Question: What steps are required in constructing a

> Milden Company has an exclusive franchise to purchase a product from the manufacturer and distribute it on the retail level. As an aid in planning, the company has decided to start using a contribution format income statement. To have data to prepare suc

> Refer to the data for Archer Company in Exercise 5–6. Data from Exercise 5–6. Required: 1. Using the least-squares regression method, estimate a cost formula for shipping expense. 2. If you also completed Exercise 5&a

> George Caloz & Frères, located in Grenchen, Switzerland, makes prestige high-end custom watches in small lots. One of the company’s products, a platinum diving watch, goes through an etching process. The company has obse

> Bargain Rental Car offers rental cars in an off-airport location near a major tourist destination in California. Management would like to better understand the behaviour of the company’s costs. One of those costs is the cost of washing

> Hokuriku-Seika Co., Ltd., of Yokohama, Japan, is a subcontractor to local manufacturing companies. The company specializes in precision metal cutting using focused high-pressure water jets and high-energy lasers. The company has a traditional job-order c

> In what ways are job-order and process costing similar?

> Weston Products manufactures an industrial cleaning compound that goes through three processing departments—Grinding, Mixing, and Cooking. All raw materials are introduced at the start of work in the Grinding Department. The Work in Pro

> The Lakeshore Hotel’s guest-days of occupancy and custodial supplies expense over the last seven months were: Guest-days is a measure of the overall activity at the hotel. For example, a guest who stays at the hotel for three days is c

> Miller Company’s most recent contribution format income statement is shown below: Required: Prepare a new contribution format income statement under each of the following conditions (consider each case independently): 1. The number of

> Builder Products, Inc., manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May: The company uses the weighted-average method. Required:

> Sunspot Beverages, Ltd., of Fiji makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then bottled and packed for shipping in the Bottling Depa

> Lubricants, Inc., produces a special kind of grease that is widely used by race car drivers. The grease is produced in two processing departments: Refining and Blending. Raw materials are introduced at various points in the Refining Department. The follo

> Data concerning a recent period’s activity in the Prep Department, the fi rst processing department in a company that uses process costing, appear below: A total of 20,100 units were completed and transferred to the next processing dep

> Superior Micro Products uses the weighted-average method in its process costing system. Data for the Assembly Department for May appear below: Required: 1. Compute the cost per equivalent unit for materials, for labour, and for overhead. 2. Compute the

> Clonex Labs, Inc., uses a process costing system. The following data are available for one department for October: The department started 175,000 units into production during the month and transferred 190,000 completed units to the next department. Requ

> Quality Brick Company produces bricks in two processing departments—Molding and Firing. Information relating to the company’s operations in March follows: a. Raw materials were issued for use in production: Molding Department, $23,000; and Firing Departm

> Alaskan Fisheries, Inc., processes salmon for various distributors. Two departments are involved— Cleaning and Packing. Data relating to pounds of salmon processed in the Cleaning Department during July are presented below: A total of

> Superior Micro Products uses the weighted-average method in its process costing system. During January, the Delta Assembly Department completed its processing of 25,000 units and transferred them to the next department. The cost of beginning inventory an

> Pittman Company is a small but growing manufacturer of telecommunications equipment. The company has no sales force of its own; rather, it relies completely on independent sales agents to market its products. These agents are paid a commission of 15% of

> Harris Company manufactures and sells a single product. A partially completed schedule of the company’s total and per unit costs over the relevant range of 30,000 to 50,000 units produced and sold annually is given below: Required: 1.

> Roberts Corporation uses a process cost system. The records for the month of May show the following information: Required Prepare a cost of production summary for each department. Production Report Cutting Grinding Units in process, May 1 5,000 10,

> Digital Software, Inc., has two product lines. The income statement for the year ended December 31 shows the following: The products, Num 1 and Num 2, are sold in two territories, North and South, as follows: The common fixed expenses are traceable to

> Define differential analysis, differential revenue, differential cost, and differential income.

> Limerick Enterprises, Inc., is considering building a manufacturing plant in Dublin. Predicting sales of 100,000 units, Limerick estimates the following expenses: An Irish firm that specializes in marketing will be engaged to sell the manufactured produ

> 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

> 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 . . . . . . . . . . .

> The normal capacity of a manufacturing plant is 5,000 units per month. Fixed overhead at this volume is $2,500, and variable overhead is $7,500. Additional data follow: Month 1 Month 2 Actual production (units) . . . . . . . . . . . . . . . . .

> 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?