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 7, Problem 12E
Classify each of the following departments in a factory that produces crème-filled snack cakes as a producing department or a support department.
- a. Janitorial
- b. Baking
- c. Inspection
- d. Mixing
- e. Engineering
- f. Grounds
- g. Purchasing
- h. Packaging
- i. Icing (frosts top of snack cakes and adds decorative squiggle)
- j. Filling (injects crème mixture into baked snack cakes)
- k. Personnel
- l. Cafeteria
- m. General factory
- n. Machine maintenance
- o. Bookkeeping
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Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.
Each of the following cost items pertains to one of these companies: Home Depot (a merchandising-sector company), Apple (a manufacturing-sector company), and Rent a Nanny (a service-sector company):
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Requirement 1. Distinguish between manufacturing-, merchandising-, and service- companies.
▼
Manufacturing-sector
Merchandising-sector
Service-sector
companies provide services or intangible products to their
customers—for
example, legal advice or audits.
▼
Manufacturing-sector
Merchandising-sector
Service-sector
companies purchase materials and components and convert them into different finished goods.
▼
Manufacturing-sector
Merchandising-sector
Service-sector
companies purchase and then sell tangible products without changing their basic form.
Requirement 2. Distinguish between inventoriable costs and period costs.
Select whether each…
[The following information applies to the questions displayed below.]Sara’s Salsa Company produces its condiments in two types: Extra Fine for restaurant customers and Family Style for home use. Salsa is prepared in department 1 and packaged in department 2. The activities, overhead costs, and drivers associated with these two manufacturing processes and the company’s production support activities follow.
Process
Activity
Overhead cost
Driver
Quantity
Department 1
Mixing
$
5,300
Machine hours
1,700
Cooking
10,000
Machine hours
1,700
Product testing
113,300
Batches
550
$
128,600
Department 2
Machine calibration
$
290,000
Production runs
800
Labeling
16,000
Cases of output
130,000
Defects
10,000
Cases of output
130,000
$
316,000
Support
Recipe formulation
$
98,000
Focus groups
50
Heat, lights, and water
34,000
Machine hours
1,700
Materials handling
73,000
Container types
10
$
205,000…
Chapter 7 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 7 - Describe the two-stage allocation process for...Ch. 7 - Why must support service costs be assigned to...Ch. 7 - Explain how allocation of support service costs is...Ch. 7 - Prob. 4DQCh. 7 - Explain how allocating support service costs will...Ch. 7 - Prob. 6DQCh. 7 - Explain why it is better to allocate budgeted...Ch. 7 - Why is it desirable to allocate variable costs and...Ch. 7 - Explain why either normal or peak capacity of the...Ch. 7 - Explain why variable bases should not be used to...
Ch. 7 - Prob. 11DQCh. 7 - Explain the difference between the direct method...Ch. 7 - The reciprocal method of allocation is more...Ch. 7 - What is a joint cost? How does it relate to...Ch. 7 - How do joint costs differ from other common costs?Ch. 7 - The expected costs for the Maintenance Department...Ch. 7 - Prob. 2CECh. 7 - Valron Company has two support departments, Human...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3. Now assume that...Ch. 7 - Refer to Cornerstone Exercise 7.3 and solve for...Ch. 7 - Orchard Fresh, Inc., purchases apples from local...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - Refer to Cornerstone Exercise 7.7. Assume that...Ch. 7 - A company manufactures three products, L-Ten,...Ch. 7 - Refer to Cornerstone Exercise 7.10. (Round...Ch. 7 - Classify each of the following departments in a...Ch. 7 - Prob. 13ECh. 7 - Identify some possible causal factors for the...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Kumar, Inc., evaluates managers of producing...Ch. 7 - Refer to the data in Exercise 7.18. When the...Ch. 7 - Jasmine Company manufactures both pesticide and...Ch. 7 - Refer to the data in Exercise 7.20. The company...Ch. 7 - Eilers Company has two producing departments and...Ch. 7 - Refer to the data in Exercise 7.22. The company...Ch. 7 - Refer to the data in Exercise 7.22. The support...Ch. 7 - Alomar Company manufactures four products from a...Ch. 7 - Refer to Exercise 7.25 and allocate the joint...Ch. 7 - Pacheco, Inc., produces two products, overs and...Ch. 7 - Minor Co. has a job order cost system and applies...Ch. 7 - A CPA would recommend changing from plantwide...Ch. 7 - A company uses charging rates to allocate service...Ch. 7 - Chester Company provided information on overhead...Ch. 7 - Which of the following statements is true? a. The...Ch. 7 - Biotechtron, Inc., has two research laboratories...Ch. 7 - AirBorne is a small airline operating out of...Ch. 7 - Duweynie Pottery, Inc., is divided into two...Ch. 7 - Macalister Corporation is developing departmental...Ch. 7 - Prob. 37PCh. 7 - Welcome Inns is a chain of motels serving business...Ch. 7 - Sonimad Sawmill, Inc. (SSI), purchases logs from...Ch. 7 - Prob. 40P
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