Explain the difference between service companies, merchandising companies, and manufacturing companies.
> Give two examples of an itemized cost sheet that you have received recently (e.g., a medical bill or a tuition statement would qualify as an itemized cost record).
> Many service industries use job order costing to keep track of the cost of serving clients. Can you think of a service industry that provides fairly homogeneous services? Describe the industry and explain why it might use process costing rather than job
> What types of companies are likely to use process costing? Give three examples.
> Lindwood Company manufactures coffee cups in several different sizes and has identified the following activities in its manufacturing process: ∙ Storing inventory ∙ Creating molds ∙ Pouring plaster ∙ Firing pots in kiln ∙ Sanding and finishing ∙ Painting
> Seth’s Skateboard Company incurs the costs listed in the following table. Required: Use an X to categorize each of the following costs. You may have more than one X for each item.
> Explain the most common method of eliminating any balance in the Manufacturing Overhead account at year-end. What account(s) is (are) adjusted? What happens to the account(s) when manufacturing overhead is overapplied? Underapplied?
> How do you know when manufacturing overhead is underapplied? What type of balance would you expect to see in the Manufacturing Overhead account?
> What types of companies are likely to use job order costing? Give three examples.
> How do you know when manufacturing overhead is overapplied? What type of balance would you expect to see in the Manufacturing Overhead account?
> Will the amount of manufacturing overhead that is applied to Work in Process Inventory be equal to the actual amount of manufacturing overhead costs incurred? Why or why not?
> How do you apply manufacturing overhead to the Work in Process Inventory account? Is it based on estimated or actual data?
> How is a predetermined overhead rate calculated? How does a company decide which allocation base to use to calculate the rate?
> Explain how and why depreciation on office equipment is treated differently than depreciation on manufacturing equipment
> Why is manufacturing overhead assigned to Work in Process Inventory in a different manner than direct materials and direct labor? Explain how it is different.
> Some would argue that costs would be more accurate if overhead costs were assigned to jobs using an overhead rate based on actual overhead costs and the actual value of the allocation base, rather than estimated amounts. Do you agree or disagree with thi
> Ridgecrest Company manufactures plastic storage crates and has the following information available for the month of April: Required: Using the weighted-average method of process costing, complete each of the following steps: 1. Reconcile the number of ph
> What is the primary source document used to trace the cost of direct labor to specific jobs? What information should it contain?
> Explain how the cost of direct and indirect materials flows through the Raw Materials, Work in Process, and Manufacturing Overhead accounts.
> What is the purpose of a materials requisition form? What information should it contain?
> What is the difference between job order and process costing?
> Suppose a company accountant incorrectly classified advertising costs as a product cost. What impact would this have on the company’s financial statements?
> If you wanted to know the total amount of period costs for a company, which financial statement(s) would you consult?
> What triggers the movement of product costs from an asset on the balance sheet to an expense on the income statement?
> Explain why product costs are also called inventoriable costs and how those costs move through a company’s financial statements.
> What is the difference between product and period costs in terms of how and when they are treated in the financial statements (balance sheet and income statement)?
> Why can’t prime cost and conversion cost be added together to arrive at total manufacturing cost?
> Refer to E3-7 for information regarding Silver Company. Required: Complete all requirements for E3-7 using the FIFO method. Data from E3-7: Silver Company manufactures kites and has the following information available for the month of April:
> What types of costs are included in manufacturing overhead? Other than direct materials and direct labor, what costs would not be included in manufacturing overhead?
> What are prime costs? Why have they decreased in importance over time?
> Suppose you and your friends are planning a trip for spring break. You have narrowed the destination choices to Panama City, Florida, and Galveston Bay, Texas. List two costs that are relevant to this decision and two costs that are irrelevant to this de
> Explain the difference between relevant and irrelevant costs. What are the two criteria used to determine whether a cost is relevant?
> Explain the difference between fixed and variable costs. Give an example of a cost that varies with the number of miles you drive your car each week and an example of a cost that is fixed regardless of how many miles you drive your car each week.
