Steve Silversmith produces unique and exclusive sterling silver rings, pendants, buckles, and chains. Steve pays one supervisor to oversee the work performed by several part-time silversmiths. He pays each silversmith to work 20 hours per week or 40 hours week, depending on production demand. He also hires a jewelry expert to perform quality assurance inspections and pays her based on the weight (per ounce of silver) of each piece inspected. The controller and the sales manager are discussing potential price increases due to the increasing cost of silver and increases in other costs. Required: The following are several costs they are discussing. Indicate whether each cost is a variable, fixed, step, or mixed cost within Steve's relevant range of activity. a. Depreciation on production equipment. b. Supervisor salary. c. Packaging (each piece is packaged in a designer carton). d. Silver. e. Part-time labor (silversmith). f. Production facility utilities. g. Quality assurance. h. Mortgage on the production facility.

Steve Silversmith produces unique and exclusive sterling silver rings, pendants, buckles, and chains. Steve pays one supervisor to oversee the work performed by several part-time silversmiths. He pays each silversmith to work 20 hours per week or 40 hours week, depending on production demand. He also hires a jewelry expert to perform quality assurance inspections and pays her based on the weight (per ounce of silver) of each piece inspected. The controller and the sales manager are discussing potential price increases due to the increasing cost of silver and increases in other costs. Required: The following are several costs they are discussing. Indicate whether each cost is a variable, fixed, step, or mixed cost within Steve's relevant range of activity. a. Depreciation on production equipment. b. Supervisor salary. c. Packaging (each piece is packaged in a designer carton). d. Silver. e. Part-time labor (silversmith). f. Production facility utilities. g. Quality assurance. h. Mortgage on the production facility.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter5: Product And Service Costing: Job-order System

Section: Chapter Questions

Problem 10E: Reggie Wilmore has just started a new businessbuilding and installing custom garage organization...

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Elliott, Inc., has four salaried clerks to process purchase orders. Each clerk is paid a salary of 25,750 and is capable of processing as many as 6,500 purchase orders per year. Each clerk uses a PC and laser printer in processing orders. Time available on each PC system is sufficient to process 6,500 orders per year. The cost of each PC system is 1,100 per year. In addition to the salaries, Elliott spends 27,560 for forms, postage, and other supplies (assuming 26,000 purchase orders are processed). During the year, 25,350 orders were processed. Required: 1. Classify the resources associated with purchasing as (1) flexible or (2) committed. 2. Compute the total activity availability, and break this into activity usage and unused activity. 3. Calculate the total cost of resources supplied (activity cost), and break this into the cost of activity used and the cost of unused activity. 4. (a) Suppose that a large special order will cause an additional 500 purchase orders. What purchasing costs are relevant? By how much will purchasing costs increase if the order is accepted? (b) Suppose that the special order causes 700 additional purchase orders. How will your answer to (a) change?
You are a management accountant for Time Treasures Company, whose company has recently signed an outsourcing agreement with Spotless. Inc., a janitorial service company. Spotless will provide all of Time Treasures janitorial services, including sweeping floors, hauling trash, washing windows, stocking restrooms, and performing minor repairs. Time Treasures will be billed at an hourly rate based on the type of service performed. The work of common laborers (sweeping, hauling trash) is to be billed at $8 per hour. More skilled (repairs) and more dangerous work (washing outside windows on the 23rd floor) are to be billed at $18 per hour. Supervisory time is to be billed at $20 per hour. Spotless will submit monthly invoices, which will show the number and types of hours for which Time Treasures is being charged. The outsourcing contract is simple and straightforward. A. What are some of the internal control problems you foresee as a result of our sourcing the janitorial service with this contract? B. Explain recommendations to control risk that would you suggest after reviewing the contract.
Ingles Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Ingles, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 16 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40 percent of next month’s sales are in the finished goods inventory. Ingles also purchases sufficient materials to ensure that materials inventory is 60 percent of the following month’s scheduled production. Ingles’s sales budget inunits for the next quarter is as follows: July 2,450August 2,900September 2,100Ingles’s ending inventories in units for July 31 are as follows:Finished goods 1,900Materials (legs) 4,000 Required:1. Calculate the number of tables to be produced during August. 2. Disregarding your response to Requirement 1, assume the required…
*Merriweather Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Merriweather, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Merriweather also purchases sufficient raw materials (legs) to ensure that raw materials (legs) inventory is 60% of the following month's scheduled production needs. Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted) July 2,500 August 2,700 September 2,300 Merriweather's ending inventories in units for June 30 are: Finished goods 2,100 Raw materials (legs) 4,200 Assume the required production for August and…
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Reggie Wilmore has just started a new businessbuilding and installing custom garage organization systems. Reggie builds the cabinets and work benches in his workshop, then installs them in clients garages. Reggie figures his overhead for the coming year will be 12,000. Since his business is labor intensive, he plans to use direct labor hours as his overhead driver. For the coming year, he expects to complete 100 jobs, averaging 25 direct labor hours each. However, he has the capacity to complete 125 jobs averaging 25 direct labor hours each. Required: 1. Four measures of activity level were mentioned in the text. Which two measures is Reggie considering in computing a predetermined overhead rate? 2. Compute the predetermined overhead rates using each of the measures in your answer to Requirement 1. 3. Which one would you recommend that Reggie use? Why?
Reggie Wilmore has just started a new businessbuilding and installing custom garage organization systems. Reggie builds the cabinets and work benches in his workshop, then installs them in clients garages. Reggie figures his overhead for the coming year will be 12,000. Since his business is labor intensive, he plans to use direct labor hours as his overhead driver. For the coming year, he expects to complete 100 jobs, averaging 25 direct labor hours each. However, he has the capacity to complete 125 jobs averaging 25 direct labor hours each. Required: 1. What source documents will Reggie need to account for costs in his new business? 2. Suppose Reggies business grows, and he expands his workshop and hires three additional carpenters to help him. What source documents will he need now?
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One of the tennis rackets that Ace Sporting Goods manufactures is a titanium model (Slam) that sells for 149. The cost of each Slam consists of: Job 100 produced 100 Slams, of which six were spoiled and classified as seconds. Seconds are sold to discount stores for 50 each. Required: 1. Under the assumption that the loss from spoilage will be distributed to all jobs produced during the current period, use general journal entries to (a) record the costs of production, (b) put spoiled goods into inventory, and (c) record the cash sale of spoiled units. 2. Under the assumption that the loss due to spoilage will be charged to Job 100, use general journal entries to (a) record the costs of production, (b) put spoiled goods into inventory, and (c) record the cash sale of spoiled units.
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Munoz Manufacturing Company makes tents that it sells directly to camping enthusiasts through a mail-order marketing program. The company pays a quality control expert $77,050 per year to inspect completed tents before they are shipped to customers. Assume that the company completed 1,690 tents in January and 1,300 tents in February. For the entire year, the company expects to produce 11,500 tents. If the cost objective is to determine the cost per tent, is the expert’s salary a direct or an indirect cost? How much of the expert’s salary should be allocated to tents produced in January and February?
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