Refer to the data in Exercise 8-24. Cost data for April show the following: Beginning WIP inventory Direct materials costs . . . . . . . . . . . . . . $ 24,300 Conversion costs . . . . . . . . . . . . . . . . . . . . 38,700 Current period costs Direct materials costs . . . . . . . . . . . . . $ 280,950 Conversion costs . . . . . . . . . . . . . . . . . . 1,079,550 In Exercise 8-24 Materials are added at the beginning of the production process at Santiago Company, which uses a FIFO process costing system. The following information on the physical flow of units is available for the month of April: Beginning work in process (40% complete) . . . . . . . . . . . . . 22,500 Started in April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,000 Completed in April and transferred out . . . . . . . . . . . . . . . 240,000 Ending work in process (70% complete) . . . . . . . . . . . . . . . . 37,500 Required a. Compute the cost equivalent units for the conversion cost calculation assuming Santiago uses the weighted-average method. b. Compute the cost per equivalent unit for materials and conversion costs for April.
> “Activity-based costing could not be applied in a business school.” Do you agree? Explain.
> The more important individual unit costs are used for decisions, the more likely it is that process costing will be preferred to job costing. Do you agree?
> “Activity-based costing does a better job of allocating both direct and indirect cost than traditional methods do.” Is this statement true, false, or uncertain? Explain.
> In what ways is implementing an activity-based costing system in a manufacturing firm’s personnel department the same as implementing it in the plant? In what ways is it different?
> What type of organization is most likely to benefit from using activity-based costing for product costing? Why?
> What are the basic steps in computing costs using activity-based costing?
> What are the costs of moving to an activity-based cost system? What are the benefits?
> Why do companies commonly use direct labor-hours or direct labor cost but not the number of units to allocate overhead?
> The product costs reported using either plantwide or department allocation are the same. The only difference is in the number of cost drivers used. True or false? Explain.
> Howard Rockness was worried. His company, Rockness Bottling, showed declining profits over the past several years despite an increase in revenues. With profits declining and revenues increasing, Rockness knew there must be a problem with costs. Rockness
> “Activity-based costing is just another inventory valuation method. It isn’t relevant for making operating decisions.” Do you agree with this statement? Explain.
> You have been asked to determine whether a company uses an activity-based cost system. What information would you look for to answer the question?
> It has been said that a prior department’s costs behave similarly to direct materials costs. Under what conditions are the costs similar? Why account for them separately?
> “Activity-based costing breaks down the indirect costs into several activities that cause costs (cost drivers). These should be the same for each department in an organization.” Is this true, false, or uncertain? Explain.
> “One of the lessons learned from activity-based costing is that all costs are really a function of volume of output.” Is this true, false, or uncertain? Explain.
> “It is clear after reading this chapter that activity-based costing is the best system. Whenever someone asks, I’ll recommend its adoption.” Do you agree? Explain.
> Bouwens Corporation manufactures a solvent used in airplane maintenance shops. Bouwens sells the solvent to both U.S. military services and commercial airlines. The solvent is produced in a single plant in one of two buildings. Although the solvent sold
> Vermont Company uses continuous processing to produce stuffed bears and FIFO process costing to account for its production costs. It uses FIFO because costs are quite unstable due to the volatile price of fi ne materials it uses in production. The bears
> Pacific Siding Incorporated produces synthetic wood siding used in the construction of residential and commercial buildings. Pacific Siding’s fiscal year ends on March 31, and the weighted-average method is used for the companyâ&#
> Miller Outdoor Equipment (MOE) makes four models of tents. The model names are Rookie, Novice, Hiker, and Expert. MOE manufactures the tents in two departments: Stitching and Customizing. All four models are processed initially in Stitching where all mat
> “Activity-based costing is the same as department costing.” Is this true, false, or uncertain? Explain.
