Account 221 Assistance

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B-20.01

Five of the following nine statements are patently false. Find the five false statements. The other statements are true. For the false statements, mark the words that make the statement false.
1.	In a process costing environment involving multiple departments, raw materials are only introduced in the first department, but labor and overhead may occur in any department.
2.	The primary difference between job costing and process costing is that with process costing, costs are captured for each process or department rather than for each job.
3.	A job costing environment uses a job cost sheet, but a process costing environment uses a cost allocation report.
4.	Process costing would be logically suited to a manufacturer of barbed wire fencing material.
5.	An item is not considered in the equivalent units calculations until it is a finished good.
6.	Factory overhead is not applied in a process costing environment.
7.	It would be logical to maintain a separate Work in Process ledger account for each department.
8.	The balance sheet of a business that uses process costing methods would include work in process and finished goods, but not raw materials inventory.
9.	Process costing can be applied on a weighted-average or FIFO basis.

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B-20.01

Worksheet-B-20.01

Five of the following nine statements are patently false. Find the five false statements. The other statements are true. For the false statements, mark the words that make the statement false.
F	1.	In a process costing environment involving multiple departments, raw materials are only introduced in the first department, but labor and overhead may occur in any department.
	2.	The primary difference between job costing and process costing is that with process costing, costs are captured for each process or department rather than for each job.
	3.	A job costing environment uses a job cost sheet, but a process costing environment uses a cost allocation report.
	4.	Process costing would be logically suited to a manufacturer of barbed wire fencing material.
	5.	An item is not considered in the equivalent units calculations until it is a finished good.
	6.	Factory overhead is not applied in a process costing environment.
	7.	It would be logical to maintain a separate Work in Process ledger account for each department.
	8.	The balance sheet of a business that uses process costing methods would include work in process and finished goods, but not raw materials inventory.
	9.	Process costing can be applied on a weighted-average or FIFO basis.

&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-20.01

B-20.01

B-21.01

Each of the following ten statements includes a pair of words within parenthesis. Indicate which of the words should be chosen to make the statement true. The first statement is done as an example.
1.	A ( loan application / budget ) is a detailed financial plan that quantifies future expectations and actions relative to acquiring and using resources.
2.	Budgets ( should / should not ) be used to provide managers with "preapproval" for execution of spending plans.
3.	The ( master budget / sales budget ) is a comprehensive document specifying sales targets, production activities, and financing actions.
4.	"Responsibility accounting" is a concept under which managers are held accountable for transactions and events ( beyond / under ) their direct influence and control.
5.	Some entities will follow a top-down ( mandated / participative ) approach to budgeting.
6.	A deliberate effort to create "breathing room" within a budget is known as ("padding the budget" / "aerating" ).
7.	With ( incremental budgeting / zero-based budgeting ), each expenditure item must be justified for the new budget period.
8.	The starting point for the master budget is an assessment of anticipated ( sales / production ).
9.	This comes before the other: ( production budget / materials purchases budget ).
10.	A ( static budget / flexible budget ) is not designed to change with changes in activity level.

B-21.01

Worksheet -B-21.01

Each of the following statements includes a pair of words within parenthesis. Indicate which of the words should be chosen to make the statement true. The first statement is done as an example.
	1.	A ( loan application / budget ) is a detailed financial plan that quantifies future expectations and actions relative to acquiring and using resources.
	2.	Budgets ( should / should not ) be used to provide managers with "preapproval" for execution of spending plans.
	3.	The ( master budget / sales budget ) is a comprehensive document specifying sales targets, production activities, and financing actions.
	4.	"Responsibility accounting" is a concept under which managers are held accountable for transactions and events ( beyond / under ) their direct influence and control.
	5.	Some entities will follow a top-down ( mandated / participative ) approach to budgeting.
	6.	A deliberate effort to create "breathing room" within a budget is known as ("padding the budget" / "aerating" ).
	7.	With ( incremental budgeting / zero-based budgeting ), each expenditure item must be justified for the new budget period.
	8.	The starting point for the master budget is an assessment of anticipated ( sales / production ).
	9.	This comes before the other: ( production budget / materials purchases budget ).
	10.	A ( static budget / flexible budget ) is not designed to change with changes in activity level.

