Explain how the cost of a cost object/job is determined under a job-costing system.
> Why is a linear cost function useful?
> Virtual Company produces gadgets for the coveted small appliance market. The following data reflect activity for the year 2020: Virtual Co. uses a normal-costing system and allocates overhead to work in process at a rate of $2.50 per direct manufacturing
> Explain linear cost function and give an example.
> Do companies in either the service sector or the merchandising sector make choices about absorption costing versus variable costing?
> How does the treatment of fixed production overhead differ under variable costing and absorption costing?
> What needs to be calculated to explain a variable flexible-budget variance? Explain what an €8,000 unfavorable flexible-budget variance indicates.
> Assume variable manufacturing overhead is allocated using machine-hours. Give three possible reasons for a favorable variable overhead efficiency variance.
> Describe some of the characteristics of a flexible budget.
> Explain why standard costing should not be used to report results in year-end financial statements. Why would managers use standard costing?
> What are the main features to be considered in planning variable overhead costs and fixed over- head costs?
> How can flexible-budget variance analysis be used to control costs of activity areas?
> How are the main components of materials variances interrelated in a flexible budget?
> Olga Ltd produces stapling machines for most businesses operating in New Orleans. The production process involves three stages: cutting department, assembly department and painting and finishing department. Required Each department is treated as a cost
> Which of the following statements is true about a master budget? I. It is a summary of all other budgets. It is expressed as a budgeted income and is mentioned in the balance sheet. II. The master budget comprises of the operating budget and the financia
> Describe why standard costs are used in variance analysis.
> When is a flexible budget similar to a static budget? Why?
> What are the impacts of variances on an operating income?
> Why are standard costs often used in variance analysis?
> Benchmarking is about comparing your firm’s performance against the best levels of performance in the market and has nothing to do with variance analyses.” 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 management accountant: “The plant manager has little knowledge of the individual impacts of the purchase department, the sales department, and the production department on the total unfavorable variance in our
> What is the purpose of variance analysis to management?
> What is the usual starting point for an operating budget?
> Budgets meet the cost–benefit test by pushing managers to act differently.” Do you agree? Explain.
> Holland Builders uses normal costing and allocates manufacturing overhead to jobs based on a budgeted labor-hour rate and actual direct labor-hours. Under- or over allocated overhead, if immaterial, is written off to cost of goods sold. During 2020, Holl
> Budgets can promote coordination and communication among subunits within the company.” Do you agree? Explain.
> List the key questions that a manager must consider when developing a successful strategy.
> What are the advantages of a budget?
> Define a master budget and explain its purpose. Describe its components.
> Explain why cash budgets are important.
> What are some additional considerations when budgeting in multinational companies?
> What is the key emphasis in Kaizen budgeting?
> The cost of cost objects under simple costing systems and under activity-based costing are never the same.” Do you agree? Explain.
> What are some behavioral issues that managers must be sensitive to when implementing ABC systems?
> Outline the steps involved in a simple costing system using a single indirect-cost pool.
> Plunge Manufacturing produces outdoor wading and slide pools. The company uses a normal-costing system and allocates manufacturing overhead based on direct manufacturing labor-hours. Most of the company’s production and sales occur in t
> Which levels of cost hierarchy (under activity-based costing) are not used in simple costing systems and why are they important?
> How can a cost hierarchy lead to a more accurate costing system?
> What are the fundamental cost objects in activity-based costing? How does activity-based costing work?
> The total annual production cost of a manufacturing company that produces three different USB devices is $10,000,000. The manager of the company states that the contribution margins of all three products guarantee and justify their productions and, there
> What are the main factors determining the number of indirect-cost pools in a costing system, to increase the accuracy of product or service costs? Explain.
> Activity-based costing is providing more accurate and detailed information and should replace simple costing.” Do you agree? Explain.
> Explain why ABC is equally important for both manufacturing and service companies.
> Describe the main limitations of ABC systems.
> Describe normal costing and actual costing systems.
