TUGAS

Managerial Accounting
Dosen Pengampu
Dr. Narumondang Bulan Siregar MM., Ak.,CA

Oleh:

KELOMPOK 4

1. Samuel Silalahi (200503147)

2. Maeldi Perbina Sembiring (200503150)
3. Prudence Hesita Manurung (200503151)
4. Dina Maria Turnip (200503177)

KELAS: AR-E
PROGRAM STUDI S1-AKUNTANSI
FAKULTAS EKONOMI DAN BISNIS
UNIVERSITAS SUMATERA UTARA
2023
1. Case- Cost of Good Manufactured

Hector P. Wastrel, a careless employee, left some combustible materials near an open
flame in Salter Company’s plant. The resulting explosion and fire destroyed the entire plant
and administrative offices. Justin Quick, the company’s controller, and Constance Trueheart,
the operations manager, were able to save only a few bits of information as they escaped
from the roaring blaze.

“What a disaster,” cried Justin. “And the worst part is that we have no records to use
in filing an insurance claim.” “I know,” replied Constance. “I was in the plant when the
explosion occurred, and I managed to grab only this brief summary sheet that contains
information on one or two of our costs. It says that our direct labor cost this year has totaled
$180,000 and that we have purchased $290,000 in raw materials. But I’m afraid that doesn’t
help much; the rest of our records are just ashes.”

“Well, not completely,” said Justin. “I was working on the year-to-date income
statement when the explosion knocked me out of my chair. I instinctively held onto the page I
was working on, and from what I can make out, our sales to date this year have totaled
$1,200,000 and our gross margin rate has been 40% of sales. Also, I can see that our goods
available for sale to customers has totaled $810,000 at cost.”

“Maybe we’re not so bad off after all,” exclaimed Constance. “My sheet says that
prime cost has totaled $410,000 so far this year and that manufacturing overhead is 70% of
conversion cost. Now if we just had some information on our beginning inventories.”

“Hey, look at this,” cried Justin. “It’s a copy of last year’s annual report, and it shows
what our inventories were when this year started. Let’s see, raw materials was $18,000, work
in process was $65,000, and finished goods was $45,000.

“Super,” yelled Constance. “Let’s go to work.”

To file an insurance claim, the company must determine the amount of cost in its
inventories as of the date of the fire. You may assume that all materials used in production
during the year were direct materials.

Required:

Determine the amount of cost in the Raw Materials, Work in Process, and Finished Goods
inventory accounts as of the date of the fire. (Hint: One way to proceed would be to
reconstruct the various schedules and statements that would have been affected by the
company’s inventory accounts during the period.)

Answer:

The following cost item are needed before a schedule of cost of goods manufactured can be
prepared:

Materials used in production:

Prime cost $410,000
Less direct labor cost $180,000
Direct materials cost $230,000

Manufacturing overhead cost:

Direct labor cost $ 180,000

= =$ 600,000 total conversion cost
Percentage of conversion cost 30 %

*100% - 70% = 30%

Conversion cost $600,000

Less direct labor cost $180,000
Manufacturing overhead cost $420,000
Cost of goods manufactured:
Goods available for sale $810,000
Less finished goods inventory, beginning 45,000
Cost of good manufactured $765,000

The easiest way to proceed from this poin tis to place all known amounts in a partially
completed schedule of cost of goods manufactured and a partially completed income
statement. Then fill in the missing amounts by analysis of the available data.

Direct materials:

Raw materials inventory, beginning $ 18,000

Add: Purchases of raw materials 290,000
Raw materials available for use 308,000
Deduct: Raw materials inventory, ending A
Raw materials used in production (see 230,000
above)
Direct labor cost 180,000
Manufacturing overhead cost (see above) 420,000
Total manufacturing costs 830,000
Add: Work in process inventory, beginning 65,000
Total Work in process 895,000
Deduct: Work in proocess inventory, ending B
Cost of goods manufactured (see above) $765,000
Therefore, “A” (Raw materials inventory, ending) would be $78,000; and “B” (Work in
process inventory, ending) would be $130,000.

