Question: Carmen Douglas claims that her company’s

> How are job order, process, and operations costing the same? How are they different?

> Why is a process costing system not appropriate for companies that produce items that are distinctly different from one another?

> How is depreciation on manufacturing equipment recorded in ledger accounts? How is this depreciation assigned to the items produced in a job-order costing system and in a process costing system?

> To what types of products is a job-order costing system best suited? Provide examples.

> What do the terms overapplied overhead and underapplied overhead mean?

> Al Carmon says that his company has a difficult time establishing a predetermined overhead rate because the number of units of product produced during a period is difficult to measure. What are two measures of production other than the number of units of

> Why is the salary of a production worker capitalized while the salary of a marketing manager is expensed?

> X Company recorded the payment for utilities used by the manufacturing facility by decreasing Cash and increasing Manufacturing Overhead. Why was the increase made to Manufacturing Overhead instead of Work in Process Inventory?

> At the end of the accounting period, an adjustment is made for the accrued wages of production workers. How would this entry affect assets, liabilities, and equity? What is the effect on the income statement?

> Goods that cost $2,000 to make were sold for $3,000 on account. How does their sale affect assets, liabilities, and equity? What is the effect on the income statement?

> How do manufacturing costs flow through inventory accounts?

> The management team of Magnificent Modems Inc. (MMI) wants to investigate the effect of several different growth rates on sales and cash receipts. Cash sales for the month of January are expected to be $10,000. Credit sales for January are expected to be

> Direct raw materials were purchased on account, and the costs were subsequently transferred to Work in Process Inventory. How would the transfer affect assets, liabilities, equity, and cash flows? What is the effect on the income statement? Would your an

> Under what circumstance is a variable costing statement format used? What potential problem could it eliminate?

> How is profitability affected by increases in productivity under the variable and absorption costing approaches?

> How does the variable costing approach differ from the absorption costing approach? Explain the different income statement formats used with each approach.

> For what purpose is the schedule of cost of goods manufactured and sold prepared? Do all companies use the statement?

> What is the purpose of the Manufacturing Overhead account?

> Because of seasonal fluctuations, Buresch Corporation has a problem determining the unit cost of its products. For example, high heating costs during the winter months cause the cost per unit to be higher than the per-unit cost in the summer months even

> Why are actual overhead costs not used in determining periodic product cost?

> How does the adjustment to close an insignificant amount of overapplied overhead to the Cost of Goods Sold account affect net income?

> What are product costs and selling, general, and administrative costs? Give examples of product costs and of selling, general, and administrative costs.

> Use the same transaction data for Magnificent Modems Inc. Required 1. One of Magnificent Modems’ sales representatives receives a special offer to sell 1,000 modems at a price of $72 each. Should the offer be accepted? 2. Magnificent Modems has the oppor

> What is the difference between direct and indirect raw materials costs?

> How can present value “what-if” analysis be enhanced by using software programs?

> Define the term annuity. What is one example of an annuity receipt?

> Why are present value tables frequently used to convert future values to present values?

> If you wanted to have $100,000 one year from today and desired to earn a 6 percent return, what amount would you need to invest today? Which amount has more value, the amount today or the $100,000 a year from today?

> How does a company establish its minimum acceptable rate of return on investments?

> Define the term return on investment. How is the return normally expressed? Give an example of a capital investment return.

> A dollar today is worth more than a dollar in the future.” “The present value of a future dollar is worth less than one dollar.” Are these two statements synonymous? Explain.

> What is a postaudit? How is it useful in capital budgeting?

> How do capital investments affect profitability

> To this point, we have assumed that Magnificent Modems produced only one type of modem. Suppose instead we assume the company produces several different kinds of modems. The production process differs for each type of product. Some require more setup tim

> What are the advantages and disadvantages associated with the unadjusted rate of return method for evaluating capital investments?

> The payback method cannot be used if the cash inflows occur in unequal patterns.” Do you agree or disagree? Explain.

> What are three reasons that cash is worth more today than cash to be received in the future?

> I always go for the investment with the shortest payback period.” Is this a sound strategy? Why or why not?

> What typical cash inflow and outflow items are associated with capital investments?

> What is the relationship between desired rate of return and internal rate of return?

> Paul Henderson is a manager for Spark Company. He tells you that his company always maximizes profitability by accepting the investment opportunity with the highest internal rate of return. Explain to Mr. Henderson how his company may improve profitabili

> Which is the best capital investment evaluation technique for ranking investment opportunities?

> Does the net present value method provide a measure of the rate of return on capital investments?

> What criteria determine whether a project is acceptable under the net present value method?

> In 2019, Uber Technologies, Inc., reported a net loss, although it had a net profit in 2018. It reported negative cash flows from operating activities in both 2019 and 2018. Using the company’s Form 10-K for the fiscal year ended December 31, 2019, compl

> Two investment opportunities have positive net present values. Investment A’s net present value amounts to $40,000 while B’s is only $30,000. Does this mean that A is the better investment opportunity? Explain.

> Maria Espinosa borrowed $15,000 from the bank and agreed to repay the loan at 8 percent annual interest over four years, making payments of $4,529 per year. Because part of the bank’s payment from Ms. Espinosa is a recovery of the original investment, wh

> Receiving $100,000 per year for five years is equivalent to investing what amount today at 14 percent? Provide a mathematical formula to solve this problem, assuming use of a present value annuity table to convert the future cash flows to their present v

> What is a capital investment? How does it differ from an investment in stocks or bonds?

