Question: What steps are involved in developing an

> LRF Printing provides printing services to many different corporate clients. Although LRF bids most jobs, some jobs, particularly new ones, are negotiated on a “cost-plus” basis. Costplus means that the buyer is willing to pay the actual cost plus a retu

> Spin Cycle Company uses three activity pools to apply overhead to its products. Each activity has a cost driver used to allocate the overhead costs to the product. The activities and related overhead costs are as follows: product design $40,000; machinin

> Trammell, Inc. operates 20 injection molding machines in the production of tool boxes of four different sizes, named the Apprentice, the Handyman, the Journeyman, and the Professional. Classify each of the following costs as unit-level, batch-level, prod

> At December 31, balances in Manufacturing Overhead are Shimeca Company— debit $1,200, Garcia Company—credit $900. Prepare the adjusting entry for each company at December 31, assuming the adjustment is made to cost of goods sold.

> Preprah Engineering Contractors incurred service salaries and wages of $32,000 ($24,000 direct and $8,000 indirect) on an engineering project. The company applies overhead at a rate of 25% of direct labor. Record the entries to assign service salaries an

> In March, Stinson Company completes Jobs 10 and 11. Job 10 cost $20,000 and Job 11 $30,000. On March 31, Job 10 is sold to the customer for $35,000 in cash. Journalize the entries for the completion of the two jobs and the sale of Job 10.

> During the first quarter, Roland Company incurs the following direct labor costs: January $40,000, February $30,000, and March $50,000. For each month, prepare the entry to assign overhead to production using a predetermined rate of 80% of direct labor c

> Marquis Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are direct labor cost $500,000, direct labor hours 50,000, and machine hours 100,000. Compute the predetermined overhead rate f

> Data pertaining to job cost sheets for Knox Company are given in BE15-3 and BE15-4. Prepare the job cost sheets for each of the three jobs. (Note: You may omit the column for Manufacturing Overhead.) Data given in BE15-3: In January, Knox Company requis

> Factory labor data for Knox Company is given in BE15-2. During January, time tickets show that the factory labor of $6,000 was used as follows: Job 1 $2,200, Job 2 $1,600, Job 3 $1,400, and general factory use $800. Prepare a summary journal entry toreco

> In January, Knox Company requisitions raw materials for production as follows: Job 1 $900, Job 2 $1,400, Job 3 $700, and general factory use $600. Prepare a summary journal entry to record raw materials used.

> You are the management accountant for Williams Company. Your company does custom carpentry work and uses a job order cost system. Williams sends detailed job cost sheets to its customers, along with an invoice. The job cost sheets show the date materials

> During January, its first month of operations, Knox Company accumulated the following manufacturing costs: raw materials $4,000 on account, factory labor $6,000 of which $5,200 relates to factory wages payable and $800 relates to payroll taxes payable, a

> Determine the missing amounts. Unit Selling Unit Variable Contribution Contribution Margin per Unit (a) $300 $330 Price Costs Margin Ratio $180 (c) (f) 1. $250 $500 (e) (b) (d) 2. 3. 30%

> Eye Spy Corporation manufactures and sells three different types of binoculars. They are referred to as Good, Better, and Best binoculars. Grinding and polishing time is limited. More time is required to grind and polish the lenses used in the Better and

> Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below. The company’s total fixed costs to produce the filtration systems are $165,480. (a) Determine the sale

> Queensland Company reports the following operating results for the month of April. Management is considering the following course of action to increase net income: Reduce the selling price by 4%, with no changes to unit variable costs or fixed costs. M

> Presto Company makes radios that sell for $30 each. For the coming year, management expects fixed costs to total $220,000 and variable costs to be $18 per unit. (a) Compute the break-even point in dollars using the contribution margin (CM) ratio. (b) Com

> Flynn Industries has three activity cost pools and two products. It expects to produce 3,000 units of Product BC113 and 1,500 of Product AD908. Having identified its activity cost pools and the cost drivers for each pool, Flynn accumulated the following

> The assembly department has the following production data for the cur Materials are entered at the beginning of the process. The ending work in process units are 70% complete as to conversion costs. Compute the equivalent units of production for (a) m

> Kopa Company manufactures CH-21 through two processes: Mixing and Packaging. In July, the following costs were incurred. Units completed at a cost of $21,000 in the Mixing Department are transferred to the Packaging Department. Units completed at a cos

> In March, Kelly Company had the following unit production costs: materials $10 and conversion costs $8. On March 1, it had zero work in process. During March, Kelly transferred out 22,000 units. As of March 31, 4,000 units that were 40% complete as to co

> Many politicians, scientists, economists, and businesspeople have become concerned about the potential implications of global warming. The largest source of the emissions thought to contribute to global warming is from coal-fired power plants. The cost o

> During the current month, Reyes Corporation completed Job 310 and Job 312. Job 310 cost $60,000 and Job 312 cost $50,000. Job 312 was sold on account for $90,000. Journalize the entries for the completion of the two jobs and the sale of Job 312.

> Milner Company is working on two job orders. The job cost sheets showthe following. Prepare the three summary entries to record the assignment of costs to Work in Process from the data on the job cost sheets. Job 201 Job 202 Direct materials $7,200

> During the current month, Tomlin Company incurs the following manufacturing costs. (a) Purchased raw materials of $16,000 on account. (b) Incurred factory labor of $40,000. Of that amount, $31,000 relates to wages payable and $9,000 relates to payroll ta

> What approach should be used to calculate the breakeven point of a company that has many products?

> Describe the features of a CVP income statement that make it more useful for management decision making than the traditional income statement that is prepared for external users.

> Distinguish between a traditional income statement and a CVP income statement.

> (a) What is the major rationale for the use of variable costing? (b) Discuss why variable costing may not be used for financial reporting purposes.

> How does the replacement of manual labor with automated equipment affect a company’s cost structure? What implications does this have for its operating leverage and break-even point?

> In the long run, will net income be higher or lower under variable costing compared to absorption costing?

> (a) Describe the philosophy and approach of just-in time processing. (b) Identify the major elements of JIT processing.

> Ger Corporation manufactures two products with the following characteristics. If Ger’s machine hours are limited to 2,000 per month, determine which product it should produce. Contribution Margin Machine Hours per Unit $42 $35 Req

> How does a company decide whether to use a job order or a process cost system?

> What is the relevance of the classification of levels of activity to ABC?

> In what ways is the application of ABC to service industries the same as its application to manufacturing companies?

> Matt Litkee is confused about under- and overapplied manufacturing overhead. Define the terms for Matt, and indicate the balance in the manufacturing overhead account applicable to each term.

> Under what conditions is ABC generally the superior overhead costing system?

> How can the agreement of Work in Process Inventory and job cost sheets be verified?

> Peggy Turnbull asks your help in constructing a CVP graph. Explain to Peggy (a) how the break-even point is plotted, and (b) how the level of activity and dollar sales at the break-even point are determined.

> What is the theory of constraints? Provide some examples of possible constraints for a manufacturer.

> Explain the purpose and use of a “materials requisition slip” as used in a job order cost system.

> Adam Antal is confused. He does not understand why rent on his apartment is a fixed cost and rent on a Hertz rental truck is a mixed cost. Explain the difference to Adam.

> Faune Furniture Co. consists of two divisions, Bedroom Division and Dining Room Division. The results of operations for the most recent quarter are: (a) Determine the company’s sales mix. (b) Determine the company’s

> Huegel Hollow Resort has ordered 20 rotomolded kayaks from Current Designs. Each kayak will be formed in the rotomolded oven, cooled, and then the excess plastic trimmed away. Then, the hatches, seat, ropes, and bungees will be attached to the kayak. Dav

> J. P. Alexander claims that the relevant range concept is important only for variable costs. (a) Explain the relevant range concept. (b) Do you agree with J. P.’s claim? Explain.

> John Harbeck is confused about computing physical units. Explain to John how physical units to be accounted for and physical units accounted for are determined.

> Explain the preparation and use of a value-added/ non–value-added activity flowchart in an ABC system.

> (a) What source documents are used in assigning (1) materials and (2) labor to production in a process cost system? (b) What criterion and basis are commonly used in allocating overhead to processes?

> (a) Scott Winter asks your help in understanding the term “activity index.” Explain the meaning and importance of this term for Scott. (b) State the two ways that variable costs may be defined.

> What has happened in recent industrial history to reduce the usefulness of direct labor as the primary basis for allocating overhead to products?

