Managerial Accounting Problems

Problem 12-6: Changing Standards

The empirical evidence reveals that very few firms change their standard prices and standard quantities during the fiscal year.  Most firms have the following policy, “We set our standards before the fiscal year begins and we NEVER, NEVER change them during the year (except when we have to).”

Required:

1.	Evaluate the “never change” policy.  Does it make any sense?  Why would firms adopt such a policy?

2.	When would you expect firms to change their standards during the fiscal year?

 

Problem 12-11: Zinc Faucets

The standard cost sheet calls for 80 pounds of zinc per batch of 70 faucets.  Zinc has a standard price of $5.10 per pound.  One thousand pounds of zinc are purchased for $5,530.  Ten batches of the faucets are produced, and 840 pounds of zinc are used.  There was no beginning zinc inventory.  All variances are calculated as soon as possible.

Required:

Prepare a table that decomposes the total purchase price of the zinc ($5,530) into its various components as calculated by the standard cost system.

Problem 12-14: Flower City Cartridges

Flower City Cartridges (FCC) manufactures replacement cartridges for desktop printers.  FCC uses standard costs within a job order cost system.  In June, FCC purchased 18 gallons of blue ink for $385.20 and produced the following four different cartridge jobs using the blue ink (and other inks, materials, and direct labor):                                       

                                             Jobs                                     Blue Ink, Gallons Used

                                             CJ120                                                 4.2

                                             HP9X2                                                3.9

                                             CN417                                                3.8

                                             XRX776                                              4.4

 

               All four jobs have a blue ink materials standard that calls for four gallons of blue ink per job.  Blue ink has a standard cost of $20 per gallon.  These were the only jobs calling for blue ink in June.  There was no beginning blue ink inventory on June 1.

Required:

Prepare a table that indicates the financial disposition of the historical cost of the blue ink purchased in June.  (That is, account for the $385.20 blue ink purchase.)

 

Problem 12-15: Great Southern Furniture

Ed Koehler started Great Southern Furniture five years ago to assemble prefabricated bedroom furniture for large hotel chains.  Hotels purchase furniture (beds, night stands, and chests of drawers) from manufacturers who ship the furniture to the hotels unassembled.  Koehler sends a site supervisor and a small crew of employees to the hotel.  The site supervisor first hires additional local employees to help assemble the furniture and then trains them.  The locally hired employees along with the small crew of Great Southern employees assemble the furniture at the hotel.  This significantly reduces the shipping charges and damage to the furniture.  Before sending a crew to the site, Koehler has a crew in his office assemble several sets to make sure there are no problems and also to estimate the expected time required to assemble the particular furniture.

               The 500-room Hyatt opens in Tampa and Koehler sends a crew to assemble the 500 bedroom sets.  He establishes that 4.5 hours are required to assemble one complete room and the estimated cost per hour is $22.  Upon completing the job, the crew reports they had total wages of $49,693 for 2,170 hours worked.

Required:

Write a report evaluating the performance of the crew at the Hyatt in Tampa.

 

Problem 12-17: Software Associates

Software Associates (SA) is a computer software consulting firm that specializes in designing and implementing integrated marketing database warehousing programs.  Humphrey Catalog is a client.  In preparing its bid for Humphrey, SA estimates its total labor cost for this project to be $225,500, broken down as follows:

                                    Budgeted Hours                Budgeted Wage                Budgeted Cost

Partner                            100                                      $175                                 $17,500

Associate                         300                                      120                                     36,000

Senior Analyst                 600                                        90                                      54,000

Analyst                          1,000                                     40                                       40,000

Programmer                   3,000                                      25                                      75,000

 

Total                                                                                                                   $225,500

 

After completing the Humphrey contract, SA reports the following the data.

 

                                          Actual Cost                    Actual Hours

Partner                                    90                                $ 15,750

Associate                                280                                  35,000

Senior Analyst                        750                                   63,750

Analyst                                1,400                                   49,000

Programmer                        3,600                                    82,800

Total                                                                            $ 246,300

 

Required:

1.	Prepare a performance report for the Humphrey Catalog project.

2.	Offer a plausible explanation for SA’s performance on the Humphrey project