> For each of the following independent cases, determine the units or equivalent units requested (assuming weighted-average costing). a. The WIP Inventory account had a beginning balance of $11,400 for conversion costs on items in process and, during the p
> For each of the following independent cases, use FIFO costing to determine the information requested. a. The ending inventory included $87,000 for conversion costs. During the period, 42,000 equivalent units were required to complete the beginning invent
> What is the distinction between equivalent units under the FIFO method and equivalent units under the weighted-average method?
> Refer to the information in Problem 8-47. Department R uses FIFO process costing to account for production. In January, beginning work-in-process inventory consisted of 50,000 units, 80 percent complete with respect to conversion. The cost of rubber pell
> Saline Solutions uses process costing to account for production of its unique compound BG at its River Plant. The River Plant has two departments: R and S. Raw materials are added at two points in the production of BG. First, rubber pellets are added at
> Why are cost drivers based on direct labor widely used?
> In its Department R, Recyclers, Inc., processes donated scrap cloth into towels for sale in local thrift shops. It sells the products at cost. The direct materials costs are zero, but the operation requires the use of direct labor and overhead. The compa
> Cost allocation allocates only a given amount of costs to products. The total allocated is the same; therefore the choice of the system does not matter. True or false? Explain.
> Refer to the facts in Problem 8-42. In Problem 8-42 Douglas Toys is a manufacturer that uses the weighted-average process costing method to account for costs of production. It produces a plastic toy in three separate departments: Molding, Assembling, an
> Douglas Toys is a manufacturer that uses the weighted-average process costing method to account for costs of production. It produces a plastic toy in three separate departments: Molding, Assembling, and Finishing. The following information was obtained f
> The following pertains to the Cereal Division of McKenzie Corporation. Conversion costs for this division were 80 percent complete as to beginning work-in-process inventory and 50 percent complete as to ending work-in-process inventory. Information about
> Select the best answer for each of the following independent multiple-choice questions. a. Adams Company’s production cycle starts in Department A. The following information is available for July: _____________________________Units Wor
> Ferdon Watches, Inc., makes four models of watches, Gag-Gift, Commuter, Sport, and Retirement. Ferdon manufactures the watches in four departments: Assembly, Polishing, Special Finishing, and Packaging. All four models are started in Assembly where all m
> If costs increase from one period to another, will costs that are transferred out of one department under FIFO costing be higher or lower than costs transferred out using weighted-average costing? Why?
> Brokia Electronics manufactures three cell phone models, which differ only in the components included: Basic, Photo, and UrLife. Production takes place in two departments, Assembly and Special Packaging. The Basic and Photo models are complete after Asse
> Refer to the information in Exercise 8-36. In Exercise 8-36 Calgary Corporation produces a liquid solvent in two departments: Mixing and Finishing. Assume that Calgary Corporation provides you with the following information for Finishing operations for
> Calgary Corporation produces a liquid solvent in two departments: Mixing and Finishing. Assume that Calgary Corporation provides you with the following information for Finishing operations for November (no new material is added in the Finishing Departmen
> Refer to the information in Exercise 8-34. In Exercise 8-34 Assume that El Paso Corporation provides you with the following information for one of its department’s operations for September (no new material is added in Department B): WIP inventory—Depar
> Assume that El Paso Corporation provides you with the following information for one of its department’s operations for September (no new material is added in Department B): WIP inventory—Department B Beginning inventory (7,500 units, 20% complete with r
> Refer to the data in Exercise 8-30. Compute the cost of goods transferred out and the cost of ending inventory using the FIFO method. Is the ending inventory higher or lower under the weighted-average method compared to FIFO? Why? In Exercise 8-30 Pacif
> Refer to the data in Exercise 8-30. Compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. In Exercise 8-30 Pacific Ink had beginning work-in-process inventory of $744,960 on October 1. Of this amount,
