Question:

> Absorption vs marginal costing (From ACCA Financial Information for Management, Part1, June 2004) (40 minutes) Langdale Ltd is a small company manufacturing and selling two different products – the Lang and the Dale. Each product passes

> E plc provides a computer upgrading, servicing and repair facility to a variety of business and personal computer users. The management team has managed the business to date by using a standard costing and budgetary control system. However, the team has

> Mayfair Limited currently subsidizes cafeteria services for its 200 employees. Mayfair is in the process of reviewing the cafeteria services as cost-cutting measures are needed throughout the organization to keep the prices of its products competitive.

> Spring Distribution has decided to analyze the profitability of another five customers (see pages 373 of the text). It buys bottled water at €0.50 per bottle and sells to wholesale customers at a list price of €0.60 per

> Wright Air is a no-frills airline that services the Midwest. Its mission is to be the only short-haul, low-fare, high-frequency, point-to-point carrier in the Midwest. However, there are several large commercial carriers offering air transportation, and

> Comtrex Company provides cable and internet services in the Greater Boston area. There are many competitors that provide similar services. Comtrex believes that the key to financial success is to offer a quality service at the lowest cost. Comtrex curren

> Refer to the information in Exercise 21.18 in answering the following requirements; there is no connection between the situations. Required 1. An outside contractor offers to do the finishing operation for 12 000 units at €10 per unit, double the €5 p

> Salamanca SA manufactures filing cabinets in two operations: machining and finishing. Additional information is as follows. Each cabinet sells for €72 and has direct materials costs of €32 incurred at the start of the m

> Range-Tout SARL builds and distributes industrial storage racks using a just-in-time system and maintaining minimal stocks. Range-Tout’s earnings increased sharply in 2017 and earnings-based bonuses were paid to the management sta for the first time in

> Arjun Manraj runs a print shop. Manraj requires 100 000 boxes of printing paper each year. He wants his suppliers to deliver the boxes on a JIT basis in order quantities of 400 boxes. Papyrus Ltd currently supplies the paper to Manraj. Papyrus charges

> Keep-Kool makes air conditioners. It purchases 12 000 units of a particular type of compressor part, CU29, each year at a cost of £50 per unit. Keep-Kool requires a 12% annual return on investment. In addition, relevant carrying costs (for insurance, mat

> Kari-Klær AS buys and sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming fre

> Assume the same facts as in Exercise 21.11. Now assume that there is only one trigger point, the completion of good finished units of product, which are debited to Finished Goods Control at standard costs. Any under- or overallocated conversion costs are

> Sloan Moving Ltd transports household goods from one city to another within the UK. It measures quality of service in terms of (1) time required to transport goods, (2) on-time delivery (within 2 days of agreed-upon delivery date), and (3) number of lost

> Overloon BV is a repair-service company specializing in the rapid repair of photocopying machines. Each of its 10 clients pays a fixed monthly service fee (based on the type of photocopying machines owned by that client and the number of employees at tha

> LappalainenOy manufactures pharmaceutical products in two departments: Mixing and Tablet Making. Additional information on the two departments follows. Each tablet contains 0.5 gram of direct materials. The Mixing Department makes 200 000 grams of direc

> Assume the same facts as in Exercise 21.11. Assume that the second trigger point for Papadopoulos is the sale – rather than the production – of finished units. Also, the Stock Control account is confined solely to direct materials, whether these material

> Jane plc purchases its requirements for component RB at a price of £80 per unit. Its annual usage of component RB is 8760 units. The annual holding cost of one unit of component RB is 5% of its purchase price and the cost of placing an order is £12.50.

> Mannklein AG is a major manufacturer of metal-cutting machines. It has plants in Frankfurt and Stuttgart. The managers of these two plants have different manufacturing philosophies. LiisaKurunmäki, the recently appointed manager of the Fra

> RèveAndalou retails a broad line of Spanish merchandise at its Mont-St-Michel store. It sells 26000 Juanita linen bedroom packages (two sheets and two pillow cases) each year. RèveAndalou pays Juanita, SA, €104 per package. Its ordering costs per purchas

> Anna de Noailles, the plant manager at Electro-Sons, calls Pauline Eluard, the plant controller, into her office. She had just finished reviewing Eluard’s report on the financial benefits from implementing JIT. The report described the