Sales $1,200,000
Less cost of goods sold:
Finished goods inventory, beginning $ 45,000
Add: Cost of goods manufactured (see above) . 765,000
Goods available for sale 810,000
Deduct: Finished goods inventory, ending C 720,000
Gross margin $ 480,000

* $1,200,000 × (100% – 40% ) = $720,000. Therefore, “C” (Finished goods inventory,

ending) would be $90,000. The procedure outlined above is just one way in which the
solution to the case can be approached. Some may wish to start at the bottom of the income
statement (with gross margin) and work upwards from that point. Also, the solution can be
obtained by use of T-accounts.

2. Case-Analyzing a Quality Cost Report

Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the
company’s market share has been eroded by stiff competition from overseas. Price and
product quality are the two key areas in which companies compete in this market.
A year ago, the company’s cell phones had been ranked low in product quality in a
consumer survey. Shocked by this result, Jorge Gomez, Mercury’s president, initiated a crash
effort to improve product quality. Gomez set up a task force to implement a formal quality
improvement program. Included on this task force were representatives from the Engineering,
Marketing, Customer Service, Production, and Accounting departments. The broad
representation was needed because Gomez believed that this was a companywide program
and that all employees should share the responsibility for its success.
After the first meeting of the task force, Holly Elsoe, manager of the Marketing
Department, asked John Tran, production manager, what he thought of the proposed program.
Tran replied, “I have reservations. Quality is too abstract to be attaching costs to it and then
to be holding you and me responsible for cost improvements. I like to work with goals that I
can see and count! I’m nervous about having my annual bonus based on a decrease in quality
costs; there are too many variables that we have no control over.”
Mercury’s quality improvement program has now been in operation for one year. The
company’s most recent quality cost report is shown below.
Mercury, Inc.
Quality cost Repost
(in thousands)
Last
Year This Year
Prevention costs:
Machine Maintenance $ 70 $ 120
Training suppliers 0 10
Quality Circles 0 20
Total prevention costs 70 150

Appraisal costs:
Incoming inspection $ 20 $ 40
Final testing 80 90
Total appraisal costs: 100 130

Internal failure costs:

Warranty repairs 90 30
Customer returns 320 80
Total external failure costs 410 110
Total quality cost $ 670 $ 590
Total Production cost $ 4,200 $ 4,800

As they were reviewing the report, Elsoe asked Tran what he now thought of the quality
improvement program. Tran replied. “I’m relieved that the new quality improvement
program
hasn’t hurt our bonuses, but the program has increased the workload in the Production
Department. It is true that customer returns are way down, but the cell phones that were
returned by customers to retail outlets were rarely sent back to us for rework.”
Required:

1. Expand the company’s quality cost report by showing the costs in both years as
percentages of both total production cost and total quality cost. Carry all computations to
one decimal place. By analyzing the report, determine if Mercury, Inc.’s quality
improvement program has been successful. List specific evidence to support your answer.
2. Jorge Gomez believed that the quality improvement program was essential and that
Mercury,.Inc., could no longer afford to ignore the importance of product quality. Discuss
how Mercury, Inc., could measure the cost of not implementing the quality improvement
program.
Answer:
a. An analysis of the company's quality cost report is presented below:

Last Year This Year

Amount Percent Amount Percent
Prevention costs:

Machine maintenance $ 70 1.7 10.4 $ 120 2.5 20.3

Training suppliers. 0 - - 10 0.2 1.7

Quality circles 0 - - 20 0.4 3.4

Total prevention costs. 70 1.7 10.4 150 3.1 25.4

Appraisal costs:

Incoming inspection 20 0.5 3.0 40 0.8 6.8

Final testing 80 1.9 11.9 90 1.9 15.3

Total appraisal costs 100 2.4 14.9 130 2.7 22.1

Internal failure costs:

Rework 50 1.2 7.5 130 2.7 22.0

Scarp 40 1.0 6.0 70 1.5 11.9

Total internal failure costs 90 2.2 13.5 200 4.2 33.9

External failure costs:

Warranty repairs 90 2.1 13.4 30 0.6 5.1

Customer returns 320 7.6 47.8 80 1.7 13.6

Total external failure
costs 410 9.7 61.2 110 2.3 18.7

Total quality cost $ 670 16.0 100 $ 590 12.3 100

Total production cost. $4,200 $ 4,800

*Percentage figures may not add down due to rounding.

b. From the above analysis it would appear that Mercury, Inc.'s program has been
successful.
1. Total quality costs have declined from 16.0% to 12.3% as a percentage of total production
cost. In dollar amount, total quality costs went from $670,000 last year to $590,000 this
year.
2. External failure costs, those costs signaling customer dissatisfaction, have declined from
9.8% of total production costs to 2.3%. These declines in warranty repairs and customer
returns should result in increased sales in the future.
3. Appraisal costs have increased from 2.4% to 2.7% of total production cost. Internal
failure costs have increased from 2.1% to 4.2% of production costs. This increase has
probably resulted from the increase in appraisal activities. Defective units are now being
spotted more frequently before they are shipped to customers.
4. Prevention costs have increased from 1.7% of total production cost to 3.1% and from
10.4% of total quality costs to 25.4%. The $80,000 increase is more than offset by
decreases in other quality costs.
So, To measure the cost of not implementing the quality program, management could
assume that sales and market share would continue to decline and then calculate the lost
profit. Or, management might assume that the company will have to cut its prices to hang
on to its market share. The impact on profits of lowering prices could be estimated.

3. Case-Economic Characteristics of Costs; Closing a Department;

Ethics CompTech Company Limited manufactures printers for use with home
computer systems. The firm currently manufactures both the electronic components for its
 printers and the plastic cases in which the devices are enclosed. Jim Cassanitti, the
production manager, recently received a proposal from Universal Plastics Corporation to
manufacture the cases for CompTech's printers. If the cases are purchased outside,
CompTech will be able to close down its Printer Case Department. To help decide
whether to accept the bid from Universal Plastics Corporation, Cassanitti asked
CompTech's controller to prepare an analysis of the costs that would be saved if the
Printer Case Department was closed. Included in the controller's list of annual cost
savings were the following items:

Building rental (The Printer Case Department occupies one-sixth of

The factory building, which CompTech rents for $177,000 per year.)………….. $29,500
Salary of the Printer Case Department supervisor……………………………….. $50,000

In a lunchtime conversation with the controller, Cassanitti learned that CompTech

was currently renting space in a warehouse for $39,000. The space is used to store
completed printers. If the Printer Case Department was discontinued, the entire storage
operation could be moved into the factory building and occupy the space vacated by the
closed department. Cassanitti also learned that the supervisor of the Printer Case
Department would be retained by CompTech even if the department was closed. The
supervisor would be assigned the job of managing the assembly department, whose
supervisor recently gave notice of his retirement. All of CompTech's department
supervisors earn the same salary.
Required:

1. You have been hired as a consultant by Cassanitti to advise him in making his
decision.
Write a memo to Cassanitti commenting on the costs of space and supervisory salaries
included in the controller's cost analysis. Explain in your memo about the “real” costs
of the space occupied by the Printer Case Department and the supervisor's salary.
What types of costs are these?

2. Independently of your response to requirement (1), suppose that CompTech's

controller had been approached by his friend Jack McGinty, the assistant supervisor
 of the Printer Case Department. McGinty is worried that he will be laid off if the
Printer Case Department is closed down. McGinty has asked his friend to understate
the cost savings from closing the department in order to slant the production
manager's decision toward keeping the department in operation. Comment on the
controller's ethical responsibilities. And what the sunk cost in this decisional
situation?

