Chapter 22: 14DQ (page 1013)
What is a joint cost? How are joint costs usually allocated among the products produced from them?
Thecost incurred for more than one productis known as joint cost. The business entity uses the physical and value basis methods to allocate joint costs.
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Question: Pablo Management has five part-time employees, eachof whom earns $250 per day. They are normally
paid on Fridays for work completed Monday through Friday of the same week. Assume that December 28,
2017, was a Friday, and that they were paid in full on that day. The next week, the five employees worked
only four days because New Year’s Day was an unpaid holiday.
a. Assuming that December 31, 2017, was a Monday, prepare the adjusting entry for wages expense that
would be recorded at the close of that day.
b. Assuming that January 4, 2018, was a Friday, prepare the journal entry that would be made to record
payment of the employees’ wages for that week.
Question: In each blank next to the following terms, place the identifying letter of its best description.
1. Cost center | A. Incurs costs without directly yielding revenues. |
2. Investment center | B. Provides information used to evaluate the performance of a department. |
3. Departmental accounting system | C. Holds manager responsible for revenues, costs, and investments. |
4. Operating Department | D. Engages directly in manufacturing or in making sales directly to customers. |
5. Profit center | E. Does not directly manufacture products but contributes to profitability of the entire company. |
6. Responsibility accounting system | F. Incurs costs and also generates revenues |
7. Service department | G. Provides information used to evaluate the performance of a department manager |
Question: What is the difference between operating departments and service departments?
Nombre Company management predicts \(390,000 of variable costs, \)430,000 of fixed costs, and a pretax income of \(155,000 in the next period. Management also predicts that the contribution margin per unit will be \)9. Use this information to compute the
(1) total expected dollar sales for next period and
(2) number of units expected to be sold next period.
Heart & Home Properties is developing a subdivision that includes 600 home lots. The 450 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 150 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is \(55,000 and for each Hilltop lot is \)110,000. The developer acquired the land for \(4,000,000 and spent another \)3,500,000 on street and utilities improvements. Assign the joint land and improvement costs to the lots using the value basis of allocation and determine the average cost per lot.
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