> TurunTelelaitosOy manufactures cordless telephones. TurunTelelaitos is planning to implement a JIT production system, which requires annual tooling costs of €150 000. TurunTelelaitos estimates that the following annual benefits would arise from JIT produ

> Grano BV and Henco BV manufacture fairly similar remote-controlled toy cars. Sido BV, a retailer of children’s toys, expects to buy and sell 4000 of these cars each year. Both Grano and Henco can supply all of Sido’s

> Krügsmann AG has a plant that manufactures transistor radios. The production time is only a few minutes per unit. The company uses a just-in-time production system and a back flush costing system with two trigger points for journal entries

> AlcazarquivirLda manufactures and sells industrial grinders. The following table presents financial information pertaining to quality in 2017 and 2018 (in €000): Required 1. Classify the cost items in the table into prevention, appraisa

> Duff Co manufactures three products, X, Y and Z. Demand for products X and Y is relatively elastic while demand for product Z is relatively inelastic. Each product uses the same materials and the same type of direct labor but in different quantities. For

> John Emburey, division manager of the Household Products Division, a maker of kitchen dishwashers, has just seen the balanced scorecard for his division for the year. He immediately calls Patricia Conley, the management accountant for the division into h

> Lee SA manufactures various types of colour laser printer in a highly automated facility with high fixed costs. The market for laser printers is competitive. The various colour laser printers on the market are comparable in terms of features and price. L

> Colombe-Déménagements SA is a removals company that transports household goods from one Belgian city to another. It measures service quality in terms of (a) time required to transport goods, (b) on-time delivery (within two day

> ZaccariaSrl manufactures automotive parts. A major customer has just given Zaccaria an edict: ‘Improve quality or no more business.’ Lorenzo Da Ponte, the controller of Zaccaria, is given the task of developing a COQ programme. He seeks your advice on c

> Meredith Ltd makes a special-purpose machine D4H used in the textile industry. Meredith has designed the D4H machine for 2018 to be distinct from its competitors. It has been generally regarded as a superior machine. Meredith presents the following data

> PB is a car production company. PB uses a system of standard costing to set its budgets. Budgets are set annually by the Finance department and approved by the Board of Directors of PB. The Finance department prepares variance reports each month for revi

> AST is a grocery and general merchandise retail group. AST has supermarkets located in most towns and cities in its home country. Over the last few years, profits have fallen and AST has recognized that it has paid insufficient attention to customer car

> TSH provides courses for students who are studying for accountancy examinations. The accountancy education sector is extremely competitive; it is dominated by a small number of national organizations but there is also a large number of smaller regional t

> YY is a large banking organization. It has a branch in most of the towns in the country in which it operates. The bank’s business is mainly concerned with private individuals. It is a very ‘traditional’ bank that offers only ‘over the counter’ services d

> Jamair was founded in September 2007 and is one of a growing number of low-cost airlines in the country of Shania. Jamair’s strategy is to operate as a low-cost, high-efficiency airline, and it does this by: ● operating mostly in secondary cities to redu

> Beckley Hill (BH) is a private hospital carrying out two types of procedures on patients. Each type of procedure incurs the following direct costs: BH currently calculates the overhead cost per procedure by taking the total overhead cost and simply divi

> Alexon SL is an electronics business with eight product lines. Profit data for one of the products (XT-107) for the month just ended (June 2018) are as follows: XuclàMecàniquesFluvià SA, an instruments company, h

> Let y be any response variable and x a binary explanatory variable. Let {(xi, yi): i = 1, . . . , n} be a sample of size n. Let n0 be the number of observations with xi = 0 and n1 the number of observations with xi = 1. Let y0 be the average of the yi wi

> Suppose that the linear model, written in matrix notation, y = X + u satisfies Assumptions E.1, E.2, and E.3. Partition the model as y = X1b1 + X22 + u, where X1 is n * (k1 + 1) and X2 is n * k2. (i)

> Assume that the model y = X + u satisfies the Gauss-Markov assumptions and let ^ be the OLS estimator of . Let Z = G(X) be an n * (k + 1) matrix function of X and assume that Z’X[a (k + 1) * (k + 1) matrix] is nonsingular. Define a new estimator of 

> Let ^ be the OLS estimate from the regression of y on X. Let A be a (k + 1) * (k + 1) nonsingular matrix and define zt ; xtA, t = 1, . . . , n. Therefore, zt is 1 * (k + 1) and is a nonsingular linear combination of xt. Let Z be the n * (k + 1) matrix w

> Let xt be the 1 * (k + 1) vector of explanatory variables for observation t. Show that the OLS estimator ^ can be written as Dividing each summation by n shows that ^ is a function of sample averages.

