Amanda McNall is the corporate controller of Scott Quarry. Scott Quarry operates 12 rock-crushing plants in Scott County, Kentucky, that process huge chunks of limestone rock extracted from underground mines. Given the competitive landscape for pricing, Scott’s managers pay close attention to costs. Each plant uses a process-costing system, and at the end of every quarter, each plant manager submits a production report and a production-cost report. The production report includes the plant manager’s estimate of the percentage of completion of the ending work in process as to direct materials and conversion costs, as well as the level of processed limestone inventory. McNall uses these estimates to compute the cost per equivalent unit of work done for each input for the quarter. Plants are ranked from 1 to 12, and the three plants with the lowest cost per equivalent unit for direct materials and conversion costs are each given a bonus and recognized in the company newsletter. McNall has been pleased with the success of her benchmarking program. However, she has recently received anonymous e-mails that two plant managers have been manipulating their monthly estimates of percentage of completion in an attempt to obtain the bonus. Required: 1. Why and how might managers manipulate their monthly estimates of percentage of completion and level of inventory? 2. McNall’s first reaction is to contact each plant controller and discuss the problem raised by the anonymous communications. Is that a good idea? 3. Assume that each plant controller’s primary reporting responsibility is to the plant manager and that each plant controller receives the phone call from McNall mentioned in requirement 2. What is the ethical responsibility of each plant controller (a) to Amanda McNall and (b) to Scott Quarry in relation to the equivalent-unit and inventory information each plant provides? 4. How might McNall learn whether the data provided by particular plants are being manipulated?
> KidsPlay, Inc., manufactures and sells table sets. In 2016, it reported the following: Units produced and sold 3,000 Investment…………………………………..$3,000,000 Markup percentage on full cost…………………10% Rate of return on investment……………………15% Variable cost per un
> Jason Brady is the managing partner of a business that has just finished building a 60-room motel. Brady anticipates that he will rent these rooms for 15,000 nights next year (or 15,000 room-nights). All rooms are similar and will rent for the same price
> Solar Energy Systems (SES) sells solar heating systems in residential areas of eastern Pennsylvania. A successful sale results in the homeowner purchasing a solar heating system and obtaining rebates, tax credits, and financing for which SES completes al
> Neuro Instruments uses a manufacturing costing system with one direct-cost category (direct materials) and three indirect-cost categories: a. Setup, production-order, and materials-handling costs that vary with the number of batches b. Manufacturing-op
> Assume the same facts for Acton Corporation as in Problem 20-37, except that now assume Acton uses a JIT production system and backflush costing with two trigger points for making entries in the accounting system: â– Completion of good
> Fancy Foods is considering replacing all 12 of its meat scales with new, digital ones. The old scales are fully depreciated and have no disposal value. The new scales cost $120,000 (in total). Because the new scales are more efficient and more accurate
> Johnny Buster owns Entertainment World, a place that combines fast food, innovative beverages, and arcade games. Worried about the shifting tastes of younger audiences, Johnny contemplates bringing in new simulators and virtual reality games to maintain
> The Kuhl Brothers own a frozen custard ice cream shop. The brothers currently are using a machine that has been in use for the last 4 years. On January 1, 2017, the Kuhl Brothers are considering buying a new machine to make their frozen custard. The Kuhl
> Sage Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high efficiency washing machines that will allow for the laundry’s status to be checked via smar
> Liam Mitchell, a manager of the Plate Division for the Harvest Manufacturing company, has the opportunity to expand the division by investing in additional machinery costing $495,000. He would depreciate the equipment using the straight-line method and e
> 21-36 DCF, sensitivity analysis, no income taxes. (CMA, adapted) Sentax Corporation is an international manufacturer of fragrances for women. Management at Sentax is considering expanding the product line to men’s fragrances. From the best estimates of
> Assume the same facts as in Problem 21-34, except that the plant is located in Buffalo, New York. Dublin Chips has no special waiver on income taxes. It pays a 35% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the
> Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2018, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth
> Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2016: Required: For 2016, Snappy buys 250,000 mar
> Galveston Pump Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $2,000,000 by 75%, but it would require a much greater dependency on the company’s core suppliers for on-time
