Janet Segato is division controller and Tom Maloney is division manager of the Sports Shoe Company. Segato has line responsibility to Maloney, but she also has staff responsibility to the company controller. Maloney is under severe pressure to achieve budgeted division income for the year. He has asked Segato to book $240,000 of sales on December 31. The customers’ orders are firm, but the shoes are still in the production process. They will be shipped on or about January 4. Maloney said to Segato, “The key event is getting the sales order, not shipping the shoes. You should support me, not obstruct my reaching division goals.” Required: 1. Describe Segato’s ethical responsibilities. 2. What should Segato do if Maloney gives her a direct order to book the sales?
> Describe why direct materials rate variance and direct materials efficiency variance may be computed with reference to different points in time.
> Distinguish between a favourable variance and an unfavourable variance .
> What is the relationship between management by exception and variance analysis ?
> ABC systems apply only to manufacturing companies.” Do you agree? Explain.
> How can the use of sensitivity analysis increase the benefits of budgeting?
> A number of terms are listed below: source document ………………………………………………..actual cost tracing ……………………………………..cost allocation rate proration ……………………………………………..opportunity cost cost pool Required: Select the terms from the above list to complete
> A number of terms are listed below: prime costs…………………………………………….fixed cost inventoriable costs………………………………period costs indirect………………………………………..conversion costs variable cost……………………………………….relevant cost Required: Select the terms from the above list
> Brite Exteriors is a firm that provides house painting services. Robert Brite, the owner, is trying to find new ways to increase revenues. Mr. Brite performs the following actions, not in the order listed. Required: Classify each action below according
> Consolidated Minerals (CM) owns the rights to extract minerals from beach sands on Fraser Island. CM has costs in three areas: a.Payment to a mining subcontractor who charges $80 per tonne of beach sand mined and returned to the beach (after being proces
> Honel Foods makes frozen dinners that it sells through grocery stores. Typical products include turkey dinners, pot roast, fried chicken, and meatloaf. The managers at Honel have recently introduced a line of frozen chicken pies. They take the following
> Conner Company makes and sells brooms and mops. It takes the following actions, not necessarily in the order given below. Required: For each action (1–5 below), state whether it is a planning decision or a control decision. 1. Conner asks its marketing
> A Canadian biopharmaceutical company incurs the following costs: 1. Cost of redesigning blister packs to make drug containers more tamper-proof. 2. Cost of videos sent to doctors to promote sales of a new drug. 3. Cost of a toll-free telephone line used
> Burger King, a hamburger fast food restaurant, incurs the following costs: 1. Cost of oil for the deep fryer. 2. Wages of the counter help who give customers the food they order. 3. Cost of the costume for the King on the Burger King television commercia
> A number of terms are listed below: timely ………………………………..management accounting ethical …………………………………guidelines cost–benefit technical ………………………………………………………control value chain ………………………………………………….reliable corporate social responsibility……………………… strategy
> Describe briefly why modern technology such as Electronic Data Interchange (EDI) is helpful to managers.
> Describe three different debit entries in the Work-in-Process Control general ledger T-account.
> Knowledge of technical issues such as computer technology is necessary but not sufficient to becoming a successful accountant.” Do you agree? Why?
> A number of terms are listed below: contribution margin ………………………cost–volume–profit analysis capital intensive …………………………………………..operating leverage gross margin …………………………………………………………….sales mix contribution margin percentage ………………………breakeven point ma
> The revenue budget is the cornerstone for budgeting.” Why?
> Maximum Office Products (MOP) produces three different paper products at its Vernon lumber plant—Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. MOP currently uses the following three-part
> If actual results do not match the budget, what should managers do?
> Define master budget.
> When governments reduce their funding to hospitals and universities, often the executives respond with a demand for an equal percentage reduction in costs by all business functions. Is this the best strategic approach?
> Comment on the following statement made by a plant supervisor: “Meetings with my plant accountant are frustrating. All he wants to do is pin the blame for the many variances he reports.
> Explain how the direct materials mix and direct materials yield variances provide additional information about the direct materials efficiency variance.
> Describe three reasons for an unfavourable direct manufacturing labour efficiency variance.