Answer:
1. MEMORANDUM
Date : Today
To : James Cassanitti
From : I. M. Student
Subject: Costs related to Printer Case Department

The $29,500 building rental cost allocated to the Printer Case Department is part of
larger rental costs for the entire building. Even if the Printer Case Department is
closed down, CompTech still will occupy the entire building. Therefore, the entire
rental cost, including the $29,500 portion allocated to the Printer Case Department,
will be incurred whether or not the department closes.

The real cost of the space occupied by the Printer Case Department is the $39,000 the
company is paying to rent warehouse space. This cost would be avoided if the Printer
Case Department were closed, since the storage operation could be moved into the
company’s main building. The $39,000 rental cost is the opportunity cost of using
space in the main building for the Printer Case Department.

The supervisor of the Printer Case Department will be retained by the company
regardless of the decision about the Printer Case Department. However, if the Printer
Case Department is kept in operation the company will have to hire a new supervisor
for the Assembly Department. The salary of that new supervisor is a relevant cost of
continuing to operate the Printer Case Department.
Another way of looking at the situation is to realize that with the Printer Case
Department in operation, the company will need two supervisors: the current Printer
Case Department supervisor and a new supervisor for the Assembly Department.
 Alternatively, if the Printer Case Department is closed, only the current Printer Case
Department supervisor will be needed. He or she will move to the Assembly
Department. The difference, then, between the two alternatives is the cost of
compensation for the new Assembly Department supervisor if the Printer Case
Department is not closed.

2. The controller has an ethical obligation to state accurately the projected cost savings
from closing the Printer Case Department. The production manager and other decision
makers have a right to know the financial implications of closing the department.
Several of the ethical standards for management accountants apply, including the
following:
Competence:

 Maintain an appropriate level of professional expertise by continually developing

knowledge and skills.
 Perform professional duties in accordance with relevant laws, regulations, and
technical standards.
 Provide decision support information and recommendations that are accurate, clear,
concise, and timely.
 Recognize and communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an activity.

Credibility:

 Communicate information fairly and objectively.

 Disclose all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports, analyses, or recommendations.
 Disclose delays or deficiencies in information, timeliness, processing, or internal
controls in conformance with organization policy and/or applicable law.

* In this case, Comptech rented the building for $39,000. Where the space is only
used to store printers that have been damaged. So, if the department responsible for
this printer is terminated, then the department is closed. however, the department
responsible for this printer will still be maintained by comptech even though it will be
 closed. and caused the company to incur a $39,000 sunk cost because comptech made
a non-refundable transaction in the past.

1. Case-Cost of Good Manufactured

The Dorilane Company specializes in producing a set of wood patio furniture consisting of a
table and four chairs. The set enjoys great popularity, and the company has ample orders to
keep production going at its full capacity of 2,000 sets per year. Annual cost data at full
capacity follow:

Factory labor, direct $118,000

Advertising $50,000
Factory supervision $40,000
Property taxes, factory building $3,500
Sales commissions $80,000
Insurance, factory $2,500
Depreciation, office equipment $4,000
Lease cost, factory equipment $12,000
Indirect materials, factory $6,000
Depreciation, factory building $10,000
General office supplies (billing) $3,000
General office salaries $60,000
Direct materials used (wood, bolts, etc.) $94,000
Utilities, factory . $20,000
Required:

1. Prepare an answer sheet with the column headings shown below. Enter each cost item on
your answer sheet, placing the dollar amount under the appropriate headings. As examples,
this has been done already for the first two items in the list above. Note that each cost item is
classified in two ways: first, as variable or fixed with respect to the number of units produced
and sold; and second, as a selling and administrative cost or a product cost. (If the item is a
product cost, it should also be classified as either direct or indirect as shown.)

Cost Item Cost Behavior Selling or Product Cost

Variable Fixed Administrative Direct Indirect
 Cost
Factory labor, direct $118,000 $118,000
Advertising $50,000 $50,000
*To units product.

