Question: How does activity-based costing differ from

> Why do businesses spend time, effort, and money to produce forecasts? Explain.

> What do financial managers look for when they analyze pro forma financial statements?

> Explain the significance of the term additional funds needed.

> Explain how management goals are incorporated into pro forma financial statements.

> Explain how the cash budget and the capital budget relate to pro forma financial statements.

> Why do analysts calculate financial ratios?

> What is a financial ratio?

> Why would an analyst use the Modified Du Pont system to calculate ROE when ROE may be calculated more simply? Explain.

> Under what circumstances would market to book value ratios be misleading? Explain.

> Describe the duties of the financial manager in a business firm.

> Which ratios would a banker be most interested in when considering whether to approve an application for a short-term business loan? Explain.

> What are the time dimensions of the income statement, the balance sheet, and the statement of cashflows? Hint: Are they videos or still pictures? Explain.

> Why do total assets equal the sum of total liabilities and equity? Explain.

> Indicate in which section the following balance items belong (current assets, fixed assets, currentliabilities, long-term liabilities, or equity).

> Why do financial managers calculate the marginal tax rate?

> What are retained earnings? Why are they important?

> Define depreciation expense as it appears on the income statement. How does depreciation affect cash flow?

> What can a financial institution often do for a deficit economic unit (DEU) that it would have difficulty doing for itself if the DEU were to deal directly with an SEU?

> What can a financial institution often do for a surplus economic unit that it would have difficulty doing for itself if the surplus economic unit (SEU) were to deal directly with a deficit economic unit (DEU)?

> Define intermediation.

> List and describe the three career opportunities in the field of finance.

> Compare and contrast a defined benefit and a defined contribution pension plan.

> Which type of insurance company generally takes on the greater risks: a life insurance company or a property and casualty insurance company?

> Who owns a credit union? Explain.

> Compare and contrast mutual and stockholder-owned savings and loan associations.

> What are a bank's primary reserves? When the Fed sets reserve requirements, what is its primary goal?

> What is a security?

> Would there be positive interest rates on bonds in a world with absolutely no risk (no default risk, maturity risk, and so on)? Why would a lender demand and a borrower be willing to pay, a positive interest rate in such a no-risk world?

> What is the role of a broker in security transactions? How are brokers compensated?

> How are financial trades made in an over-the-counter market? Discuss the role of a dealer in the OTC market.

> Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations.

> How is finance related to the disciplines of accounting and economics?

> Orlando Metals manufactures tin. During the process, a byproduct— scrap metal—is obtained and placed in stock. The estimated sales value of the scrap metal produced during the month of April is $2,000. Assume that the value of the by-product is treated a

> Seymour Brothers Products, Inc., manufactures a liquid product in one department. Due to the nature of the product and the process, units are regularly lost at the beginning of production. Materials and conversion costs are added evenly throughout the pr

> Materials often represent a substantial portion of a company’s assets; therefore, they should be controlled from the time orders are placed to the time finished goods are shipped to the customer. What are the control procedures used for safeguarding mate

> Clark Kent, Inc., buys crypton for $0.80 a gallon. At the end of processing in Dept. 1, crypton splits off into products A, B, and C. Product A is sold at the split-off point with no further processing. Products B and C require further processing before

> In P3-11, prepare the entries to distribute the weekly payroll and the costs and liabilities related to the bonus, vacation, and holiday pay, assuming that the fringe benefits of the direct laborers are charged to the individual jobs worked on during the

> What are the advantages and disadvantages of the scattergraph method as compared to the high-low method?

> What effect does a change in volume have on total variable, fixed, and semi variable costs?

> Bristol Manufacturing, Inc., uses the job order cost system of accounting. The following information was taken from the company’s books after all posting had been completed at the end of May: a. Prepare the journal entries to charge t

> When a product’s cost is composed of both fixed and variable costs, what effect does the increase or decrease in production has on per unit cost?

> What are the distinguishing characteristics of variable, fixed, and semi variable factory overhead costs?

> What are three categories of factory overhead expenses? Give examples of each.

> What are factory overhead expenses, and what distinguishes them from other manufacturing costs? What other terms are used to describe factory overhead expenses?

> What are two ways that an under- or over applied factory overhead balance can be disposed of at the end of a fiscal period? How can one decide which method to choose?