> Explain the difference between a direct cost and an indirect cost. Take a look at your purse or wallet. Name two direct costs of making your purse or wallet. Name two indirect costs of making it.
> Why is it important for managers to be able to determine the cost of a particular item? Name one decision that a company might make using cost information.
> Think about all of the choices you make on a day-to-day basis: everything from driving versus riding a bike to school or deciding where to have lunch. Pick three decisions you have made today. Identify an out-of-pocket and opportunity cost for each decis
> Describe the three types of analytics. Give an example of how a manager at California Pizza Kitchen might use each type of analytics.
> What three factors make “big data” difficult to analyze using traditional tools such as spreadsheets and databases.
> Silver Company manufactures kites and has the following information available for the month of April: Required: Using the weighted-average method, complete each of the following steps: 1. Reconcile the number of physical units worked on during the period
> What factors does sustainability accounting include that traditional accounting systems do not?
> Why are businesses starting to incorporate sustainability into their business model?
> According to a recent Statement on Management Accounting (SMA), what are some of the potential benefits of a strong ethical business climate?
> How did the Sarbanes-Oxley Act attempt to reduce fraudulent reporting by addressing opportunity, incentives, and character?
> How did the Sarbanes-Oxley Act affect managers’ responsibility for creating and maintaining an ethical business and reporting environment?
> What events or factors led to the creation and enactment of the Sarbanes-Oxley Act of 2002?
> What are ethics and why is ethical behavior important to managers?
> How are the three basic management functions interrelated?
> What are the three basic functions of management?
> Consider the area within a 3-mile radius of your campus. What service companies, merchandising companies, and manufacturing firms are located within that area?
> Refer to the information for Oasis Company in E3-5. Required: 1. Reconcile the number of physical units to find the missing amounts. Determine the number of units started and completed each month. 2. Calculate the number of equivalent units for both mate
> Why are traditional, GAAP-based financial statements not necessarily useful to managers and other internal parties?
> Your friend, Maria Cottonwood, has designed a new type of fire extinguisher that is very small and easy to use. It will target two groups of people: people who have trouble operating heavy, traditional extinguishers (e.g., the elderly or people with disa
> You have been asked to take part in an upcoming Young Professionals meeting in your area. The program planned for the evening focuses on today’s manufacturing environment. Specifically, you have been asked to explain how manufacturing firms determine h
> You have the opportunity to invest $10,000 in one of two companies from a single industry. The only information you have is shown here. The word high refers to the top third of the industry; average is the middle third; low is the bottom third. Required:
> The financial statements for Thor and Gunnar companies are summarized here: These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit o
> Mattel and Hasbro are the two biggest makers of games and toys in the world. Mattel sells over $5.6 billion of products each year while annual sales of Hasbro products exceed $5 billion. Compare the two companies as a potential investment based on the fo
> A condensed income statement for Southwest Airlines and a partially completed vertical analysis follow. Required: 1. Complete the vertical analysis by computing each line item (a)–(f) as a percentage of sales revenues. Round to the near
> A condensed balance sheet for Southwest Airlines and a partially completed vertical analysis are presented below. Required: 1. Complete the vertical analysis by computing each line item (a)–(c) as a percentage of total assets. Round to
> Use the data given in PB13–1 for Tiger Audio. Required: 1. Compute the gross profit percentage in the current and previous years. Are the current year results better, or worse, than those for the previous year? 2. Compute the net profit
> Oasis Company adds all materials at the beginning of its manufacturing process. Production information for selected months of the year follows: Required: 1. Reconcile the number of physical units to find the missing amounts. 2. Calculate the number of eq
> Tiger Audio declared and paid a cash dividend of $5,525 in the current year. Its comparative financial statements, prepared at December 31, reported the following summarized information: Required: 1. Complete the two final columns shown beside each item
> Refer to PB12–4. Required: Complete requirements 1 and 2 using the direct method. Data from PB12-4: Dive In Company was started several years ago by two diving instructors. The company’s comparative balance sheets and
> Refer to the information in PB12–2. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method. Data from PB12-2: The income statement and selected balance sheet informatio
> Dive In Company was started several years ago by two diving instructors. The company’s comparative balance sheets and income statement, as well as additional information, are presented below. Additional Data: a. Rent is paid in advance
