Explain how the choice of the type of responsibility center (cost, revenue, profit, or investment) affects behavior.
> Budgeted performance is a better criterion than past performance for judging managers.” Do you agree? Explain.
> Define master budget.
> Define Kaizen budgeting.
> Westover Motors is a small car dealership. On average, it sells a car for $32,000, which it purchases from the manufacturer for $28,000. Each month, Westover Motors pays $53,700 in rent and utilities and $69,000 for salespeople’s salaries. In addition to
> What is an activity-based approach to designing a costing system?
> Why should managers worry about product overcosting or undercosting?
> Activity-based costing is the wave of the present and the future. All companies should adopt it.” Do you agree? Explain.
> Year 1 financial data for the ABC Company is as follows: Sales $5,000,000 Direct materials 850,000 Direct manufacturing labor 1,700,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 750,000 Variable SG&A 150,0
> ABC systems only apply to manufacturing companies.” Do you agree? Explain.
> Fill in the blanks for each of the following independent cases. Variable Operating Costs Fixed Costs Total Costs Income Margin Percentage $1,600 $ 00 Contribution Case Revenues $600 $ 800 a. $2,500 $ 500 $1,200 b. $200 $300 $ 500 C. d. $200 25%
> Describe briefly why Electronic Data Interchange (EDI) is helpful to managers.
> When might a company use budgeted costs rather than actual costs to compute direct-labor rates?
> Describe two ways in which a house-construction company may use job-cost information.
> In CVP analysis, gross margin is a less-useful concept than contribution margin.” Do you agree? Explain briefly.
> How can a company with multiple products compute its breakeven point?
> What are three common features of cost accounting and cost management?
> Define product cost. Describe three different purposes for computing product costs.
> Where does the management accounting function fit into an organization’s structure?
> Frisco Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant range, which of the following statements is/are correct? I. As the cost driver level increases, total
> What is operating leverage? How is knowing the degree of operating leverage helpful to managers?
> Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant.” Do you agree? Why?
> What three guidelines help management accountants provide the most value to managers?
> How does an increase in the income tax rate affect the breakeven point?
> Describe the five-step decision-making process.
> What is the relevant range? What role does the relevant-range concept play in explaining how costs behave?
> Give examples of two cost objects in companies using job costing.
> Define contribution margin, contribution margin per unit, and contribution margin percentage.
> Name three factors that will affect the classification of a cost as direct or indirect.
> How does a job-costing system differ from a process-costing system?
> Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct servi
> Define cost–volume–profit analysis.
> Define cost object and give three examples.
> List three causes of a favorable direct materials price variance.
> How might a manager gain insight into the causes of a flexible-budget variance for direct materials?
> Describe the steps in developing a flexible budget.
> What is the key difference between a static budget and a flexible budget?
> Benchmarking against other companies enables a company to identify the lowest-cost producer. This amount should become the performance measure for next year.” Do you agree?
> When inputs are substitutable, how can the direct materials efficiency variance be decomposed further to obtain useful information?
> Comment on the following statement made by a plant manager: “Meetings with my plant accountant are frustrating. All he wants to do is pin the blame on someone for the many variances he reports.”
> Why might an analyst examining variances in the production area look beyond that business function for explanations of those variances?
> Which of the following is not a primary function of the management accountant? a. Communicates financial results and position to external parties. b. Uses information to develop and implement business strategy. c. Aids in the decision making to help an o
> How does variance analysis help in continuous improvement?
> Describe three reasons for an unfavorable direct manufacturing labor efficiency variance.
> Outline the steps in preparing an operating budget.
> Define rolling budget. Give an example.
> Production managers and marketing managers are like oil and water. They just don’t mix.” How can a budget assist in reducing conflicts between these two areas?
> Strategy, plans, and budgets are unrelated to one another.” Do you agree? Explain.
> Cash budgets must be prepared before the operating income budget.” Do you agree? Explain.
> What are some additional considerations that arise when budgeting in multinational companies?
> Describe how nonoutput-based cost drivers can be incorporated into budgeting.
> What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?
> How can sensitivity analysis be used to increase the benefits of budgeting?
> What are the four elements of the budgeting cycle?
> Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.
> What are the key reasons for product cost differences between simple costing systems and ABC systems?
> Why is it important to classify costs into a cost hierarchy?
> Describe four levels of a cost hierarchy.
