Exam 1: Accounting for Decision Making and Control

Accounting for JIT Vail operates a JIT plant assembling ceiling fans. The Sunset Model ceiling fam has a standard material cost of $28.40, a standard direct labor cost of $14.80, and overhead (fixed and variable) of $16.10. On Monday, a batch of 100 Sunset fans is completed. All of the materials for the 100 fans were on hand prior to Monday and had been previously recorded in the raw and in-process inventory account. Required: a. Describe the accounting entries that are made at the end of Monday to record the assembly of the batch of 100 Sunset fans. b. In analyzing the financial statements of a firm using JIT and another firm in the same industry not using JIT, what differences would you expect to observe?

Choosing Allocation Bases For Levying Taxes The town of Seaside has decided to construct a new sea aquarium to attract tourist. The cost of the measure is to be paid by a special tax. although most of the townspeople believe the sea aquarium is a good idea, there is disagreement about how the tax should be levied. Required: Suggest three different methods of levying the tax and the advantages and disadvantages of each.

The Effect of Budgets on Organization Describe how budgets and budgeting systems help solve the organization problem. Give examples.

Incentives and Depreciation Methods What conditions are likely to exist when operating managers are compensated based on accounting earnings and accelerated depreciation methods are used to compute overhead charges to operating departments?

Cost, Volume, Profit Analysis With the possibility of the US Congress relaxing restrictions on cutting old growth, a local lumber company is considering an expansion of its facilities. The company believes it can sell lumber for $0.18/board foot. A board foot is a measure of lumber. The tax rate for the company is 30 percent. The company has the following two opportunities: • Build Factory A with annual fixed costs of $20 million and variable costs of $0.10/board foot. This factory has an annual capacity of 500 million board feet. • Build Factory B with annual fixed costs of $10 million and variable costs of $0.12/board foot. This factory has an annual capacity of 300 million board feet. Required: a. What is the break-even point in board feet for Factory A? b. If the company wants to generate an after tax profit of $2 million with Factory B, how many board feet would the company have to process and sell? c. If demand for lumber is uncertain, which factory is riskier? d. At what level of board feet would the after-tax profit of the two factories be the same?

Labor Variances Hospital Software sells and installs computer software used by hospitals for patient admissions and billing. Every sale requires that Hospital Services modify its proprietary software for the specific demands of the client. Prior to each installation, Hospital Software estimates the number of hours of programming time each job will require and the cost of the programmers. Programmers record the amount of time they spend on each modification, and variance reports are prepared at the end of each installation. For the Denver General Hospital account, Hospital Software estimates the following labor standards: After the job was completed, the following costs were reported: Required: Calculate the labor efficiency and labor wage rate variances for the junior and senior programmers on the Denver General Hospital account.