> Refer to the data in Exercise 8-30. Compute the costs of goods transferred out and the ending inventory using the weighted-average method. In Exercise 8-30 Pacific Ink had beginning work-in-process inventory of $744,960 on October 1. Of this amount, $30
> Pacific Ink had beginning work-in-process inventory of $744,960 on October 1. Of this amount, $304,920 was the cost of direct materials and $440,040 was the cost of conversion. The 48,000 units in the beginning inventory were 30 percent complete with res
> Refer to the data in Exercises 8-26 and 8-28. Compute the cost of goods transferred out and the ending inventory using the FIFO method. In Exercises 8-26 and 8-28 The Matsui Lubricants plant uses the weighted-average method to account for its work-in-pr
> A manufacturing company has records of its activity during the month in work-in-process inventory and of its ending work-in-process inventory; however, the record of its beginning inventory has been lost. What data are needed to compute the beginning inv
> Using the data in Exercise 8-26, compute the cost per equivalent unit for direct materials and for conversion costs using the FIFO method. In Exercises 8-26 The Matsui Lubricants plant uses the weighted-average method to account for its work-in-process
> Refer to the data in Exercise 8-26. Compute the cost of goods transferred out and the ending inventory using the weighted-average method. In Exercises 8-26 The Matsui Lubricants plant uses the weighted-average method to account for its work-in-process i
> The Matsui Lubricants plant uses the weighted-average method to account for its work-in process inventories. The accounting records show the following information for a particular day: Beginning WIP inventory Direct materials . . . . . . . . . . . . . .
> Materials are added at the beginning of the production process at Santiago Company, which uses a FIFO process costing system. The following information on the physical flow of units is available for the month of April: Beginning work in process (40% com
> Refer to the data in Exercise 8-22. In Exercise 8-22. The following information pertains to the Davenport plant for the month of May (all materials are added at the beginning of the process): Required Compute the cost per equivalent unit for materials
> The following information pertains to the Davenport plant for the month of May (all materials are added at the beginning of the process): Required Compute the cost per equivalent unit for materials using the weighted-average method. Units Material
> Delhi, Inc., seeks your assistance in developing cash and other budget information for August, September, and October. At July 31, the company had cash of $22,000, accounts receivable of $1,748,000, inventories of $1,237,600, and accounts payable of $532
> Capstone Corporation has just received its sales expense report for January, which follows. Item _____________________Amount Sales commissions . . . . . . . . . . . . . . . . . $121,500 Sales staff salaries . . . . . . . . . . . . . . . . . . . 28,800 Te
> Lotus Fixtures, Inc. (LFI), manufactures steel fittings. Each fitting requires both steel and an alloy that allows the fitting to be used under extreme conditions. The following data apply to the production of the fittings: Direct materials per unit 2 po
> Refer to the data in Problem 13-42. Estimate the cash from operations expected in year 2. In Problem 13-42 Cameron Parts has the following data from year 1 operations, which are to be used for developing year 2 budget estimates: Sales revenue (12,500 un
> Refer to the data in Problem 13-40. Estimate the cash from operations expected in year 2. In Problem 13-40 The following information is available for year 1 for Dancer Components: Sales revenue (300,000 units) . . . . . . $5,700,000 Manufacturing costs
> Bay Area Limos operates transportation services to Bay City airport. The price of service is fixed at a flat rate for each trip and most costs of providing the service are fixed for each trip. Betty Smith, the owner, forecasts income by estimating two fa
> Sanjana’s Sweet Shoppe operates on the boardwalk of a New England coastal town. The store only opens for the summer season and the business is heavily dependent on the weather and the economy in addition to new competition. Sanjana Swee
> Elizabeth Jablonski is the director of Research and Development for Galaxy Electronics. Last week, she submitted the following funding request as part of the annual budget process. Project ___________________Funding Request 1. Portable audio project . .
> Bears, Inc., adds materials at the beginning of the process in Department MO. The following information on physical units for Department MO for the month of July is available: Work in process, July 1 (75% complete with respect to conversion). . . . . .