> Let a be an n * 1 nonrandom vector and let u be an n * 1 random vector with E(uu’) = In. Show that E[tr(auu’a’)] = Σni=1a2i .

> Let A be an n * n symmetric, positive definite matrix. Show that if P is any n * n nonsingular matrix, then P’AP is positive definite.

> (i) Use the definition of inverse to prove the following: if A and B are n * n nonsingular matrices, then (AB)-1 = B-1A-1. (ii) If A, B, and C are all n * n nonsingular matrices, find (ABC)-1 in terms of A-1, B-1, and C-1.

> Let X be any n * k matrix. Show that X’X is a symmetric matrix.

> Let X be an n * k matrix partitioned as X = (X1 X2), where X1 is n * k1 and X2 is n * k2. (i) Show that What are the dimensions of each of the matrices? (ii) Let b be a k * 1 vector, partitioned as where b1 is k1 * 1 and b2 is k2 * 1. Show that

> Use the data in DISCRIM to answer this question. (See also Computer Exercise C8 in Chapter 3.) (i) Use OLS to estimate the model Log(psoda) = 0 + 1prpblck + 2log(income) + 3prppov + u, and report the results in the usual form. Is ^1 statistically di

> Suppose that a military dictator in an unnamed country holds a plebiscite (a yes/no vote of confidence) and claims that he was supported by 65% of the voters. A human rights group suspects foul play and hires you to test the validity of the dictator’s cl

> The new management at a bakery claims that workers are now more productive than they were under old management, which is why wages have “generally increased.” Let Wbi be Worker i’s wage under the old

> Let Y denote a Bernoulli(() random variable with 0 < ( < 1. Suppose we are interested in estimating the odds ratio,  = (/(1 - (), which is the probability of success over the probability of failure. Given a random sample {Y1, . . . , Yn}, we know that a

> Let Y denote the sample average from a random sample with mean m and variance 2. Consider two alternative estimators of m: W1 = [(n – 1)/n]Y and W2 = Y/2. (i) Show that W1 and W2 are both biased estimators of m and find the biases. What happens to the b

> Suppose that between their first and second years in college, 400 students are randomly selected and given a university grant to purchase a new computer. For student i, yi denotes the change in GPA from the first year to the second year. If the average c

> Let Y1, Y2, Y3, and Y4 be independent, identically distributed random variables from a population with mean m and variance 2. Let Y = ¼(Y1 + Y2 + Y3 + Y4) denote the average of these four random variables. (i) What are the expected value and variance of

> (i) Let X be a random variable taking on the values -1 and 1, each with probability 1/2. Find E(X) and E(X2). (ii) Now let X be a random variable taking on the values 1 and 2, each with probability 1/2. Find E(X) and E(1/X). (iii) Conclude from parts (i

> Consider the line y = 0 + 1x. (i) Let (x1, y1) and (x2, y2) be two points on the line. Show that (x, y) is also on the line, where x = (x1 + x2)/2 is the average of the two values and y = (y1 + y2)/2. (ii) Extend the result of part (i) to n points on t

> Let X denote the annual salary of university professors in the United States, measured in thousands of dollars. Suppose that the average salary is 52.3, with a standard deviation of 14.6. Find the mean and standard deviation when salary is measured in do

> In Problem 2 in Chapter 4, we added the return on the firm&acirc;&#128;&#153;s stock, ros, to a model explaining CEO salary; ros turned out to be insignificant. Now, define a dummy variable, rosneg, which is equal to one if ros Log(salary) = &iuml;&#129;

> Suppose the yield of a certain crop (in bushels per acre) is related to fertilizer amount (in pounds per acre) as (i) Graph this relationship by plugging in several values for fertilizer. (ii) Describe how the shape of this relationship compares with a l

> If a basketball player is a 74% free throw shooter, then, on average, how many free throws will he or she make in a game with eight free throw attempts?