> Seasonal patterns and fluctuating levels of monthly outputs are the two main factors for most organizations to use an annual period rather than a weekly or a monthly period to compute budgeted indirect-cost rates. Explain how annual indirect rates allevi
> Global Enterprize, a management consulting firm, has the following condensed budget for 2021: Required Global Enterprize has a single direct-cost category (professional labor) and a single indirect-cost pool (client support). Indirect costs are allocate
> Explain the role of information technology in job costing.
> Describe a key feature of job costing and process costing.
> Why do managers have to make adjustments for under- or over-allocated indirect costs?
> Describe the flow of costs in a normal job-costing system.
> Comment on the following statement: There is no difference between “actual costing” and “nor- mal costing” systems because both systems use the product’s actual direct-cost rates and actual quantities of direct-cost inputs.
> Explain how job-costing information may be used for decision making.
> Explain what are the main limitations of CVP analysis for decision making? Explain.
> What is breakeven point (BEP)?
> Differentiate between contribution margin and contribution margin ratio.
> The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two m
> What is the main difference between gross margin and contribution margin? Which one is the focus of CVP analysis? Explain briefly.
> What are some of the assumptions underlying breakeven analysis in a multiple products environment?
> CVP analysis assumes that costs can be accurately divided into fixed and variable categories. Do you agree? Explain.
> Is it possible to calculate the breakeven point for a company that produces and sells more than one type of product? Explain.
> Is CVP analysis more focused on the short or the long term? Explain.
> Explain three common features of cost accounting and cost management and their applications.
> Inventoriable costs are usually associated with the manufacturing firms whilst period costs are mainly for trading firms. Discuss.
> Explain the impact of having weak ethics on suppliers, customers, and the market. Provide an example to illustrate your answer.
> Due to the significance of the information they’re trusted with, management accountants are expected to observe well-defined professional ethical standards. Professional management accountant organizations around the world have developed professional eth
> Explain how overtime premium and idle time affect labor costs.
> Gammaro Manufacturer uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per machine-hour. The following data are available for 2020: Required 1. Calculate the budgeted manufacturing overhead rate. 2. Calculate the manuf
> As the new controller, reply to the following comment made by your plant manager: “When I install a proper accounting software, which can process all my daily accounting records and provide me with all necessary reports and analyses, I am not sure what a
> Technical and basic analytical competence are necessary but not sufficient conditions to becoming a successful management accountant.” Do you agree? Why?
> Give an example for each of the following: A cost that is variable and direct, a cost that is variable and indirect, a cost that is fixed and direct, and a cost that is fixed and indirect.
> Explain whether a business department can be a cost object.
> Why and when is it essential to calculate a unit cost?
> What is a cost driver? Give one example.
> PostNews.com offers its subscribers several services, such as an annotated TV guide and local-area information on weather, restaurants, and movie theaters. Its main revenue sources are fees for banner advertisements and fees from subscribers. Recent data
> Tiffany Cosmetics manufactures and sells a variety of makeup and beauty products. The company has come up with its own patented formula for a new anti-aging cream. The company president wants to make sure the product is priced competitively because its p
> The new chief executive officer (CEO) of Richard Manufacturing has asked for a variety of information about the operations of the firm from last year. The CEO is given the following information, but with some data missing: Required 1. Find (a) total sa
> News Report Group has two major divisions: print and Internet. Summary financial data (in millions) for 2019 and 2020 are as follows: The two division managers’ annual bonuses are based on division ROI (defined as operating income divid
> Caldwell Toys produces toys mainly for the domestic market. The company uses a job-costing system under which materials and labors used in the manufacturing process are directly allocated to different jobs. Whereas costs incurred in the manufacturing sup
> Newmann, Inc. has divisions in the United States, France, and Australia. The U.S. division is the oldest and most established of the three and has a cost of capital of 6%. The French division was started 4 years ago when the exchange rate for the euro wa