> What type of industry is likely to use a job order cost system? Give some examples.

> (a) Distinguish between the two types of cost accounting systems. (b) Can a company use both types of cost accounting systems?

> (a) Mary Barett is not sure about the difference between cost accounting and a cost accounting system. Explain the difference to Mary. (b) What is an important feature of a cost accounting system?

> Presented on the next page are variable costing income statements for Logan Company and Morgan Company. They are in the same industry, with the same net incomes, but different cost structures. Compute the break-even point in dollars for each company an

> Electricoil is a division of Meier Products Corporation. The division manufactures and sells an electric coil used in a wide variety of applications. During the coming year, it expects to sell 200,000 units for $9 per unit. Mark Barnes is the division ma

> FAB produces fabrics that are used for clothing and other applications. In 2013, the first year of operations, FAB produced 500,000 yards of fabric and sold 400,000 yards. In 2014, the production and sales results were exactly reversed. In each year, sel

> Peaches and Cream Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 16.25% of sales. The income statement for the year ending December 31, 2014, is shown below. The company i

> The following variable costing income statements are available for Lyte Company and Darke Company. Instructions: (a) Compute the break-even point in dollars and the margin of safety ratio for each company. (b) Compute the degree of operating leverage f

> The Eatery is a restaurant in DeKalb, Illinois. It specializes in deluxe sandwiches in a moderate price range. Michael Raye, the manager of The Eatery, has determined that during the last 2 years the sales mix and contribution margin ratio of its offerin

> Keppel Corporation manufactures and sells three different models of exterior doors. Although the doors vary in terms of quality and features, all are good sellers. Keppel is currently operating at full capacity with limited machine time. Sales and produc

> Huber Corporation has collected the following information after its first year of sales. Sales were $1,000,000 on 40,000 units; selling expenses $200,000 (30% variable and 70% fixed); direct materials $327,000; direct labor $190,000; administrative expen

> McCure Corporation had a bad year in 2013, operating at a loss for the first time in its history. The company’s income statement showed the following results from selling 200,000 units of product: net sales $2,400,000; total costs and e

> Mega Electronix carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2014, Mega’s break-even point was $2.4 million. On sales

> Isaac Corporation has collected the following information after its first year of sales. Sales were $1,800,000 on 100,000 units; selling expenses $400,000 (30% variable and 70% fixed); direct materials $456,000; direct labor $250,000; administrative expe

> Production costs chargeable to the Finishing Department in May at Kim Company are materials $8,000, labor $20,000, overhead $18,000, and transferred-in costs $67,000. Equivalent units of production are materials 20,000 and conversion costs 19,000. Kim us

> Alma Ortiz is the advertising manager for CostLess Shoe Store. She is currently working on a major promotional campaign. Her ideas include the installation of a new lighting system and increased display space that will add $18,000 in fixed costs to the $

> Olgivie Company had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 60,000 units of product: sales $1,800,000; total costs and expens

> The Sasoon Barber Shop employs four barbers. One barber, who also serves as the manager, is paid a salary of $3,000 per month. The other barbers are paid $1,500 per month. In addition, each barber is paid a commission of $3 per haircut. Other monthly cos

> Smith and Jones is a law firm that serves both individuals and corporations. A controversy has developed between the partners of the two service lines as to who is contributing the greater amount to the bottom line. The area of contention is the assignme

> Merando Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 600,000 gallon jugs per year of a low-cost, high-volume product called Valley Fresh. Merando also produces and sells roughly 2

> Luxury Furniture designs and builds factory-made, premium, wood armoires for homes. All are of white oak. Its budgeted manufacturing overhead costs for the year 2014 are as follows. Overhead Cost Pools

> VideoPlus, Inc. manufactures two types of DVD players, a deluxe model and a standard model. The deluxe model is a multi-format progressive-scan DVD player with networking capability, Dolby digital, and DTS decoder. The standard model’s

> Swinn Company manufactures bicycles. Materials are added at the beginning of the production process, and conversion costs are incurred uniformly. Production and cost data for the month of May are as follows. Instructions: (a) Calculate the following. (

> Luxman Company has several processing departments. Costs charged to the Assembly Department for October 2014 totaled $1,298,400 as follows. Production records show that 25,000 units were in beginning work in process 40% complete as to conversion cost,

