Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 14, Problem 21E
At the end of 20x5, Bing Pharmaceuticals began to implement an environmental quality management program. As a first step, it identified the following costs in its accounting records as environmentally related for the calendar year just ended:
Required:
- 1. Prepare an environmental cost report by category. Assume that total operating costs are $150,000,000.
- 2. Use a pie chart to illustrate the relative distribution percentages for each environmental cost category. Comment on what this distribution communicates to a manager.
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Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's
controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern
of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an
equation, in the form of Y= a + bx, for maintenance costs. Data regarding the maintenance hours and costs for last year
are as follows:
Month
January
February
March
April
May
June
July
August
September
October
November
December
Total
Average
Hours of
Maintenance
Service
560
480
280
470
350
460
320
430
490
380
350
340
4,910
409
Maintenance cost
Maintenance
Costs
$ 5,110
4,240
2,730
4,300
3,030
4, 120
3,000
3,590
4,000
3,220
3,170
3,070
$ 43,580
$ 3,632
PR 6-38 (Algo) Part 3 Compute the predicted maintenance cost...
3. Compute the predicted maintenance cost at 670 hours of activity.
Answer is complete but not entirely correct.
$
49,192 X
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's
controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern
of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an
equation, in the form of Y= a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year
are as follows:
Month
January
February
March
April
May
June
July
August
September
October
November
December
Total
Average
Hours of
Maintenance
Service
Variable maintenance cost
560
480
280
470
350
460
320
430
490
380
350
340
4,910
409
$
Maintenance
Costs
$ 5,110
4,240
2,730
4,300
3,030
4, 120
PR 6-38 (Algo) Part 2 What is the variable component of the maintenance cost?
2. Using your answer to requirement 1, what is the variable component of the maintenance cost?
Note: Round your answer to 2 decimal places.
3,000
3,590…
Nation's Capital Fitness, Incorporated, operates a chain of fitness centers in the Washington, D.C., area. The firm's
controller is accumulating data to be used in preparing its annual profit plan for the coming year. The cost behavior pattern
of the firm's equipment maintenance costs must be determined. The accounting staff has suggested the use of an
equation, in the form of Y= a + bX, for maintenance costs. Data regarding the maintenance hours and costs for last year
are as follows:
Month
January
February
March
April
May
June
July
August
September
October
November
December
Total
Average
Hours of
Maintenance
Service
560
480
280
470
350
Monthly maintenance cost =
460
320
430
490
380
350
340
4,910
409
Maintenance
Costs
$ 5,110
4,240
2,730
4,300
3,030
4,120
3,000
3,590
4,000
3,220
3,170
3,070
$ 43,580
$ 3,632
PR 6-38 (Algo) Part 1 Estimate the behavior of the maintenance costs incurred...
Required:
1. Using the high-low method of cost estimation, estimate the behavior of the maintenance…
Chapter 14 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 14 - What is the difference between quality of design...Ch. 14 - Why are quality costs the costs of doing things...Ch. 14 - Prob. 3DQCh. 14 - Describe the Taguchi quality loss function, and...Ch. 14 - Identify and discuss the four kinds of quality...Ch. 14 - Explain why external failure costs can be more...Ch. 14 - Prob. 7DQCh. 14 - Prob. 8DQCh. 14 - Describe the three types of quality performance...Ch. 14 - Prob. 10DQ
Ch. 14 - If a firms annual sales are 200 million, what...Ch. 14 - Explain why it is important for a manager to...Ch. 14 - Prob. 13DQCh. 14 - Explain why the Accounting Department should be...Ch. 14 - Prob. 15DQCh. 14 - What is ecoefficiency?Ch. 14 - Prob. 17DQCh. 14 - Prob. 18DQCh. 14 - Prob. 19DQCh. 14 - What are the four categories of environmental...Ch. 14 - Prob. 21DQCh. 14 - What does full environmental costing mean? Full...Ch. 14 - What information is communicated by the unit...Ch. 14 - Evans Company had total sales of 3,000,000 for...Ch. 14 - Prob. 2CECh. 14 - Ross Company implemented a quality improvement...Ch. 14 - Nabors Company had actual quality costs for the...Ch. 14 - Verde Company reported operating costs of...Ch. 14 - Pinter Company had the following environmental...Ch. 14 - Rachel Boyce, president of a company that...Ch. 14 - Quality attributes such as performance and...Ch. 14 - Stahman, Inc., estimates its hidden external...Ch. 14 - Prob. 10ECh. 14 - Abernathy, Inc., produces two different generators...Ch. 14 - Kang Company reported sales of 3,240,000 in 20x5....Ch. 14 - Gagnon Company reported the following sales and...Ch. 14 - Muskogee Company had sales of 60,000,000 in 20x1....Ch. 14 - Javier Company has sales of 8 million and quality...Ch. 14 - In 20x4, Tru-Delite Frozen Desserts, Inc.,...Ch. 