Financial And Managerial Accounting
15th Edition
ISBN: 9781337902663
Author: WARREN, Carl S.
Publisher: Cengage Learning,
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Chapter 16, Problem 3TIF
To determine
Preoare a memo interpreting this graph and requesting any additional information that might be needed to explain this situation.
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Carol Creedence, the plant manager of the Clearwater Company’s Revival plant, has prepared the following graph of the unit costs from the job cost reports for the plant’s highest volume product, Product CCR:
Attachment
Carol is concerned about the erratic and increasing cost of Product CCR and has asked for your help. Prepare a half-page memo to Carol, interpreting this graph and requesting any additional information that might be needed to explain this situation.
Question 2: Walker Co. designs and builds computer servers for data centers. They use job costing to determine the cost of
the systems that they install which consist of server racks. Each system requires a different number of server racks to be installed.
Use the forecasts below to determine the total cost of each customer's system.
One manager must be hired for every twenty direct labor hours that will be spent on installations in total (round up for fractions),
and the advertising expenses are used to run local television advertisements in the hopes of enticing new business.
The cost of a typical project is shown below, along with details about several customer orders.
Direct Materials
$5,000 per server rack
Direct Labor
$60 per hour
$3,000 per person
Manager Salary
Advertising Expenses
$10,000 per month
Direct Labor Time
2 hours per server rack
Customers
Alice
Ben
Chris
Doris
Hours
Alice
Ben
Chris
Doris
Size of System in Racks
10
4
15
20
14
30
(A) What driver should Walker Co. use…
Using job order costing in a service company
Chance Realtors, a real estate consulting firm, specializes in advising companies on potential new plant sites. The company uses a job order costing system with a predetermined overhead allocation rate, computed as a percentage of direct labor costs.
At the beginning of 2018, managing partner Andrew Chance prepared the following budget for the year:
Maynard Manufacturing, Inc. is inviting several consultants to bid for work. Andrew Chance wants to submit a bid. He estimates that this job will require about 180 direct labor hours.
Requirements
Compute Chance Realtors’ (a) hourly direct labor cost rate and predetermined overhead allocation rate.
Compute the predicted cost of the Maynard Manufacturing job.
If Chance wants to earn a profit that equals 25% of the job’s cost, how much should he bid for the Maynard Manufacturing job?
Chapter 16 Solutions
Financial And Managerial Accounting
Ch. 16 - A. Name two principal types of cost accounting...Ch. 16 - What kind of firm would use a job order cost...Ch. 16 - Prob. 3DQCh. 16 - Prob. 4DQCh. 16 - What is a job cost sheet?Ch. 16 - Prob. 6DQCh. 16 - Discuss how the predetermined factory overhead...Ch. 16 - A. How is a predetermined factory overhead rate...Ch. 16 - A. What is (1) overapplied factory overhead and...Ch. 16 - Describe how a job order cost system can be used...
Ch. 16 - Issuance of materials On May 7, Bergan Company...Ch. 16 - Direct labor costs During May, Bergan Company...Ch. 16 - Factory overhead costs During May, Bergan Company...Ch. 16 - Applying factory overhead Bergan Company estimates...Ch. 16 - Job costs At the end of May, Bergan Company had...Ch. 16 - Cost of goods sold Pine Creek Company completed...Ch. 16 - Transactions in a job order cost system Five...Ch. 16 - The following information is available for the...Ch. 16 - Cost of materials issuances under the FIFO method...Ch. 16 - Prob. 4ECh. 16 - Kingsford Furnishings Company manufactures...Ch. 16 - A summary of the time tickets is as follows:...Ch. 16 - Entry for factory labor costs The weekly time...Ch. 16 - Schumacher Industries Inc. manufactures...Ch. 16 - Eclipse Solar Company operates two factories. The...Ch. 16 - Exotic Engine Shop uses a job order cost system to...Ch. 16 - Predetermined factory overhead rate Obj. 2...Ch. 16 - The following account appears in the ledger prior...Ch. 16 - Collegiate Publishing Inc. began printing...Ch. 16 - The following events took place for Rushmore...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Job order cost accounting for a service company...Ch. 16 - Barnes Company uses a job order cost system. The...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job cost sheet Remnant Carpet Company sells and...Ch. 16 - Analyzing manufacturing cost accounts Fire Rock...Ch. 16 - Prob. 5PACh. 16 - Entries for costs in a job order cost system Royal...Ch. 16 - Entries and schedules for unfinished jobs and...Ch. 16 - Job cost sheet Stretch and Trim Carpet Company...Ch. 16 - Analyzing manufacturing cost accounts Clapton...Ch. 16 - Prob. 5PBCh. 16 - Antolini Enterprises produces mens sports coats...Ch. 16 - Alvarez Manufacturing Inc. is a job shop. The...Ch. 16 - Raneri Trophies Inc. uses a job order cost system...Ch. 16 - Brady Furniture Company manufactures wooden oak...Ch. 16 - Ethics in Action TAC Industries Inc. sells heavy...Ch. 16 - Team Activity As an assistant cost accountant for...Ch. 16 - Prob. 3TIFCh. 16 - RIRA Company makes attachments such as backhoes...Ch. 16 - Todd Lay just began working as a cost accountant...Ch. 16 - Baldwin Printing Company uses a job order cost...Ch. 16 - John Sheng, a cost accountant at Starlet Company,...Ch. 16 - Lucy Sportswear manufactures a specialty line of...Ch. 16 - Patterson Corporation expects to incur 70,000 of...
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- Communications Jamarcus Bradshaw, plant manager of Georgia Paper Companys papermaking mill, was looking over the cost of production reports for July and August for the Papermaking Department. The reports revealed the following: Jamarcus was concerned about the increased cost per ton from the output of the department. As a result, he asked the plant controller to perform a study to help explain these results. The controller, Leann Brunswick, began the analysis by performing some interviews of key plant personnel in order to understand what the problem might be. Excerpts from an interview with Len Tyson, a paper machine operator, follow: Len: We have two papermaking machines in the department. I have no data, but I think paper machine No. 1 is applying too much pulp and, thus, is wasting both conversion and materials resources. We haven't had repairs on paper machine No. 1 in a while. Maybe this is the problem. Leann: How does too much pulp result in wasted resources? Len: Well, you see, if too much pulp is applied, then we will waste pulp material. The customer will not pay for the extra product; we just use more material to make the product. Also, when there is too much pulp, the machine must be slowed down in order to complete the drying process. This results in additional conversion costs. Leann: Do you have any other suspicions? Len: Well, as you know, we have two productsgreen paper and yellow paper. They are identical except for the color. The color is added to the papermaking process in the paper machine. I think that during August these two color papers have been behaving very differently. I don't have any data, but it just seems as though the amount of waste associated with the green paper has increased. Leann: Why is this? Len: I understand that there has been a change in specifications for the green paper, starting near the beginning of August. This change could be causing the machines to run poorly when making green paper. If this is the case, the cost per ton would increase for green paper. Leann also asked for a database printout providing greater detail on Augusts operating results. September 9 Requested by: Leann Brunswick Papermaking DepartmentAugust detail Prior to preparing a report, Leann resigned from Georgia Paper Company to start her own business. You have been asked to take the data that Leann collected, and write a memo to Jamarcus Bradshaw with a recommendation to management. Your memo should include analysis of the August data to determine whether the paper machine or the paper color explains the increase in the unit cost from July. Include any supporting schedules that are appropriate. Round any calculations to the nearest cent.arrow_forwardEthics in Action Danielle Hastings was recently hired as a cost analyst by CareNet Medical Supplies Inc. One of Danielles first assignments was to perform a net present value analysis for a new warehouse. Danielle performed the analysis and determined a present value index of 0.75. The plant manager, Jerrod Moore, is very intent on purchasing the warehouse because he believes that more storage space is needed. Jerrod asks Danielle into his office and the following conversation takes place: Jerrod: Danielle, youre new here, arent you? Danielle: Yes, I am. Jerrod: Well, Danielle, Im not at all pleased with the capital investment analysis that you performed on this new warehouse. I need that warehouse for my production. If I dont get it, where am I going to place our output? Danielle: Well, we need to get product into our customers hands. Jerrod: I agree, and we need a warehouse to do that. Danielle: My analysis does not support constructing a new warehouse. The numbers dont lie; the warehouse does not meet our investment return targets. In fact, it seems to me that purchasing a warehouse does not add much value to the business. We need to be producing product to satisfy customer orders, not to fill a warehouse. Jerrod: The headquarters people will not allow me to build the warehouse if the numbers dont add up. You know as well as I that many assumptions go into your net present value analysis. Why dont you relax some of your assumptions so that the financial savings will offset the cost? Danielle: Im willing to discuss my assumptions with you. Maybe I overlooked something. Jerrod: Good. Heres what I want you to do. I see in your analysis that you dont project greater sales as a result of the warehouse. It seems to me that if we can store more goods, then we will have more to sell. Thus, logically, a larger warehouse translates into more sales. If you incorporate this into your analysis, I think youll see that the numbers will work out. Why dont you work it through and come back with a new analysis. Im really counting on you on this one. Lets get off to a good start together and see if we can get this project accepted. What is your advice to Danielle?arrow_forwardThe following situations describe decision scenarios that could use managerial accounting information: The manager of High Times Restaurant wishes to determine the price to charge for various lunch plates. By evaluating the cost of leftover materials, the plant manager of a precision tool facility wishes to determine how effectively the plant is being run. The division controller of West Coast Supplies needs to determine the cost of products left in inventory. The manager of the Maintenance Department of a large manufacturing company wishes to plan next year’s anticipated expenditures. For each situation, discuss how managerial accounting information could be used. b) What are the major differences between managerial accounting and financial accounting?arrow_forward
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