> Reliable Security Devices (RSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company has two product lines: Mechanical Devices and Electronic
> Assume the same facts for Acton Corporation as in Problem 20-37, except that now assume Acton uses a JIT production system and backflush costing with two trigger points for making entries in the accounting system: â– Purchase of direct
> The Acton Corporation manufactures electrical meters. For August, there were no beginning inventories of direct materials and no beginning or ending work in process. Acton uses a JIT production system and backflush costing with three trigger points for m
> Couture Jeans orders high-quality denim fabric from two different suppliers: Designer Fabrics and Cannon Cotton. Couture would like to use only one of the suppliers in the future. Due to variations in quality, Couture would need to inspect 20% of Designe
> Peach Computer Co. outsources the production of motherboards for its computers. It is currently deciding which of two suppliers to use: Alpha or Beta. Due to differences in the product failure rates in the two companies, 5% of motherboards purchased from
> The Gibson Corporation is a manufacturing company that uses automatic stamping machines to manufacture garage doors from rolled sheets of raw steel. Gibson’s inventory of raw steel averages $600,000. Juan Sanchez, president of Gibson, a
> Rugged Outfitters purchases one model of mountain bike at a wholesale cost of $520 per unit and resells it to end consumers. The annual demand for the company’s product is 49,000 units. Ordering costs are $500 per order and carrying costs are $100 per bi
> Tech Works Corp. produces J-Pods, music players that can download thousands of songs. Tech Works forecasts that demand in 2017 will be 48,000 J-Pods. The variable production cost ofeach J-Pod is $54. In its MRP system, due to the large $10,000 cost per s
> Phillips Corporation is a major manufacturer of food processors. It purchases motors from Viking Corporation. Annual demand is 52,000 motors per year or 1,000 motors per week. The ordering cost is $360 per order. The annual carrying cost is $6.50 per mot
> Refer to Exercise 12-29. Required: 1. Calculate the amount and cost of unused architectural support capacity at the beginning of 2017, based on the number of jobs actually done in 2017. 2. Suppose Compton can add or reduce its architectural support ca
> Calvert Associates prepares architectural drawings to conform to local structural-safety codes. Its income statement for 2017 is as follows: Revenues…………………………………………………………………………….$701,250 Salaries of professional staff (7,500 hours * $52 per hour)……..390
> Chadwick Shoe Co. produces and sells an excellent-quality walking shoe. After production, the shoes are distributed to 20 warehouses around the country. Each warehouse services approximately 100 stores in its region. Chadwick uses an EOQ model to determi
> Dover Corporation makes printed cloth in two departments: weaving and printing. Currently, all product first moves through the weaving department and then through the printing department before it is sold to retail distributors for $2,800 per roll. Dover
> Weston Corporation manufactures auto parts for two leading Japanese automakers. Nancy Evans is the management accountant for one of Weston’s largest manufacturing plants. The plant’s general manager, Chris Sheldon, has just returned from a meeting at co
> Family First Healthcare operates two medical groups, one in Philadelphia and one in Baltimore. The semiannual bonus plan for each medical group’s president has three components: a. Profitability performance. Add 0.75% of operating inco
> The DJ Corporation makes custom specified wire harnesses for the trucking industry only upon receiving firm orders from its customers. DJ has recently purchased a new machine to make two types of wire harnesses, one for Peterbilt and the other for Kenwor
> Sandstone is still debating whether it should introduce Y21. The following table provides information on selling prices, variable costs, and inventory carrying costs for Z35 and Y21: Required: Using the average manufacturing cycle times calculated in Pr
> The Sandstone Corporation uses an injection molding machine to make a plastic product, Z35, after receiving firm orders from its customers. Sandstone estimates that it will receive 60 orders for Z35 during the coming year. Each order of Z35 will take 100
> The Crimson Corporation uses multicolored molding to make plastic lamps. The molding operation has a capacity of 200,000 units per year. The demand for lamps is very strong. Crimson will be able to sell whatever output quantities it can produce at $40 pe
> The Tristan Corporation sells 250,000 V262 valves to the automobile and truck industry. Tristan has a capacity of 150,000 machine-hours and can produce two valves per machine-hour. V262’s contribution margin per unit is $7. Tristan sells only 250,000 val
> Pauli’s Pizza has recently begun collecting data on the quality of its customer order processing and delivery. Pauli’s made 1,800 deliveries during the first quarter of 2017. The following quality data pertain to first
> Suppose that during 2017, the market for architectural jobs increases by 10%. Assume that any increase in market share more than 10% and any decrease in selling price are the result of strategic choices by Compton’s management to implement its strategy.
