Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 5, Problem 8E
Refer to the data in Exercise 5.7. Vince Melders, owner of EcoScape, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identical amounts of prime cost. Vince met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Vince created a new company, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the following:
Required:
- 1. Should Irrigation Specialties use
process costing or job-order costing? Explain. - 2. If Irrigation Specialties uses an actual costing system, what is the cost of a single system installed in June? In July? In August? Round your answers to the nearest dollar.
- 3. Now assume that Irrigation Specialties uses a normal costing system. Estimated
overhead for the year is $54,000, and estimated production is 600 watering systems. What is the predetermined overhead rate per system? What is the cost of a single system installed in June? In July? In August?
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Refer to the data in Exercise 5.7. Vince Melders, owner of EcoScape, noticed that the watering systems for many houses in a local subdivision had the same layout and required virtually identi-cal amounts of prime cost. Vince met with the subdivision builders and offered to install a basic watering system in each house. The idea was accepted enthusiastically, so Vince created a newcompany, Irrigation Specialties, to handle the subdivision business. In its first three months in business, Irrigation Specialties experienced the following:
June July AugustNumber of systems installed 60 80 120Direct materials used $18,000 $24,000 $36,000Direct labor incurred $12,000 $16,000 $24,000Overhead $10,900 $12,340 $14,500Required:1. Should Irrigation Specialties use process costing or job-order…
Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested that the cost system might be providing misleading information.
The controller decided that a good summer project for the intern would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were:
Cost Pools
Costs
Activity Drivers
Receiving
$
600,000
Direct material cost
Manufacturing
5,500,000
Machine-hours
Machine setup
900,000
Production runs
Shipping
1,000,000
Units shipped…
Cain Components manufactures and distributes various plumbing products used in homes and other buildings. Over time, the production staff has noticed that products they considered easy to make were difficult to sell at margins considered reasonable, while products that seemed to take a lot of staff time were selling well despite recent price increases. A summer intern has suggested that the cost system might be providing misleading information.
The controller decided that a good summer project for the intern would be to develop, in one self-contained area of the plant, an alternative cost system with which to compare the current system. The intern identified the following cost pools and, after discussion with some plant personnel, appropriate cost drivers for each pool. There were:
Cost Pools
Costs
Activity Drivers
Receiving
$
600,000
Direct material cost
Manufacturing
5,500,000
Machine-hours
Machine setup
900,000
Production runs
Shipping
1,000,000
Units shipped…
Chapter 5 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 5 - What is cost measurement? Cost accumulation? What...Ch. 5 - Why is actual costing rarely used for product...Ch. 5 - Explain the differences between job-order costing...Ch. 5 - What are some differences between a manual...Ch. 5 - Prob. 5DQCh. 5 - How do firms collect job-related information on...Ch. 5 - Explain the role of activity drivers in assigning...Ch. 5 - Define the following terms: expected actual...Ch. 5 - Why would some prefer normal activity to expected...Ch. 5 - When using normal costing, how are jobs charged...
Ch. 5 - Wilson Company has a predetermined overhead rate...Ch. 5 - Why are the accounting requirements for job-order...Ch. 5 - Explain the difference between normal cost of...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Amber Company produces custom framing. For one...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Naranjo Company designs industrial prototypes for...Ch. 5 - Heitger Company is a job-order costing firm that...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Frieling Company installs granite countertops in...Ch. 5 - Prob. 6ECh. 5 - Vince Melders, of EcoScape Company, designs and...Ch. 5 - Refer to the data in Exercise 5.7. Vince Melders,...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - Reggie Wilmore has just started a new...Ch. 5 - During March, Aragon Company worked on three jobs....Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - Job Cost On April 1, Sangvikar Company had the...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - On August 1, Cairle Companys work-in-process...Ch. 5 - Ehrling Brothers Company makes jobs to customer...Ch. 5 - During August, Skyler Company worked on three...Ch. 5 - Feldspar Company uses an ABC system to apply...Ch. 5 - Kapoor Company uses job-order costing. During...Ch. 5 - Salazar Company is a job-order costing firm that...Ch. 5 - Lorrimer Company has a job-order cost system. The...Ch. 5 - CleanCom Company specializes in cleaning...Ch. 5 - Prob. 23ECh. 5 - Geneva, Inc., makes two products, X and Y, that...Ch. 5 - Prob. 25ECh. 5 - During May, the following transactions were...Ch. 5 - Firenza Company manufactures specialty tools to...Ch. 5 - Prob. 28PCh. 5 - Cherise Ortega, marketing manager for Romer...Ch. 5 - Lieu Company is a specialty print shop. Usually,...Ch. 5 - Warrens Sporting Goods Store sells a variety of...Ch. 5 - Sutton Construction Inc. is a privately held,...Ch. 5 - Dr. Alyx Hemmings is employed by Mesa Dental. Mesa...Ch. 5 - Prob. 34P
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