> Natural Bounty Corporation operates three divisions that process and bottle natural fruit juices. The historical-cost accounting system reports the following information for 2020: Natural Bounty estimates the useful life of each plant to be 12 years, wit
> Blue Fish owns and operates coffee shops in three large cities on the West Coast: Seattle, San Francisco, and Los Angeles. The three geographic areas are considered separate divisions. Each division owns the buildings of the coffee shops, which are consi
> Doorharmony Company makes doorbells. It has a weighted-average cost of capital of 7% and total assets of $5,630,000. Doorharmony has current liabilities of $750,000. Its operating income for the year was $620,000. Doorharmony does not have to pay any inc
> Rapid Grow Inc., based in Des Moines, Iowa, sells high-end fertilizers. Rapid Grow has two divisions: â– North Italy mining division, which mines potash in northern Italy â– U.S. processing division, which uses potash in
> Refer to Problem 23-28. Assume that Pat Borges, CEO of Cranfuel, had mandated a transfer price equal to 175% of full cost. Now he decides to decentralize some management decisions and sends around a memo that states: “Effective immediately, each division
> Cranfuel Products is a cranberry cooperative that operates two divisions, a harvesting division and a processing division. Currently, all of harvesting’s output is converted into cranberry juice by the processing division, and the juice
> Chicago, Inc., has two divisions, A and B, that manufacture expensive bicycles. Division A produces the bicycle frame, and division B assembles the rest of the bicycle onto the frame. There is a market for both the subassembly and the final product. Each
> The Aqua Company manufactures and sells television sets. Its assembly division (AD) buys television screens from the screen division (SD) and assembles the TV sets. The SD, which is operating at capacity, incurs an incremental manufacturing cost of $60 p
> Shalie Manufacturing makes several thousand different metal products, including building materials, tools, and furniture parts. The manager of the furniture parts division has proposed that his division expand into bicycle parts. The furniture parts divi
> Carolin Chemicals pro- duces a range of chemical products for industries on getting bulk orders. It uses a job-costing system to calculate the cost of a particular job. Materials and labors used in the manufacturing process are direct in nature, but manu
> TriMart is considering replacing 20 of their checkout registers with new self-checkout equipment. The equipment currently being used is fully depreciated and has no disposal value. The new equipment will cost a total of $220,000. Because the new equipmen
> Johnny Buster owns Entertainment World, a place that combines fast food, innovative beverages, and arcade games. Worried about the shift- ing tastes of younger audiences, Johnny contemplates bringing in new simulators and virtual reality games to maintai
> The Kuhl Brothers own a frozen custard ice cream shop. The brothers currently are using a machine that has been in use for the last 4 years. On January 1, 2020, the Kuhl Brothers are considering buying a new machine to make their frozen custard. The Kuhl
> Bobwhite Laundromat is trying to enhance the services it provides to customers, mostly college students. It is looking into the purchase of new high- efficiency washing machines that will allow for the laundry’s status to be checked via
> Paulina Jones, a manager for the Carpenter Manufacturing Company, has the opportunity to upgrade the equipment in the Midwest division by replacing and upgrading some of its machinery. The cost of the upgraded machinery will be $840,000 and will be depre
> Jeong Natural Snacks is contemplating an expansion. The finance manager is looking at buying a second machine that would cost $62,000 and last for 10 years, with no disposal value at the end of that time. Jeong expects the increase in cash revenues from
> Assume the same facts as in Problem 22-34, except that the plant is located in Buffalo, New York. Dublin Chips has no special waiver on income taxes. It pays a 35% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the
> Dublin Chips is a manufacturer of prototype chips based in Dublin, Ireland. Next year, in 2021, Dublin Chips expects to deliver 615 prototype chips at an average price of $95,000. Dublin Chips’ marketing vice president forecasts growth
> Perez Containers Corporation is considering implementing a JIT production system. The new system would reduce current average inventory levels of $4,000,000 by 75%, but it would require a much greater dependency on the company’s core sup- pliers for on-t
> Steadfast Security Devices (SSD) has introduced a just-in-time production process and is considering the adoption of lean accounting principles to support its new production philosophy. The company has two product lines: Mechanical Devices and Electronic
