Question: The normal capacity of a manufacturing plant

> The production of a new product required Mirage Manufacturing Company to lease additional plant facilities. Based on studies, the following data have been made available: Estimated annual sales—24,000 units Selling expenses are expecte

> 1. For E5-10, prepare a cost of production summary for the month for Blending. 2. Prepare a journal entry to transfer the completed units from Blending to Finished Goods. In E5-10 Cost in Mixing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Using the data, determine: 1. The cost of goods received from Shaping during the month. 2. The production costs incurred in Forming during the month. 3. The cost of goods completed and transferred to Finishing during the month. Work in Process-Formi

> If the prior department’s transfers from two different periods have different unit costs each month, how are they treated for purposes of the cost of production summary for the department to which they were transferred?

> What is the difference between the contribution margin ratio and the margin of safety ratio?

> Foamy, Inc., manufactures shaving cream and uses an average cost system. In November, production is 14,800 equivalent units for materials and 13,300 units for labor and overhead. During the month, materials, labor, and overhead costs were as follows: Mat

> Camacho Chemical Company uses an average cost processing system. All materials are added at the start of the production process. Labor and overhead are added evenly at the same rate throughout the process. Camacho’s records indicate the following data fo

> What information is reflected on a production report?

> Fifteen workers are assigned to a group project. The productionstandard calls for 500 units to be completed each hour to meet acustomer’s set deadline for the products. If the required unitscan be delivered before the target date on the

> Analyze the information presented in the following general ledger account of Mantle Manufacturing Co., which has three departments: Shaping, Forming, and Finishing: Additional facts: a. 2,000 units were in process at the beginning of the month, one-half

> What is the importance of make-or-buy studies for a company?

> What is the primary objective in accumulating costs by departments?

> Buscemi Products, Inc., desires an after-tax income of $500,000. It has fixed costs of $2,500,000, a unit sales price of $300, and unit variable costs of $150, and is in the 40% tax bracket. Required: 1. What amount of pre-tax income is needed to earn

> Ichiro Manufacturing Co. uses the process cost system. The following information for the month of December was obtained from the company’s books and from the production reports submitted by the department heads: Required: 1. Prepare co

> Using the data in P5-5: 1. Draft the necessary entries to record the manufacturing costs incurred during the month of July. 2. Prepare a statement of cost of goods manufactured for the month ended July 31. Cubbies Manufacturing Co. Departmental Cost

> Using the data given for Cases 1–3 and the FIFO cost method, compute the separate equivalent units of production, one for materials and one for labor and overhead, under each of the following assumptions (labor and factory overhead are applied evenly dur

> What are the advantages and disadvantages of using variable costing?

> Spaulding Manufacturing Company has determined the cost of manufacturing a unit of product as follows, based on normal production of 100,000 units per year: Direct materials . . . . . . . . . . . . . . . . . . . . $ 5 Direct labor . . . . . . . . . . .

> Why is it necessary to estimate the stage or degree of completion of work in process at the end of the accounting period under the process cost system?

> Marion Corporation has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year: Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> What would be the effect on the unit cost of finished goods if an estimate of the stage of completion of work in process was too high?

> Assume each of the following conditions concerning the data given: 1. All materials are added at the beginning of the process. 2. All materials are added at the end of the process. 3. Half of the materials are added at the beginning of the process, and

> In E5-7, prepare a statement of cost of goods manufactured for the period. In E5-7 North Arlington Company has two production departments. The nature of the process is such that no units remain in process in Finishing at the end of the period. During th

> North Arlington Company has two production departments. The nature of the process is such that no units remain in process in Finishing at the end of the period. During the period, 10,000 units with a cost of $30,000 were transferred from Assembly to Fini

> The Coca-Cola Company’s manufacturing operations are ideal for process costing because it and its bottlers produce long runs of identical beverages in a continuous flow production process. Go to the companion Web site at www.cengage.com/accounting/vander

> What steps are required in constructing a break-even chart?