14 - Prob. 17ECh. 14 - Prob. 18ECh. 14 - Achieving sustainable development will likely...Ch. 14 - Classify the following environmental activities as...Ch. 14 - At the end of 20x5, Bing Pharmaceuticals began to...Ch. 14 - Prob. 22ECh. 14 - Coyle Pharmaceuticals produces two organic...Ch. 14 - Prob. 24ECh. 14 - Which of the following quality costs is an...Ch. 14 - Which of the following would be a hidden quality...Ch. 14 - Using the Taguchi quality loss function, an...Ch. 14 - Environmental costs are those costs incurred...Ch. 14 - Two products, Product A and Product B, are...Ch. 14 - Kathy Shorts, president of Oliver Company, was...Ch. 14 - Panguitch Company manufactures a component for...Ch. 14 - Gaston Company manufactures furniture. One of its...Ch. 14 - Classify the following quality costs as...Ch. 14 - Wayne Johnson, president of Banshee Company,...Ch. 14 - Recently, Ulrich Company received a report from an...Ch. 14 - In 20x5, Major Company initiated a full-scale,...Ch. 14 - Paper Products Division produces paper diapers,...Ch. 14 - In 2011, Milton Thayne, president of Carbondale...Ch. 14 - Iona Company, a large printing company, is in its...Ch. 14 - Prob. 40PCh. 14 - The following items are listed in an environmental...Ch. 14 - Refer to Problem 14.41. In the environmental...Ch. 14 - The following environmental cost reports for 20x3,...Ch. 14 - Refer to Problem 14.43. In 20x3, Jack Carter,...
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- The controller of Emery, Inc. has computed quality costs as a percentage of sales for the past 5 years (20X1 was the first year the company implemented a quality improvement program). This information is as follows: Required: 1. Prepare a trend graph for total quality costs. Comment on what the graph has to say about the success of the quality improvement program. 2. Prepare a graph that shows the trend for each quality cost category. What does the graph have to say about the success of the quality improvement program? Does this graph supply more insight than the total cost trend graph does? 3. Prepare a graph that compares the trend in relative control costs versus relative failure costs. Comment on the significance of this trend.arrow_forwardPintura Company implemented a quality improvement program and tracked the following for the five years: By cost category as a percentage of sales for the same period of time: Required: 1. Prepare a bar graph that reveals the trend in quality cost as a percentage of sales (time on the horizontal axis and percentages on the vertical). Comment on the message of the graph. 2. Prepare a bar graph for each cost category as a percentage of sales. What does this graph tell you?arrow_forwardNabors Company had actual quality costs for the year ended June 30, 20x5, as given below. At the zero-defect state, Nabors expects to spend 375,000 on quality engineering, 75,000 on vendor certification, and 50,000 on packaging inspection. Assume sales to be 25,000,000. Required: 1. Prepare a long-range performance report for 20x5. What does this report tell the management of Nabors? 2. Explain why quality costs still are present for the zero-defect state. 3. What if Nabors achieves the zero-defect state reflected in the report? What are some of the implications of this achievement?arrow_forward
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- The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express the companys maintenance costs as an equation where x represents the gallons of paint produced. Then estimate the fixed and variable costs. Predict the maintenance costs i190,000 gallons of paint are produced. Predict the maintenance costs if 81,000 gallons of paint are produced. Using Excel, create a scatter graph of the cost data and explain the relationship between gallons of paint produced and equipment maintenance expenses.arrow_forwardNorris Company implemented a quality improvement program and tracked the following for the 5 years: By cost category of sales for the same period of time: Required: 1. Prepare a bar graph (hat reveals the trend in quality cost as a percentage of sales (time on horizontal axis and percentages on the vertical). Comment on the message of the graph. 2. Prepare a bar graph for each cost category as a percentage of sales. What does this graph tell you?arrow_forwardPinter Company had the following environmental activities and product information: 1. Environmental activity costs 2. Driver data 3. Other production data Required: 1. Calculate the activity rates that will be used to assign environmental costs to products. 2. Determine the unit environmental and unit costs of each product using ABC. 3. What if the design costs increased to 360,000 and the cost of toxic waste decreased to 750,000? Assume that Solvent Y uses 6,000 out of 12,000 design hours. Also assume that waste is cut by 50 percent and that Solvent Y is responsible for 14,250 of 15,000 pounds of toxic waste. What is the new environmental cost for Solvent Y?arrow_forward
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