Dropping a customer, activity-based costing, ethics.
1. CRS would not benefit from dropping Martha Leones because it would lose $21,840 in
revenues and save $21,672 in costs resulting in a $168 decrease in operating income.
Problem - 6-32:
Revenue and production budgets
This is a routine budgeting problem. The key to its solution is to compute the correct quantities of
finished goods and direct materials. Use the following general formula:
Budgeted production = Target endin
Problem 11-19: Special order, activity-based costing.
Direct materials cost per unit ($350,000 10,000 units) = $35 per unit
Direct manufacturing labor cost per unit ($375,000 10,000 units) = $37.50 per unit
Variable cost per batch = $500 per batch
ALLOCATION OF SUPPORT-DEPARTMENT COSTS,
COMMON COSTS, AND REVENUES
15-1 The single-rate (cost-allocation) method makes no distinction between fixed costs and
variable costs in the cost pool. It allocates costs in each cost pool to cost objects
ACTIVITY-BASED COSTING AND ACTIVITY-BASED MANAGEMENT
Broad averaging (or peanut-butter costing) describes a costing approach that uses broad
averages for assigning (or spreading, as in spreading peanut butter) the cost of resources
Budgeted income statement.
Smart Video Company
Budgeted Income Statement for 2014
Equipment ($8,000 1.06 1.10)
Maintenance contracts ($1,900 1.06)
Cost of goods sold ($4,000 1.06 1.05)
17-1 Industries using process costing in their manufacturing areas include chemical
processing, oil refining, pharmaceuticals, plastics, brick and tile manufacturing, semiconductor
chips, beverages, and breakfast cereals.
AN INTRODUCTION TO COST TERMS AND PURPOSES
A cost object is anything for which a separate measurement of costs is desired. Examples
include a product, a service, a project, a customer, a brand category, an activity, and a
Special order price per unit
Variable manufacturing cost per unit
Contribution margin per unit
Effect on operating income
= $1.25 5,000 units
= $6,250 increase
2. (b) Costs of purchases, 30,000 units $47
Variance analysis, nonmanufacturing setting.
1. This is a problem of two equations and two unknowns. The two equations relate to the
number of cars detailed and the labor costs (the wages paid to the employees).
X = number of cars detailed by the exp
THE MANAGER AND MANAGEMENT ACCOUNTING
See the front matter of this Solutions Manual for suggestions regarding your choices of
assignment material for each chapter.
Management accounting measures, analyzes, and reports financial and nonfinanc
Problem 7-18: Flexible-budget preparation and analysis.
Variance Analysis for Bank Management Printers for September 2014
Level 1 Analysis
15-17 Single-rate method, budgeted versus actual costs and quantities.
1. a. Budgeted rate =
Budgeted indirect costs
= $115,000/50 trips = $2,300 per round-trip
Indirect costs allocated to Dark C. Division
= $2,300 per round-trip 30 budgete
Cost poola grouping of individual indirect cost items.
Cost tracingthe assigning of direct costs to the chosen cost object.
Cost allocationthe assigning of indirect costs to the chosen cost object.
Cost-allocation basea factor th
NOTATION USED IN CHAPTER 3 SOLUTIONS
Variable cost per unit
Contribution margin per unit
Target operating income
Cost-volume-profit (CVP) analysis examines the behavi
Problem 6-24: Budgets for production and direct manufacturing labor.
Budget for Production and Direct Manufacturing Labor
for the Quarter Ended March 31, 2015
Budgeted sales (units)
Add target ending finished goods
Problem 5-21: ABC process costing.
Rates per unit cost driver.
$375,000 (25,000 + 50,000)
= $5 per machine hour
$120,000 (50 + 50)
= $1,200 per production run
Problem 18-31: Weighted-average method, spoilage.
Solution Exhibit 18-31 summarizes total costs to account for, calculates the equivalent units of
work done to date for each cost category, and assigns total costs to units completed (including
FIFO method, spoilage.
Solution Exhibit 18-22, Panel A calculates equivalent units of work done in the current
period for direct materials and conversion costs.
Solution Exhibit 18-22, Panel B summarizes total costs to account for, calcul
Problem: 18-20 - FIFO method, assigning costs (continuation of 18-19).
Solution Exhibit 18-20 summarizes total costs to account for, calculates the costs per equivalent
unit for direct materials and conversion costs, and assigns total costs to units compl
Support-department cost allocations: single-department cost pools; direct, stepdown, and reciprocal methods.
1. a. Allocate the total Support Department costs to the production departments under the
Direct Allocation Method:
Problem 18-21: Weighted-average method, spoilage.
Solution Exhibit 18-21, Panel A calculates equivalent units of work done to date for direct
materials and conversion costs.
Solution Exhibit 18-21, Panel B summarizes total costs to account for, calc
UNIVERSITY OF MASSACHUSETTS - AMHERST
ISENBERG SCHOOL OF MANAGEMENT
ACC 331 COST ACCOUNTING; Sections 01 & 02
Instructor: Dr. Orhan Akisik
Office: SOM 350, Isenberg School of Management
Phone: 413 577 2248
Office Hours: TTH 09:30-11:00, and
Problem 18-32: FIFO method, spoilage.
For the Cleaning Department, Solution Exhibit 18-32 summarizes the total costs for May,
calculates the equivalent units of work done in the current period for direct materials and
conversion costs, and assigns total c
18-36 Spoilage in job costing.
1. Normal spoilage rate= Units of normal spoilage Total good units completed
= 6 40
a. Journal entry for spoilage related to a specific job:
Materials Control (spoiled goods at current disposal value) 6 $235
15-18 Dual-rate method, budgeted versus actual costs, and practical capacity versus actual
quantities (continuation of 15-17).
1. Charges with dual rate method.
Variable indirect cost rate
$1,350 per trip
Fixed indirect cost rate
$47,500 budgeted co