Professional Documents
Culture Documents
a. Laboratory Managcr: An HMO approachcel rnc reccntly:rnd offered us its enrirc rangc of ,(Aai^t
iiitxrd tests. ii pror,'ideci :r pricc list revcaling tile rnonnt it is u.illing to pay fbr each test. In
many cases) the priccs are belos'u,hat l'e rrolmallv charge. I nced to knotr the costs of the
inciivi<.lii'al tests i(-) asscss the fbasibiiiry oi accepdng irs ofr-er lnci pcrhaps suggcst somc pncc
adjustrlents ()n s()nre of the rcsts.
b. OperatingManager: This report indicares that w'e have .30 perccnt morc defects than rlrigi
nallv targctcd. An investigation into thc c:rusc has revealcd the prcblcm. We u,ere usrJrg a
lowcr -qr.rtrlitv nratcrial than expectcd. rncl thc 'vvaste has been lrigher than normal. Bv slr,itch-
ing to tlre clualiw level originally spccificcl, \\re cau reduce the dcflcts ro the planned lcvel.
c' Divisional Manager: Our markct sharc has incrcascd bccausc of higher-quaiiry prcrclucts.
(lurrcnt projcctictns indicatc tirat u'e shoulci scii 25 percent morc units th.lp iirst
vear- I rvalt
a projcction of the effcct that this increase in salcs will havc on profits, I also lr.ant to knou'
ouf c.iilccicLl
- -- - J I
casi:r receipts rnd cash expenditr-rres on; month-bJ,-rnor.rth Llasis. I harrc a fecJ_
ing that some short-term borro'uving n1a\: be ncccssary.
d. Plant Manager: Foreign con.lpetit(nr arc prociltcing gocrrJs -u..ith lou'er costs and deli.,-ering
them more rapidly thatr u'e can to clr.stomers in our markets. need to decrcase the cvcle
rimc end incrcasc the efEcie nc\i of our nranufhcturiLrg process. Tlrcrc rrc nvcr proposals that
should help us irccomplish these goals, both of r,r,l.ricl-r involve investing in comprite r-aidct{
uatlufltctttring. I neecl to ktros' the ftltr.ire cash flows associated vl.ith eaclr svstern and rhc
ciicct cach svsrcm has on unit costs and cvcle dme.
e. Manager: At the last board rnecting, rvc established an objectivc of earning a 25 perccrlt
rciurn c)R saies. i nced to know how manv rrnirs oiour prociuct u,c need ro sell to meet this
obicctive. Once I have dre estirnatcd sales in units. rve nced to outline a promotional canr-
paigrr that will take tts 'nvhcre wr: urant to bc. Hou.ever, in crder tc c()rxpute the targc'te<J sales
itr units, I necd fo knorv thc ex1-rcctccl unit price antl a lot ofcost infbrmation.
f
' Manager: Perhaps the Harrison Medical Cliuic shoulel r:ot crffer a firll range of mcdical sen,
ices. Some scn'ices seem to be having a difficult time sh ing ar,y kind of profit. I am partic-
ularlv conr,erncd about the mental health scnice. It has not shou,n a prolit since the clinic
opcncd. I ivant to i<norl'*'hat costs cen be avoided if I drop the senicc. I also r.va1t some
lrsscssment of the impact on the other scn-ices u'c offbr. Sonte of our patients rnay choose this
elinic be cause rve r a fuii ranqe of sen'iccs.
Requi .
Select thc managerial accounting objcctivels) that are applicable for each scenario: planning, con
trolling (incl rrding pertbrmance evaluation I, or ciecisio n rlakin g.
Exercise l-12
Difforences bfi,veen MonogeriolAccounting ond FinonciolAccounting ORJECT'IVH
|enna Suarez, thc controller filr Arber-r Oompan-t', has faccd the fbllou'ing situatjons in rhe past
trvo rvceks:
a. Ben Hcirld, iread of production, tvondercd s,hether it would Lrc more cost ellbctive to buv
Parts Paftiilllv asse mbled or to buv individual parts and assemble them at the ArLren tbcton,.
h. 'l'he
iry('5iclc;ii of Art'rcn rL'iriirlded lcrrna that the sr<rckhoiticrs'mcctirrg u.ls comil€ up, ilrrti
hc neeclecl her to preP.lre a Pou'erllointx prescnraticln sh6qing the incomc staterirent a'd
balance shect illf{}rmation f,:r last vear.
c' Fillcn |ohnson, \'ice. prcsicler.rt of ialcs, has clccidecl to expand the sales offices
for nerr vcar.
She sent Ienna the i[f<rrmation on next vear's rent ancl <lcpreciarion
intbrmarion tilr burjset-
tng pU4)oscs
d' ]cnna's assistant' I'Iikc. received the infbrmation frorn Ellen on deprq:eiadon and addcd
it r<r
rucks had incorrcctly assigned to product cost (thr()ugh overhead). Accordingl,v, the
h charee u'as reallocatcd on the income statement.