> The controller of Northwest Hardware has just received two forecasts for sales in the Montana District for the coming year. Based on an econometric analysis of consumer spending and economic trends, a marketing research firm estimates sales of $1 million
> BK Consulting is a management consulting fi rm. Other than the senior leadership (who manage the firm, but do not actively consult), the managers and staff are billed to clients on an hourly basis. The workload varies quite a bit from month to month requ
> Carreras Café is a Spanish restaurant in a college town. The owner expects that the number of meals served in June will be 40 percent below those served in May, because so many students leave for the summer. In May, the restaurant served 4,200 meals at a
> Rhodes, Inc., is a fast-growing start-up firm that manufactures bicycles. The following income statement is available for July: Sales revenue (200 units @ $500 per unit) . . . . $100,000 Less Manufacturing costs Variable costs . . . . . . . . . . . . . .
> Refer to the data in Exercise 13-31. Varmit-B-Gone estimates that the number of subscribers in September should fall 10 percent below August levels, and the number of service calls per subscriber should decrease by an estimated 20 percent. The following
> Varmit-B-Gone is a pest control service that operates in a suburban neighborhood. The company attempts to make service calls at least once a month to all homes that subscribe to its service. It makes more frequent calls during the summer. The number of s
> Scare-2-B-U (S2BU) specializes in costumes for all occasions. The average price of each of its costumes is $240. For each occasion, S2BU receives a 20 percent deposit two months before the occasion, 50 percent the month before, and the remainder on the d
> Nassau Products is preparing a cash budget for April. The following information on accounts receivable collections is available from past collection experience: Percent of current month’s sales collected this month . . . . . . . . . . . . . . . . . . . .
> Duluth Company is preparing its cash budget for December. The following information is available concerning its accounts receivable: Estimated credit sales for December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000 Act
> Ashland Corporation, a merchandising fi rm, is preparing its cash budget for October. The following information is available concerning its inventories: Inventories at beginning of October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
> Refer to the data in Exercise 8-18. In Exercise 8-18. Missouri Corporation shows the following information concerning the work in process at its plant: • Beginning inventory was partially complete (materials are 100 percent complete; conversion costs ar
> What are the characteristics of industries most likely to use process costing?
> White Products wishes to purchase goods in one month for sale in the next. On March 31, the company has 8,000 portable music players in stock, although sales for the next month (April) are estimated to total 8,600 players. Total sales of players are expe
> Westile Company buys plain ceramic tiles and prints different designs on them for souvenir and gift stores. It buys the tiles from a small company in Europe, so at all times it keeps on hand a stock equal to the tiles needed for three months’ sales. The
> The Casings Plant of Wyoming Machines makes plastics shells for the company’s calculators. (Each calculator requires one shell.) For each of the next two years, Wyoming expects to sell 160,000 calculators. The beginning finished goods inventory of shells
> Hamilton Corp. manufactures a component used in a popular gaming console. Demand has been strong and the executive staff at Hamilton is planning for next year. On October 1, they call you into a budgeting meeting where production plans are being reviewed
> The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $50,000 of new equipment each year and wants to begin a fu
> When the fraud at PepsiCo occurred, the company had five somewhat diverse groups of divisions: food products, such as Frito-Lay, Inc.; transportation, such as northAmerican Van Lines, Inc.; sporting goods, such as Wilson Sporting Goods Co.; food service,
> Overview River Beverages is a food and soft drink company with worldwide operations. The company is organized into five regional divisions with each vice president reporting directly to the CEO, Cindy Wilkins. Each vice president has a Strategic Research
> An article in The Wall Street Journal indicated that dressmaker Fallo Me (name changed) backdated invoices to record revenue in the quarter before sales were actually made. As long as sales remained strong, the practice went undetected. When a recession