> Audio City, Inc., is developing its annual financial statements at December 31. The statements are complete except for the statement of cash flows. The completed comparative balance sheets and income statement are summarized below: Additional Data: a. Bo
> The income statement and selected balance sheet information for Calendars Incorporated for the year ended December 31 are presented below. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirec
> For each of the following transactions, indicate whether operating (O), investing (I), or financing activities (F) are affected and whether the effect is a cash inflow (+) or outflow (−). Use (NE) if the transaction has no effect on cash. 1. Received dep
> Citco Company is considering investing up to $500,000 in a sustainability-enhancing project. Its managers have narrowed their choices to three potential projects. ∙ Project A would redesign the production process to recycle raw material
> After incurring a serious injury caused by a manufacturing defect, your friend has sued the manufacturer for damages. The manufacturer made your friend three offers to settle the lawsuit: a. Receive an immediate cash payment of $100,000. b. Receive $10,0
> Montego Production Co. is considering an investment in new machinery for its factory. Various information about the proposed investment follows: Required: Help Montego evaluate this project by calculating each of the following: 1. Accounting rate of retu
> The following four companies use a process cost system: Required: Treating each case independently, find the missing amounts for letters a through h. You should do them in the order listed.
> Harmony Company has a number of potential capital investments. Because these projects vary in nature, initial investment, and time horizon, Harmony’s management is finding it difficult to compare them. Project 1: Retooling Manufacturing Facility This pro
> Gondola Company is considering automating its production facility. The initial investment in automation would be $5,800,000 and the equipment has a useful life of eight years with a residual value of $400,000. The company will use straight-line depreciat
> The Best Cab Company (TBCC) is considering the purchase of four new taxicabs. Various information about the proposed investment follows: Required: Help TBCC evaluate this project by calculating each of the following: 1. Accounting rate of return. 2. Payb
> The following table lists several metrics from the Global Reporting Initiatives’ (GRI) sustainability reporting standards and other industry sources. For each metric, classify it based on its impact on the triple bottom line (People, Pr
> Monona produces bottled water. The company recently purchased Cabot Co., a manufacturer of plastic bottles. In the past, Monona has purchased plastic bottles on the open market at $0.20 each. Financial information for the past year for Monona and Cabot f
> Quail Company produces outdoor gear. Salter is a division of Quail that manufactures unbreakable zippers used in Quail’s gear and sold to other manufacturers. Cost information per zipper follows: In addition, Salter’s
> Yummy Company has three divisions: Chips, Cookies, and Crackers. The company has a hurdle rate of 7 percent. Selected operating data for the three divisions follow: Yummy is considering an expansion project in the upcoming year that will cost $5,250,000
> The following is partial information for Tonopah Company’s most recent year of operation. Tonopah manufactures children’s shoes and categorizes its operations into two divisions: Girls and Boys. Required: 1. Without ma
> Escuda Company has the following information available for the past year: The company’s hurdle rate is 12 percent. 1. Determine Escuda’s return on investment (ROI) and residual income for each division for last year. 2
> Refer to the information in PB9–7 for First Trax. Required: Prepare the journal entries to record the following for First Trax: 1. Direct materials costs and related variances. 2. Direct labor and related variances. Data from PB9-7: Fi
> In 2008, Fetzer Vineyards redesigned its bottling process to use a more lightweight bottle by reducing the thickness of the glass and removing the “punt” or indentation at the base of the bottle. The result was to reduce the weight of each wine bottle f
> First Trax Company manufactures snowboards. Its standard cost information follows. First Trax has the following actual results for the month of June: Required: Calculate the following for First Trax: 1. Direct materials price, quantity, and spending vari
> Refer to the information in PB9–4 for Dolles Clay. Required: Prepare the journal entries to record the following for Dolles Clay: 1. Direct materials costs and related variances. Assume the company purchases direct materials as needed a
> Refer to the information for Dolles Clay in PB9–4. Required: Compute the following for Dolles Clay: 1. Fixed overhead spending variance 2. Fixed overhead volume variance. 3. Over- or underapplied fixed manufacturing overhead. Data from
> Dolles Clay, Inc., manufactures basic terra cotta planters. Its standard cost information for the past year follows: Dolles Clay has the following actual results for the past year: Required: Calculate the following for Dolles Clay: 1. Direct materials pr
> Refer to the information in PB9–1 for Sweetly Sent. Required: Prepare the journal entry to record the following for Sweetly Sent: 1. Direct materials costs and related variances. Assume the company purchases direct materials as needed a
> Refer to the information for Sweetly Sent in PB9–1. Required: Compute the following for Sweetly Sent: 1. Fixed overhead spending variance. 2. Fixed overhead volume variance. 3. Total over- or underapplied fixed manufacturing overhead.