> What are the three types of responsibility centers? Explain how each differs from the others.

> What is a responsibility center?

> How do responsibility reports promote the management by exception doctrine?

> How does the concept of predominant control as opposed to that of absolute control apply to responsibility accounting?

> Who receives responsibility reports? What do the reports include?

> Andy and Jean Crocket are involved in divorce proceedings. When discussing a property settlement, Andy told Jean that he should take over their investment in an apartment complex because she would be unable to absorb the loss that the apartments are gene

> What are five potential advantages of decentralization?

> All travel expenses incurred by Pure Water Pump Corporation are reported only to John Daniels, the company president. Pure Water is a multinational company with five divisions. Are travel expenses reported following the responsibility accounting concept?

> If cost is the basis for transfer pricing, should actual or standard cost be used? Why?

> What are three approaches to establishing transfer prices? List the most desirable approach first and the least desirable last.

> Why are transfer prices important to managers who are evaluated based on profitability criteria?

> Is it true that the manager with the highest residual income is always the best performer?

> How can a residual income approach to performance evaluation reduce the likelihood of suboptimization?

> What three ways can a manager increase the return on investment?

> What two factors affect the computation of return on investment?

> Pam Kelly says she has no faith in budgets. Her company, Kelly Manufacturing Corporation, spent thousands of dollars to install a sophisticated budget system. One year later the company’s expenses are still out of control. She believes budgets simply do

> The following selected information was drawn from the records of Fleming Company. Fleming is experiencing cash flow problems. Despite the fact that it reported significant increases in operating income, operating activities produced a net cash outflow. R

> Minnie Divers, the manager of the marketing department for one of the industry’s leading retail businesses, has been notified by the accounting department that her department experienced an unfavorable sales volume variance in the preceding period but a

> How are flexible budget variances determined? What causes these variances?

> With respect to fixed costs, what are the consequences of the actual volume of activity exceeding the planned volume?

> What factors could lead to an increase in sales revenues that would not merit congratulations to the marketing manager?

> When would variable cost volume variances be expected to be unfavorable? How should unfavorable variable cost volume variances be interpreted?

> Joan Mason, the marketing manager for a large manufacturing company, believes her unfavorable sales volume variance is the responsibility of the production department. What production circumstances that she does not control could have been responsible fo

> When are sales and cost variances favorable and unfavorable?

> What is the primary cause of a favorable fixed cost spending variance?

> What is the primary cause of an unfavorable fixed cost volume variance?

> When the operating costs for Bill Smith’s production department were released, he was sure that he would be getting a raise. His costs were $20,000 less than the planned cost in the master budget. His supervisor informed him that the results look good bu

> The following financial statements and information are available for Blythe Industries Inc. Table Summary: The Balance Sheets as of December 31 show 3 columns. Column 1 has entries. Column 2 has year 3. Column 3 has year 2. Balance Sheets As of December

> Which individuals are normally held responsible for labor usage variances?

> John Jamail says that he doesn’t understand why companies have labor price variances because most union contracts or other binding agreements set wage rates that do not normally change in the short term. How could rate variances occur even when binding c

> Who is normally responsible for a materials price variance? Identify two factors that may be beyond this individual’s control that could cause an unfavorable price variance.

> What two factors affect the total materials and labor variance?

> Sara Anderson says that she is a busy woman with no time to look at favorable variances. Instead, she concentrates solely on the unfavorable ones. She says that favorable variances imply that employees are doing better than expected and need only quick c

> A processing department of Carmine Corporation experienced a high unfavorable materials quantity variance. The plant manager initially commented, “The best way to solve this problem is to fire the supervisor of the processing department.” Do you agree? E

> What is the primary benefit associated with using a standard cost system?

> So many variances,” exclaimed Carl, a production manager with Bonnyville Manufacturing. “How do I determine the variances that need investigation? I can’t possibly investigate all of them.” Which variances will lead to useful information?

> What is the difference between a static budget and a flexible budget? When is each used?

> What are the three ranges of difficulty in standard setting? What level of difficulty normally results in superior employee motivation?

> What three attributes are necessary for establishing the best standards? What information and considerations should be taken into account when establishing standards?

> Tesla Inc. began operations in 2003 but did not begin selling its stock to the public until June 28, 2010. It has lost money every year it has been in existence, and by December 31, 2019, it had total lifetime losses of approximately $6.1 billion. In add

> What is a master budget?

> Ken Shilov, manager of the marketing department, tells you that “budgeting simply does not work.” He says that he made budgets for his employees and when he reprimanded them for failing to accomplish budget goals, he got unfounded excuses. Suggest how Mr

> How may budgets be used as a measure of performance?

> What are the advantages of budgeting?

> What is the advantage of using a perpetual budget instead of the traditional annual budget?

> What is the primary factor that distinguishes the three different levels of planning from each other?

> What are the three levels of planning? Explain each briefly.

> Why does preparing the master budget require a committee?

> How does the pro forma statement of cash flows differ from the cash budget?

> Refer to the data in ATC 13-6. Required Construct a spreadsheet to conduct vertical analysis for both years, Year 4 and Year 3. Data from ATC 13-6: Tomkung Corporation’s income statements are presented in the following spreadsheet.

> What information does the pro forma income statement provide? How does its preparation depend on the operating budgets?