> List three causes of a favourable materials rate variance.
> What is the key difference between a static budget and a flexible budget ?
> How does static-budget variance analysis mislead those assessing actual performance against pro forma performance indicators?
> Explain how the choice of the responsibility centre type (cost, revenue, profit, or investment) affects budgeting.
> Graham’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $20 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $20,000 per period.
> Describe how non-output-based cost drivers can be incorporated into budgeting.
> Explain “padding” and why managers might be motivated to employ this negative budget behaviour. What are some of senior management’s options to address this behaviour?
> Define rolling budget. Give an example.
> How might a company benefit by sharing its own internal budget information with other companies?
> Strategy, plans, and budgets are unrelated to one another.” Do you agree? Explain.
> The controller of a retailer has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice-president involved in rejecting the request noted, “Given a choice, I will always prefer a $50,000 investment in improving things a
> Increasing the number of indirect cost pools is guaranteed to sizably increase the accuracy of product or service costs.” Do you agree? Why?
> Describe four ways that help indicate when ABC systems are likely to provide the most benefits.
> Department indirect cost rates are never activity cost rates.” Do you agree? Explain.
> What are the key reasons for product cost differences between traditional costing systems and ABC systems?
> A student association has hired a musical group for a graduation party. The cost will be a fixed amount of $4,800. Required: 1. Suppose 500 people attend the party. What will be the total cost of the musical group; the unit cost per person? 2. Suppose 4
> What is an activity-based approach to refining a cost assignment system?
> Describe three alternative ways to dispose of underallocated or overallocated indirect costs.
> 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.”
> How does actual costing differ from normal costing?
> What is the main concern about source documents used to prepare job-cost records?
> Describe the three major source documents used in job-costing systems.
> Jorge Michaels is the Winnipeg-based controller of SXSW Foods, a rapidly growing manufacturer and marketer of Mexican food products. Michaels is currently considering the purchase of a new cost management package for use by each of its six manufacturing
> Harvest Day Corporation is a publishing company that produces trade magazines. The company’s shareholders are awaiting the announcement of Harvest Day’s earnings for the fiscal year, which ends on December 31. Market analysts have predicted earnings to b
> Janet Taylor is the new division controller of the snack-foods division of Gourmet Foods. Gourmet Foods has reported a minimum 15% growth in annual earnings for each of the past five years. The snack-foods division has reported annual earnings growth of
> Ana Compo is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans: Plan A: Pay 10 cents per minute of long-distance calling. Plan B: Pay a fixed monthly fee of $16 for up to 30
> Stephen Bergstrom is the new corporate controller of a multinational company that has just overhauled its organizational structure. The company is now decentralized. Each division is under an operating vice-president who, within wide limits, has responsi
> Softmoc is a shoe retailing company. The majority of its sales are made at its own stores. These stores are often located in shopping malls or in the downtown shopping districts of cities. A small but increasing percentage of sales are made via its inter
> A series of independent situations in which a firm is about to make a strategic decision follow. a. Yello Phones is about to decide whether to launch production and sale of a cell phone with standard features. b. Soft Solutions is trying to decide wheth
> Julie Leung is the newly appointed president of Northern University. Northern University Hospital (NUH) is a major problem for her because it is running large deficits. While it is not-for-profit, the province will reduce funding if hospitals fail to mee
> Coast Finance helps prospective homeowners of substantial means to find low-cost financing and assists existing homeowners in refinancing their current loans at lower interest rates. Coast works only for customers with excellent borrowing capacity. Hence
> Electric Eels Company produces high-quality electric eels for Museums and Aquaria to sell in their gift shops. It accounts for the production of these eels with an ABC system. For 2015, Electric Eels expected to produce and sell 16,000 units, but actual
> You are a student preparing for a job interview with a large Canadian consumer products manufacturer. You are applying for a job in the finance department. This company is known for its rigorous case-based interview process. One of the students who succe
