and timely information about its construction activities and costs.Required Describe the modules of a computerized information
Suppose you want to automate a production system so that ma- terials and labor costs can be determined and tracked based on inputs within the production system.Required Describe a computerized system
The description of Kwiki Oil Company's job-order system refers to tables, forms, queries, and reports that are used in the systern. Required Describe the purpose of tables, forms, queries, and
Most manufacturing companies use computerized accounting systems. Typically, these systems are part of larger information systems that integrate various management functions throughout an
Computerized information systems are separated into modules. Common modules include sales, purchasing and materials management, human resources, production, asset management, financial management,
Enterprise resource planning (ERP) systems integrate the various management functions into a comprehensive information system.
ERP systems, like SAP, include many functions such as financial accounting, controlling, asset management, project management, human resources, quality management, production planning, materials
A goal of many companies is to automate their supply chain so that interaction with customers and vendors can be handled by the computer system with little human intervention.
Computer systems receive, store, and process data to create useful information that can be reported to decision makers.
E-business uses computer networks to provide customer sales.
Application software is part of a computer system that includes computer programs that permit data to be recorded and processed.
Data are stored in databases, and database management systems control the database functions to ensure accuracy and security of data.
Client-server networks provide for interaction by users through client workstations to application and database servers that process and store data.
The production module obtains input from the materials, human resources, asset management, and other modules. The production module accumulates production costs and allocates these to individual
Computerized information systems use relational databases, which store data in related tables. Forms are used to enter data in tables, and queries are used to retrieve and manipulate data for
Why are integrated business systems more efficient than using individual systems for differObj. 1 ent functions in a business?
How would the human resources module for a manufacturing company differ from that for Obj. 1 a retail or service company?
Irmo Co.'s asset management module lists each piece of equipment the company has purObj. 1 chased, when it was purchased, its cost, its expected life, and its location in the company. Why would the
Kreel Co.'s financial management module lists each loan the company has outstanding, when obj. 1 the money was borrowed, the amount borrowed, the interest rate, the dates payments were made, and the
What purposes does a manufacturing company's purchasing module serve? What accounts Obj. 1 and types of transactions will be associated with this module?
What purposes does a manufacturing company's human resources module serve? What acObj. 1 counts and types of transactions will be associated with this module?
Street Inc.'s purchasing module lists each vendor's name, address, the materials purchased Obj. 1 from the vendor, and when purchases were made. What uses might the company make of this information?
Why would the sales module of Dell Computer Corporation differ from the sales module of obj. 1 Wal-Mart? What transactions would Dell record as part of its sales process that would differ from those
Why is it important for the accounting department of a manufacturing company to receive Obj. 1 data from human resources? What internal control function is served by this process?
Why is it important for the accounting department of a manufacturing company to receive Obj. 1 data from purchasing and receiving? What internal control function is served by this process?
What is a computer network? Why are they used by businesses to maintain accounting sysObj. 2 tems?
Suppose a company sells to customers through the web. Customers are required to pay for Obj. 3 their orders with credit cards at the time of the order. What primary activities would be required of
Complete each sentence with the appropriate term.1. Systems that integrate most of the business information functions are referred to as 2. The use of computer networks, like the Internet, to provide
Match each term with the appropriate definition.a. application softwaree. enterprise resource planning (ERP) sys-b. database management system temsc. databasef. relational databased. E-business 1. a
Complete each sentence with the appropriate term for a component in the information system.The \(\qquad\) receives sales order data from customers and maintains accounts receivable information.2. The
Dell Computer Corporation is a large, well-known manufacturer of computers for home and obj. 1 business. Assume you logged onto its web site, ordered a computer system, and paid for it by credit

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