B-21.01

18.02

True Flight Golf manufacturers a popular shaft for golf clubs. Its trade secret is a unique process for weaving high-tension wire into the center of the shaft such that energy is accumulated during the swing and released at impact. A specialized machine costing $3,000,000 is utilized in the manufacturing process. The machine has a 3-year life and no salvage value. True Flight uses straight-line depreciation. During the year, 25,000 shafts were produced, and the company was operating at full capacity. $700,000 of wire was used during the year.
(a)	Is machinery depreciation fixed or variable? Is wire fixed or variable?
(b)	For the two noted cost items, how much was total variable cost and total fixed cost?
(c)	For the two noted cost items, how much was variable cost per unit and how much was fixed cost per unit?
(d)	Repeat requirements (b) and (c), assuming production was only 20,000 units (and wire usage was reduced proportionately).
(e)	For the following year, if the company acquired an additional machine to enable production of 40,000 total units, what would happen to the expected total and per unit variable and fixed cost?
(f)	If the company experiences significant growth, and finds it necessary to continue to add additional machines, how would the machine cost be characterized (hint: fixed, variable, or something else)? In theory, at what production level(s) would per unit cost be minimized?

B-18.02

Worksheet-18.02

(a)

(b)

(c)

(d)

(e)

(f)

B-18.02

B-19.02

Mary Ann Clark is an artist and is employed by Fenway Racing. Fenway Racing manufactures custom race cars to exact specifications of drivers. Mary Ann's job is to hand paint logos and other custom artwork on each car. Below is her daily time sheet for March 7, 20X6:
	FENWAY RACING
	Employee:		Mary Ann Clark					Daily Time Sheet
	Date:		03/07/X6
	Start Time	Stop Time		Job Number	Task	Client	Admin Hours	Direct Labor Hours
	8:00	8:30		set up	Prepare paints and airbrush	n/a	0.50	0.00
	8:30	10:45		#11245	Paint race numbers	Mario A.	0.00	2.25
	10:45	11:00		repairs	Repair broken compressor	n/a	0.25	0.00
	11:00	12:00		#11302	Paint advertising sign on door	AJF	0.00	0.75
	12:00	1:00		lunch	n/a	n/a	0.00	0.00
	1:00	4:30		#11305	Paint hood logo	Jeff G.	0.00	3.50
	4:30	5:00		clean up	Clean up equipment	n/a	0.50	0.00
						Total hours	1.25	6.50
(a)	Examine the time sheet and find the error. What is the importance of correctly accumulating time by job? How does the time sheet data track to the cost assignment process?
(b)	How much of Mary Ann's time (after making the correction) is attributable to direct labor and how much to overhead? How is the direct labor cost assigned to individual jobs, and how is the overhead cost allocated?

B-19.02

Worksheet- B-19.02

(a)

(b)

B-20.02

Zeus Corporation produces cultured diamonds via a secretive process that grows the diamonds in a vacuum chamber filled with a carbon gas cloud. The diamonds are produced in a single continuous process, and Zeus uses the weighted-average process costing method of accounting for production. The production process requires constant utilization of facilities and equipment, as well as direct labor by skilled technicians. As a result, direct labor and factory overhead are both deemed to be introduced uniformly throughout production.

At the beginning of June, 20X9, 4,000 diamonds were in process. During June, an additional 8,000 diamonds were started, and 7,000 diamonds were completed and transferred to finished goods.

As of the beginning of the month, work in process was 80% complete with respect to materials and 60% complete with respect to conversion costs.

As of the end of the month, work in process was 70% complete with respect to materials and 40% complete with respect to conversion costs.

Prepare a "unit reconciliation" schedule that includes calculations showing the equivalent units of materials, direct labor, and factory overhead for June.

B-20.02

Worksheet-B-20.02


Unit Reconciliation:
	Quantity Schedule
Beginning Work in Process
Started into Production
Total Units into Production		Equivalent Units Calculations:
			Conversion
		Direct Materials	Direct Labor	Factory Overhead
To Finished Goods
Ending Work in Process
Total Units Reconciled
		Ending WIP Completion Status: Materials = % Conversion = %

B-20.02

21.02

Logan Township acquired its water system from a private company on June 1. No receivables were acquired with the purchase. Therefore, total accounts receivable on June 1 had a zero balance. Logan plans to bill customers in the month following the month of sale, and 70% of the resulting billings will be collected during the billing month. In the next following month, 90% of the remaining balance should be collectable. The remaining uncollectible amounts will relate to citizens who have moved away. Such amounts are never expected to be collected and will be written off. Water sales during June are estimated at $3,000,000, and expected to increase 30% in July. August sales will be 10% less than July sales.
(a)	For each dollar of sales, how much is expected to be collected?
(b)	Estimate the monthly cash collections for June, July, August, and September.
(c)	As of the end of August, how much will be the estimated amount of receivables from which future cash flows are anticipated?

B-21.02

Worksheet-21.02

Name:
Date: Section:
(a)
(b)	June	July	August	September
(c)	June	July	August	Total Receivables

B-21.02