> If the factory overhead control account has a debit balance of $1,000 at the end of the first month of the fiscal year, has the overhead been under- or overapplied for the month? What are some probable causes for the debit balance?

> Distinguish between volume-related and non-volume-related overhead costs.

> The factory payroll for the week is $200,000, consisting of $140,000 earned by 100 direct laborers and $60,000 earned by 30 indirect laborers. The total of factory bonuses to be received at year-end is estimated at $400,000. All factory workers receive a

> What steps must a company take to successfully employ activity-based costing?

> Under what conditions would it be desirable for a company to use more than one method to apply factory overhead to jobs or products?

> After a product is inspected, some units may be classified as spoiled and others as defective. What distinguishes a product as being spoiled or defective?

> What factory operating conditions and data are required for each of the traditionally used methods for applying factory overhead to products? Discuss the strengths and weaknesses of each method.

> What are three methods traditionally used for applying factory overhead to jobs? Discuss the allocation base used in each method.

> What are the two types of budget data needed to compute predetermined overhead rates?

> What are the shortcomings of waiting until the actual factory overhead expenses are known before recording such costs on the job cost sheets?

> When using the step-down method of distributing service department costs, if a service department receives services from other service departments, will those costs be allocated back to it even though it was the first service department distributed?

> What are the two most frequently used methods of distributing service department costs to production departments?

> Giovanni Construction Company uses the job order cost system. In recording payroll transactions, the following accounts are used: Cash Administrative Salaries Wages Payable Miscellaneous Administrative Expense FICA Tax Payable Sales Salaries Federal Une

> What are two types of departments found in a factory? What is the function or purpose of each?

> What is the function and use of each of the two types of factory overhead analysis spreadsheets?

> How does accounting for factory overhead differ in small enterprises versus large enterprises?

> Listed below are the budgeted factory overhead costs for 2011 for Muncie Manufacturing, Inc., at a projected level of 2,000 units: Expenses: Indirect materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> A manufacturing process may produce a considerable quantity of scrap material because of the nature of the product. What methods can be used to account for the sales value of scrap material?

> Fahrenheit Company manufactures a product that requires the use of a considerable amount of natural gas to heat it to a desired temperature. The process requires a constant level of heat, so the furnaces are maintained at a set temperature for 24 hours a

> The cost behavior patterns on page 222 are lettered A through H. The vertical axes of the graphs represent total dollars of expense, and the horizontal axes represent production in units, machine hours, or direct labor hours. In each case, the zero point

> Plano Products, Inc., had a remaining credit balance of $10,000 in its under- and overapplied factory overhead account at yearend. It also had year-end balances in the following accounts: Work in Process . . . . . . . . . . . . . . . . . . . . . . . . .

> Planet Products, Inc., completed Job 2525 on May 31, and there were no jobs in process in the plant. Prior to June 1, the predetermined overhead application rate for June was computed from the following data, based on an estimate of 5,000 direct labor ho

> Ko-Be Corporation has four departmental accounts: Building Maintenance, General Factory Overhead, Machining, and Assembly. The direct labor hour method is used to apply factory overhead to the jobs being worked on in Machining and Assembly. The company e

> An analysis of the payroll for the month of November for Hollywood, Inc., reveals the information shown: Crowe, Eastwood, and Carey are production workers, and Penn is the plant manager. Giamatti is in charge of the office. Cumulative earnings paid (bef

> The following information, taken from the books of Nicholas Company, represents the operations for the month of January: The job cost system is used, and the February cost sheet for Job M45 shows the following: The following actual information was accu

> Manufacturing Company is studying the results of applying factory overhead to production. The following data have been used: estimated factory overhead, $60,000; estimated materials costs, $50,000; estimated direct labor costs, $60,000; estimated direct

> GGT Products, Inc., uses a job order cost system. Selected transactions dealing with factory items for the month follow: a. Requisitioned indirect materials from storeroom, $3,200. b. Purchased, on account, factory supplies for future needs, $4,400. c.

> Julio Manufacturing Company uses activity-based costing. The factory overhead budget for the coming period is $500,000, consisting of the following: Cost Pool Budgeted Amount Direct labor support . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Lexus Products, Inc., has its factory divided into three departments, with individual factory overhead rates for each department. In each department, all the operations are sufficiently alike for the department to be regarded as a cost center. The estima

> What are the arguments for and against ‘‘backflush’’ costing?