> Suppose the following model describes the relationship between annual salary (salary) and the number of previous years of labor market experience (exper): Log(salary) = 10.6 + .027 exper. (i) What is salary when exper = 0? When exper = 5? (ii) Use equati

> Just prior to jury selection for O. J. Simpson’s murder trial in 1995, a poll found that about 20% of the adult population believed Simpson was innocent (after much of the physical evidence in the case had been revealed to the public). Ignore the fact th

> In a random effects model, define the composite error vit = i + uit, where i is uncorrelated with uit and the uit have constant variance 2u and are serially uncorrelated. Define eit = vit - (vi, where ( is given. (i) Show that E(eit) = 0. (ii) Show th

> Suppose that the idiosyncratic errors in (14.4), {uit: t = 1, 2, . . . , T}, are serially uncorrelated with constant variance, 2u. Show that the correlation between adjacent differences, (uit and (ui,t+1, is 2.5. Therefore, under the ideal FE assumption

> The following is a simple model to measure the effect of a school choice program on standardized test performance: score = 0 + 1choice + 2faminc + u1, where score is the score on a statewide test, choice is a binary variable indicating whether a stude

> Assume that u = x, so that the population variation in the error term is the same as it is in x. Suppose that the instrumental variable, z, is slightly correlated with u: Corr(z, u) = .1. Suppose also that z and x have a somewhat stronger correlation:

> Consider the simple regression model y = 0 + 1x + u and let z be a binary instrumental variable for x. Use (15.10) to show that the IV estimator ^1 can be written as ^1 = (y1 - y0)/(x1 - x0), where y0 and x0 are the sample averages of yi and xi over

> Consider a simple time series model where the explanatory variable has classical measurement error: yt = 0 + 1x*t + ut xt = x*t + et, where ut has zero mean and is uncorrelated with x*t and et. We observe yt and xt only. Assume that et has zero mean an

> (i) The variable phsrank is the person&acirc;&#128;&#153;s high school percentile. (A higher number is better. For example, 90 means you are ranked better than 90 percent of your graduating class.) Find the smallest, largest, and average phsrank in the s

> For a large university, you are asked to estimate the demand for tickets to women’s basketball games. You can collect time series data over 10 seasons, for a total of about 150 observations. One possible model is lATTENDt = 0 + 1lPRICEt + 2WINPERCt +

> A simple model to determine the effectiveness of condom usage on reducing sexually transmitted diseases among sexually active high school students is infrate = 0 + 1conuse + 2percmale + 3avginc + 4city + u1, where; infrate = the percentage of sexual

> Use the state-level data on murder rates and executions in MURDER for the following exercise. (i) Consider the unobserved effects model mrdrteit = t + 1execit + 2unemit + i + uit, where t simply denotes different year intercepts and i is the unobs

> Use the data in SCHOOL93_98 to answer the following questions. Use the command xtset schid year to set the cross section and time dimensions. (i) How many schools are there. Does each school have a record for each of the six years? Verify that lavgrexpp

> Use the data in COUNTYMURDERS to answer this question. The data set covers murders and executions (capital punishment) for 2,197 counties in the United States. (i) Consider the model murdrateit = (t + 0execsit + 1execsi,t-1 + 2execsi,t-2 + 3execsi,t

> This question assumes that you have access to a statistical package that computes standard errors robust to arbitrary serial correlation and heteroskedasticity for panel data methods. (i) For the pooled OLS estimates, obtain the standard errors that allo

> Use the data in RENTAL for this exercise. The data on rental prices and other variables for college towns are for the years 1980 and 1990. The idea is to see whether a stronger presence of students affects rental rates. The unobserved effects model is wh

> The purpose of this exercise is to compare the estimates and standard errors obtained by correctly using 2SLS with those obtained using inappropriate procedures. Use the data file WAGE2. (i) Use a 2SLS routine to estimate the equation Log(wage) = 0 + 1

> Use the data in PHILLIPS for this exercise. (i) We estimated an expectation augmented Phillips curve of the form (inft = 0 + 1unemt + et, where (inft = inft – inft-1. In estimating this equation by OLS, we assumed that the supply shock, et, was uncorre

> Use the data in CARD for this exercise. (i) In Table 15.1, the difference between the IV and OLS estimates of the return to education is economically important. Obtain the reduced form residuals, v^2, from the reduced form regression educ on nearc4, expe

