Horngren's Cost Accounting, Student Value Edition (16th Edition)

16th Edition

ISBN: 9780134476032

Author: Srikant M. Datar, Madhav V. Rajan

Publisher: PEARSON

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Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

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Textbook Question

Chapter 5, Problem 5.43P

Activity-based costing, activity-based management, merchandising. Mountain Outfitters operates a large outdoor clothing and equipment store with three main product lines: clothing, equipment, and shoes. Mountain Outfitters operates at capacity and allocates selling, general, and administration (S, G & A) costs to each product line using the cost of merchandise of each product line. The company wants to optimize the pricing and cost management of each product line and is wondering if its accounting system is providing it with the best information for making such decisions. Store manager Aaron Budd gathers the following information regarding the three product lines:

Chapter 5, Problem 5.43P, Activity-based costing, activity-based management, merchandising. Mountain Outfitters operates a

For 2017, Mountain Outfitters budgets the following selling, general, and administration costs:

Mountain Outfitters Selling, General, and Administration (S, G & A) Costs For the Year Ended December 31, 2017
Purchasing department expense	$ 320,000
Receiving department expense	210,000
Customer support expense (cashiers and floor employees)	250,000
Rent	240,000
General store advertising	100,000
Store manager’s salary	125,000
	$1,245,000

1. Suppose Mountain Outfitters uses cost of merchandise to allocate all S, G & A costs. Prepare budgeted product-line and total company income statements.

Required

2. Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new budgeted product-line and total company income statements. Compare your results to the results in requirement 1.
3. Write a memo to Mountain Outfitters management describing how the improved system might be useful for managing the store.

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Chapter 5, Problem 5.42P

Chapter 6, Problem 6.1Q

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Chapter 5 Solutions

Horngren's Cost Accounting, Student Value Edition (16th Edition)

Ch. 5 - What is broad averaging, and what consequences can...Ch. 5 - Why should managers worry about product...Ch. 5 - What is costing system refinement? Describe three...Ch. 5 - What is an activity-based approach to designing a...Ch. 5 - Describe four levels of a cost hierarchy.Ch. 5 - Why is it important to classify costs into a cost...Ch. 5 - What are the key reasons for product cost...Ch. 5 - Prob. 5.8Q Ch. 5 - Department indirect-cost rates are never...Ch. 5 - Prob. 5.10Q

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Solution Summary: The author explains job order costing, which is a method of estimating the amount of allocating the overhead cost of resources to the associated product based on the total units manufacture of that product, machine and labor hour consumed to manufacture

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