> Barbara-Lee Manufacturing Company uses the job order cost system of accounting. The following is a list of the jobs completed during the month of March, showing the charges for materials requisitioned and for direct labor. Assume that factory overhead i

> Using the information in P4-6, prepare a schedule showing the distribution of the service departments’ expenses using the sequential distribution method in the order of number of other departments served. Mixing . . . . . . . . . . . . . . . . $21,000 F

> Bakery Products, Inc., is divided into five departments, Mixing, Blending, Finishing, Factory Office, and Building Maintenance. The first three departments are engaged in production work. Factory Office and Building Maintenance are service departments. D

> Home Entertainment, Inc., manufactures two types of DVD players: standard and deluxe. It attempts to set selling prices based on a 50% markup on manufacturing costs to cover selling and administrative expenses and to earn an acceptable return for shareho

> Pan-Am Manufacturing Company prepares cost estimates for projects on which it will bid. In order to anticipate the labor cost to be included in a request to bid on a contract for 1,200,000 units that will be delivered to the customer at the rate of 100,0

> Go to the companion Web site at www.cengage.com/accounting/vanderbeck and click on the link to Activity-based costing from Economist.com. Required: Answer the following questions based on the article: 1. If two activities use the same amount of direct c

> Scentsation, Inc., budgeted for 12,000 bottles of perfume Oui during the month of May. The unit cost of Oui was $20, consisting of direct materials, $7; direct labor, $8; and factory overhead, $5 (fixed, $2; variable, $3). a. What would be the unit cost

> Determine: 1. The variable cost per unit, the total fixed cost, and R2. 2. The plotted data points using Chart Wizard. 3. Compare the results to your solutions in E4-2 and E4-3. Indirect Indirect Labor Hours Labor Costs January 400 $ 6,000 February 5

> Using the data in E4-2 and a piece of graph paper: 1. Plot the data points on the graph and draw a line by visual inspection, indicating the trend shown by the data points. 2. Determine the variable cost per unit and the total fixed cost from the informa

> Copper Mountain Company has accumulated the following data over a six-month period: Separate the indirect labor into its fixed and variable components, using the high-low method. Indirect Indirect Labor Hours Labor Costs January 400 $ 6,000 February

> Classify each of the following items of factory overhead as either a fixed or a variable cost. (Include any costs that you consider to be semivariable within the variable category. Remember that variable costs change in total as the volume of production

> What is the difference between throughput time and velocity?

> ETA Company had a remaining credit balance of $20,000 in its under- and overapplied factory overhead account at year-end. The balance was deemed to be large and, therefore, should be closed to Work in Process, Finished Goods, and Cost of Goods Sold. The

> The following form represents an account taken from the general ledger of Brodsky Costumes Company: Answer the following questions: a. What is the title of the account? b. Is this a departmentalized factory? c. What does the balance of $1,100 represent?

> The general ledger of Stephens Products, Inc. contains the following control account: If the materials charged to the one uncompleted job still in process amounted to $3,400, what amount of labor and factory overhead must have been charged to the job if

> The payroll records of XU Corporation for the week ending October 7, the fortieth week in the year, show the following: Required: 1. Complete a work sheet with the following column headings: Employee 3 columns for Earnings for Week: . Use one for Regula

> The books of Prestige Products Company revealed that the following general journal entry had been made at the end of the current accounting period: Factory Overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 Und

> Match each of the following cost pools with the most appropriate cost allocation base and determine the overhead rates: Cost Pool Amount Assembly support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

> Job 401k required $5,000 for direct materials, $2,000 for direct labor, 200 direct labor hours, 100 machine hours, two setups, and three design changes. The cost pools and overhead rates for each pool follow: Cost Pool Overhead Rate Assembly support $5/

> a. If the direct labor cost method is used in applying factory overhead and the predetermined rate is 100%, what amount should be charged to Job 2010 for factory overhead? Assume that direct materials used totaled $5,000 and that the direct labor cost to

> A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next year’s ope

> What would be the appropriate basis for distributing the costs of each of the following service departments to the user departments? a. Building maintenance b. Inspection and packing c. Machine repair d. Human resources e. Purchasing f. Shipping g. Raw m

> What purpose do digital records and remote computer terminals serve in a payroll system?

> How does the just-in-time approach to production differ from the traditional approach?

> Briefly stated, what are the advantages and disadvantages of (a) the hourly rate wage plan and (b) the piece-rate wage plan?