> Harvest Cereals produces a wide variety of breakfast products. The company’s three best-selling breakfast cereals are Double Bran Bits, Honey Wheat Squares, and Sugar King Pops. Each box of a particular type of cereal is required to mee
> Flextron Company is a contract manufacturer for a variety of pharmaceutical and over-the-counter products. It has a reputation for operational excellence and boasts a normal spoilage rate of 2% of normal input. Normal spoilage is recognized during the bu
> The horsheim Company is a furniture manufacturer with two departments: molding and finishing. The company uses the weighted-average method of process costing. In August, the following data were recorded for the finishing department: Units of beginning wo
> Chemet manufactures chemicals in a continuous process. The company combines various materials in a specially configured machine at the beginning of the process, and conversion is considered uniform through the period. Occasionally, the chemical reactions
> Assume that Job #10 of Jellyfish Machine Shop generates normal scrap with a total sales value of $700 (it is assumed that the scrap returned to the storeroom is sold quickly). Required: Prepare the journal entries for the recognition of scrap, assuming
> Assume that the 6 spoiled units of Jellyfish Machine Shop’s Job #10 can be reworked for a total cost of $1,800. A total cost of $6,600 associated with these units has already been assigned to Job #10 before the rework. Required: Prepare the journal ent
> Jellyfish Machine Shop is a manufacturer of motorized carts for vacation resorts. Patrick Cullin, the plant manager of Jellyfish, obtains the following information for Job #10 in August 2017. A total of 46 units were started, and 6 spoiled units were det
> SunEnergy produces solar panels. A key step in the conversion of raw silicon to a completed solar panel occurs in the assembly department, where lightweight photovoltaic cells are assembled into modules and connected on a frame. In this department, mater
> Refer to the information in Problem 18-37 except that the transferred-in costs of beginning work in process on May 1 are $66,180 (instead of $67,397). Transferred-in costs for May equal the total cost of good units completed and transferred out in May fr
> In the shipping department of World Class Steaks, conversion costs are added evenly during the process, and direct materials are added at the end of the process. Spoiled units are detected upon inspection at the end of the process and are disposed of at
> Refer to Exercise 12-29. Required: 1. Calculate the operating income of Compton Associates in 2016 and 2017. 2. Calculate the growth, price-recovery, and productivity components that explain the change in operating income from 2016 to 2017. 3. Commen
> Refer to the information in Problem 18-35. Required: Do Problem 18-35 using the FIFO method of process costing. (Problem 18-38 explores additional facets of this problem.) From problem 35: World Class Steaks is a meat-processing firm based in Texas. It
> The Sedona Company is dedicated to making products that meet the needs of customers in a sustainable manner. Sedona is best known for its KLN water bottle, which is a BPA-free, dishwasher-safe, bubbly glass bottle in a soft silicone sleeve. The producti
> The Warner Company manufactures reproductions of expensive sunglasses. Warner uses the standard-costing method of process costing to account for the production of the sunglasses. All materials are added at the beginning of production. The costs and outpu
> Suppose that Spelling Sports uses the FIFO method instead of the weighted-average method. Assume that all other information, including the cost of beginning WIP, is unchanged. From problem 43: Spelling Sports, which produces basketballs, has two depart
> Spelling Sports, which produces basketballs, has two departments: cutting and stitching. Each department has one direct-cost category (direct materials) and one indirect-cost category (conversion costs). This problem focuses on the stitching department.
