Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
16th Edition
ISBN: 9780134475585
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 6.28E
Budgeting, service company. Ever Clean Company provides gutter cleaning services to residential clients. The company has enjoyed considerable growth in recent years due to a successful marketing campaign and favorable reviews on service-rating Web sites. Ever Clean owner Joanne Clark makes sales calls herself and quotes on jobs based on length of gutter surface. Ever Clean hires college students to drive the company vans to jobs and clean the gutters. A part-time bookkeeper takes care of billing customers and other office tasks.
Joanne Clark estimates that her gutter cleaners will work a total of 1,000 jobs during the year. Each job averages 600 feet of gutter surface and requires 12 direct labor-hours. Clark pays her gutter cleaners $15 per hour, inclusive of taxes and benefits. The following table presents the budgeted overhead costs for 2018:
| Variable costs | |
| Supplies ($6.50 per DLH) | $ 78,000 |
| Fixed costs (to support capacity of 12,000 DLH) | |
| Indirect labor | 25,000 |
| |
17,000 |
| Other | 24,000 |
| Total budgeted costs | $144,000 |
- 1. Prepare a direct labor budget in both hours and dollars.
- 2. Calculate the budgeted overhead allocation rate based on the budgeted quantity of the cost drivers.
- 3. Calculate the budgeted total cost of all jobs for the year and the budgeted cost of an average 600-foot gutter-cleaning job.
- 4. Prepare a revenues budget for the year assuming that Ever Clean charges customers $0.60 per square foot.
- 5. Calculate the budgeted operating income.
- 6. What actions can Clark take if sales should decline to 900 jobs annually?
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Q.Calculate the budgeted overhead allocation rate based on the budgeted quantity of the cost drivers.
Refer to Exercise 8.29. Suppose Gene determines that next year's Sales Division activities
include the following:
Research researching current and future conditions in the industry
Shipping arranging for shipping of mattresses and handling calls from purchasing agents at
retail stores to trace shipments and correct errors
Jobbers coordinating the efforts of the independent jobbers who sell the mattresses
Basic ads-placing print and television ads for the Sleepeze and Plushette lines
Ultima ads choosing and working with the advertising agency on the Ultima account
Office management-operating the Sales Division office
The percentage of time spent by each employee of the Sales Division on each of the above
activities is given in the following table:
Research
Administrative
Gene
Assistant
Assistant
Research
75%
Shipping
Jobbers
30%
20%
15
10
20
Basic ads
15
40
Ultima ads
30
5
Office management
25
15
Taylor Construction builds custom homes in Dallas, Texas. Brandon Taylor knows that his future depends on the quality of the homes he builds and the service he provides to customers. Most new-customer sales arise from word-of-mouth advertising by former customers.Identify the balanced scorecard perspective for each measure in the exercise.
Perspective
a.
Number of customer complaints
Internal business processesCustomerLearning & growthFinancial
b.
Employee turnover
Learning & growthFinancialInternal business processesCustomer
c.
Net profit per house constructed
Learning & growthFinancialInternal business processesCustomer
d.
Turnaround time on customer design changes
Learning & growthInternal business processesCustomerFinancial
e.
Hours of training per employee
Learning & growthFinancialInternal business processesCustomer
f.
Average labor cost per house
CustomerLearning &…
Chapter 6 Solutions
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
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