COST ACCOUNTING
16th Edition
ISBN: 9781323169261
Author: Horngren
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 22, Problem 22.17E
Cost centers, profit centers, decentralization, transfer prices. Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality.
- A. Are the three departments cost centers, revenue centers, or profit centers?
- B. Are the three departments centralized or decentralized?
- C. Can a centralized department be a profit center? Why or why not?
- D. Suppose the upper management of Fenster Corporation decides to let the three departments set their own production schedules, buy and sell products in the external market, and have the wood and metal departments negotiate with the glass department for the glass panes using a transfer price.
- a. Will this change your answers to requirements 1 and 2?
- b. How would you recommend upper management evaluate the three departments if this change is made?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Cost centers, profit centers, decentralization, transfer prices. Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality.
1. Are the three departments cost centers, revenue centers, or prot centers?2. Are the three departments centralized or decentralized?3. Can a centralized department be a prot center? Why or why not?4. Suppose the upper management of Fenster Corporation decides to let the three departments set their own production schedules, buy and sell products in the external market, and have the wood and metal departments negotiate with the glass department for the glass panes using a transfer price. a. Will this change…
Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality.
Q. Are the three departments cost centers, revenue centers, or profit centers?
Fenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality.
Q.Can a centralized department be a profit center? Why or why not?
Chapter 22 Solutions
COST ACCOUNTING
Ch. 22 - Prob. 22.1QCh. 22 - Describe three criteria you would use to evaluate...Ch. 22 - What is the relationship among motivation, goal...Ch. 22 - Name three benefits and two costs of...Ch. 22 - Organizations typically adopt a consistent...Ch. 22 - Transfer pricing is confined to profit centers. Do...Ch. 22 - What are the three methods for determining...Ch. 22 - What properties should transfer-pricing systems...Ch. 22 - All transfer-pricing methods give the same...Ch. 22 - Prob. 22.10Q
Ch. 22 - Prob. 22.11QCh. 22 - Prob. 22.12QCh. 22 - Prob. 22.13QCh. 22 - Under the general guideline for transfer pricing,...Ch. 22 - How should managers consider income tax issues...Ch. 22 - Evaluating management control systems, balanced...Ch. 22 - Cost centers, profit centers, decentralization,...Ch. 22 - Prob. 22.18ECh. 22 - Prob. 22.19ECh. 22 - Multinational transfer pricing, effect of...Ch. 22 - Prob. 22.21ECh. 22 - Multinational transfer pricing, global tax...Ch. 22 - Prob. 22.23ECh. 22 - Prob. 22.24ECh. 22 - Transfer-pricing problem (continuation of 22-24)....Ch. 22 - Prob. 22.26PCh. 22 - Prob. 22.27PCh. 22 - Effect of alternative transfer-pricing methods on...Ch. 22 - Goal-congruence problems with cost-plus...Ch. 22 - Multinational transfer pricing, global tax...Ch. 22 - Transfer pricing, external market, goal...Ch. 22 - Prob. 22.32PCh. 22 - Transfer pricing, goal congruence, ethics. Cocoa...Ch. 22 - Prob. 22.34PCh. 22 - Transfer pricing, perfect and imperfect markets....Ch. 22 - Prob. 22.36PCh. 22 - Prob. 22.37P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Larsen, Inc., produces two types of electronic parts and has provided the following data: There are four activities: machining, setting up, testing, and purchasing. Required: 1. Calculate the activity consumption ratios for each product. 2. Calculate the consumption ratios for the plantwide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plantwide rate? Which product is undercosted? 3. What if the machine hours were used for the plantwide rate? Would this remove the cost distortion of a plantwide rate?arrow_forwardFenster Corporation manufactures windows with wood and metal frames. Fenster has three departments: glass, wood, and metal. The glass department makes the window glass and sends it to either the wood or metal department where the glass is framed. The window is then sold. Upper management sets the production schedules for the three departments and evaluates them on output quantity, cost variances, and product quality. Q. Are the three departments centralized or decentralized?arrow_forwardCost Classification Match each cost to the appropriate cost behavior pattern shown in graphs (a) through (l). Any graph can fit two or more patterns. The cost of lumber used to manufacture wooden kitchen tables. The cost of order fillers in a warehouse. When demand increases significantly, the number of order fillers is increased, and when demand falls off significantly, the number is decreased. The salary of the plant’s quality control inspector, who inspects each batch of products. The cost of water and sewer service to the manufacturing plant. The local municipality charges a fixed rate per gallon for usage up to 10,000 gallons and a higher charge per gallon for usage above that point. The cost of an internet connection of $23 per month. The cost of an internet connection of $10 per month plus $2 per hour of usage above 10 hours. The cost to make copies of a given document at a printing shop, where the per-copy charge is reduced for customers who make more than…arrow_forward
