Professional Documents
Culture Documents
A Managerial Emphasis
thirteenth edition
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
p. Cleaning supplies for factory p. Indirect, most likely fixed since the custodians
probably do the same amount of cleaning every
night
2009 Pearson Prentice Hall. All rights reserved. 2 -18
2. If the cost object were Baking
Department rather than output, which costs
above would now be direct instead of
indirect costs?
Anything directly associated with the Baking
Department will be a direct cost.
Including:
Depreciation on machinery and molds
Baking Department manager
Materials handlers (of the Baking Department)
Machinist
Machine Maintenance personnel (of the Baking
Department)
Maintenance supplies (of the Baking Department)
The clay will also be a direct cost of the Baking
Department, but it is already a direct cost of each kind of
figurine produced.
40,000
Variable Costs
30,000
20,000 Total
Manufacturing
10,000 Costs
0
0 5,000 10,000
Num ber of Flanges
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
1,500,000
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Process costing
i) A flour mill
j) A paint manufacturer Process costing
k) A medical care facility Job costing
l) A landscaping company Job costing
m) A cola-drink-concentrate producer Process costing
n) A movie studio Job costing
o) A law firm Job costing
p) A commercial aircraft manufacturer Job costing
q) A management consulting firm Job costing
r) A breakfast-cereal company Process costing
s) A catering service Job costing
t) A paper mill
Process costing
u) An auto repair shop
Job costing
Compute the cost of Job 626 using (a) actual costing and
(b) normal costing.
Actual Normal
Cost Cost
Direct materials $40,000 $40,000
Direct manufacturing labor cost 30,000 30,000
Manufacturing overhead costs
$30,000 1.90; $30,000 1.80 57,000 54,000
Total manufacturing costs of Job 626 $127,000 $124,000
= $8,000,000
160,000 hours = $50 per dl hour
Actual Indirect
Actual Indirect Cost Rate = Costs
Actual Direct
Labor Hours
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Exercise 5-17
Problems 5-28, 33
Service-sustaining costs
d. Costs of designing tests, $252,000.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Exercises 6-16, 19
Problem 6-26
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Actual output was 8,800 attach cases. Assume all three direct-cost items
above are variable costs.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
(a) $440,000
(b) $200,000
(c) $600,000
(d) $840,000
(e) none of these
(a) $800,000
(b) $440,000
(c) $200,000
(d) $600,000
(e) none of these
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Contract 1: y = $50
Contract 2: y = $30 + $0.20X
Contract 3: y = $1X
Contract 1: Fixed
Contract 2: Mixed
Contract 3: Variable
The vertical axes of the graphs represent total cost, and the horizontal
axes represent units produced during a calendar year. In each case,
the zero point of dollars and production is at the intersection of the two
axes. The graphs may be used more than once.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
R3 HP6
Selling Price $ 100 $ 150
Variable Manufacturing Cost Per Unit $ 60 $ 100
Variable Marketing Cost Per Unit $ 15 $ 35
Budgeted Total Fixed Overhead Cost $350,000 $550,000
Hours Required to Produce One Unit on the Regular Machine 1.0 0.5
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Note that the variable costs, except for commissions, are affected by
production volume, not sales dollars.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Operating
FINANCIAL Cost reduction in key Operating income
income from
PERSPECTIVE areas from growth
productivity
gain
Market share in
CUSTOMER Number of
Customer satisfaction corrugated boxes
new customers
PERSEPCTIVE market
Productivity Quality
INTERNAL-
BUSINESS-
PROCESS Number of major
PERSEPCTIVE On-time
improvements in
delivery
manufacturing
process
LEARNING-AND-
GROWTH Employee-
Percentage of employees
satisfaction
PERSEPCTIVE ratings
trained in process
and quality management
Customer Perspective
(1) Market share in corrugated boxes market
(2) New customers
(3) Customer satisfaction index
(4) Customer retention
(5) Time taken to fulfill customer orders.
