Cost Accounting for Managers
Cost Accounting for Managers ACCT 310
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This 28 page Class Notes was uploaded by Mrs. Antoinette Kiehn on Monday October 5, 2015. The Class Notes belongs to ACCT 310 at California State University - Long Beach taught by Michael Constas in Fall. Since its upload, it has received 8 views. For similar materials see /class/218771/acct-310-california-state-university-long-beach in Accounting at California State University - Long Beach.
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Date Created: 10/05/15
Chapter 132 Demonstration Problem Solutions Page 1 Demo 1321 ANSWER a You need to know the joint costs 3 butchers X 5 hours X 16 per hour 240 Product High quality steaks Med quality steaks Low quality steaks Hamburger Roasts Liver b Product High quality steaks Medm quality steaks Low quality steaks Hamburger Roasts Liver Units Price Tt Value Rel Value X Jt Cost Jt Cost CostUnit 180 165 297 2971583 X 240 4512 25 220 140 308 3081583 X 240 4680 21 240 120 288 2881583 X 240 4368 18 300 95 285 285158 X 240 4320 14 200 180 360 360158 X 240 5448 27 90 45 451583 X 240 672 13 1 190 1583 M M M JtC st M 180 1801190 X 240 3624 20 220 2201190 X 240 4440 20 240 2401190 X 240 4848 20 300 3001190 X 240 6048 20 200 2001190 X 240 4032 20 501190 X 240 1008 20 1190 Demo 1322 ANSWER Net Realizable Value Method We do not have a value of the SilvenNare at the SplitOff Point All we know is that after it is processed further at a cost of 10000 the SilvenNare is worth 250000 Working backwards we can estimate that the value of the SilvenNare at the SplitOff Point is 240000 250000 10000 Now we can allocate the Joint Costs Product FIeXtin Silverware Un s 45K 500K 545K Relative Value X Jt Cost X 550K Jt Cost 88 53012 Price Tt Value 50 2250K 2250K 2490K 48 240K 2402490K 2490K Add 10000 Tt Cost 988 496 63012 The unit cost of FleXtin is 1104 496988 45000 and the unit cost of the SilvenNare is 13 63012 500000 Please Send Comments and Corrections to me at mconstascsulbedu Chapter 132 Demonstration Problem Solutions Page 2 Demo 1323 ANSWER a Sales Value At SplitOff Method Product Units Price Ttl Value G 10000 250 25000 H 15000 175 26250 25000 125 31250 50000 82500 b Set Off Against Joint Costs Revenue COGS Less ByProduct 55 70 Gross Margin c Other Revenue Revenue ByProduct 55 70 Total Revenue COGS Gross Margin Rel Value 25825 2625825 31 25825 15x500 15x500 X Jt Cost X50000 X50000 X50000 50000 1275 Jt Cost Cost Unit 151 106 75 15152 15909 18940 82500 49 725 32775 82500 E 82775 50 000 32775 Please Send Comments and Corrections to me at moonstascsulbedu Chapter 5 Review Questions Questions 1 through 3 relate to the following facts The following information has been accumulated to be used in preparing the 20X8 annual budget The cost behavior pattern of the maintenance costs must be determined for this budget The accounting staff has suggested that linear regression be employed to derive a cost estimation equation in the form of y a bx for the total maintenance costs Information regarding the maintenance hours and costs for 1990 and the partial results of the regression analysis are as follows adapted from CMA exam May 1981 Month January February March April May June July August September October November December TOTALS Regression Data constant bcoefficient Standard error of the constant Standard error of the bcoefficient Standard error of the estimate Rsquare unadjusted tvalue for acoefficient tvalue for bcoefficient Hours of Activity 480 320 400 300 500 310 320 520 490 470 350 E 4 800 68465 72884 49515 12126 34469 99724 13827 60105 Maintenance Costs 4200 3000 3600 2820 4350 2960 3030 4470 4260 4050 tstatistics 90 186 183 181 180 178 177 176 165 95 231 226 223 220 218 216 215 196 99 336 325 317 311 305 301 298 258 39 9000 03 03 03 9 9007 P 9007 If this company uses the highlow method of estimating the cost equation the relationship between the hours of activity and the total maintenance costs would be TC 3600 750 per hour TC 570 750 per hour TC 3600 900 per hour TC 570 900 per hour Based upon the information from the regression analysis the total maintenance costs budgeted for 420 hours of activity would be round to the nearest whole dollar 3797 3780 3746 3461 The percent of the change in the maintenance costs that can be explained by a change in the activity hours is 9972 9986 6011 6961 The variable costs per unit increases as the activity level increases within the relevant range True False The fixed cost per unit decreases as the activity level increases within the relevant range True False The scattergraph approach is useful pointing out past data items that are out of line when preparing a costestimation equation True False 9000 Find the total number of units on which the following information is based Direct laborhours 12000 Direct labor cost 270 per hour Direct materials cost 75 per unit Total manufacturing cost 132600 Fixed overhead cost 36000 Variable overhead cost 50 of total labor cost 360 432 640 840 ANSWE RS lCDO IPODN l Ogtgtwgt0w 9000 39 9000 w mpowgt Chapter 6 Review Questions At the breakeven point of 400 units the variable costs were 400 and the fixed costs were 200 What will the 401st unit sold contribute to profit before income taxes 00 50 100 150 XYZ Company s sales are 750000 with operating profits of 130000 If the contribution margin ratio is 40 what did the fixed costs amount to 370000 300000 270000 170000 130000 Fowler Manufacturing Company has total fixed costs of 225000 for the production of its only product Estimated sales are 750000 150000 units and a beforetax profit of 125000 at that level of sales is desired by the controller What unit contribution margin is required to meet this profit target 3000 2667 2333 2000 9000 0 900 For the following questions refer to the information below Donco Company manufactures and sells two products Widgetmaster and Gadgetmaster The two products have the following characteristics Widgetmaster 25 375000 15 Gadgetmaster 15 450000 12 Selling price per unit Sales revenue Variable cost per unit Total fixed costs for the company are 160000 but increase to 200000 for production levels over 50000 total units Selling price and variable cost per unit are the same at all production levels What is the breakeven point in total unit sales for Donco assuming a constant productsales mix between Widgetmasters and Gadgetmasters 10000 16000 24615 30000 How many total units must be sold for the Donco Company to earn an operating profit of 200000 before tax assuming a constant product mix between Widgetmasters and Gadgetmasters 75000 67500 45000 37500 ANSWERS mgwm n gtUOUUJ 9000 39 9000 Chapter 8 Review Questions For the following questions refer to the information below RS Company manufactures and distributes two products R and 8 Overhead costs are currently allocated using the number of units produced as the allocation base The controller has recommended changing to an activitybased costing ABC system She has collected the following information Activity Cost Driver Amount E g Production setups Number of setups 82000 8 12 Material handling Number of parts 48000 56 24 Packaging costs Number of units 130 000 80000 50000 260 000 What is the total overhead allocated to Product R using the current system 100000 130000 146400 160000 What is the total overhead per unit allocated to Product R using activity based costing ABC 293 293 142 183 9000 Smelly Perfume Company manufactures and distributes several different products They currently use a plantwide allocation method for allocating overhead at a rate of 7 per direct labor hour Assume that overhead costs described in the problem are the only overhead costs The product costs per case of 24 bottles and other information are as follows J Overhead 8300 Direct materials per case 10000 Direct labor per case 4200 Overhead per case old rule plantwide 2800 17000 Machine hours per case 4 Number of cases per year 300 Products E 1 10000 9000 7200 4800 3150 1200 2100 1400 12450 7400 2 3 500 600 If Smelly allocates its overhead using separate department rates and P allocates its overhead using machine hours what is the total product cost per case for Product P 10850 14400 13815 12350 ANSWERS JON l UUU 9000 39 9000 Chapter 3 Review Questions For the following questions refer to the information below Incomplete accounts of the Joyce Manufacturing Company appear as follows on January 31 Materials Inventor Beg Balance 