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Solution Manual For Principles of Cost Accounting 16Th Edition Vanderbeck 1133187862 9781133187868 Full Chapter PDF
Solution Manual For Principles of Cost Accounting 16Th Edition Vanderbeck 1133187862 9781133187868 Full Chapter PDF
Solution Manual For Principles of Cost Accounting 16Th Edition Vanderbeck 1133187862 9781133187868 Full Chapter PDF
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SOLUTIONS
MANUAL
FOR
Principles of Cost Accounting
16th Edition
By Vanderbeck
ISBN13-9781133187868
INSTRUCTOR’ S SOLUTIONS
MANUAL
to accompany
PRINCIPLES OF
COST ACCOUNTING
Sixteenth Edition
Edward J. VanDerbeck
Professor Emeritus; Xavier University
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
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CHAPTER 2............................................................................................................................................................. 37
CHAPTER 3............................................................................................................................................................. 81
iii
CHAPTER 1
QUESTIONS
1. The function of cost accounting is to provide c. The manufacturer will incur some costs
the cost accounting information that is the peculiar to this type of industry, such as
basis for planning and controlling current machine maintenance, materials handling,
and future operations. It provides the cost and inspection of manufactured goods.
figures and analyses that management needs The two types of operations are similar in
in order to find the most efficient methods of that they are both concerned with purchas-
operating, achieving control of costs, and ing, storing, and selling goods; they must
determining selling prices. have efficient management and adequate
2. Originally issued for companies marketing sources of capital; and they may employ
products in Europe, a set of international many workers.
standards for quality management, known 7. Cost accounting information is used by
as the ISO 9000 family, was designed by the management in the following ways:
International Organization for Standardiza- a. Determining product costs which are
tion. Obtaining ISO 9000 is important be- necessary for: determining cost of
cause many companies will only contract with goods sold and valuing inventories; de-
ISO 9000 suppliers. termining product selling price; meeting
3. A company meeting the requirements of ISO competition; bidding on contracts; and
14000 has an environmental management analyzing profitability.
system that (1) identifies and controls the b. Planning by providing historical costs
environmental impact of its activities, prod-
that serve as a basis for projecting data.
ucts, or services, (2) improves its environ-
c. Controlling operations by providing cost
mental performance continually, and (3) im-
data that enable management to period-
plements a systematic approach to setting ically measure results, to take corrective
environmental objectives and targets. action where necessary, and to search
4. Reasons given by U.S. companies for for ways to reduce costs.
“reshoring” their manufacturing operations 8. Unit cost information is important to man-
include (1) Chinese wages and shipping agement because the unit costs of one peri-
costs have risen sharply in the past few od can be compared with those of other pe-
years, (2) frustration with the sometimes riods, and significant trends can be identified
poor quality of goods made by foreign con- and analyzed. Unit costs are also used in
tractors, (3) the desire to bring production making important marketing decisions relat-
managers and assembly-line workers closer ed to selling prices, competition, bidding,
to engineers, suppliers, and customers, (4) 9. For a manufacturer, the planning process
an effort to protect a company’s intellectual involves the selection of clearly defined ob-
property, and (5) weariness from midnight jectives of the manufacturing operation and
phone calls and multiple annual trips to the development of a detailed program to
Asian producers. guide the organization in reaching the objec-
5. Manufacturers convert purchased materials tives. Cost accounting provides historical
into finished goods by using labor, technolo- cost information that is used as the basis for
gy, and facilities. Merchandisers purchase planning future operations.
completed products for resale. Service busi- 10. In a manufacturing concern, effective control
nesses or agencies sell or provide services is achieved in the following ways:
rather than products. a. Responsibility must be assigned for each
6. A manufacturer differs from a merchandiser detail of the master production plan.
in these ways: b. There must be a periodic measurement
a. The merchandiser buys items to sell of the actual results as compared with
while the manufacturing business must predetermined objectives.
make the items it markets. c. Management must take corrective action
b. Usually the manufacturer has a greater as necessary to improve or eliminate inef-
investment in physical facilities. ficient and unprofitable operations.