> Your company has a travel policy that reimburses employees for the “ordinary and necessary” costs of business travel. Employees often mix a business trip with pleasure by either extending the time at the destination or
> Paulista Corporation’s division managers have been expressing growing dissatisfaction with the methods the organization uses to measure division performance. Division operations are evaluated every quarter by comparing them with a budget prepared during
> Missouri Corporation shows the following information concerning the work in process at its plant: • Beginning inventory was partially complete (materials are 100 percent complete; conversion costs are 60 percent complete). • Started this month, 180,000 u
> Hall O’ Fame Products is a nationwide sporting goods manufacturer. The company operates with a widely based manufacturing and distribution system that has led to a highly decentralized management structure. Each division manager is resp
> SPG Company manufactures and sells metal products that are used in many manufacturing operations. The management at SPG believes strongly in decentralized decision making and using performance evaluation and compensation to encourage high-performing mana
> In the late 1980s, General Electric Company (GE), whose CEO at the time was Jack Welch, acquired Kidder Peabody, an investment banking firm founded in 1824. In 1991, Kidder hired a bond trader named Joseph Jett. Jett’s job was trading STRIPS, which are s
> “We can’t drop our prices below $210 per hundred pounds,” exclaimed Greg Berman, manager of Forwarders, a division of Custom Freight Systems. “Our margins are already razor thin. Our
> Refer to Problem 15-41. Suppose Health Services could sell time on the machine to other companies in the area on a per-hour basis. Further, it can sell all the time available for $30 per hour. In Problem 15-41 CHS is a large multidivision fi rm. One div
> CHS is a large multidivision fi rm. One division, Health Services, is well known inside CHS for its efficient information technology (IT). A smaller division, Optics, has approached Health Services with a proposal that it provide IT support in the form o
> Refer to the data in Problem 15-39. At the end of the year, the following data are available on actual operations at the landfill. Volume of trash . . . . . . . . . . . . . . . . . . . . . . 1,250 tons (400 loads) Preparation costs (per load) . . . . .
> Mathes Corporation manufactures paper products. The company operates a landfill, which it uses to dispose of nonhazardous trash. The trash is hauled from the two nearby manufacturing facilities in trucks that can carry up to five tons of trash in a load.
> Gage Corporation has two operating divisions in a semiautonomous organizational structure. Adams Division, located in the United States, produces a specialized electrical component that is an input to Bute Division, located in the south of England. Adams
> Western States Supply, Inc. (WSS), consists of three divisions—California, Northwest, and Southwest—that operate as if they were independent companies. Each division has its own sales force and production facilities. Each division manager is responsible
> Refer to the data in Exercise 8-16. Assume that beginning inventory is 50 percent complete with respect to materials and 30 percent complete with respect to conversion costs. In Exercise 8-16. Clean Corporation manufactures liquid window cleaner. The fo
> Oriole, Inc. is a large consumer products company, which manufactures health and beauty products sold at grocery and drug stores throughout the country. One division, PS, does both manufacturing and shipping and operates a warehouse and transportation ac
> Cochise Corporation’s Southern Division is operating at capacity. It has been asked by Northern Division to supply it a thermal switch, which Southern sells to its regular customers for $60 each. Northern, which is operating at 70 percent capacity, is wi
> Skane Shipping Ltd. (SSL) operates a fleet of container ships in international trade between Sweden and Singapore. All of the shipping income (that is, that related to SSL’s ships) is deemed to be earned in Sweden. SSL also owns a dock facility in Singap
> Refer to the data in Problem 15-29. Division managers are evaluated using residual income using a 15 percent cost of capital. In Problem 15-29 Athena Company has two divisions. Spartan Division, which has an investment base of $8,400,000, produces and s
> Athena Company has two divisions. Spartan Division, which has an investment base of $8,400,000, produces and sells 450,000 units of a product at a market price of $28 per unit. Its variable costs total $8 per unit. The division also charges each unit $14