> Required: 1. Complete Problem 17-41 using the FIFO method of process costing. 2. If you did Problem 17-41, explain any difference between the cost of work completed and transferred out and the cost of ending work in process in the assembly department un
> McKnight Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing sys
> Suppose that Hoffman Company uses the FIFO method instead of the weighted-average method in all of its departments. The only changes to Problem 17-39 under the FIFO method are that total transferred-in costs of beginning work in process on October 1 are
> Compton Associates is an architectural firm that has been in practice only a few years. Because it is a relatively new firm, the market for the firm’s services is very competitive. To compete successfully, Compton must deliver quality s
> Hoffman Company, as you know, is a manufacturer of car seats. Each car seat passes through the assembly department and testing department. This problem focuses on the testing department. Direct materials are added when the testing department process is 9
> Required: 1. Do Problem 17-36 using the FIFO method of process costing. Explain any difference between the cost per equivalent unit in the assembly department under the weighted-average method and the FIFO method. 2. Should Hoffman’s m
> Required: Prepare a set of summarized journal entries for all October 2017 transactions affecting Work in Process— Assembly. Set up a T-account for Work in Process—Assembly and post your entries to it. From problem 36
> Hoffman Company manufactures car seats in its Boise plant. Each car seat passes through the assembly department and the testing department. This problem focuses on the assembly department. The process-costing system at Hoffman Company has a single direct
> Louisville Sports manufactures baseball bats for use by players in the major leagues. A critical requirement for elite players is that each bat they use have an identical look and feel. As a result, Louisville uses a dedicated process to produce bats to
> Kardash Cosmetics purchases flowers in bulk and processes them into perfume. From a certain mix of petals, the firm uses Process A to generate Seduction, its high-grade perfume, as well as a certain residue. The residue is then further treated, using Pro
> Arnold Technologies manufactures a variety of flash memory chips at its main plant in Taiwan. Some chips are sold to makers of electronic equipment while others are embedded into consumer products for sale under Arnold’s house label, AT
> Newcastle Mining Company (NMC) mines coal, puts it through a one-step crushing process, and loads the bulk raw coal onto river barges for shipment to customers. NMC’s management is currently evaluating the possibility of further proces
> Mountainair Construction Company (MCC) crushes boulders to obtain decorative rock, which they sell through various outlets. The process produces three grades of rock, which are viewed as joint products: Red Rock, a high-end decorative rock; White Rock, c
> The accountant for SRC needs to record the information about the joint and byproducts in the general journal, but is not sure what the entries should be. The company has hired you as a consultant to help its accountant. Required: 1. Show journal entries
> Refer to Exercise 12-25. Required: 1. Calculate the amount and cost of (a) unused manufacturing capacity and (b) unused selling and customer-service capacity at the beginning of 2017 based on actual production and actual number of customers
> The Seattle Recycling Company (SRC) purchases old water and soda bottles and recycles them to produce plastic covers for outdoor furniture. The company processes the bottles in a special piece of equipment that first melts, then reforms the plastic into
> SW Flour Company has decided that their bread flour may sell better if it was marketed for gourmet baking and sold with infused spices. This would involve additional cost for the spices of $0.80 per cup. Each cup could be sold for $5.50. Required: 1. I
> SW Flour Company buys 1 input of standard flour and refines it using a special sifting process to 3 cups of baking flour and 9 cups of bread flour. In May 2017, SW bought 12,000 inputs of flour for $89,000. SW spent another $47,800 on the special sifting
> Liverpool Sawmill, Inc. (LSI) purchases logs from independent timber contractors and processes the logs into three types of lumber products: â– Studs for residential buildings (walls, ceilings) â– Decorative pieces (fir
> The Rich and Creamy Edibles Factory manufactures and distributes chocolate products. It purchases cocoa beans and processes them into two intermediate products: chocolate-powder liquor base and milk-chocolate liquor base. These two intermediate products
> The Chicago Oil Company buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C, and D. Product C is fully processed by the splitoff point. Products A, B, and D can individually be further refined into Super A,
> Garden Labs produces a drug used for the treatment of arthritis. The drug is produced in batches. Chemicals costing $50,000 are mixed and heated, then a unique separation process extracts the drug from the mixture. A batch yields a total of 3,000 gallons
> Ballantine Corporation has two operating departments: Eastern Department and Western Department. Each of the operating departments uses the services of the company’s two support departments: Engineering and Information Technology. Addit
> Boca Resorts (BR) operates a five-star hotel with a worldclass spa. BR has a decentralized management structure, with three divisions: â– Lodging (rooms, conference facilities) â– Food (restaurants and in-room service)