11. Responsibility accounting is the assigning of Board to provide oversight of the accounting
accountability for costs or production results to profession; prohibiting a public accounting
those individuals who have the authority to firm from providing many nonauditing ser-
influence costs or production. It involves an vices to a company that it audits; requiring
information system that traces these data to that a company’s annual report contain
the managers who are responsible for them. management’s opinion on the effectiveness
12. The criteria for a cost center are: of its internal controls; placing the responsi-
bility for hiring, compensating, and terminat-
a. A reasonable basis on which manufac-
ing the audit firm in the hands of the board
turing costs can be allocated. of director’s audit committee; criminal penal-
b. A person who has control over and is ties for the destruction or alteration of busi-
accountable for many of the costs ness documents and for retaliating against
13. The requirements for becoming a CMA in- “whistleblowers.”
clude a four-year college degree, two years 19. Financial accounting focuses upon financial
of relevant work experience, and passing a statements which meet the decision-making
rigorous two-day examination. needs of external parties, such as investors,
14. The four major categories of ethical conduct creditors, and governmental agencies, and to
that must be adhered to by management some extent the needs of management.
accountants include competence, confiden- Management accounting focuses on both
tiality, integrity, and objectivity. historical and estimated data that manage-
15. The steps that should be taken by the man- ment needs to conduct ongoing business op-
agement accountant include: erations and do long-range planning. Cost ac-
a. Discuss the problem with the immediate counting includes those parts of both finan-cial
supervisor except when it appears that and management accounting that collects and
the supervisor is involved, in which case analyzes cost information. It provides the
it should be taken to the next higher product cost data required for special reports
management level. to management (manage-ment accounting)
b. Clarify relevant ethical issues by confi- and for inventory costing in the financial
dential discussion with an objective ad- statements (financial accounting).
visor. 20. With regard to methods for computing the
c. Consult your own attorney as to legal cost of goods sold, the difference between a
obligations and rights. manufacturer and a merchandiser is in the
d. If the ethical issue still exists after ex- determination of the cost of goods available
hausting all levels of internal review, for sale. Since the manufacturing business
there may be no other recourse on sig- makes the products it has availa-ble for sale,
nificant matters than to resign from the the cost of goods manufac-tured must be
organization. determined and added to beginning finished
16. Corporate governance is the means by which goods inventory to de-termine the cost of
a company is directed and controlled. Good finished goods available for sale. Since the
corporate governance is important to all merchandiser purchases rather than makes
stakeholders because, due to recent account- goods to sell, the cost of purchases is added
ing scandals, the need for ethical conduct in to beginning merchan-dise inventory to
managing corporate affairs has never. compute the cost of goods available for sale.
17. The recent accounting scandals where 21. Finished Goods—this is an inventory ac-
management, including controllers and chief count reflecting the total cost incurred in
financial officers, has “cooked the books” to manufacturing goods on hand that are ready
make reported financial results seem better for sale to customers.
than actual created the need for the Sar- Work in Process—this inventory account
banes-Oxley Act. To help curb future abus- includes all of the costs incurred to date in
es the act holds CEO’s and CFO’s account- manufacturing goods that are not yet com-
able for the accuracy of their firms’ financial pleted.
statements. Materials—this account represents the cost
18. Key elements of the Sarbanes-Oxley Act of materials on hand that will be used in the
include: certification by the CEO and CFO manufacturing process.
