Big Al’s Inc. produces and sells various cuts of steak, including sirloin, ribeye, and T-bone. The cuts of steak are produced jointly until Big Al’s cattle are butchered. Big Al estimates that, at the split-off point, 10 cows yield 99 pounds of sirloin cuts, 55 pounds of ribeye cuts, and 66 pounds of T-bone cuts. Given Big Al’s estimate that the joint cost of producing 10 cows’ worth of steak cuts is $1,500, use the physical units method to allocate the joint costs of production to each product.
> Red Line Railroad Inc. has three regional divisions organized as profit centers. The chief executive officer (CEO) evaluates divisional performance, using operating income as a percent of revenues. The following quarterly income and expense accounts were
> How does the sales mix affect the computation of the break-even point?
> GHT Tech Inc. sells electronics over the Internet. The Consumer Products Division is organized as a cost center. The budget for the Consumer Products Division for the month ended January 31 is as follows: During January, the costs incurred in the Consum
> Shasta Fixture Company manufactures faucets in a small manufacturing facility. The faucets are made from brass. Manufacturing has 70 employees. Each employee presently provides 38 hours of labor per week. Information about a production week is as follows
> Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year: a. Estimated sales at $125 per unit: January ………&
> The budget director of Birding Homes & Feeders Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January: a. Estimate
> During the first month of operations ended May 31, Big Sky Creations Company produced 40,000 designer cowboy boots, of which 36,000 were sold. Operating data for the month are summarized as follows: During June, Big Sky Creations produced 32,000 designe
> The demand for solvent, one of numerous products manufactured by Logan Industries Inc., has dropped sharply because of recent competition from a similar product. The company’s chemists are currently completing tests of various new formu
> Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: The division of costs between variable and fixed is as follows: Management is considering a plan
> Florissa’s Flowers jointly produces three varieties of flowers in the same garden: tulips, lilies, and daisies. The flowers are all watered via the same irrigation system and all receive the same amount of water; daisies require three times as much as li
> Lovely Lotion Inc. produces three different lotions: hand, body, and foot. The lotions are produced jointly in a mixing process that costs a total of $250 per batch. At the split-off point, one batch produces 80, 40, and 25 bottles of hand, body, and foo
> Jake’s Gems mines and produces diamonds, rubies, and other gems. The gems are produced by way of the Mining and Cutting activities. These production activities are supported by the Maintenance and Security activities. Security costs are
> Both Austin Company and Hill Company had the same unit sales, total costs, and operating income for the current fiscal year; yet, Austin Company had a lower break-even point than Hill Company. Explain the reason for this difference in break-even points.
> From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object). b. Advertising
> For apparel manufacturer Abercrombie & Fitch, Inc. (ANF), classify each of the following costs as either a product cost or a period cost: a. Advertising expenses b. Chief financial officer’s salary c. Depreciation on office equipment d. Depreciation on s
> Which of the following items are properly classified as part of factory overhead for Ford Motor Company (F), a maker of heavy automobiles and trucks? a. Air conditioner units for installation in vehicles b. Consultant fees for a study of production line
> Indicate whether the following costs of Procter & Gamble (PG), a maker of consumer products, would be classified as direct materials cost, direct labor cost, or factory overhead cost: a. Depreciation on assembly line equipment in the Mehoopany, Pennsylva
> Indicate whether each of the following costs of an automobile manufacturer would be classified as direct materials cost, direct labor cost, or factory overhead cost: a. Automobile engine b. Brake pads c. Depreciation of robotic assembly line equipment d.
> On March 31, the end of the first month of operations, Barnard Inc. manufactured 15,000 units and sold 12,000 units. The following income statement was prepared, based on the variable costing concept: Determine the unit cost of goods manufactured, based
> Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (150,000 units) during the first month, creating an ending inventory of 20,000 units. During February, th
> Gallatin County Motors Inc. assembles and sells snowmobile engines. The company began operations on July 1 and operated at 100% of capacity during the first month. The following data summarize the results for July: a. Prepare an income statement accordi
> The operating revenues of the three largest business segments for Time Warner, Inc. (TWX), for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses. Assume that the variable costs as a percen
> Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is avai
> What does operating leverage measure, and how is it computed?