> Assuming that all materials are added at the beginning of the process and the labor and factory overhead are applied evenly during the process, compute the figures to be inserted in the blank spaces of the following data, using the average cost method.

> Eradicate, Inc., produces and sells a line of insect repellants that are sold primarily in the summer months. Recently, the chief operating officer has become interested in possibly manufacturing a repellant, ‘‘Halt’’ that can prevent a person from being

> U.S. Grant Company has two production departments. Blending had 1,000 units in process at the beginning of the period, two fifths complete. During the period 7,800 units were received from Mixing, 8,200 units were transferred to Finished Goods, and 600 u

> Why are there objections to using absorption costing when segment reports of profitability are being prepared?

> Colbert Company has 1,000 units in process in Forming at the beginning of the month with a transferred cost of $21,200 from Blanking. During the month, 5,000 units with a total cost of $100,000 are received from Blanking; 4,000 units are finished and tra

> The Nut House, Inc., sells three types of nuts: almonds, cashews, and walnuts. Ten thousand cans of nuts were sold in 2011, and the amount of walnuts sold were twice as much as the number of cans of cashews, whereas almond sales were one-half the amount

> Rancho Santa Fe Manufacturing, Inc., produces and sells a product with a price of $100 per unit. The following cost data have been prepared for its estimated upper and lower limits of activity: Required: 1. Classify each cost element as either variable,

> The following data appeared in the accounting records of Royale Manufacturing Company, which uses an average cost production system: Started in process . . . . . . . . . . . . . . . . . . . 12,000 units Finished and transferred . . . . . . . . . . . .

> How do the two cost accounting systems differ in accounting for each of the following items? a. Materials b. Labor c. Factory overhead

> Swedish Navy Company manufactures wristwatches on an assembly line. The work in process inventory as of March 1 consisted of 1,000 watches that were complete as to materials and 75% complete as to labor and overhead. The March 1 work in process costs wer

> Lexington Lumber Co. processes rough timber to obtain three grades of finished lumber, A, B, and C. The company allocates costs to the joint products on the basis of market value. During the month of May, Lexington incurred total production costs of $300

> What is the primary difference between the two cost accounting systems regarding the accumulation of costs and the calculation of unit costs?

> South-Central Publishing Company prepares income statements segmented by divisions, but the chief operating officer is not certain about how the company is actually performing. Financial data for the year follow: The Electronic Publishing Division appea

> Cooper Company’s joint cost of producing 1,000 units of Product A, 500 units of Product B, and 500 units of Product C is $200,000. The unit sales values of the three products at the split-off point are Product A—$20, Product B—$200, and Product C—$160. E

> What are the two basic systems of costaccounting, and under what conditions mayeach be used advantageously?

> Does the calculation of unit cost in a department subsequent to the first department take into consideration the costs transferred in from the previous departments?

> Go to the text Web site at www.cengage.com/accounting/vanderbeck and click on the link to ‘‘kaizen,’’ from Wikipedia, the free encyclopedia. After reading the entry, answer the following questions: 1. What is the meaning of kaizen? 2. What is the goal of

> The normal capacity of a factory is 8,000 units per month. Cost and production data follow: Standard application rate for fixed overhead . . . . . . . . . . . . . . . . $0.50 per unit Standard application rate for variable overhead . . . . . . . . . . .

> How would you describe accounting for by-products for which no further processing is required?

> Solar Panels, Inc., has the following items and amounts as part of its master budget at the 10,000-unit level of sales and production: Sales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,00

> How would you define each of the following? a. joint products b. by-products c. joint costs d. split-off point

> How is the cost of units normally lost in manufacturing absorbed by the unit cost for the period?

> Strand Manufacturing, Inc., has the following flexible budget formulas and amounts: Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25 per unit Direct materials . . . . . . . . . . . . . . . .