Customer Perspective
(1) Market share in distinctive, name-brand T-shirts, (2) customer
satisfaction, (3) new customers, (4) number of mentions of Oceanos T-
shirts in the leading fashion magazines
Oceanos strategy should result in improvements in these customer
measures that help evaluate whether Oceanos product differentiation
strategy is succeeding with its customers. These measures are, in turn,
leading indicators of superior financial performance.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
a. Direct method
Allocate on a ranking of
a. The percentage of their total services provided to other support
department
AS 25% The approach in method (a)
typically better approximates
I S 10%
the theoretically preferred
b. Total dollar amount in the support department
reciprocal method. It results
I S $2,400,000 in a higher percentage of
support-department costs
AS $ 600,000 provided to other support
c. The dollar amounts of service provideddepartments
to other support
being
department incorporated into the step-
I S $ 240,000 (0.10 $2,400,000)
down process than does
method (b) or (c).
AS $ 150,000 (0.25 $600,000)
2009 Pearson Prentice Hall. All rights reserved. 15-267
Exercise 15-22
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Product A, $50,000
Product B, $30,000
Product C, $70,000
Revenues at Splitoff
Joint Costs
and Separable Costs
A, 300000 gallons
Processing Super A
Revenue = $50000
$200000 $300000
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Exercises 17-19, 20
Problem 17-21
STEP 2:
Compute
Output in
Equivalent
Units
2009 Pearson Prentice Hall. All rights reserved. 17-298
Exercise 17-20
Weighted-average method, assigning costs (17-19 continued).
For the data in Exercise 17-19, summarize total costs to account
for, calculate cost per equivalent unit for direct materials and
conversion costs, and assign total costs to units completed
(and transferred out) and to units in ending work in process.
STEP 3:
Summariz
e Total
Costs to
STEP
Account4:
Compute
For
STEPper
Cost 5:
Assign
Equivalen
Total Costs
t Unit
to Units
Completed
and to
Units in
Ending
Work in
Process
2009 Pearson Prentice Hall. All rights reserved. 17-299
Exercise 17-21
FIFO method, equivalent units. Refer to 17-19. Suppose the
Assembly Division at Fenton Watches, Inc., uses the FIFO method
of process costing instead of the weighted-average method.
Compute equivalent units for direct materials and conversion
costs. Show physical units in the first column of your schedule.
STEP 1:
Summarize
Output in
Physical
Units
STEP 2:
Compute
Equivalent
Units done
in current
period
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
In fact, his variable cost per unit number seems arbitrary and
specifically targeted to improve his transfer pricing negotiations. If
that is the reason for his request and there is no fundamental
problem with the current cost classifications, Bedford should not
change the variable cost per unit. To do so would be unethical. To
resolve this situation, Bedford should begin by explaining his
decision to Lasker. If Lasker insists on using a higher variable cost
per unit, then Bedford may need to alert Laskers supervisor in
Whengons upper management.
Charles T. Horngren
Srikant M. Datar
George Foster
Madhav Rajan
Christopher Ittner
Exercise 23-21
Problems 23-29, 23-35
The new machine would cost $30,000 and would last 10 years. It
would have no salvage value. The old machine is fully depreciated
and has no trade-in value. Bleefl uses straight-line depreciation
for all assets. The new machine, being new and more efficient,
would save the company $5,000 per year in cash operating costs.
The only difference between cash flow and net income is
depreciation. The internal rate of return of the project is
approximately 11%. Bleefl Corporations weighted average cost of
capital is 6%. Bleefl is not subject to any income taxes.
2009 Pearson Prentice Hall. All rights reserved. 23-369
1. Should Bleefl Corporation replace
the machine? Why or why not?
Bleefl could use long term rather than short term ROI, or
use ROI and some other long term measures to evaluate
Patio Furniture division to create goal congruence.
Evaluating the managers on residual income rather than
ROI would achieve goal congruence. For example,
replacing the machine increases residual income in Year 1.
Residual income = Operating income (6% Average net
assets)
= $2,000 (6% 28,500)
= $2,000 $1,710 = $290