> At the end of the first year of operations, 21,500 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows: Direct materials ……………………… $30 Direct labor ……………………………… 18 Fixed factory overhead ……………… 22
> a. Young Company budgets sales of $112,900,000, fixed costs of $25,000,000, and variable costs of $66,611,000. What is the contribution margin ratio for Young Company? b. If the contribution margin ratio for Martinez Company is 40%, sales were $34,800,00
> Continental Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Continental Railroad is a measure of railroad operating a
> Child Play Inc. manufactures electronic toys within a relevant range of 20,000 to 150,000 toys per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost schedule, identifying each cos
> Using the data for Loudermilk Inc. in Exercise 17, (a) Determine the maximum possible operating loss, (b) Compute the maximum possible operating profit, (c) Construct a profit-volume chart, and (d) Estimate the break-even sales (units) by using the profi
> Sprint Corporation (S) is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 60 million direct subscribers (accounts) that generated revenue of $33,347 million. Costs and expenses for the ye
> The Parents for Better Schools of Fresno, California, collected recipes from members and published a cookbook entitled Food for Everyone. The book will sell for $20 per copy. The chairwoman of the cookbook development committee estimated that the club ne
> Currently, the unit selling price of a product is $7,520, the unit variable cost is $4,400, and the total fixed costs are $23,400,000. A proposal is being evaluated to increase the unit selling price to $8,000. a. Compute the current break-even sales (un
> Anheuser-Busch InBev SA/NV (BUD) reported the following operating information for a recent year (in millions): In addition, assume that Anheuser-Busch InBev sold 500 million barrels of beer during the year. Assume that variable costs were 75% of the cos
> For the current year ended March 31, Cosgrove Company expects fixed costs of $27,600,000, a unit variable cost of $805, and a unit selling price of $1,150. a. Compute the anticipated break-even sales (units). b. Compute the sales (units) required to real
> What are the two most often used ways of accounting for revenue from by-products?
> For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions): Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrativ
> Following is a list of various costs incurred in producing replacement automobile parts. With respect to the production and sale of these auto parts, classify each cost as either variable, fixed, or mixed. 1. Oil used in manufacturing equipment 2. Plasti
> Refer to the information provided for Becker Tabletops in Exercise 7. Allocate the support department costs to the production departments using the reciprocal services method. Table in Exercise 7:
> Refer to the information provided for Becker Tabletops in Exercise 7. Allocate the support department costs to the production departments using the sequential method. Allocate the support department with the highest department cost first. Table in Exerc
> Becker Tabletops has two support departments (Janitorial and Cafeteria) and two production departments (Cutting and Assembly). Relevant details for these departments are as follows: Allocate the support department costs to the production departments usi
> Davis Snowflake & Co. produces Christmas stockings in its Cutting and Sewing departments. The Maintenance and Security departments support the production of the stockings. Costs from the Maintenance Department are allocated based on machine hours, an
> Crystal Scarves & Co. produces winter scarves. The scarves are produced in the Cutting and Sewing departments. The Maintenance and Security departments support these production departments, and allocate costs based on machine hours and square feet, r
> Christmas Timber, Inc., produces Christmas trees. The trees are produced through a cutting and pruning process. Machine maintenance and janitorial labors are performed throughout the production process by nonproduction employees. Maintenance and janitori
> Blue Africa Inc. produces laptops and desktop computers. The company’s production activities mainly occur in what the company calls its Laser and Forming departments. The Cafeteria and Security departments support the companyâ
> Snowy River Stallion Inc. produces horse and rancher equipment. Costs from Support Department 1 are allocated based on the number of employees. Costs from Support Department 2 are allocated based on asset value. Relevant department information is provide
> When would management most likely use the net realizable value method of joint cost allocation?
> Lily’s Lemonade Stand makes three types of lemonade: pure, raspberry, and strawberry. The lemonade is produced through a joint mixing process that costs a total of $30 per batch. One batch produces 32 cups of pure lemonade, 21 cups of strawberry lemonade
> Toil & Oil processes crude oil to jointly produce gasoline, diesel, and kerosene. One batch produces 3,415 gallons of gasoline, 2,732 gallons of diesel, and 1,366 gallons of kerosene at a joint cost of $12,000. After the split-off point, all products are
> Gordon’s Smoothie Stand makes three types of smoothies: blueberry lemon, orange swirl, and triple berry. Before all flavors are added, the smoothies go through a joint mixing process that costs a total of $43 per batch. One batch produces 21.75 cups of b
> Nature’s Garden Inc. produces wood chips, wood pulp, and mulch. These products are produced through harvesting trees and sending the logs through a wood chipper machine. One batch of logs produces 20,304 cubic yards of wood chips, 14,100 cubic yards of m
> Sugar Sweetheart, Inc., jointly produces raw sugar, granulated sugar, and caster sugar. After the split-off point, raw sugar is immediately sold for $0.20 per pound, while granulated and caster sugar are processed further. The market value of the granula
> Carving Creations jointly produces wood chips and sawdust used in agriculture. The wood chips and sawdust are actually by-products of the company’s core operations, but Carving Creations accounts for them just like normally produced goods because of thei
> Board-It, Inc., produces the following types of 2 × 4 × 10 wood boards: washed, stained, and pressure treated. These products are produced jointly until they are cut. One batch produces 45 washed boards, 35 stained boards, and 20 pressure treated boards.
