Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Chapter 5, Problem 9E
Reggie Wilmore has just started a new business—building 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
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?
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Reggie Wilmore has just started a new business—building 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 thecoming 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 onsidering in computing a predetermined overhead rate?2. Compute the predetermined overhead rates using each of the measures in your answer toRequirement 1.3. Which one would you recommend that Reggie use? Why?
Mary Smith is the owner and manager of a small bakery, “Mary’s Cookies”, which is known for its special gigantic almond-chocolate chip cookies. She has been offered a job by Cookie Monster, Inc., to come to work for them at $110,000 per year. Currently, she is producing her own cookies and she has revenues of $260,000 per year. Her costs are $10,000 for rent, $35,000 for ingredients, $5,000 for utilities, and $80,000 for wages, including $40,000 for Mary in concept of manager’s salary. She has $100,000 of her own money invested in the operation, which if she leaves, can be sold for $40,000 that she can invest at 8.2% per year. Using this information, calculate:
Accounting profits = $
Economic profits = $
If instead, Mary pays herself no salary:
Accounting profits = $
Economic profits = $
The owner of Warwick Printing is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year's plans:
Each color on the banner must be printed one at a time. Thus, for example, a four-color banner will need to be run through the printing operation four separate times. The total production volume last year was 800, as follows:
The four-color banner is a new product offering for the upcoming year. The owner believes that the expected 1,000-unit increase in volume fromlast year means that direct labor expenses should increase bu 125% (1,000/800). What do you think?
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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