15000 Purchases 35000 Work In Process Beg Balance 0 40000 Mat Requisitioned 20000 Finished Goods Inventory Beg Balance 10000 I 20000 Also supplied is the following information a There were 5500 direct laborhours worked in January All manufacturing employees receive 8 per hour b Manufacturing Overhead is applied at a rate of 4 per direct laborhour c There were no indirect materials nor indirect labor used this period What is the January 31 balance for the Work in Process Inventory 46000 75000 76000 82000 The actual manufacturing overhead costs incurred during the month of January were 24000 What is the amount of the underapplied or over applied manufacturing overhead cost for January 1000 overapplied 2000 overapplied 1000 underapplied 2000 underapplied 0 COW COW m COW m COW What is the Cost of Goods Sold for January 10000 20000 30000 40000 Before prorating overhead the current period overhead component of Cost of Goods Sold for the Fabian Company was 57500 while the current period overhead component of ending inventory was 20000 Manufacturing overhead of 77500 was applied during this period whereas 74000 was actually incurred If the manufacturing overhead adjustment is prorated between inventory and cost of goods sold how much will be allocated to the ending inventory round to the nearest whole dollar 0 903 1217 3500 The predetermined overhead rate for manufacturing overhead was 400 per direct laborhour The estimated labor rate was 500 per hour If the estimated direct labor cost was 75000 what was the estimated manufacturing overhead 15000 60000 75000 93750 Job 201 required direct materials costing 20000 and direct labor costing 5000 300 hours were spent on this job Additionally manufacturing overhead of 80 per direct labor dollar is charged to the job It was discovered that the labor cost shown was 125 of the correct amount due to erroneous overtime premiums What is the corrected cost of Job 201 24240 27200 28000 29000 ANSWERS NL WE3gt mowb WWW Chapter 8 Demonstration Problems Page 1 I Demo 81 ANSWER PlantWide PlantWide Application Rate 30000010000 wigs 30 per wig By Department Departmental Application Rates Manufacturing Department 20000010000 20 Styling Department 10000050000 2 Amount Allocated To Each Wig Yul Brynner Manufacturing 20 X 5000 100000 Styling 2 X 10000 20 000 Total 120 000 24 per unit Dolly Parton Manufacturing 20 X 5000 100000 Styling 2 X 40000 80000 Total 180 000 36 per unit Demo 82 ANSWER Superior Deluxe Direct MaterialsMiXing 60000X4 24000 60000X6 36000 Direct LaborMiXing 80000X7 56000 80000X3 24000 12500 Direct Materials Cooking 25000x5 l 12500 25000x5 Direct Labor Cooking 5oooox4 20000 l l 50000X6 30000 Overhead Mixing 90000x7 63000 90000x3 27000 Overhead Cooking 1soyooox4 72 000 1soyooox5 108 000 Total Cost 247 500 237 500 Please Send Comments and Corrections to me at mconstascsulbedu Chapter 8 Demonstration Problems Page 2 I Demo 83 ANSWER M Mae ts Direct Materials 24000 18000 Direct Labor 7610 5000 Overhead Mat Handling 2x700 1400 2x500 1000 Machining 30x200 6000 30x100 3000 Assembly 320x600 1920 320x700 2240 Inspection 4X200 4X600 2 400 41 730 31 640 Units 600 700 Per Unit Cost 6955 4520 I Demo 84 ANSWER The Unknowns A 4 x A 8 9 A 84 2 Radio Shells B 30 x 110 B C C x 64 32 9 C 3264 50 D Dx30369 D 3630 120 E 9XE189 E189 2Boards F Fx1630409 F304016 190 G 30 x 15 G 45 Job 200 Manufacturing Overhead Allocation M W Initialize Job 800 Radio lnsertion 3300 Shell lnsertion 3200 Control Knob 3600 Parts Soldered 1800 Back Connections 3040 Quality Review 4500 OH Allocated 20240 Please Send Comments and Corrections to me at mconstascsulbedu mpowgt w mpowgt mpowgt Chapter 132 Review Questions For the following questions refer to the information below The Moody Company produces three joint products at a joint cost of 100000 Two of these products were precessed further Production and sales were Weight Sales Additional Processing Costs P 300000 lbs 245000 200000 Q 100000 lbs 30000 0 R 100000 lbs 175000 100000 If the net realizable value method is used and product Q is accounted for as a joint product how much of the joint costs would be allocated to product R 38889 41667 50000 62500 Some other answer Assume Q is a byproduct whose sales value is credited