- Makani Handcraft is a manufacturer of picture frames for large retailers. Every picture frame passes through two departments: the assembly department and the finishing department. This problem focuses on the assembly department. The process-costing system at Makani has a single direct-cost category (direct materials) and a single indirect-cost category (conversion costs). Direct materials are added at the beginning of the process. Conversion costs are added evenly during the assembly department's process. Consider the following data for the assembly department in June 2020: Physical units (Frames) Direct materials Direct labour Work in progress (June 1) 80 $1,500 $150 Completed during June 500 Work in progress June 30 200 Total costs added during June $17,800 $11,500 Degree of completion is as follows: Work in progress (June 1): 100% 60% Work in progress June 30 100% 25% Required: Compute the costs assigned to products using two methods: 1. Weighted average method (WAM); | 2. First in…arrow_forwardRitz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Total Costs Cost Driver Annual Activity Packaging and shipping $168,100 Number of boxes shipped 20,600 boxes Final inspection $197,500 Number of individual items shipped 97,500 items General operations and supervision $81,900 Number of orders…arrow_forwardRitz Company sells fine collectible statues and has implemented activity-based costing. Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping and Rand has determined that the number of boxes shipped is an appropriate cost driver for these costs. The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected and shipped. The final cost pool is used for general operations and supervision of the department and the cost driver is the number of shipments. Information about the department is summarized below: Cost Pool Total Costs Cost Driver Annual Activity Packaging and $167,300 Number of boxes 21,800 boxes Shipping shipped Final Inspection $201,300…arrow_forward
- Theory of constraints, throughput margin, relevant costs. The Denver Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information:arrow_forwardPBB Company manufactures high end product. Because of the high volume of this type of product, the company employs a process cost system using the weighted average method to determine costs. Product Parts are manufactured in the Molding Department and transferred to the assembly Department were they are partially assembled. After assembly, the product is sent to packaging department. Cost per unit data for the high end product has been completed through the Molding department. Annual cost and production figures for the assembly Department are presented below: Production Data Beg. Inventory 50% Complete as to Assembly materials; 20% complete 3,000 as to Conversion units 45,000 Transferred In during the year units 40,000 Transferred to Packaging Department units 4,000 Ending Inventory 80% complete units Cost Data: Transferred-In Materials Conversion Current Period P 1,240,800 P 97,020 P 236,470 Work in Process, beginning 82,200 6,660 11,930 Damage product are identified on inspection…arrow_forwardPrism Company has two service departments: security departments and maintenance departments that give services to two producing departments: machining department and assembling department. Security department costs will be allocated using the number of employees and maintenance department costs will be allocated using direct labor hours. For calculation of predetermined rate, machine hours and direct labor hours are used for machining and assembling departments, respectively.arrow_forward
- Data Performance, a computer software consulting company, has three major functional areas: computer programming, information systems consulting, and software training. Carol Bingham, a pricing analyst, has been asked to develop total costs for the functional areas. These costs will be used as a guide in pricing a new contract. In computing these costs, Carol is considering three different methods of the departmental allocation approach to allocate overhead costs: the direct method, the step method, and the reciprocal method. She assembled the following data from the two service departments, information systems and facilities: Service Departments Production Departments Information Systems Facilities Computer Programming Information Systems Consulting Software Training Total Budgeted overhead (base) $ 368,000 $ 184,000 $ 736,000 $ 874,000 $ 575,000 $ 2,737,000 Information Systems (computer hours) 600 1,200 300 900 3,000 Facilities (square feet) 240 960 600 600…arrow_forwardMirabile Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company's three activity cost pools--Processing, Supervising, and Other. The costs in those activity cost pools appear below: Processing Supervising Other Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the other activity cost pool are not assigned to products. Activity data appear below: Product MO Product M5 Total $ 3,800 $ 23,800 $ 10,400 MHs (Processing) 9,700 300 10,000 Sales (total) Direct materials (total) Direct labor (total) Batches (Supervising) 500 500 1,000 Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. Product Mº $ 74,100 $ 28,500 $ 27,800 Product M5 $ 89,900 $ 31,400 $ 41,700arrow_forwardTheory of constraints, throughput margin, relevant costs. The Denver Corporation manufactures ling cabinets in two operations: machining and nishing. It provides the following information:arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Cost Accounting - Definition, Purpose, Types, How it Works?; Author: WallStreetMojo;https://www.youtube.com/watch?v=AwrwUf8vYEY;License: Standard YouTube License, CC-BY