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Managerial Accounting: Peter Catalano's Verde Vineyards, Doc Gibbs

Doc Gibbs has prepared the following list of statements about process cost accounting.
Identify each statement as true or false.

1. Process cost systems are used to apply costs to similar products that are mass-produced in a continuous fashion.

2. A process cost system is used when each finished unit is indistinguishable from another.

3. Companies that produce soft drinks, motion pictures, and computer chips would all use process cost accounting.

4. In a process cost system, costs are tracked by individual jobs.

5. Job order costing and process costing track different manufacturing cost elements.

6. Both job order costing and process costing account for direct materials, direct labor, and manufacturing overhead.

7. Costs flow through the accounts in the same basic way for both job order costing and process costing.

8. In a process cost system, only one work in process account is used.

9. In a process cost system, costs are summarized in a job cost sheet.

10. In a process cost system, the unit cost is total manufacturing costs for the period divided by the units produced during the period

Peter Catalano's Verde Vineyards in Oakville, California produces three varieties of wine: Merlot, Viognier, and Pinot Noir. His wine master, Kyle Ward, has identified the following activities as cost pools for accumulating overhead and assigning it to products. For each of Verde's fifteen activity cost pools, identify a probable cost driver that might be used to assign overhead costs to its three wine varieties.

1. Culling and replanting. Dead or overcrowded vines are culled, and new vines are planted or relocated. (Separate vineyards by variety.)

2. Tying. The posts and wires are reset, and vines are tied to the wires for the dormant season.

3. Trimming. At the end of the harvest the vines are cut and trimmed back in preparation for the next season.

4. Spraying. The vines are sprayed with chemicals for protection against insects and fungi.

5. Harvesting. The grapes are hand-picked, placed in carts, and transported to the crushers.

6. Stemming and crushing. Cartfuls of bunches of grapes of each variety are separately loaded into machines which remove stems and gently crush the grapes.

7. Pressing and filtering. The crushed grapes are transferred to presses which mechanically remove the juices and filter out bulk and impurities.

8. Fermentation. The grape juice, by variety, is fermented in either stainless-steel tanks or oak barrels.

9. Aging. The wines are aged in either stainless-steel tanks or oak barrels for one to three years depending on variety.

10. Bottling and corking. Bottles are machine-filled and corked.

11. Labeling and boxing. Each bottle is labeled, as is each nine-bottle case, with the name of the vintner, vintage, and variety.

12. Storing. Packaged and boxed bottles are stored awaiting shipment.

13. Shipping. The wine is shipped to distributors and private retailers.

14. Heating and air-conditioning of plant and offices.

15. Maintenance of buildings and equipment. Printing, repairs, replacements, and general maintenance are performed in the off-season.

Solution Summary

Answers are supplemented by coaching remarks in red to assist you. There is CONSIDERABLE judgment involved in the Vineyard response and different professors and solution sets may disagree with these classifications. This is one suggested solution. If your professor insists on a "correct answer" then you need more details about each process to better select a causal cost driver.

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