that the financial statements fairly reflect the
results of operations; the establishment of
the Public Company Accounting Oversight
34. An advantage of accumulating costs by de- 36. Standard costs are reasonably attainable
partments (process costing) or by jobs (job costs which are estimated by management
order costing) is that the information provid- in advance of production. Standard costs
ed aids management in achieving control of are then compared with actual costs, and
costs. With a process cost system, man- differences called variances are calculated
agement can make departmental compari- and analyzed. A standard cost system is not
sons of current period costs with prior period a separate cost accounting system but is
costs and can take corrective action as applied in conjunction with either process
needed. If costs were accumulated for the costing or job order costing to increase cost
factory as a whole, management would have control effectiveness.
difficulty identifying specific sources of ex- 37. Square footage occupied by each of the ar-
cessive costs and inefficiencies. The infor- eas would be a good cost allocation base to
mation provided by a job order cost system use in allocating the depreciation expense
aids management in the determination of between the factory operations and the sell-
selling prices, the profit on each job, and ing and administrative function. This distinc-
costs applicable to similar jobs produced in tion is important because the depreciation
future periods. allocated to factory operations is a manufac-
35. A job cost sheet is a form on which all of the turing expense that becomes part of invento-
individual costs applicable to a job are rec- ry cost and eventually cost of goods sold,
orded. Since the job cost sheets show de- whereas the portion allocated to selling and
tailed costs and gross profit for each job, administrative expense is a period cost that
they are useful to management in bidding on is always expensed in the period incurred.
similar jobs in the future.
EXERCISES
E1-1
The variances for kitchen wages and utilities were favorable for September,
whereas the variances for food and supplies were unfavorable. On a year-to-date
basis, the only expense that did not have the same pattern as September was
utilities which had a $120 F variance for the month, but an $850 U year-to-date
variance.
E1-2
No, the performance report should not be prepared just once a year. It should be
furnished to managers at regular intervals, in this case monthly, on a timely ba-
sis. If it is not provided in a timely fashion, it will not be effective in controlling fu-
ture operations.
E1-3
E1-4
Finished goods, July 1 ............................................................ $ 85,000
Plus cost of goods manufactured............................................ 343,000
Finished goods available for sale ............................................ $ 428,000
Less finished goods, July 31 ................................................... 93,000
Cost of goods sold .................................................................. $ 335,000
E1-5
Selling &
Direct Direct Factory Admin.
Items Materials Labor Overhead Expense
a. Steel used in an overhead door plant
b. Cloth used in a shirt factory .............
c. Fiberglass used by a sailboat
builder ..............................................
d. Cleaning solvent for the factory floor
e. Wages of ..........................................abinderemployedina
printing plant ....................................
f. Insurance on factory machines ........
g. Rent paid for factory buildings..........
h. Wages of the Machining
Department supervisor .....................
i. Leather used in a shoe factory .........
j. Wages of a factory janitor ................
m. Fuel used in heating a factory ..........
n. Paint used in the manufacture of
jet skis ….….....................................
o. Wages of an ironworker in the
construction business ......................
p. Electricity used in lighting
sales offices .....................................
E1-6
When direct materials and supplies are purchased, the materials account is debited.
When direct materials and supplies are issued to the factory, the materials account is
credited, Work in Process is debited for the cost of the direct materials, and the factory
overhead account is debited for the cost of indirect materials.
When labor costs are distributed, the payroll account is credited, Work in Process is
debited for the cost of direct labor, and Factory Overhead is debited for the cost of indi-
rect labor.
As other costs related to manufacturing are recorded, the factory overhead account is
charged. The debit to Work in Process for factory overhead is made by allocating over-
head expenses to this account. At the same time, the factory overhead account is cred-
ited. The total cost of goods completed is recorded by debiting Finished Goods and
crediting Work in Process. When units are sold, Cost of Goods Sold is debited and Fin-
ished Goods is credited.
E1-7
Valley View Manufacturing Co. Statement
of Cost of Goods Manufactured For the
Month Ended January 31, 20—
a. Materials:
E1-8
Viejas Manufacturing Co.
Statement of Cost of Goods Manufactured
For the Month Ended January 31, 20—
a. Materials: