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Cost and management accounting

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1. A process cost summary is a managerial accounting report that describes:
A) The costs charged to a department.
B) The equivalent units of production by the department.
C) How the costs were assigned to the output.
D) Physical transfers for a department.
E) All of the above.

2. A company that applies process costing is most frequently characterized by:
A) Low standardization and high production volume.
B) Custom orders and homogeneous products.
C) Repetitive production and heterogeneous products.
D) Repetitive production and low production volume.
E) Homogeneous product and high production volume.

3. A company's beginning work in process inventory consisted of 20,000 units that were 1/5 complete with respect to direct labor. These beginning units were completed and another 90,000 units were started during the current period. Of those started, 60,000 were finished and the remaining 30,000 were 1/3 complete at the end of the period. The equivalent units of production were:
A) 60,000.
B) 74,000.
C) 76,000.
D) 86,000.
E) 96,000.

4. To compute an equivalent unit of production, one must be able to reasonably estimate:
A) The percentage of completion.
B) Units completed.
C) Units started and completed.
D) Direct labor cost.
E) Materials cost.

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1. A process cost summary is a managerial accounting report that describes:
A) The costs charged to a department.
B) The equivalent units of production by the department.
C) How the costs were assigned to the output.
D) Physical transfers for a department.
E) All of the ...

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Break even analysis and process costing

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? Questions:
What are the three roles that management accountants perform?
What are three guidelines help management accountants provide the most value to managers?
Why do managers consider direct cost to be more accurate than indirect costs?
What are three different types of inventory that manufacturing companies hold?
Distinguish between inventorable costs and period costs.
Describe three methods that can be used to calculate the breakeven point
Give example of how a manager can decrease variable costs while increasing fixed costs.
"There is no such thing as a fixed cost. All costs can be "unfixed" given sufficient time'. Do you agree? What is the implication of your answer for CVP analysis?
Name four approaches to estimating a cost function
List six steps in estimating a cost function on the basis of an analysis of a part cost relationship. Which step is typically the most difficult for the cost analyst?
? Exercises:
Planning and control decisions. Barnes & Noble is a book retailing company. Most of its sales are made at its own stores, located in shopping malls or in central business districts. A small but increasing percentage of sale is made via BarnesandNoble.com, in which its major competitor is Amazon.com.
The following five reports were recently prepared by the management accounting group at Barnes & Noble:
1. Annual Financial statements
2. Weekly reports to vice president of operation for each Barnes &Noble's store-includes revenue, gross margin, and operating costs
3. Study for vice president of new business development of the expected revenues and cost of Barnesandobles.com, selling music products (CD, cassettes,ect.) as well as book.
4. Weekly report to book publishers and trade magazines on the sales of the top 10 selling fiction and nonfiction books at both its own stores and BarnesandNoble.com.
5. Report to insurance company on losses Barnes& Noble suffered at its three San Francisco stores due to an earthquake
For each report, identify both a planning-decision and a control-decision use by a Barnes & Noble manager..
Computing cost of goods purchased and cost of goods sold. The data below are for Marvin Department Store. The account balances (in thousands) are for 2004.
Marketing, distribution, and customer-service costs $37,000
Merchandise inventory, January 1, 2004 $ 27,000
Utilities $ 17,000
General and administrative costs $43,000
Merchandise inventory, December 31, 2004 $ 34,000
Purchases $155,000
Miscellaneous cost $4,000
Transportation-in $7,000
Purchase returns and allowances $ 4,000
Purchase discounts $6,000
a. cost of goods purchased
b. cost of goods sold
CBP exercises. The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed cost are $900,000 per year. Variable cost are $0.30 per unit.
Consider each case separately:
1. a. What is the present operating income for a year?
b. What is the present breakeven point in revenue?
Compute the new operating income for each of the following changes:
2. A $0.04 per unit increase in variable costs
3. A 10% increase in fixed costs and a 10% increase in unit sold
4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in unit sold.
Compute the new breakeven point in units for each of the following changes:
5. A 10% increase in fixed costs
6. A 10% increase in selling price and a $20,000 increase in fixed costs.
CVP analysis, multiple cost drivers. Susan Wong is a distributor of brass picture frames. For 2002, she plans to purchase frames for $30 each and sell them for $45 each. Susan's fixed costs for 2002 are expected to be $240,000. Susan's only other cost will be variable cost of $60 per shipment for preparing the invoice and delivery documents, organizing the delivery, and following up for collecting accounts receivable. The $60 cost will be incurred each Susan ships an order of picture frames, regardless of the number of frames in the order.
1. a. Suppose Susan sells 40,000 picture frames in 1,000 shipments in 2002. Calculate Susan's 2002 operating income
b. Suppose Susan sells 40,000 pictures frames in 800 shipments in 2002. Calculate Susan's 2002 operating income.
2. Suppose Susan anticipates making 500 shipments in 2002. How many pictures frames must Susan sell to break even in 2002?
3. Calculate another breakeven point for 2002, different from the one describes in requirement 2. Explain briefly why Susan has multiple breakeven points.
Account analysis method. Lorenzo operate a car wash. Incoming cars are put on an automatic conveyor belt. Cars are washed as the conveyor belt carries the car from the start station to the finish station. After the Car moves off the conveyor belt, the car is dried manually. Workers then clean and vacuum the inside car. Lorenzo serviced 80,000 cars in 2004. Lorenzo report the following cost for 2004.
Account description Cost $
Car wash labor 240,000
Soap, cloth, and supplies 32,000
Water 28,000
Electric power to move conveyor belt 72,000
Depreciation 64,000
Salaries 46,000
1. Classify each account as variable or fixed with respect to the number of car washes. Explain
2. Lorenzo expect to wash 90,000 cars in 2005. Use the cost classification you developed in requirement1 to estimate Lorenzo's total costs in 2005. Depreciation is computed on a straight-line basis.
Missing data. Shaheen Plastic, Inc's selected data for the month of August 2004 are presented bellow (in millions):
Work-in-process inventory 08/01/2004 200
Direct materials inventory 08/01/2004 90
Direct materials purchased 360
Direct materials used 375
Variable manufacturing overhead 250
Total manufacturing overhead 480
Total manufacturing costs 1600
Cost of goods manufactured 1650
Cost of goods sold 1700
Finished goods inventory 08/01/2004 125

Calculate the following costs:
1. Direct materials inventory 08/31/2004
2. Fixed manufacturing overhead costs foe August
3. Direct manufacturing labor cost for August
4. Work-in-process inventory 08/31/2004
5. Goods available for sale in August
6. Finished-goods inventory 08/31/2004
Deciding where to produce. (CMA, adapted) The PTO Division produces the same power takeoff units in two plants, new plants in Peoria, and an older plant in Moline. The PTO Division expected to produce and sell 192,000 power takeoff units during the coming year. The following data are available for the two plants.
Peoria Peoria Moline Moline
Selling price 150.00 150.00
Variable manufacturing cost per unit 72.00 88.00
Fixed manufacturing cost per unit 30.00 15.00
Variable marketing and distribution cost per unit 14.00 14.00
Fixed marketing and distribution cost per unit 19.00 14.50
Total cost per unit 135.00 131.5
Operating income per unit 15.00 18.50
Production rate per day 400 units 320 units

All fixed costs per unit are calculated based on a normal year consists of 240 working days. When the number of working days exceeds 240, variable manufacturing cost increase by $3.00 per unit in Peoria and $8.00 per unit in Moline. Capacity for each plant is 300 working days per year.
Whishing to take advantage of the higher operating income per unit at Moline, PTO's production manager has decided to manufacture 96,000 units at each plant. This production plan results in Moline operating at capacity (320 units per day x 300 days) and Peoria operating at its normal value (400 units per day x 240 days).
1. Calculate the breakeven points in units for the Peoria and Moline plants.
2. Calculate the operating income that would result from the production manager's plan to produce 96,000 units at each plant.
3. Determine how the production of the 192,000 units should be allocated between the Peoria and Moline plants to maximize operating income for the PTO Division. Show you calculation.

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