What types of companies are likely to use process costing? Give three examples.
> Suppose you have decided to start a small business selling snacks from vending machines. You have secured a location for one candy vending machine in a local bookstore. Rental for the space will cost $200 per month. Vending machines can be purchased at w
> Define activity-based management and explain how it is related to activity-based costing.
> Companies must make many decisions regarding day-to-day business activities. For each of the following decision-making situations, discuss its impact on a company’s contribution margin, break-even point, margin of safety, and degree of operating leverage
> Explain the difference between the activity-rate method and the activity-proportion method of ABC.
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find a product that you have purchased in the last year, such as a toothbrush, ball poi
> Consider a company that offers drivers’ education and defensive driving courses. Give an example of each of the Consider a company that offers drivers’ education and defensive driving courses. Give an example of each of the following activities: customer
> Refer to E4–12. 1. Calculate the overhead assigned to the leather case line using the traditional costing system based on direct labor hours. 2. Calculate the overhead assigned to the leather case line using ABC. (Round activity rates o
> Consider a construction company that builds semicustom homes. Give an example of each of the following activities: facility level, product level, batch level, and unit level.
> Ink Spot Inc. is a new business located in upstate New York. It prints promotional flyers for local businesses and distributes them at public places or area events. The flyers are either placed on the windshield of cars in parking lots or distributed by
> What is the difference between a volume-based cost driver and a non-volume-based cost driver?
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find a product that interests you and answer the following questions: ∙ What product di
> How is the number of physical units reconciled to prepare a production report?
> Sustainability accounting should include measures of economic, environmental and social impact. Consider the following metrics which were obtained from Toyota’s 2017 corporate social responsibility (CSR) report and Sustainability websit
> What two methods can be used to prepare a process costing production report? What is the key difference between them?
> Restaurants such as Subway generally offer a limited number of food categories (subs, salads, wraps, etc.) that are similarly priced. On the other hand, a restaurant such as Applebee’s will have a broader menu in which each entrée is individually priced.
> What is the difference between conversion cost and manufacturing overhead?
> Assume you recently accepted a job with a company that designs and builds helicopters for commercial and military use. The company has numerous contracts with the U.S. military that require the use of cost-plus pricing. In other words, the contracted pri
> Bunker makes two types of briefcases, fabric and leather. The company is currently using a traditional costing system with labor hours as the cost driver but is considering switching to an activity-based costing system. In preparation for the possible sw
> Review recent issues of business publications (e.g., Bloomberg Businessweek, The Wall Street Journal) for information about companies that have implemented activity-based costing. Choose one company to research in detail. Required: Answer the following q
> Why is a production report important to a company?
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Search for a product that provides a form of transportation, such as an automobile, ATV
> What are the five steps in preparing a weighted-average production report?
> Overnight package delivery is a multimillion-dollar industry that has grown steadily since it began. The four largest package carriers are the U.S. Postal Service (USPS), Federal Express (FedEx), United Parcel Service (UPS), and DHL. Suppose you have a d
> Explain the flow of costs in a process costing system, including the type of accounts used and the respective financial statement on which the cost appears.
> Consider the many different products a person might use or consume in a typical day from toothpaste to a slice of pizza. Required: Choose three items that you use regularly and whose manufacturer you believe is likely to use process costing. Investigate
> Explain the differences between Raw Materials Inventory, Work in Process Inventory, and Finished Goods Inventory accounts.
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find a product or service for which process costing would be appropriate, such as tooth
> Briefly explain the underlying logic of a process costing system and its assignment of costs to products.
> Refer to your solutions obtained in E4–9 and E4–10. Required: 1. Discuss the costs and benefits to Schell of moving from a traditional costing system to an ABC system. 2. Compare the results of each potential tradition
> Sampson Company uses a job order cost system with overhead applied to products based on direct labor hours. Based on previous history, the company estimated its total overhead for the coming year (2018) to be $720,000 and its total direct labor hours to
> What triggers the cost of manufacturing to be transferred from the balance sheet to the income statement?
> Assume you are going to become an entrepreneur and start your own business. Think about your talents and interests and come up with an idea for a small business venture that provides a unique product or service to local customers. You can select any busi
> What does a credit to the Work in Process Inventory account represent?
> When are the weighted-average and FIFO methods likely to arrive at different estimates of product cost?
> Go to www.YouTube.com and search for How It’s Made, a television show produced by the Discovery Channel that shows how thousands of products and services are created. Find a product or service for which job order costing would be appropriate, such as an
> What are the steps in preparing a FIFO production report? Are they different from the steps to prepare a weighted-average production report?
> The following example is adapted from a real-life case study developed by ENGIE Insight, a technology-enabled energy consulting company that helps companies identify opportunities to reduce energy consumption/spending and manage its energy resources.
> Is the weighted-average method or FIFO method usually more accurate? Why?
> How do the weighted-average and the FIFO methods treat beginning inventory?
> Suppose that Schell has conducted further research into its overhead and potential cost drivers. As a result, the company has compiled the following detailed information, breaking total overhead into three cost pools: Required: 1. Calculate the activity
> How can a unit be 100 percent complete with respect to materials but only partially complete in terms of conversion effort?
> Why must a company calculate equivalent units when using process costing?
> Briefly describe the differences between job order and process costing. Give an example of a type of company that would use each one.
> The job cost sheet serves as a subsidiary ledger to the Work in Process Inventory account. Explain what this means and how you would verify this.
> What is the purpose of a job cost sheet? What information should it contain?
> What are the three major types of manufacturing costs that are accounted for in a job order cost system? Describe and give an example of each type of cost for an auto repair shop that uses job order costing.
> Many companies use a modified costing system that blends certain elements of process costing and job order costing. Can you think of a company that makes products or provides services that have certain similarities (similar to process costing) but also a
> 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
> 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
> Explain the difference between service companies, merchandising companies, and manufacturing companies.
> 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:
