EBK HORNGREN'S COST ACCOUNTING
16th Edition
ISBN: 9780134475998
Author: Rajan
Publisher: YUZU
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Chapter 9, Problem 9.48P
Costing methods and variances, comprehensive. Rob Kapito, the controller of Blackstar Paint Supply Company, has been exploring a variety of internal accounting systems. Rob hopes to get the input of Blackstar’s board of directors in choosing one. To prepare for his presentation to the board, Rob applies four different cost accounting methods to the firm’s operating data for 2017. The four methods are actual absorption costing, normal absorption costing, standard absorption costing, and standard variable costing. With the help of a junior accountant, Rob prepares the following alternative income statements:
Where applicable, Rob allocates both fixed and variable manufacturing
- 1. Match each method below with the appropriate income statement (A, B, C, or D):
Required
| Actual Absorption costing | _____ |
| Normal Absorption costing | _____ |
| Standard Absorption costing | _____ |
| Standard Variable costing | _____ |
- 2. During 2017, how did Blackstar’s level of finished-goods inventory change? In other words, is it possible to know whether Blackstar’s finished-goods inventory increased, decreased, or stayed constant during the year?
- 3. From the four income statements, can you determine how the actual volume of production during the year compared to the denominator (expected) volume level?
- 4. Did Blackstar have a favorable or unfavorable variable overhead spending variance during 2017?
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Dhaka Power Corporation is one of Walton’s equipment suppliers. Dhaka Power currently uses traditional costing for making business decisions. Upon request from Walton, the company has decided to move to activity-based costing for equipment production related to products WAL101 and WAL201. As one of the company’s management accountants, you have been asked to prepare an analysis comparing the two costing methods for the next company board meeting. Your CFO has given you the following quarterly data from the Dhaka Power Corporation’s costing system:
Answer the following questions: a) What is the total manufacturing cost per unit using traditional costing for WAL101 and WAL201? Use machine hours as the cost-allocation base.b) What is the total manufacturing cost per unit using activity-based costing for WAL101 and WAL201?c) What conclusions can be drawn from your results?
Your manager asks you to bring the following incomplete accounts of Endeavor Printing, Inc.,
up to date through January 31, 2017. Consider the data that appear in the T-accounts as well
as the following information in items (a) through (j).
Endeavor's normal-costing system has two direct-cost categories (direct material costs and
direct manufacturing labor costs) and one indirect-cost pool (manufacturing overhead costs,
which are allocated using direct manufacturing labor costs).
Materials Control
Wages Payable Control
12-31-2016 Bal. 30,000
1-31-2017 Bal. 6,000
Work-in-Process Control
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1-31-2017 Bal. 114,000
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You forecast next year's manufacturing overhead costs and next year's direct manufactur-
ing labor costs. The budget for 2017 is $1,200,000 for manufacturing overhead…
Andrew Jarvis started his manufacturing business earlier this year and has been preparing management accounts using variable (marginal) costing. He has approached you as a Certified Chartered Management Accountant, to help his finance team prepare annual financial statements. As part of your discussions with the company’s finance team, you mentioned that you will use absorption costing to prepare the financial statements. Peter Cullen, the Finance Manager, said that he was unfamiliar with this method of costing and has asked you for more information about it.
Draft a Report for Peter Cullen that:a) Describes and explains the basis of variable (marginal) and absorption costing
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b) Explains the effect on profit of using variable (marginal) and absorption costing.
c) Outlines TWO advantages and TWO disadvantages of both variable (marginal) AND absorption costing systems.
Chapter 9 Solutions
EBK HORNGREN'S COST ACCOUNTING
Ch. 9 - Differences in operating income between variable...Ch. 9 - Why is the term direct costing a misnomer?Ch. 9 - Do companies in either the service sector or the...Ch. 9 - Explain the main conceptual issue under variable...Ch. 9 - Companies that make no variable-cost/fixed-cost...Ch. 9 - The main trouble with variable costing is that it...Ch. 9 - Give an example of how, under absorption costing,...Ch. 9 - What are the factors that affect the breakeven...Ch. 9 - Critics of absorption costing have increasingly...Ch. 9 - What are two ways of reducing the negative aspects...
Ch. 9 - Prob. 9.11QCh. 9 - Describe the downward demand spiral and its...Ch. 9 - Will the financial statements of a company always...Ch. 9 - Prob. 9.14QCh. 9 - The difference between practical capacity and...Ch. 9 - In comparing the absorption and variable cost...Ch. 9 - Queen Sales, Inc. has just completed its first...Ch. 9 - King Tooling has produced and sold the following...Ch. 9 - The following information relates to Drexler Inc.s...Ch. 9 - Prob. 9.20MCQCh. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-21). The...Ch. 9 - Variable and absorption costing, explaining...Ch. 9 - Throughput costing (continuation of 9-23). The...Ch. 9 - Variable versus absorption costing. The Tomlinson...Ch. 9 - Absorption and variable costing. (CMA) Miami,...Ch. 9 - Absorption versus variable costing. Horace Company...Ch. 9 - Candyland uses standard costing to produce a...Ch. 9 - Capacity management, denominator-level capacity...Ch. 9 - Denominator-level problem. Thunder Bolt Inc., is a...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Variable costing versus absorption costing. The...Ch. 9 - Throughput Costing (continuation of 9-32) 1....Ch. 9 - Variable costing and absorption costing, the Z-Var...Ch. 9 - Comparison of variable costing and absorption...Ch. 9 - Effects of differing production levels on...Ch. 9 - Alternative denominator-level capacity concepts,...Ch. 9 - Motivational considerations in denominator-level...Ch. 9 - Denominator-level choices, changes in inventory...Ch. 9 - Variable and absorption costing and breakeven...Ch. 9 - Downward demand spiral. Market.com is about to...Ch. 9 - Absorption costing and production-volume...Ch. 9 - Operating income effects of denominator-level...Ch. 9 - Variable and absorption costing, actual costing....Ch. 9 - Prob. 9.45PCh. 9 - Cost allocation, responsibility accounting, ethics...Ch. 9 - Absorption, variable, and throughput costing....Ch. 9 - Costing methods and variances, comprehensive. Rob...
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