2. Total the dollar amounts in each of the columns in (1) above. Compute the average product
cost of one patio set.

3. Assume that production drops to only 1,000 sets annually. Would you expect the average
product cost of one set to increase, decrease, or remain unchanged? Explain. No
computations are necessary.

4. Refer to the original data. The president’s brother-in-law has considered making himself a
patio set and has priced the necessary materials at a building supply store. The brother-in-law
has asked the president if he could purchase a patio set from the Dorilane Company “at cost,”
and the president agreed to let him do so. a. Would you expect any disagreement between the
two men over the price the brother-inlaw should pay? Explain. What price does the president
probably have in mind? The brother-in-law? b. Since the company is operating at full
capacity, what cost term used in the chapter might be justification for the president to charge
the full, regular price to the brother-in-law and still be selling “at cost”?

Answer:

1.

Cost Item Cost Behavior Selling or Product Cost

Variable Fixed Administrative Direct Indirect
Cost
Factory labor, direct $118,000 $118,00
0
Advertising $50,000 $50,000
Factory supervision 40,000 $40,000
Property taxes, factory 3,500 3,500
building
Sales commissions 80,000 80,000
Insurance, factory 2,500 2,500
Depreciation, office 4,000 4,000
equipment
Lease cost, factory 12,000 12,000
equipment
Indirect materials, factory 6,000 6,000
Depreciation, factory 10,000 10,000
building
General office supplies 3,000 3,000
General office salaries 60,000 60,000
Direct materials used 94,000 94,000
Utilities, factory 20,000 10,000
Total costs $321,000 $182,000 $197,000 $212,00 $94,000
0

2.

Direct $212,000
Indirect 94,000
Total $306,000
$306,000 ÷ 2,000 sets = $153 per set

3. The average product cost per set would increase. This is because the fixed costs would
be spread over fewer units, causing the average cost per unit to rise.
4. a. Yes, the president may expect a minimum price of $153, which is the average cost to
manufacture one set. He might expect a price even higher than this to cover a portion of
the administrative costs as well. The brother-in-law probably is thinking of cost as
including only direct materials, or, at most, direct materials and direct labor. Direct
materials alone would be only $47 per set, and direct materials and direct labor would
be only $106.
a. The term is opportunity cost. The full, regular price of a set might be appropriate here,
since the company is operating at full capacity, and this is the amount that must be given
up (benefit forgone) to sell a set to the brother-in-law.
2. Lafayette Products Company purchased a hydraulic hoist for $26,000. The hoist can be
used in operations for five years and is not expected to have any residual salvage value.
Shortly after making the purchase, the management of the company recognizes that the
investment should not have been made. The hoist cannot yield the operating advantages
originally contemplated but can probably yield cost savings of $14,000 over the five
years. However, the company is committed to the purchase and cannot avoid the $26,000
cost.
Required :
from the case above try to explain The company is considering whether to use a hoist or
sell it and what kind of costs are incurred?
Answer:

Alternative No. 1 Alternative No. 2

Use Sell

Saving in cost over 5 years by using the hoist $14,000

Proceeds from immediate sale of the hoist $18,000
Less: Cost of the hoist:
Depreciation over 5 years 26,000
Cost of the hoist 26,000
Net loss over 5 years ($12,000)
Net loss on the sale ($ 8,000)

The relevant amounts for decision making are the $14,000 in cost saving over five
years as compared with the $18,000 that can be received from the sale of the property. The
$26,000 invested in the property is not relevant; it is the same in both cases. Lafayette
Products Company should sell the property for $18,000. The decision was obvious in this
situation. Ordinarily future dollar amounts should be reduced to present values when a
comparison is to be made.

In the case above, the Lafayette Products Company purchased a hydraulic hoist for $26,000.
however, the company felt many of these transactions should not have taken place. where,
these costs are costs that cannot be avoided because they have made transactions in the past.
So, Lafayette Products Company has a sunk cost of $26,000.