> Refer to your answers to Exercises 7–9. Compare the total support department costs allocated to each production department under each cost allocation method. Which production department is allocated the most support department costs (a) Under the direct
> Yo-Down Inc. produces yogurt. Information related to the company’s yogurt production follows: Support Department 1’s costs total $142,000. Using the direct method of support department cost allocation, determine the c
> What is the main difference between the physical units and weighted average methods of joint cost allocation?
> Nozama.com Inc. sells consumer electronics over the Internet. For the next period, the budgeted cost of the sales order processing activity is $250,000 and 50,000 sales orders are estimated to be processed. a. Determine the activity rate of the sales ord
> Comfort Foods Inc. uses activity-based costing to determine product costs. For each activity listed in the left column, match an appropriate activity base from the right column. You may use items in the activity-base list more than once or not at all.
> The management of Nova Industries Inc. manufactures gasoline and diesel engines through two production departments, Fabrication and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company us
> Eclipse Motor Company manufactures two types of specialty electric motors, a commercial motor and a residential motor, through two production departments, Assembly and Testing. Presently, the company uses a single plantwide factory overhead rate for allo
> Handy Leather, Inc., produces three sizes of sports gloves: small, medium, and large. A glove pattern is first stenciled onto leather in the Pattern Department. The stenciled patterns are then sent to the Cut and Sew Department, where the glove is cut an
> Isaac Engines Inc. produces three products—pistons, valves, and cams—for the heavy equipment industry. Isaac Engines has a very simple production process and product line and uses a single plantwide factory overhead ra
> Scrumptious Snacks Inc. manufactures three types of snack foods: tortilla chips, potato chips, and pretzels. The company has budgeted the following costs for the upcoming period: Factory depreciation ……â€
> Bounce Back Insurance Company carries three major lines of insurance: auto, workers’ compensation, and homeowners. The company has prepared the following report: Management is concerned that the administrative expenses may make some of
> Bach Instruments Inc. makes three musical instruments: flutes, clarinets, and oboes. The budgeted factory overhead cost is $2,948,125. Overhead is allocated to the three products on the basis of direct labor hours. The products have the following budgete
> Metroid Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual custome
> Are large or small companies more likely to use the reciprocal services method to allocate support department costs to production departments? Why?
> a. Differentiate between a vertical and horizontal unit within a company. b. Are the accounting and legal departments normally considered vertical or horizontal units within a company? c. Would a consumer products division that sells products directly to
> Handbrain Inc. is considering a change to activity-based product costing. The company produces two products, cell phones and tablet PCs, in a single production department. The production department is estimated to require 2,000 direct labor hours. The to
> Lonsdale Inc. manufactures entry and dining room lighting fixtures. Five activities are used in manufacturing the fixtures. These activities and their associated budgeted activity costs and activity bases are as follows: Corporate records were obtained
> Hercules Inc. manufactures elliptical exercise machines and treadmills. The products are produced in its Fabrication and Assembly production departments. In addition to production activities, several other activities are required to produce the two produ
> Kennedy Appliance Inc.’s Machining Department incurred $450,000 of factory overhead cost in producing hoses and valves. The two products consumed a total of 9,000 direct machine hours. Of that amount, hoses consumed 4,250 direct machine hours. Determine
> a. Based upon the data in Exercise 3-7, determine the following for December: 1. Direct materials cost per equivalent unit 2. Conversion cost per equivalent unit 3. Cost of the beginning work in process completed during December 4. Cost of units started
> The following information concerns production in the Baking Department for December. All direct materials are placed in process at the beginning of production. a. Determine the number of units in work in process inventory at December 31. b. Determine th
> Data for the two departments of Kimble & Pierce Company for June of the current fiscal year are as follows: Production begins in the Drawing Department and finishes in the Winding Department. If all direct materials are placed in process at the begi
> The Converting Department of Worley Company had 2,400 units in work in process at the beginning of the period, which were 35% complete. During the period, 10,800 units were completed and transferred to the Packing Department. There were 1,900 units in pr
> The cost accountant for River Rock Beverage Co. estimated that total factory overhead cost for the Blending Department for the coming fiscal year beginning February 1 would be $3,150,000, and total direct labor costs would be $1,800,000. During February,
> Radford Inc. manufactures a sugar product by a continuous process, involving three production departments— Refining, Sifting, and Packing. Assume that records indicate that direct materials, direct labor, and applied factory overhead for the first depart
> How does management determine the order in which support department costs are allocated under the sequential method?
> Alcoa Inc. (AA) is the world’s largest producer of aluminum products. One product that Alcoa manufactures is aluminum sheet products for the aerospace industry. The entire output of the Smelting Department is transferred to the Rolling
> Based on the data in Exercise 3-14, determine the following: a. Cost of beginning work in process inventory completed in November b. Cost of units transferred to the next department during November c. Cost of ending work in process inventory on November
> a. Based on the data in Exercise 3-11, determine the following: 1. Cost of beginning work in process inventory completed this period 2. Cost of units transferred to finished goods during the period 3. Cost of ending work in process inventory 4. Cost per
> The charges to Work in Process—Assembly Department for a period, together with information concerning production, are as follows. All direct materials are placed in process at the beginning of production. Determine the following: a. Th
> Eclipse Solar Company operates two factories. The company applies factory overhead to jobs on the basis of machine hours in Factory 1 and on the basis of direct labor hours in Factory 2. Estimated factory overhead costs, direct labor hours, and machine h
> Schumacher Industries Inc. manufactures recreational vehicles. Schumacher Industries uses a job order cost system. The time tickets from June jobs are summarized as follows: Job 11-101 …………………... $ 4,640 Job 11-102 ……………….…….. 5,510 Job 11-103 ………………...…
> The weekly time tickets indicate the following distribution of labor hours for three direct labor employees: The direct labor rate earned per hour by the three employees is as follows: Tom Couro …….. $32 David Cla
> A summary of the time tickets is as follows: Journalize the entry to record the factory labor costs.
> Kingsford Furnishings Company manufactures designer furniture. Kingsford Furnishings uses a job order cost system. Balances on April 1 from the materials ledger are as follows: Fabric ………â
> Materials issued are as follows: Journalize the entry to record the issuance of materials.
> Why is the direct method of support department cost allocation less accurate than the sequential and reciprocal services methods?
> The following information is available for the first year of operations of Creston Inc., a manufacturer of fabricating equipment: Sales ……………………………………….……………… $12,375,000 Gross profit …………………………….…………………. 5,200,000 Indirect labor ………………………….………………….… 410
> Collegiate Publishing Inc. began printing operations on March 1. Jobs 301 and 302 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 303 and 304 are still in process at the end of the month, a
> Cost data for Johnstone Manufacturing Company for the month ended March 31 are as follows: a. Prepare a cost of goods manufactured statement for March. b. Determine the cost of goods sold for March.
> The following events took place for Rushmore Biking Inc. during February, the first month of operations as a producer of road bikes: • Purchased $480,000 of materials. • Used $434,500 of direct materials in production. • Incurred $125,000 of direct labor
> The following information is available for Fuller Manufacturing Company for the month ending October 31: Cost of direct materials used in production …………………. $1,323,600 Direct labor …………………………………….…………………………. 1,680,000 Work in process inventory, October
> The following account appears in the ledger prior to recognizing the jobs completed in January: Jobs finished during January are summarized as follows: a. Journalize the entry to record the jobs completed. b. Determine the cost of the unfinished jobs a
> Walker Manufacturing Company reported the following materials data for the month ending June 30: Materials purchased ………………………….. $845,700 Materials inventory, June 1 ………………….. 238,500 Materials inventory, June 30 ……………….. 190,400 Determine the cost of d
> Exotic Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows: The average shop direct labor rate is $37.50 per hour. Determine the predetermined
> The following events took place for Sorensen Manufacturing Company during January, the first month of its operations as a producer of digital video monitors: a. Purchased $250,000 of materials. b. Used $180,000 of direct materials in production. c. Incur
> The following is a manufacturing cost report of Marching Ants Inc. a. List the errors in the preceding report. b. Prepare a corrected report.
