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 6, Problem 12E
A local barbershop cuts the hair of 1,200 customers per month. The clients are men, and the barbers offer no special styling. During the month of May, 1,200 customers were serviced. The cost of haircuts includes the following:
Required:
- 1. Explain why
process costing is appropriate for this haircutting operation. - 2. Calculate the cost per haircut.
- 3. Can you identify some possible direct materials used for this haircutting service? Is the usage of direct materials typical of services? If so, provide examples of services that use direct materials. Can you think of some services that would not use direct materials?
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located on remote ranches that require considerable travel time. The owner's daughter, home for the summer from college, has
suggested investigating this question using activity-based costing. After some discussion, she designed a simple system consisting of
four activity cost pools. The activity cost pools and their activity measures appear below:
Activity Cost Pool
Cleaning carpets
Activity for the Year
13,500 hundred square feet
65,000 miles
1,900 jobs
Travel to jobs
Job support
Other (organization-sustaining costs and idle
capacity costs)
Not applicable
The total cost of operating the company for the year is $369,000 which includes the following costs:
Wages
Cleaning supplies
Cleaning equipment depreciation
Vehicle expenses
Office expenses
President's compensation
Total cost
Activity Measure
Square feet cleaned (00s)
Miles driven
Number of jobs
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Process Costing, Service Organization
A local barbershop cuts the hair of 1,200 customers per month. The clients are men, and the bar-bers offer no special styling. During the month of May, 1,200 customers were serviced. The cost of haircuts includes the following:
Required:1. Explain why process costing is appropriate for this haircutting operation.2. Calculate the cost per haircut.3. Can you identify some possible direct materials used for this haircutting service? Is the usageof direct materials typical of services? If so, provide examples of services that use directmaterials. Can you think of some services that would not use direct materials?
Marvin's Kitchen Supply delivers restaurant supplies throughout the city. The firm adds 10 percent to the cost of the supplies to cover
the delivery cost. The delivery fee is meant to cover the cost of delivery. A consultant has analyzed the delivery service using activity-
based costing methods and identified four activities. Data on these activities follow.
Activity
Processing order
Loading truck
Delivering merchandise
Processing invoice
Total overhead
Order value
Number of orders
Number of items
Number of invoices
Cost Driver
Number of orders
Number of items
Number of orders
Number of invoices
Two of Marvin's customers are City Diner and Le Chien Chaud. Data for orders and deliveries to these two customers follow.
City Diner Le Chien Chaud
$75,000
$90,000
110
1,500
150
Required A
Cost Driver Volume
52
600
12
Cost
$ 75,000
150,000
90,000
72,000
$387,000
Required B
City Diner
Le Chien Chaud
Driver Volume
5,000 orders
100,000 items
Required:
a. What would the delivery charge for each…
Chapter 6 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 6 - What is a process? Provide an example that...Ch. 6 - Describe the differences between process costing...Ch. 6 - Prob. 3DQCh. 6 - What are transferred-in costs?Ch. 6 - Explain why transferred-in costs are a special...Ch. 6 - What is a production report? What purpose does...Ch. 6 - Can process costing be used for a service...Ch. 6 - What are equivalent units? Why are they needed in...Ch. 6 - How is the equivalent unit calculation affected...Ch. 6 - Describe the five steps in accounting for the...
Ch. 6 - Under the weighted average method, how are...Ch. 6 - Under what conditions will the weighted average...Ch. 6 - In assigning costs to goods transferred out, how...Ch. 6 - Prob. 14DQCh. 6 - What is operation costing? When is it used?Ch. 6 - Lamont Company produced 80,000 machine parts for...Ch. 6 - Lising Therapy has a physical therapist who...Ch. 6 - Fleming, Fleming, and Johnson, a local CPA firm,...Ch. 6 - During October, McCourt Associates incurred total...Ch. 6 - Tomar Company produces vitamin energy drinks. The...Ch. 6 - Apeto Company produces premium chocolate candy...Ch. 6 - Jackson Products produces a barbeque sauce using...Ch. 6 - Gunnison Company had the following equivalent...Ch. 6 - Jackson Products produces a barbeque sauce using...Ch. 6 - Morrison Company had the equivalent units schedule...Ch. 6 - Shorts Company has three process departments:...Ch. 6 - A local barbershop cuts the hair of 1,200...Ch. 6 - Friedman Company uses JIT manufacturing. There are...Ch. 6 - Lacy, Inc., produces a subassembly used in the...Ch. 6 - Softkin Company manufactures sun protection...Ch. 6 - Heap Company manufactures a product that passes...Ch. 6 - K-Briggs Company uses the FIFO method to account...Ch. 6 - The following data are for four independent...Ch. 6 - Using the data from Exercise 6.18, compute the...Ch. 6 - Holmes Products, Inc., produces plastic cases used...Ch. 6 - Dama Company produces womens blouses and uses the...Ch. 6 - Fordman Company has a product that passes through...Ch. 6 - Using the same data found in Exercise 6.22, assume...Ch. 6 - Baxter Company has two processing departments:...Ch. 6 - Tasty Bread makes and supplies bread throughout...Ch. 6 - Under either weighted average or FIFO, when...Ch. 6 - During the month of June, the mixing department...Ch. 6 - As goods are transferred from a prior process to a...Ch. 6 - During March, Hanks Manufacturing started and...Ch. 6 - Proteger Company manufactures insect repellant...Ch. 6 - Swasey Fabrication, Inc., manufactures frames for...Ch. 6 - Refer to the data in Problem 6.31. Assume that the...Ch. 6 - Hatch Company produces a product that passes...Ch. 6 - FIFO Method, Single Department Analysis, One Cost...Ch. 6 - Hepworth Credit Corporation is a wholly owned...Ch. 6 - Muskoge Company uses a process-costing system. The...Ch. 6 - Prob. 37PCh. 6 - Healthway uses a process-costing system to compute...Ch. 6 - FIFO Method, Two-Department Analysis Refer to the...Ch. 6 - Jacson Company produces two brands of a popular...Ch. 6 - Golding Manufacturing, a division of Farnsworth...Ch. 6 - Larkin Company produces leather strips for western...Ch. 6 - Novel Toys, Inc., manufactures plastic water guns....Ch. 6 - Prob. 44P
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