1. As a CPA, one of your clients asks you whether his manufacturing company should include standard costs in their cost accounting system. List at least two reasons for including standard costs in your client's cost accounting system and two potential problems with including standard costs in the client's cost accounting system.
2. Southern Pecan Company grows and sells pecans. The company harvested 10,000 bags of pecans in May and sold everything that it harvested. The company's flexible budget for May was:
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Bags sold
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10,000
|
|
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Revenue ($10/bag)
|
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$100,000
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Expenses:
|
|
|
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Bags ($.50 each)
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$5,000
|
|
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Pecan orchard maintenance
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$10,000
|
|
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Wages and salaries ($2,400 + $.50 per bag)
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$7,400
|
|
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Shipping ($.40 per bag)
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$4,000
|
|
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Other expenses ($1,000 + $.45 per bag)
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$5,500
|
|
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Total Expenses
|
|
$31,900
|
|
Net operating income
|
|
$68,100
|
The actual results for May were:
|
Bags sold
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10,000
|
|
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Revenue ($10/bag)
|
|
$105,000
|
|
Expenses:
|
|
|
|
Bags ($.50 each)
|
$5,100
|
|
|
Pecan orchard maintenance
|
$9,000
|
|
|
Wages and salaries ($2,400 + $.50 per bag)
|
$7,900
|
|
|
Shipping ($.40 per bag)
|
$5,000
|
|
|
Other expenses ($1,000 + $.45 per bag)
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$5,600
|
|
|
Total Expenses
|
|
$32,600
|
|
Net operating income
|
|
$72,400
|
Prepare a report detailing the company's revenue and spending variances of May.
3. With the following information, compute the throughput time and the manufacturing cycle efficiency:
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Wait time
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12.0 days
|
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Inspection time
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0.9 days
|
|
Processing time
|
3.5 days
|
|
Move time
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0.2 days
|
|
Queue time
|
2.0 days
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For problems, be sure to answer all questions and provide all requested information.
4. What are the "exceptions" that management by exception considers? How does consideration of these "exceptions" assist a business in evaluating its performance?