> Using the following per-unit and total amounts, prepare a flexible budget at the 14,000-, 15,000-, and 16,000-unit levels of production and sales for Celestial Products, Inc.: Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Why might the total number of units completed during a month plus the number of units in process at the end of a month be less than the total number of units in process at the beginning of the month plus the number of units placed in process during the m

> Gyro Company has the following totals from its operating budgets: Selling and administrative expenses budget . . . . . . . . . . . . . . . . . . . $ 244,500 Cost of goods sold budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

> Prepare a cost of goods sold budget for the Summit Manufacturing Company for the year ended December 31, 2011, from the following estimates. Inventories of production units: Direct materials purchased during the year, $854,000; beginning inventory of dir

> What advantage does the FIFO cost method have over the average cost method relative to providing information for cost control?

> Give three examples each of operating budgets and financial budgets.

> What is a continuous budget, and why is it useful?

> What are six principles of good budgeting?

> How is the standard cost per unit for factory overhead determined?

> Is it possible for a factory to operate at more than 100% of normal capacity?

> How would you define the following? a. Theoretical capacity b. Practical capacity c. Normal capacity

> In comparing actual sales revenue to flexible budget sales revenue, would it be possible to have a favorable variance and still not have met revenue expectations?

> Why is a flexible budget better than a master budget for comparing actual results to budgeted expectations?

> S. Prosser Manufacturing Company forecast October sales to be 45,000 units. Additional information follows: Finished goods inventory, October 1 . . . . . . . . . . . . . . . . . . . . . . . . 5,000 units Finished goods inventory desired, October 31 . .

> What are the advantages and disadvantages of each of the following for a company that has greatly fluctuating sales during the year? a. A stable production policy b. A stable inventory policy

> What is the difference between the average cost method and the first-in, first-out (FIFO) cost method?

> Why is it important to have front-line managers participate in the budgeting process?

> Which budget must be prepared before the others? Why?

> Budgeted selling and administrative expenses for Cruise Tire Company in P7-2 for the year ended December 31, 2011, were as follows: Advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $942,000 Office rent

> Cruise Tire Company’s budgeted unit sales for the year 2011 were: Passenger car tires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 Truck tires . . . . . . . . . . . . . . . . .

> The sales department of Optimo Company has forecast sales for May 2011 to be 40,000 units. Additional information follows: Finished goods inventory, May 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 units Finished goods inventory, M

> Mountaineer Manufacturing Company uses a job order cost system and standard costs. It manufactures one product, whose standard cost follows: Materials, 20 yards@$0.90 per yard . . . . . . . . . . . . . . . . . . . . . . . . . . $18 Direct labor, 4 hours

> Presented below are the monthly factory overhead cost budget (at normal capacity of 5,000 units or 20,000 direct labor hours) and the production and cost data for a month. The predetermined overhead rate is based on normal capacity. Required: 1. Assuming

> Use the information in Figure 7-12 of the chapter. Required: Prepare flexible budgets for the production and sale of 29,000 units and 31,000, respectively. Figure 7-12 Flexible Budget for Production and Sale of Tables A 28,000 units $4.200,000 30,00

> Branson Manufacturing, Inc., produces a single type of small motor. The bookkeeper who does not have an in-depth understanding of accounting principles prepared the following performance report with the help of the production manager. In a conversation w

> The sales department of P. Gillen Manufacturing Company has forecast sales in March to be 20,000 units. Additional information follows: Finished goods inventory, March 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000 units Finished goods i

> What computations must be made if materials added in a department increase the number of units being processed in that department?

> How would you describe the method used to treat the cost of abnormal processing losses?