to the joint production costs If net realizable value is used how much of the joint costs would be allocated to product R 38889 43750 50000 62500 Some other answer If the physical units method is used and product Q is accounted for as a joint product how much of the joint costs would be allocated to product R 20000 25000 60000 75000 Some other answer 9000 01 9000 Great Falls Company makes two products G and H They are initially processed from the same raw material and then after split off further processed separately Additional information is as follows Q H M Final sales price 9000 6000 15000 Joint costs prior to splitoff point 6600 Costs beyond splitoff point 3000 3000 6000 What are the joint costs allocated to products A and B assuming Great Falls uses the net realizable value approach Q 3 300 3300 3960 2640 4400 2200 4560 2040 Raymer Corporation produced 3660 units consisting of three separate products in a joint process for the year The market for these products was so unstable that it was not practical to estimate the selling price of the products A cost of 425000 was incurred in the joint process Product X s production was 80 of product Y s while product Z s production was 125 of product Y s What is the amount of the joint cost allocable to product X assuming Raymer uses the physical units method of allocation 111475 114865 139344 141667 9000 N 9000 9000 Chapter 7 Review Questions For questions 14 refer to the data Ravine Manufacturing Company reported the following information for 20X8 Production Sales Selling price per unit Variable prime cost Variable overhead app rate Variable overhead applied Actual variable overhead Fixed overhead app rate Fixed overhead applied Actual fixed overhead Variable marketing costs Fixed marketing costs Beginning finished goods Ending finished goods 23000 units 24500 units 300 100 per unit 61 224489795 14082 12082 196 4508 5108 025 per unit 2500 2000 units 500 units Assume that the same predetermined overhead rate was used for 20X7 and 20X8 and any over or underapplied overhead is treated as immaterial What is the contribution margin for 20X8 27875 29875 31375 31750 Assume that the same predetermined overhead rate was used for 20X7 and 20X8 and any over or underapplied overhead is treated as immaterial What is the operating income for 20X8 using variable costing 20975 21975 24875 22261 Assume that the same predetermined overhead rate was used for 20X7 and 20X8 and any over or underapplied overhead is treated as immaterial What is the gross margin for 20X8 30600 29200 31200 30248 9000 Assume that the same predetermined overhead rate was used for 20X7 and 20X8 and any over or underapplied overhead is treated as immaterial What is the operating income for 20X8 using absorption costing 21 980 20580 22580 21 630 ANSWERS wN l gtgtUw 9000 N 000 Chapter 13 Review Questions The following information relates to the Slam Company for 1998 Sales are equal to production Amount Per unit Sales 4000000 1000 Cost of goods sold 3200000 800 Gross margin 800000 200 Marketing expenses 300000 75 Operating profits 500000 125 The cost of goods sold includes 1200000 of fixed cost and the fixed marketing costs are 100000 A special order offering to buy 50000 units for 750 each was made to Slam There will be no additional selling expenses if the special order is accepted Assuming Slam has sufficient capacity to satisfy the order how much would operating profits be increased or decreased as a result of accepting the order 25000 increase or decrease circle one 62500 increase or decrease circle one 100000 increase or decrease circle one 125000 increase or decrease circle one Which cash flow items isare relevant in decision making I A cash outflow that occurs because an alternative is adopted II A cash inflow that is lost because an alternative is adopted III A cash outflow that is avoided because an alternative is adopted land ll land III II and III I II and Ill 3 9000 The following information was made available concerning the four departments of the SnakeBite Company A Sales 100000 Variable cost of goods sold 70 000 Contribution margin 30000 Operating Expenses Fixed expenses 20000 Variable selling expenses 10000 Operating income loss i 3 25000 15 000 10000 