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 8CE
Refer to Cornerstone Exercise 7.7. Assume that Orchard Fresh, Inc., uses the weighted average method of joint cost allocation and has assigned the following weights to the four grades of apples:
Total joint cost is $18,000.
Required:
- 1. Allocate the joint cost to the four grades of apples using the weighted average method. (Carry out the percent calculations to four significant digits. Round all cost allocations to the nearest dollar.)
- 2. What if the factory found that Grade A apples were being valued less by customers and decided to decrease the weight factor for Grade A apples to 3.0? How would that affect the allocation of cost to Grade A apples? How would it affect the allocation of cost to the remaining grades?
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Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $30 per unit and $45 is used in direct labor, while the direct material for the double is $45 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 10,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows:
Activity CostPools
Driver
EstimatedOverhead
Use perTwin
Use perDouble
Framing
Square Feet of Pine
$270,000
6,000
3,000
Padding
Square Feet of Quilting
230,000
130,000
100,000
Filling
Square Feet of Filling
240,000
450,000
350,000
Labeling
Number of Boxes
250,000
850,000
400,000
Inspection
Number of Inspections
165,000
11,000
4,000
After grouping cost pools and estimating overhead and activities, Box Springs determined these rates:
Purchasing (per order)
$56
Utilities (per square foot)
2
Machine Setups (per machine hour)
7
Supervision (per direct labor hour)…
The joint process from which Ple'egrea, Inc. obtains both Nuts and Bolts has a total cost of $74,000 per batch. From each batch, 2,400 pounds of Nuts and 18,600 pounds of Bolts are obtained. These can be sold at the split-off point for $38 and $14 respectively. For product costing purposes Ple'egrea allocates joint costs using the relative sales value method.
The amount of joint cost allocated to Nuts would be, to the nearest dollar:
Box Springs, Inc., makes two sizes of box springs: twin and double. The direct material for the twin is $25 per unit and $45 is used in direct labor, while the direct material for the double is $45 per unit, and the labor cost is $50 per unit. Box Springs estimates it will make 5,000 twins and 10,000 doubles in the next year. It estimates the overhead for each cost pool and cost driver activities as follows:
Activity CostPools
Driver
EstimatedOverhead
Use perTwin
Use perDouble
Framing
Square Feet of Pine
$210,000
5,000
2,000
Padding
Square Feet of Quilting
220,000
130,000
90,000
Filling
Square Feet of Filling
340,000
550,000
300,000
Labeling
Number of Boxes
120,000
800,000
400,000
Inspection
Number of Inspections
170,000
13,000
4,000
After grouping cost pools and estimating overhead and activities, Box Springs determined these rates:
Purchasing (per order)
$56
Utilities (per square foot)
4
Machine Setups (per machine hour)
8
Supervision (per direct labor hour)…
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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