Nlatc e cosr terms n'ith rhe settings. Mcrrc than one cosi classificarion ma-v be associated rvith
6etdng; hou,.cver, select the sctting that'seems to fit thc item best. When y-ou arc done , each
term -will hre used iust once.
ReSlired:
I. Prepare a staie me nt of cost of goc'ds matrufacfured.
2. Prepare a statement of cost of g<xlds sold.
fllLrEcrr o o Problem 2-48 Income Stqlement, Cost of Services Provided, Service Attributes
Berry Company is en architectural firm Iocated in f)etroit, Michigan. Thc compan), 'rl'orks with
small and medium-size construction businesses t() prepare building plans according to the client's
contract. The fbllou'ing riata are provided tbr the preuous veir;
Number of designs completed ond Purchoses, di rect moteriols $40,000
sold 7OO Direct lobor 800,000
Beginning inveniory of direct lr4onufocturi ng overheod r00,000
moieriols $ 20,000 Administrofive expense 150,000
Eeginning inventory of designs in Selling expense 60,000
Process 60,000 Beginning inventory of finished
Ending inventory of direct moleriols I0,000 designs 300,000
Ending invenlory o[ designs in Ending invenfory of finished
'r00,000 designs 280.000
orocess
Required:
l. Calculate the c.ost of goods manLrtictured.
2. Calculate rhe cost of goods sold.
3' Assume that the average fce fur a dcsign is 52,I00. Prepare an ir:c<>rne sratemelr
tbr Ben1.
4. Concepfuol Connecfion: Rcflr to thc ci>st of gocrds sold
lcalculated in Re quiremenr 2). What is
the dominant costf Brie fly explain rvhy this cost is the clominanr one for Bern,.
| : \t
Ciro 3 Cost Behqvior e5
Required:
1. Assume that the cost d r is F of-opening shoris. I)erelop rl-re cosr fbrmuia ibr the faee z
gallery's costs for a year.
2. LTsing rhc lope <1 ir'L Pequireme iit )., rvhat is the total cost for Ben in a \,ear witu'r
I With 14 opening shorvs)
Luisa Crimini has becn <lprerating a beauty shop in a college town fbr the past l0 t'ears.
Recently. Luisa rcnted space ncxt to her shop and opened a tanning salon. She anticipated
that the costs tlrr the tanning sen'ice would primarily be fixed but found that tanning salon
cclsls incrcasecl u,itir the number of appointments. Costs fcrr this scrvice ovcr the past eight
lxonths are as fbllows:
ftioftth Tonning ApPointmqrts Tod Cost
Jonuory 7@ $I,754
Februory 2,000 , 1^6
Morch 3,500 2,79O
April 2,500 2,400
Moy 1,500 i,790
June 2,300 2,275
July 2,150 2,200
Augusl 3,O00 2,640
Exercise 3-30
High-l,,ow Method OBJECT
Refcr to the itrformation for Luisa Crimirri abovc.
Required:
l. Which month represen$ the high point? The low'pointf
per mo
3. Using yotrr answ'crs to Rcquirernent 2, u,rite thc cosi for-rrrula fbr tarrning set-r-ices.
4. Clalculatc the rotal predicted cost of tamrilg sen'ices for September for 2,500 appoinrmer-rts
using the formula fbund in Requirement 3, Of that toial cost, how niiich is the iotal fixed
cost for Septernberf Hou. much is the total predicted variablc cosr fbr Scptcmbcri
u,ise to cclnsider w.hen using the high-low me *rod to estimarc the costs of her taruring salon.
OBJECTI
Required:
Itis and number of tanning appointmeuts for the horizontal. Based on an examination of the
scattergraph, does there appear to be a linear relationship be en the cost of tanning sen'iccs
and number of appointments)
Exercise 3-32 Mefiod of qres OBJIJCI]IVE
$20
Soles l2
Totol vorioble cost
$-E
Contribuiion morgin
Totol fixed cost
Operoting income
2. H many uru$ m
Eorn Torgel
OBJECTIVE O G'
Operoting Income Th
in the snow: basic sled and aerosled'
Basu ComP follorvs:
segmented by product line'
^rniected in
Chcpier 5 JobOrder Costing
ly, overhead is applied on rhe L-rasis of chine hours using a plantwide rate. Ho$/-
, the controllcr, has been wondering ivhether it might be wonhwhile to use depan-
nrcntal ad rates. She has analyzecl dre overhead costs and drivers for the various PA6E I
dcpar-tnrents
rnac e hqlurs Assembly should base its ovcrhead ratc on dircct labor hours
Ianinc has L-ren d ro prepare bids for tw'o jobs wirh the following infbrmation;
.fo'b I Job 2
Direcl Qa 7t(
rlru,/ 4J
ttd 2,{n
{rt,gtv
Direcl lobor $r ,800 $3, r00
Direct lqbor hoursl
Welciing zv t0
Assembly 60 20
Finishing 20
Number of mochine hours:
Welding 50
Assembly 25
Finishing 125
The ical bid pricc includes a 35 percent markup over full manu cost. Round all over-
head rates to the ncarest cent. Round all bid prices to the nearest dollar.