5000 2000 3 000 Q 50000 30 000 20000 10000 6000 4 000 Q 75000 50 000 25000 15000 12000 12 0001 The president of the company has decided that one department must be dropped Fixed expenses have been assigned according to the sales of each department Regardless of your decision fixed expenses will be reduced by 25 Which department should be dropped so as to give the greatest benefit to the company A B C D For questions 4 amp 5 refer to the information below Axe Company produces hardened steel blades Axe s estimated operating profit for the year is Sales 60000 2 X 30K Variable costs 30000 1 X 30K Fixed costs 15 000 5 X 30K Operating profits 15 000 g5 X 30K Unit sales 30000 The Fixed Costs are unavoidable and common to the entire company Assume Axe is now at capacity and sufficient demand exists to sell all production to existing customers at the present prices 4 Axe has an opportunity to purchase 10000 blades of the same quality from an outside supplier for 125 which it can sell to international customers not normally served for 175 per axe Should Axe sell the blades to international customers for 200 per unit No because Axe Company would decrease its profits by 2500 Yes because Axe Company would increase its profits by 2500 Yes because Axe Company would increase its profits by 7500 Yes because Axe Company would increase its profits by 5000 No because Axe Company would decrease its profits by 5000 F1909 1 Assume Axe cannot buy the additional blades for 125 Should Axe sell blades to international customers for 175 per unit No because Axe Company would decrease its profits by 2500 Yes because Axe Company would increase its profits by 2500 Yes because Axe Company would increase its profits by 7500 Yes because Axe Company would increase its profits by 5000 No because Axe Company would decrease its profits by 5000 A B C D E Answer Key Review Questions Chapter 14 Questions 1 3 are based on the following information Tam Co is negotiating to purchase equipment that would cost 100000 with the expectation that 20000 per year could be saved in aftertax cash costs if the equipment were acquired The equipment s estimated useful life is 10 years with no residual value and would be depreciated by the straightline method Assume that this depreciation rate is used for tax purposes Tam s predetermined minimum desired rate of return is 12 Present value of an annuity of 1 at 12 for 10 periods is 565 Present value of 1 due in 10 periods at 12 is 322 Assume that the tax rate is 20 DOWPe 9003 COWPW The net present value is closest to 4900 1700 5100 13000 The payback period is closest to 45 years 5 years 55 years 60 years The simple rate of return based on initial investment is 20 16 10 8 Questions 4 6 are based on the following information Pam Co is negotiating to purchase equipment that would cost 100000 with the expectation that 20000 per year could be saved in cash costs if the equipment were acquired The equipment s estimated useful life is 10 years with no residual value and would be depreciated by the straightline method Assume that this depreciation rate is used for tax purposes Pam s predetermined minimum desired rate of return is 12 Present value of an annuity of 1 at 12 for 10 periods is 565 Present value of 1 due in 10 periods at 12 is 322 Assume that the tax rate is 20 COWPP 9003 900 The net present value is closest to 4900 1700 5100 13000 The payback period is closest to 45 years 5 years 55 years 60 years The simple rate of return based on initial investment is 20 16 10 8 Questions 7 9 are based on the following information Mam Co is negotiating to purchase equipment that would cost 1 10000 with the expectation that 20000 per year could be saved in cash costs if the equipment were acquired The equipment s estimated useful life is 10 years with a 10000 residual value and would be depreciated by the straightline method Assume that this depreciation rate is used for tax purposes Mam s predetermined minimum desired rate of return is 12 Present value of an annuity of 1 at 12 for 10 periods is 565 Present value of 1 due in 10 periods at 12 is 322 Assume that the tax rate is 20 The net present value is closest to 4900 1700 5100 13000 COWPN The payback period is closest to 45 years 5 years 