> Consider the analysis in Computer Exercise C11 in Chapter 4 using the data in HTV, where educ is the dependent variable in a regression. (i) How many different values are taken on by educ in the sample? Does educ have a continuous distribution? (ii) Plot

> Use the data in LABSUP to answer the following questions. These are data on almost 32,000 black or Hispanic women. Every woman in the sample is married. It is a subset of the data used in Angrist and Evans (1998). Our interest here is in determining how

> Use the data in WAGE2 for this exercise. (i) If sibs is used as an instrument for educ, the IV estimate of the return to education is .122. To convince yourself that using sibs as an IV for educ is not the same as just plugging sibs in for educ and runni

> For this exercise, use the data in AIRFARE, but only for the year 1997. (i) A simple demand function for airline seats on routes in the United States is Log(passen) = 10 + 1log(fare) + 11log(dist) + 12[3log(dist)]2 + u1 where; passen = average passen

> (i) Suppose that, after differencing to remove the unobserved effect, you think (log(polpc) is simultaneously determined with (log(crmrte); in particular, increases in crime are associated with increases in police officers. How does this help to explain

> Use the Economic Report of the President (2005 or later) to update the data in CONSUMP, at least through 2003. Reestimate equation. Do any important conclusions change?

> (i) Because log(pcinc) is insignificant in both (16.22) and the reduced form for open, drop it from the analysis. Estimate by OLS and IV without log(pcinc). Do any important conclusions change? (ii) Still leaving log(pcinc) out of the analysis, is land o

> A common method for estimating Engel curves is to model expenditure shares as a function of total expenditure, and possibly demographic variables. A common specification has the form; sgood = 0 + 1ltotexpend + demographics + u, where sgood is the fract

> (i) A model to estimate the effects of smoking on annual income (perhaps through lost work days due to illness, or productivity effects) is log(income) = 0 + 1cigs + 2educ + 3age + 4age2 + u1, where cigs is number of cigarettes smoked per day, on av

> Use the data in APPLE for this exercise. These are telephone survey data attempting to elicit the demand for a (fictional) “ecologically friendly” apple. Each family was (randomly) presented with a set of prices for regular apples and the ecolabeled appl

> (i) Using the 428 women who were in the workforce, estimate the return to education by OLS including exper, exper2, nwifeinc, age, kidslt6, and kidsge6 as explanatory variables. Report your estimate on educ and its standard error. (ii) Now, estimate the

> Use the data in MLB1 for this exercise. (i) Use the model estimated in equation (4.31) and drop the variable rbisyr. What happens to the statistical significance of hrunsyr? What about the size of the coefficient on hrunsyr? (ii) Add the variables runsyr

> There, we used the data in FERTIL1 to estimate a linear model for kids, the number of children ever born to a woman. (i) Estimate a Poisson regression model for kids, Interpret the coefficient on y82. (ii) What is the estimated percentage difference in

> (i) For what percentage of the workers in the sample is pension equal to zero? What is the range of pension for workers with nonzero pension benefits? Why is a Tobit model appropriate for modeling pension? (ii) Estimate a Tobit model explaining pension i

> Use the data in JTRAIN98 to answer the following questions. Here you will use a Tobit model because the outcome, earn98, sometimes is zero. (i) How many observations (men) in the sample have earn98 = 0? Is it a large percentage of the sample? (ii) Estima

> Use the data set in ALCOHOL, obtained from Terza (2002), to answer this question. The data, on 9,822 men, includes labor market information, whether the man abuses alcohol, and demographic and background variables. In this question you will study the eff

> (i) Using OLS on the full sample, estimate a model for log(wage) using explanatory variables educ, abil, exper, nc, west, south, and urban. Report the estimated return to education and its standard error. (ii) Now estimate the equation from part (i) usin

> Use the data in CPS91 for this exercise. These data are for married women, where we also have information on each husband’s income and demographics. (i) What fraction of the women report being in the labor force? (ii) Using only the data for working wo

> (i) The variable favwin is a binary variable if the team favored by the Las Vegas point spread wins. A linear probability model to estimate the probability that the favored team wins is P(favwin = 1|spread) = 0 + 1spread. Explain why, if the spread inc

> (i) Let yt be real per capita disposable income. Use the data through 1989 to estimate the model yt =  + t + yt-1 + ut and report the results in the usual form. (ii) Use the estimated equation from part (i) to forecast y in 1990. What is the forecast