Required:
L Ca-leulate. a plannr.ide rate for Fc,!,"orn Compan,v based on maehine hours is rhe bid
price of each job using this rate | (Note: Round to t-he nearesrcenr.)
2. Calculate departmental orarhead rates for the producigg departments. at is rhe
of each job using these rates) (Note : Round oyerhead rates to the nearcst cent.)
oBJEer @
Pavlovich Prosthetics Company produces anificial limbs indir-iduals. Each pros tic is
for
unique. On January l, three jobs. identified bv thc name of the person beins 6ttcd with the pros-
thedc, were irr pro(:ess uith the followir-rg costs:
Co Pelhom fillson
Direct moteriols $ 2lo $ ots $1,290
Direct lqbor 7CO 1,260
Applied overheod 374 595 1,071
Totol $I .024
During the month oi]anuary, r\\'o more jobs rvere started, |asper and Dashcll. Materials and
b_v each lob in j'u:uarlv are as follor*'s:
labor costs incurrecl
Required:
PART A
Required:
(b) Calculate the unit production cost cost of closing inventory, cost of goods sold and net
income using thc variable costing method. (4 m s)
(c) From parts (a) and (b) above, explain the di rence (if any) in the closing inventory
and net income using absorption and variable costing methods. (5 m s)
Pnae 1
SECTION C
Part A
Required:
(a) What is the rnalgin, turnover, and ROI for Jubilee Division? (2 marks)
(b) Jubilee has an option to make an additional investment that would add $100.000
to the asset base. It also intends to run an advertising c:arnpaign ihat would
require additional advertising elpg!!$ of $25,000. These plans are expected to
generate an additional $70,000 in sales revenue. Recompute the margin,
turnover, and ROI for Jubilee Division. Would you advise the manager to go
ahild witn theiption? (4 marks)
(c) Give trvo (2) advantages of using ROI as a method fbr perfornrance evaluation.
(2 marks)
Pn<x 3
SECTION C
Jumbo Standard
400 units 1'200 s
Prime costs $12,000 $18,000
Direct labour houl 4,400 hrs 7J00 hrs
Machine hour 2,400 hrs 3,500 hrs
tion how 1,200 hrs 2,400
Assembly how 2,000 hrs 2,400 hrs
Machining s!20,000
lnspection $36,000
As ting $52,800
Total overhead
Requirsd
and standard)
(b) overhead cost Per unit for each product $umbo
t wide rate. '
(4 marks)
costing (ABC),
(9m s)
1 $lo, $]20,
2 10,2 too,500
J o0F 120,000
4 3,500 u 127,500
5 10,500 u t03,500
Requi :
l. Using thc rule identift the cascs that will be investigated
Suppose investigatioir reveals that the cause of atl u orable mate -
rials usage v
respiinsible i corrcctive action r+'ould likcly be takcni
able rials usage variance is attributable ro a new approach to manufacturing that takes
time but causcs more material waste. Examination of the labor efficiency variatrce
Bolsa Corporation p'roduces high-qualiq'leather bclts. Thc comtr'r 's plant in Boise uses a
stanclard costing slrstcm and has set the follo g stanclards ior matcrials and labor;
Leother (3 strips @ $4) $12.00
Dr.ring the first rnonti of the ycar, Boise plant produced 40,000 belts. Actual leather pur-
OBJECTI
Requi :
1. Corrrprirc the costs of lcathe r and direct labor that should be incurred for the prnducri<u of
40.000leather belts.
2. Compute the total budget ances for materials and labor.
gation) Explain.
OBJECT
uired:
l. Break dow.n the rotal ance ibr materials inro a price variance arrd a usage variairce using
and is told b_y* the purchasillg manager that a che,aper sorrrce of leather Strips had been
(Continu
lti
416 pler r-D Stondorci Cosfr-ng: A Monageriol Conlroi Tooi
ciiscovereci anci thar this is the reasol'r for the iavorabic matcriais price variance. ite pieased.
the purchasing manager suggests that the materiais p standard bc updated to reflect this
L Breali don'n the total variance fior labor into a rate variance and an e{fi ciencl, variancc using
the colurnnar and fornrula approaches.
Manzaru Co anv produces apple iuice sold in gallons- Recendv, thc c v adopted the tbl-
Required:
Required:
l Cornpute the la rate vanance.
Z. C uts tlre effieiei;i-y var-iante
OBJECTI cise l0-3
At
its plastic
Direct moteriols (6 lbs. @ $5) $30.00
Direct lobor [2 hrs. @ $12] 24.40
Stondord prime cost per unit