55 years 60 years 9003 The simple rate of return based on initial investment is 15 13 7 8 COWPFO 0 Assume that the equipment was being depreciated using MACRS rather than the straightline method Assume that this means that the equipment will be fully depreciated when disposed of for its salvage value What is the cash attributable to the equipment that will be included in the net present value calculation 10000 8000 0 9000 10000 Chapter 4 Review Questions FIFO 1 9000 N 9000 9000 4 900 2300 units were completed and transferred out of Beattie Company s process C in June The ending Work in Process Inventory was 200 units which were 30 complete as to conversion costs and 100 complete as to materials costs The month s charges were 9440 for conversion costs and 6250 for materials costs There was no beginning inventory in June What is the cost of the work transferredout during June 8510 14950 15690 16250 Finishing department had 5000 incomplete units in beginning Work in Process Inventory They were 100 complete for materials and 70 complete for conversion costs 15000 units were started into the process during the period The ending Work in Process Inventory contains 2000 units that are 50 complete for materials and 30 complete for conversion costs The FIFO method is used How many units were transferred out during the period 12000 13000 18000 20000 How many units were started and completed during the period 12000 13000 18000 20000 How many equivalent units were produced during the period for materials 12000 13000 14000 15000 5 How many equivalent units were produced during the period for conversion costs 14500 15100 16500 19100 9000 WEIGHTED AVERAGE 6 B Company incurred 126000 in direct materials costs during April Additionally the 12000 units in the Work in Process lnventory on April 1 had a direct materials balance of 32000 but were only 5 complete as to direct materials No additional units were transferred into Work in Process lnventory during April and there was no Work in Process lnventory at the end of April What is the unit cost for material for April assuming the B Company uses the weightedaverage costing A 1050 B 1159 C 1317 D 1549 7 The following information pertains to Toy Company s Finishing Department for the month of August Degree of Cost of Units Completion Material Beginning Work in Process 25000 40 100000 Transferred in from the Assembly Dept 90000 Ending Work in Process 20000 75 Materials added to production during May 382500 All materials are added at the beginning of the production process in the Finishing Department What is the cost per equivalent unit for materials in August if Toy uses the weightedaverage costing method A 4595 B 4386 C 4250 D 4196 ANSWERS BCBCBCD 1234567 mpowgt FLOOD Chapter 4B Review Questions For the following questions refer to the information below The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments such as Quality Control and Maintenance to the product departments To aid them in this discussion the controller has provided the following information Numbers in Thousands Quality Control Maint Mach Assem M Budgeted overhead costs before allocation 350 200 400 300 1250 Budgeted machine hours 50 50 Budgeted direct labor hours 25 25 Budgeted hours of service Quality Control 5 7 21 7 40 Maintenance 10 5 18 12 45 If Rochester Manufacturing uses the direct method of allocating service department costs the total service costs allocated to the assembly department would be 80000 87500 120000 167500 467500 Using the direct method the total amount of overhead allocated by the Machining Department to each machine hour at Rochester Manufacturing would be 240 525 800 935 1565 FLOOD e mpowgt If Rochester Manufacturing uses the stepdown step method of allocating service costs beginning with the wrong departmentusing the percentage method the maintenance costs allocated to the assembly department would be 210000 200000 162000 108000 70000 If Rochester Manufacturing uses the reciprocal simultaneous method of allocating service costs the total amount of quality control costs rounded to the nearest dollar to be allocated to the other departments would be 469473 421 053 350000 336842 28421 1
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