> What is costing system refinement? Describe three guidelines for refinement.
> The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, “Given a choice, I will always prefer a $50,000 investment in improving things a c
> Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs.” Do you agree? Why?
> What are the main costs and limitations of implementing ABC systems?
> Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets forth these standards?
> Describe four signs that help indicate when ABC systems are likely to provide the most benefits.
> What is broad averaging, and what consequences can it have on costs?
> Distinguish between actual costing and normal costing.
> Give two reasons why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect-cost rates.
> Describe three major source documents used in job-costing systems.
> Describe the seven steps in job costing.
> Why might an advertising agency use job costing for an advertising campaign by PepsiCo, whereas a bank might use process costing to determine the cost of checking account deposits?
> Describe three alternative ways to dispose of under- or overallocated overhead costs.
> Describe three different debit entries to the Work-in-Process Control T-account under normal costing.
> Comment on the following statement: “In a normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated account.”
> Describe the overtime-premium and idle-time categories of indirect labor.
> Define cost pool, cost tracing, cost allocation, and cost-allocation base.
> Describe sensitivity analysis. How has the advent of the electronic spreadsheet affected the use of sensitivity analysis?
> “CVP analysis is both simple and simplistic. If you want realistic analysis to underpin your decisions, look beyond CVP analysis.” Do you agree? Explain.
> Why is it more accurate to describe the subject matter of this chapter as CVP analysis rather than as breakeven analysis?
> Describe three methods that managers can use to express CVP relationships.
> Distinguish between operating income and net income.
> Describe the assumptions underlying CVP analysis.
> There is no such thing as a fixed cost. All costs can be ‘unfixed’ given sufficient time.” Do you agree? What is the implication of your answer for CVP analysis?
> Give an example of how a manager can increase variable costs while decreasing fixed costs.
> Give an example of how a manager can decrease variable costs while increasing fixed costs.
> As a new controller, reply to this comment by a plant manager: “As I see it, our accountants may be needed to keep records for shareholders and Uncle Sam, but I don’t want them sticking their noses in my day-to-day operations. I do the best I know how. N
> Describe how manufacturing-, merchandising-, and service-sector companies differ from one another.
> What is a cost driver? Give one example.
> Define variable cost and fixed cost. Give an example of each.
> Why do managers consider direct costs to be more accurate than indirect costs?
> Define direct costs and indirect costs.
> Define the following: direct material costs, direct manufacturing-labor costs, manufacturing overhead costs, prime costs, and conversion costs.
> Crystal Clear Products produces two types of water filters. One attaches to the faucet and cleans all water that passes through the faucet. The other is a pitcher-cum-filter that only purifies water meant for drinking. The unit that attaches to the fauce
> The Ronowski Company has three product lines of belts—A, B, and C— with contribution margins of $3, $2, and $1, respectively. The president foresees sales of 200,000 units in the coming period, consisting of 20,000 units of A, 100,000 units of B, and 80,
> Zahner Corporation manufactures housewares products that are sold through a network of external sales agents. The agents are paid a commission of 20% of revenues. Zahner is considering replacing the sales agents with its own salespeople, who would be pai
> Thompson Engine Company manufactures and sells diesel engines for use in small farming equipment. For its 2017 budget, Thompson Engine Company estimates the following: Selling price…………………………..$ 7,000 Variable cost per engine………….$ 2,000 Annual fixed cos
> Distinguish between inventoriable costs and period costs.
> Classical Glasses operates a kiosk at the local mall, selling sunglasses for $30 each. Classical Glasses currently pays $1,000 a month to rent the space and pays two full-time employees to each work 160 hours a month at $10 per hour. The store shares a m
> Corporate Printing Company currently leases its only copy machine for $1,500 a month. The company is considering replacing this leasing agreement with a new contract that is entirely commission based. Under the new agreement, Corporate would pay a commis
> Refer to requirement 3 of Problem 3-43. In this problem, assume the role of the owner of HighStep. Required: 1. As owner, which sales compensation plan would you choose if forecasted annual sales of the new store were at least 10,000 units? What do
> The HighStep Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men’s shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fi
> The Derby Shoe Company produces its famous shoe, the Divine Loafer, that sells for $70 per pair. Operating income for 2017 is as follows: Sales revenue ($70 per pair)…………..$350,000 Variable cost ($30 per pair)…&hell