> Sweetly Sent, Inc., manufactures scented pillar candles. Its standard cost information for the month of February follows: Sweetly Sent has the following actual results for the month of February: Required: Calculate the following for Sweetly Sent: 1. Dire
> Blue Skies T-shirt Company operates a chain of T-shirt shops in the northeastern United States. The sales manager has provided a sales forecast for the coming year, along with the following information: ∙ Each T-shirt is expected to sel
> Refer to the information presented in PB8–4 regarding Boscoe Power Tools. Required: Prepare the following for the first quarter: 1. Cost of goods sold budget. 2. Selling and administrative expense budget. 3. Budgeted income statement fo
> Boscoe Power Tools manufactures a wide variety of tools and accessories. One of its more popular craft-related items is the cord free glue gun. Each glue gun sells for $30. Boscoe expects the following unit sales: Boscoe’s ending finish
> Sereno Company makes piñatas for children’s birthday parties. Information for Sereno’s last six months of operation is listed as follows. Required: Prepare the journal entries to record each of the following transactions. (a) Purchased $15,600 of raw mat
> Beach Wind Company had $12,200 cash on hand on April 1. Of its sales, 60 percent is cash. Of the credit sales, 50 percent is collected during the month of the sale and 50 percent is collected during the month following the sale. Of direct materials purch
> Refer to the information in PB8–1. Required: Prepare Beach Wind’s budgeted income statement for quarter 2. Data from PB8-1: Beach Wind Company manufactures kites that sell for $20 each. Each kite requires 2 yards of l
> Beach Wind Company manufactures kites that sell for $20 each. Each kite requires 2 yards of lightweight canvas, which costs $0.60 per yard. Each kite takes approximately 30 minutes to build, and the labor rate averages $8 per hour. Beach Wind has the fol
> Gold Dust Co. manufactures tablet PCs. The company is currently operating at capacity and has received an offer from one of its suppliers to make the 20,000 glass screens it needs for $26 each. Gold Dust’s costs to make the glass screen are $10 in direct
> Shasta Co. manufactures designer pillows for college dorm rooms. Each line of pillow is endorsed by a high-profile sports star and designed with special elements selected by the sports star. During the most recent year, Shasta Co. had the following opera
> Golden Trophy Inc. manufactures trophies and other promotional awards. The company uses an extrusion process in which metals and plastic are molded into a metal base of different sizes and shapes. Managers can either sell the unfinished base to other tro
> Prospector Company makes three types of long-burning scented candles. The models vary in terms of size and type of materials (fragrance, decorations, etc.). Unit information for Prospector follows: Prospector has determined that it can sell a limited num
> Barb Bach recently graduated from Coral College’s accounting program. She has been hired as an analyst by Rainier Ski Co. and one of her first assigned tasks was to evaluate the Colorado division of Rainier Ski Co. This division has bee