> Sportz, Inc., manufactures athletic shoes and athletic clothing for both amateur and professional athletes. The company has two product lines (clothing and shoes), which are produced in separate manufacturing facilities; however, both manufacturing facil
> Suppose that during 2017, the market for Stanmore’s special-purpose machines grew by 3%. All increases in market share (that is, sales increases greater than 3%) are the result of Stanmore’s strategic actions. Required: Calculate how much of the change
> Magic Systems, Inc., sells computer hardware to end consumers. The CX30 is sold as a “bundle,” which includes three hardware products: a personal computer (PC) tower, a 26-inch monitor, and a color laser printer. Each
> Tate Inc. and Booth Inc. are two small manufacturing companies that are considering leasing a cutting machine together. If Tate rents the machine on its own, it will cost $26,000. If Booth rents the machine alone, it will cost $14,000. If they rent the m
> The Martinez Company has two products. Product 1 is manufactured entirely in department X. Product 2 is manufactured entirely in department Y. To produce these two products, the Martinez Company has two support departments: A (a materials-handling depart
> The Eastern Summit Company has prepared department overhead budgets for budgeted-volume levels before allocations as follows: Management has decided that the most appropriate inventory costs are achieved by using individual- department overhead rates. T
> Central University completed construction of its newest administrative building at the end of 2017. The University’s first employees moved into the building on January 1, 2018. The building consists of office space, common meeting rooms
> Fang Inc. produces and sells DVDs to business people and students who are planning extended stays in China. It has been very successful with two DVDs: Beginning Mandarin and Conversational Mandarin. It is introducing a third DVD, Reading Chinese Characte
> Preston Department Store has a new promotional program that offers a free gift-wrapping service for its customers. Preston’s customer-service department has practical capacity to wrap 5,000 gifts at a budgeted fixed cost of $4,950 each
> KC Corporation manufactures an air-freshening device called GoodAir, which it sells to six merchandising firms. The list price of a GoodAir is $30, and the full manufacturing costs are $18. Salespeople receive a commission on sales, but the commission is
> The Robin’s Basket operates a chain of Italian gelato stores. Although the Robin’s Basket charges customers the same price for all flavors, production costs vary, depending on the type of ingredients. Budgeted and actu
> Miami Infonautics’ senior vice president of marketing prepared his budget at the beginning of the third quarter assuming a 25% market share based on total sales. Foolinstead Research estimated that the total handheld-organizer market would reach sales of
> Refer to Exercise 12-25. From exercise 25: Stanmore Corporation makes a special-purpose machine, D4H, used in the textile industry. Stanmore has designed the D4H machine for 2017 to be distinct from its competitors. It has been generally regarded as a
> Miami Infonautics, Inc., produces handheld Windows CEâ„¢-compatible organizers. Miami Infonautics markets three different handheld models: PalmPro is a souped-up version for the executive on the go, PalmCE is a consumer-oriented version,
> Vocal Speakers makes wireless speakers that are sold to different customers in two main distribution channels. Recently, the company’s profitability has decreased. Management would like to analyze the profitability of each channel based
> The Insurance Company insures homeowners in three regions of the United States: Eastern, Midwest, and South. In the past year, several hurricanes hit the Southern region of the United States, requiring payments to insured homeowners. Management of the c
> Forber Bakery makes baked goods for grocery stores and has three divisions: bread, cake, and doughnuts. Each division is run and evaluated separately, but the main headquarters incurs costs that are indirect costs for the divisions. Costs incurred in the
> Cathy Carpenter, controller of the Sweet and Salty Snacks is preparing a presentation to senior executives about the performance of its four divisions. Summary data related to the four divisions for the most recent year are as follows: Under the existin
> Louise Newman operates Interiors by Louise, an interior design consulting and window treatment fabrication business. Her business is made up of two different distribution channels, a consulting business in which Louise serves two architecture firms (Adam
> Mississippi Manufacturing makes a component called B2040. This component is manufactured only when ordered by a customer, so Mississippi keeps no inventory of B2040. The list price is $112 per unit, but customers who place “largeâ
> Green Paper Delivery has decided to analyze the profitability of five new customers. It buys recycled paper at $20 per case and sells to retail customers at a list price of $26 per case. Data pertaining to the five customers are: Green Paper Delivery&ac
> Bracelet Delights is a new company that manufactures custom jewelry. Bracelet Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewelry, the company has the following activitie
> Mary Martin recently started a job as an administrative assistant in the cost accounting department of Needham Manufacturing. New to the area of cost accounting, Mary is puzzled by the fact that one of Needham’s manufactured products, S
