Managerial Accounting
15th Edition
ISBN: 9781337912020
Author: Carl Warren, Ph.d. Cma William B. Tayler
Publisher: South-Western College Pub
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Chapter 2, Problem 4TIF
RIRA Company makes attachments such as backhoes and grader and bulldozer blades for construction equipment. The company uses a job order cost system. Management is concerned about cost performance and evaluates the
Management is concerned about the increase in unit costs over the months from October to December. To understand what has occurred, management interviewed the purchasing manager and quality manager.
Purchasing Manager: Prices have been holding steady for our raw materials during the first half of the year. I found a new supplier for our bulk steel that was willing to offer a better price than we received in the past. I saw these lower steel prices and jumped on them, knowing that a reduction in steel prices would have a very favorable impact on our costs.
Quality Manager: Something happened around mid-year. All of a sudden, we were experiencing problems with respect to the quality of our steel. As a result, we’ve been having all sorts of problems on the shop floor in our foundry and welding operation.
- a. Analyze the two job cost sheets and identify why the unit costs have changed for the backhoe buckets. Complete the following schedule to help in your analysis:
- b.
How would you interpret what has happened in light of your analysis and the interviews?
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RIRA Company makes attachments such as backhoes and grader and bulldozer blades for construction equipment. The company uses a job order cost system. Management is concerned about cost performance and evaluates the job cost sheets to learn more about the cost effectiveness of the operations. To facilitate a comparison, the cost sheet for Job 206 (50 backhoe buckets completed in October) was compared with Job 228, which was for 75 backhoe buckets completed in December. The two job cost sheets follow:
Landis Company uses a job-order costing system with a predetermined plantwide overhead rate based on direct labor-hours. In an effort to improve its ability to measure job profitability and make decisions, the company is considering allocating some of its overhead costs, such as electrical costs, based on machine-hours instead of direct labor-hours. To further explore the potential benefits of this approach, the company has gathered the following eight weeks of actual (not estimated) data with respect to its electrical costs:
Machine-Hours
Direct Labor-Hours
Electrical Costs
Week 1
7,700
8,910
76,200
Week 2
8,900
8,920
83,800
Week 3
8,600
8,870
81,000
Week 4
8,100
8,840
80,800
Week 5
7,600
8,990
79,400
Week 6
7,100
8,940
70,700
Week 7
5,500
8,870
61,500
Week 8
6,800
8,910
73,900
Total
60,300
71,250
607,300
Using the data above, the company…
Hampton Court Furniture Company refinishes and reupholsters furniture. Hampton uses a job order cost system. When a prospective customer asks for a price quote on a job, the estimated cost data are inserted on an unnumbered job cost sheet. If the offer is accepted, a number is assigned to the job, and the costs incurred are recorded in the usual manner on the job cost sheet. After the job is completed, reasons for the variances between the estimated and actual costs are noted on the sheet. The data are then available to management in evaluating the efficiency of operations and in preparing quotes on future jobs. On June 10, 2006, an estimate of $561.60 for reupholstering a chair and couch was given to Danzel Bishop. The estimate was based on the following data:
Estimated direct materials:
9 meters at $18 per meter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $162.00
Estimated direct labor:
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Chapter 2 Solutions
Managerial Accounting
Ch. 2 - A. Name two principal types of cost accounting...Ch. 2 - What kind of firm would use a job order cost...Ch. 2 - Which account is used in the job order cost system...Ch. 2 - What document is the source for (A) debiting the...Ch. 2 - What is a job cost sheet?Ch. 2 - Prob. 6DQCh. 2 - Discuss how the predetermined factory overhead...Ch. 2 - A. How is a predetermined factory overhead rate...Ch. 2 - Prob. 9DQCh. 2 - Describe how a job order cost system can be used...
Ch. 2 - Issuance of materials On May 7, Bergan Company...Ch. 2 - Direct labor costs During May, Bergan Company...Ch. 2 - Factory overhead costs During May, Bergan Company...Ch. 2 - Applying factory overhead Bergan Company estimates...Ch. 2 - Job costs At the end of May, Bergan Company had...Ch. 2 - Cost of goods sold Pine Creek Company completed...Ch. 2 - Transactions in a job order cost system Five...Ch. 2 - The following information is available for the...Ch. 2 - Cost of materials issuances under the FIFO method...Ch. 2 - Materials issued are as follows: Journalize the...Ch. 2 - Kingsford Furnishings Company manufactures...Ch. 2 - A summary of the time tickets is as follows:...Ch. 2 - Entry for factory labor costs The weekly time...Ch. 2 - Schumacher Industries Inc. manufactures...Ch. 2 - Eclipse Solar Company operates two factories. The...Ch. 2 - Exotic Engine Shop uses a job order cost system to...Ch. 2 - Predetermined factory overhead rate Poehling...Ch. 2 - The following account appears in the ledger prior...Ch. 2 - Collegiate Publishing Inc. began printing...Ch. 2 - The following events took place for Rushmore...Ch. 2 - Job order cost accounting for a service company...Ch. 2 - Job order cost accounting for a service company...Ch. 2 - Barnes Company uses a job order cost system. The...Ch. 2 - Entries and schedules for unfinished jobs and...Ch. 2 - Job cost sheet Remnant Carpet Company sells and...Ch. 2 - Analyzing manufacturing cost accounts Fire Rock...Ch. 2 - Prob. 5PACh. 2 - Entries for costs in a job order cost system Royal...Ch. 2 - Entries and schedules for unfinished jobs and...Ch. 2 - Job cost sheet Stretch and Trim Carpet Company...Ch. 2 - Analyzing manufacturing cost accounts Clapton...Ch. 2 - Flow of costs and income statement Technology...Ch. 2 - Antolini Enterprises produces mens sports coats...Ch. 2 - Alvarez Manufacturing Inc. is a job shop. The...Ch. 2 - Prob. 3MADCh. 2 - Prob. 4MADCh. 2 - Ethics in Action TAC Industries Inc. sells heavy...Ch. 2 - Prob. 2TIFCh. 2 - Communication Carol Creedence, the plant manager...Ch. 2 - RIRA Company makes attachments such as backhoes...Ch. 2 - Todd Lay just began working as a cost accountant...Ch. 2 - Baldwin Printing Company uses a job order cost...Ch. 2 - John Sheng, a cost accountant at Starlet Company,...Ch. 2 - Lucy Sportswear manufactures a specialty line of...Ch. 2 - Patterson Corporation expects to incur 70,000 of...
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