> The sales department of S. Miller Manufacturing Company has forecast sales for its single product to be 20,000 units for the month of June, with three-quarters of the sales expected in the East region and one-fourth in the West region. The budgeted selli

> A company’s year-end balance in accounts receivable is $2,000,000. The allowance for uncollectible accounts had a beginning-of-year credit balance of $30,000. An aging of accounts receivable at the end of the year indicates a required allowance of $38,00

> Refer to the situation described in BE 6–8. What amount did Canliss borrow assuming that the first $10,000 payment was due immediately? In BE 6–8 Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual i

> Refer to the situation described in BE 7–9. Answer the two questions assuming the company estimates that future bad debts will equal 10% of the year-end balance in accounts receivable. In BE 7–9 The following information relates to a company’s accounts

> The following information relates to a company’s accounts receivable: accounts receivable balance at the beginning of the year, $300,000; allowance for uncollectible accounts at the beginning of the year, $25,000 (credit balance); credit sales during the

> Refer to the situation described in BE 7–6. Prepare the year-end adjusting journal entries to account for anticipated sales returns under the assumption that all sales are made for cash (no accounts receivable are outstanding) In BE 7–6 During 2018, its

> During 2018, its first year of operations, Hollis Industries recorded sales of $10,600,000 and experienced returns of $720,000. Cost of goods sold totaled $6,360,000 (60% of sales). The company estimates that 8% of all sales will be returned. Prepare the

> Cutler Company has a cash account with a balance of $250,000 with Wright Bank and a cash account with an overdraft of $5,000 at Lowe Bank. What would the current assets section of Cutler’s balance sheet include for “cash” under IFRS? Under U.S. GAAP?

> Assume the same facts as in BE 7–22, but that Einhorn determines credit losses using the CECL model introduced in ASU 2016-13 and required in 2020. How much credit loss should Einhorn recognize? In BE 7–22 Einhorn Industries believes it is not probable

> Shan Enterprises received a bank statement listing its May 31, 2018, bank balance as $47,582. Shan determined that as of May 31 it had cash receipts of $2,500 that were not yet deposited and checks outstanding of $7,224. Calculate Shan’s correct May 31,

> Marin Company’s general ledger indicates a cash balance of $22,340 as of September 30, 2018. Early in October Marin received a bank statement indicating that during September Marin had an NSF check of $1,500 returned to a customer and incurred service ch

> Camden Hardware’s credit sales for the year were $320,000. Accounts receivable at the beginning and end of the year were $50,000 and $70,000, respectively. Calculate the accounts receivable turnover ratio and the average collection period for the year.

> On March 31, Dower Publishing discounted a $30,000 note at a local bank. The note was dated February 28 and required the payment of the principal amount and interest at 6% on May 31. The bank’s discount rate is 8%. How much cash will Dower receive from t

> Canliss Mining Company borrowed money from a local bank. The note the company signed requires five annual installment payments of $10,000 beginning one year from today. The interest rate on the note is 7%. What amount did Canliss borrow?

> Huling Associates plans to transfer $300,000 of accounts receivable to Mitchell Inc. in exchange for cash. Huling has structured the arrangement so that it retains substantially all the risks and rewards of ownership but shifts control over the receivabl

> Logitech Corporation transferred $100,000 of accounts receivable to a local bank. The transfer was made without recourse. The local bank remits 85% of the factored amount to Logitech and retains the remaining 15%. When the bank collects the receivables,

> On April 19, 2018, Millipede Machinery sold a tractor to Thomas Hartwood, accepting a note promising payment of $120,000 in five years. The applicable effective interest rate is 7%. What amount of sales revenue would Millipede recognize on April 19, 2018

> Refer to the situation described in BE 7–11. If credit sales for the year were $8,200,000 and $7,950,000 was collected from credit customers, what was the beginning-of-year balance in accounts receivable? In BE 7–11 A company’s year-end balance in accou

> Explain the typical way companies account for uncollectible accounts receivable (bad debts). When is it permissible to record bad debt expense only at the time when receivables actually prove uncollectible?

> Briefly explain the accounting treatment for sales returns.

> Distinguish between the gross and net methods of accounting for cash discounts.

> Explain the difference between a trade discount and a cash discount.

> Define a compensating balance. How are compensating balances reported in financial statements?