Cost Accounting Chapter 17 Solutions

14. A decision to work closely with a limited number of suppliers for the purpose of ensuring that the proper materials are available at the optimal time is an example of:

blending labor). If you divide the total cost of $68,094 by the volume produced from a batch, 169,088oz, you

a service department’s costs have been allocated, costs are not reallocated back to it under

3. Briefly describe how the current production cost assignment system works. What are the consumption ratios (activity percentages) for assigning manufacturing overhead to each product at present?

The materials used per unit of production, the Run labor hours and machine hours are provided in exhibit 2. The overhead expenses per unit of the product have been apportioned according to their percentage production and usage. (Drucker, 1999)

Going into 2004, Bob Moyer planned to produce 10,000 bicycles at Mile High Cycles. Construction of his bicycles includes the utilization of three departments, frames, wheel assembly, and final assembly. During this year, Mile High Cycles ended up actually producing 10,800 bicycles to meet higher than expected demand. Bob is curious as to whether or not he was successful in maintaining costs to meet these higher levels of demand.

• This cost method does not provide the best system for JDCW’s cost allocation. By using only three overhead rates the present system grossly undermines the true production costs since other activities of the production process are not acknowledged.

In the case study did not take other costs into considerations such as running costs of trucks and vehicles, it only provides the annual allocated costs (depreciation costs), however, the more events that the client service, this will end up having higher running costs of the trucks and vehicles such as parking, petrol, diesel, etc.

1. Use the Overhead Cost Activity Analysis in Exhibit 5 and other data on manufacturing

Abby Conroy was tasked with calculating an effective quote for Breeland Ltd., she chose the activity based accounting costing system since it more accurately captures the related costs. A special order was placed by Breeland Ltd. with Ace Fertilizer Company. The did not plan to order more of this product in the future. Based on Ace’s policy, the special order included disposal costs for any used materials in the event no other orders existed for the unused materials at the time the Breeland contract was signed. Abby correctly calculated the total direct material and labor costs and accurately arrived at the indirect costs using the ABC method and used cost activity pools that make sense for the company and

First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.

The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire more equipment for lessons and rentals and to expand club facilities. The board plans to purchase about $50,000 of new equipment each year and wants to begin a fund to purchase a $600,000 piece of property for club expansion.

For each target fill rate the proportion of bottles filled correctly had to be determined. This calculation provides a breakdown between cases that can be sold for the full amount of $186 and cases that are designated as seconds, which are sold for 80% of the full price or $148.80. Revenue per case grows continuously as the target fill rate increases. From the blending costs which include $67,662 of active ingredient per 5000 liters, and blending labor of $432 per 5000 liter batch the cost per ounce of medication is approximately $0.40. This provides input for the active ingredient cost. Based on the labor cost of $8.50 per hour at 12 cases per hour, the input for rework cost per case is approximately $0.70 per case. Contribution per case is derived from the revenue minus the costs. The contribution per case is the performance criteria that our decision is based upon.

The computation of equivalent units under FIFO method differs from weighted average method in two ways. First the units transferred out figure are divided into two parts. One part consists of the units from beginning inventory that were completed and transferred out, and the other part consists of the units that were both started and completed during the current period. Second full consideration is given to the amount of work expended during the current period on units in the beginning work in process inventory as well as units the ending inventory. Thus, under the FIFO method, it is necessary to convert both beginning and ending inventories to an equivalent unit basis. For the beginning inventory, the equivalent units represent the work done to complete the units; for the ending inventory, the equivalent units represent the work done to bring the units to a stage of partial completion at the end of the period (the same as with the weighted average method). The formula for computing equivalent units of production is more complex under FIFO method than under weighted average

Erin should notify Smart Worx of the postponement as it is consistent with ethical principles of integrity and professional competence. As Erin is complying with these codes of ethics, she has nothing to lose or suffer as she followed the guidelines of the code and therefore cannot be