> Borman Corporation manufactures in separate processes refrigerators and freezers for homes. In each process, materials are entered at the beginning and conversion costs are incurred uniformly. Production and cost data for the first process in making two

> Using the data in BE16-10, prepare the cost section of the production cost report for Sanderson Company. Data in BE16-10: Sanderson Company has the following production data for March: no beginning work in process, units started and completed 30,000, an

> Steiner Corporation manufactures water skis through two processes: Molding and Packaging. In the Molding Department, fiberglass is heated and shaped into the form of a ski. In the Packaging Department, the skis are placed in cartons and sent to the finis

> Wilbury Company manufactures a nutrient, Everlife, through two manufacturing processes: Blending and Packaging. All materials are entered at the beginning of each process. On August 1, 2014, inventories consisted of Raw Materials $5,000, Work in Process—

> Holiday Company manufactures basketballs and soccer balls. For both products, materials are added at the beginning of the production process and conversion costs are incurred uniformly. Holiday uses the FIFO method to compute equivalent units. Production

> Venuchi Cleaner Company uses a weighted-average process cost system and manufactures a single product—an all-purpose liquid cleaner. The manufacturing activity for the month of March has just been completed. A partially completed produc

> Bell Company’s fiscal year ends on June 30. The following accounts are found in its job order cost accounting system for the first month of the new fiscal year. Other data: 1. On July 1, two jobs were in process: Job No. 4085 and Job

> Net Play Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct labor hours in Department B, and machine hours in Department

> Robert Perez is a contractor specializing in custom-built jacuzzis. On May 1, 2014, his ledger contains the following data. Raw Materials Inventory ……………

> For the year ended December 31, 2014, the job cost sheets of Dosey Company contained the following data. Other data: 1. Raw materials inventory totaled $20,000 on January 1. During the year, $100,000 of raw materials were purchased on account. 2. Finis

> Pedriani Company uses a job order cost system and applies overhead to production on the basis of direct labor hours. On January 1, 2014, Job No. 25 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct mat

> Dilithium Batteries is a division of Enterprise Corporation. The division manufactures and sells a long-life battery used in a wide variety of applications. During the coming year, it expects to sell 60,000 units for $30 per unit. Nyota Uthura is the div

> Sanderson Company has the following production data for March: no beginning work in process, units started and completed 30,000, and ending work in process 5,000 units that are 100% complete for materials and 40% complete for conversion costs. Sanderson

> Gardner Company produces plastic that is used for injection-molding applications such as gears for small motors. In 2013, the first year of operations, Gardner produced 4,000 tons of plastic and sold 2,500 tons. In 2014, the production and sales results

> Bonita Beauty Corporation manufactures cosmetic products that are sold through a network of sales agents. The agents are paid a commission of 18% of sales. The income statement for the year ending December 31, 2014, is as follows. The company is consid

> The following CVP income statements are available for Viejo Company and Nuevo Company. Instructions: (a) Compute the break-even point in dollars and the margin of safety ratio for each company. (b) Compute the degree of operating leverage for each comp

> The Hillside Inn is a restaurant in Flagstaff, Arizona. It specializes in southwestern style meals in a moderate price range. Phil Weld, the manager of Hillside, has determined that during the last 2 years the sales mix and contribution margin ratio of i

> Tanek Industries manufactures and sells three different models of wet-dry shop vacuum cleaners. Although the shop vacs vary in terms of quality and features, all are good sellers. Tanek is currently operating at full capacity with limited machine time. S

> Lorge Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative expe

> Fredonia Inc. had a bad year in 2013. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 80,000 units of product: net sales $2,000,000; total costs and expe

> Kaiser Industries carries no inventories. Its product is manufactured only when a customer’s order is received. It is then shipped immediately after it is made. For its fiscal year ended October 31, 2014, Kaiser’s break-even point was $1.3 million. On sa

> Mozena Corporation has collected the following information after its first year of sales. Sales were $1,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $511,000; direct labor $290,000; administrative exp

> Dousmann Corp.’s sales slumped badly in 2014. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 500,000 units of product: sales $2,500,00

> Peine Candle Supply makes candles. The sales mix (as a percentage of total dollar sales) of its three product lines is birthday candles 30%, standard tapered candles 50%, and large scented candles 20%. The contribution margin ratio of each candle type is