Exam 6: Planning in the Product Domain

The Ever Clean Refinery Company uses a weighted average process costing system to account for its refinery operations. Data from the month of October is presented in the table below: - What was the cost per equivalent of material?

The Caswell Company produces custom bookcases in a job shop organized into three departments: fabricating; assembly; and finishing. Overhead is applied to jobs using departmental rates based on direct labor costs (dollars). Labor dollars is used as an application base because skill levels and wages of labor differ significantly across the three departments. For the coming year, Caswell's estimates of overhead costs and labor costs for each of the three departments are given in the table below: - Compute the overhead rate that Caswell will use to apply overhead to jobs in the fabricating department in the coming year.

As a job shop adds more products and activities to its manufacturing environment, the use of departmental overhead application rates will improve its decision making.

Of the following tactical steps, which would most likely be used to eliminate a cost gap for a new product intended to be sold in a highly competitive market with numerous close substitutes?

The difference between the current estimated cost of the product and its target cost is referred to as the cost gap.

Martin & Haviland is a small CPA firm that employs four partners and 14 staff auditors. Budgeted annual salaries are $200,000 for each of the partners and $50,000 for each of the staff auditors. Budgeted overhead costs are $600,000. Overhead is applied to audits based on the total cost of partner and audit staff time charged to the audit. The company has recently completed its annual audit of Whitney Power Systems, Inc., which required $80,000 of partner cost and $70,000 of staff audit cost. What amount of overhead will be applied to this audit?

Of the following products and services, which is manufactured or provided in a process/continuous flow setting?

Watson, Inc., uses a weighted average process costing system. Beginning work-in-process inventory on June 1 consisted of 5,000 units. During June, 28,000 completed units were transferred out to finished goods inventory, and on June 30, 3,000 units remained in ending work-in-process. How many units were started during June?

Olsen Company processes lumber into a product called medium density fiberboard. The manufacturing process runs on a 24/7 clock. For the month of February, it had 40,000 square feet of medium density fiberboard in process at the beginning of the month. Another 180,000 square feet were put into process during February, and 60,000 square feet remained in process at the end of February. -All raw material is added at the beginning of the process. What are the equivalent units of production for raw materials in February?

When conducting a target costing analysis, the estimated selling price of the new product will reflect:

Target costing is an integral part of a performance measurement system.

All Tech Automotive uses a job order costing system to determine the cost of work completed for its customers. All Tech employs a single plant-wide overhead rate based on direct labor hours to apply overhead to individual repair jobs. For the current year, overhead is estimated to be $200,000 and direct labor hours are estimated to total 8,000. Tim Johnson's brake repair job required two direct labor hours to complete. All Tech will apply $50 of overhead to the Johnson repair job.

D & P Equipment Company has designed and patented a new golf putter called the "Curve," which features a convex face. This design makes it virtually impossible to incorrectly strike a putt resulting in a pull to the left or push to the right. D & P's competitive analysis suggests that it will have to sell the putter at a target price of $110. The company currently estimates raw material costs will be $40, direct labor $20, and that overhead will amount to 1.5 times direct labor cost. Required: a. Assuming that D & P Equipment Company requires a profit of 25%, what is its target cost for the "Curve"? b. What current cost gap exists at present?

Joyce Company is a printing shop that offers products including brochures, advertising flyers, wedding invitations, etc. The company has accepted an order from Jane Anderson for wedding invitations. The job will require 200 sheets of card stock at $0.15 per sheet and $30 worth of various inks. The job will also require two hours of direct labor time at $15 per hour. Overhead is applied on the basis of direct labor using a plant-wide rate of $20 per hour. -What is the total cost of the wedding invitations ordered by Jane Anderson?

Acme Anvil Company is considering the introduction of a new product to its line of quality anvils. The company's engineering and manufacturing managers have concluded that there are no product design or manufacturing process changes that will allow the new product to be produced at a unit cost of less than $30. If Acme requires a profit of 40%, what price must the new product sell at to justify its introduction?

Vanadium Corporation is organized to produce custom metalworking goods. The company is organized into two departments: machining and assembly. Work in the machining department consists of cutting, shaping, and smoothing parts. This work is all highly automated and the company has determined that most overhead cost in the department is highly correlated with the number of hours the various machines are operated. By contrast, work in the assembly department is nearly all done manually and overhead is highly correlated with the number of direct labor hours worked. Consequently, Vanadium Corporation has opted to apply overhead to individual jobs using departmental overhead rates based on machine hours and direct labor hours respectively. Budget data for the two departments is given in the table below: Required: a. Determine the overhead rates that will be used to apply overhead to jobs that pass through the two departments at Vanadium Corporation. b. Vanadium has been asked to provide a price quote for a job that will require 15 machine hours and 10 direct labor hours. What amount of overhead should be charged to this job when preparing the quoted price?

Baldwin Printing Company uses a job order costing system and applies overhead based on machine hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for 1,000 units was completed and incurred the following. The accountant calculated the cost of this order to be $4.30 per unit. The annual budgeted overhead in dollars was:

Directly tracing direct material and direct labor costs to a unit of output is relatively straightforward in which of the following manufacturing settings?

John Sheng, cost accountant at Starlet Company, is developing departmental factory overhead application rates for the company's tooling and fabricating departments. The budgeted overhead for each department and the data for one job are shown below. Using the departmental overhead application rates, total overhead applied to Job 231 in the tooling and fabricating departments will be:

All Tech Automotive uses a job order costing system to determine the cost of repair work completed for its customers. This system directly traces the cost of materials and direct labor to the specific repair jobs completed.