> Tropical Fruits Inc. processes tropical fruit into a fruit salad mix, which it sells to a food-service company. Tropical Fruits has in its budget the following standards for the direct materials inputs to produce a batch of 80 kilograms of tropical fruit
> MFD Manufacturing makes wooden furniture. One of their products is a wooden dresser. The exterior and some of the shelves are made of oak, a highquality wood, but the interior drawers are made of pine, a less expensive wood. The budgeted direct materials
> Memflash Inc. manufactures 4 gigabyte flash drives that are compatible with a popular portable storage device. Memflash sells flash drives directly to computer retail chains and to direct marketing organizations that resell flash drives under their house
> The Fremont, California, plant of NUMMI (New United Motor Manufacturing, Inc.), a joint venture of General Motors and Toyota, assembles two types of cars (Corollas and Geo Prisms). A separate assembly line is used for each type of car. Required: Classif
> Your new position as supervisor of product introduction, you have to decide on a pricing strategy for a talking doll specialty product with the following cost structure: Variable costs per unit ……â€&brv
> Styles Inc. manufactures a full line of well-known sunglasses frames and lenses. Styles uses a standard costing system to set attainable standards for direct materials, labour, and overhead costs. Styles reviews and revises standards annually, as necessa
> Aunt Molly’s Old Fashioned Cookies bakes cookies for a chain of retail stores. The company’s best-selling cookie is Chocolate Nut Supreme, which is marketed as a gourmet cookie and regularly sells for $9.60 per kilogra
> Shayna’s Smart Shawls Inc. is a small business that Shayna developed while in college. She began hand-knitting shawls for her dorm friends to wear while studying. As demand grew, she hired some workers and began to manage the operation. Shayna’s shawls r
> Morro Bay Surfboards is a California company that manufactures fibreglass surfboards. The standard cost of direct materials and direct manufacturing labour is $100 per board. This includes 20 kilograms of direct materials, at the budgeted price of $2 per
> On May 1, 2015, Terra Company began the manufacture of a new internet paging device known as Flare. The company installed a standard costing system to account for manufacturing costs. The standard costs for a unit of Flare are as follows: Direct materia
> Grant Electric Inc. manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labour: Direct materials: 10 kg at $4.50/kg ……………………………………….$45.00 Direct manufacturing labour: 0.5 hour at $30
> For its manufacturing facility in Montreal, Quebec, Metalmoulder has a long-term contract with Osaka Metals. Metalmoulder manufactures large-scale machining systems that are sold to other industrial companies. Each machining system has a s izable direct
> Stevie McQueen has run Lightning Car Detailing for the past 10 years. His static-budget and actual results for June 2015 are provided below. Stevie has one employee who has been with him for all 10 years that he has been in business. He has not been as l
> The city of Riverside hired its first city manager four years ago. She favoured a “management by objectives” philosophy and accordingly set up many profit responsibility centres, including a sanitation department, a utility department, and a repair shop.
> Slopes Inc. manufactures and sells snowboards. Slopes manufactures a single model, the Pipex. In the summer of 2015, Slopes’s accountant gathered the following data to prepare budgets for 2016. These units are standard in the lumber ind
> Home Entertainment Centre (HEC) operates a large store in Halifax. The store has both a DVD section and a music section (compact discs, MP3 players, etc.). HEC reports revenues for the DVD section separately from the music section. Required: Classify ea
> Duncan Company manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual costs and outputs relative to their budgets. Departmental managers help create the budgets and usually
> Francois Chenier is the purchasing agent for Highlight Manufacturing Company. Marge Belvedere is head of the production planning and control department. Every six months, Belvedere gives Chenier a general purchasing program. Chenier gets specifications f
> Assume the following: Pet Transport (PT) does not make any sales on credit. PT sells only to the public, and accepts cash and credit cards. Of its sales, 90% are to customers using credit cards, for which PT gets the cash right away, less a 3% transactio
> Pet Transport Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metal doors, but the Cat-allac is smaller. Information for the two products for the month of April is given in the following tables: Inpu
> Korna Company manufactures a product, gizmo, that uses the following direct inputs: Korna has no direct materials inventory. All manufacturing overhead costs are variable costs. The manufacturing overhead cost comprises two activities: setup and operat
> On December 1, 2015, the Basma Wholesale Company is attempting to project cash receipts and disbursements through January 31, 2016. On January 31, 2016, a note will be payable in the amount of $120,000. This amount was borrowed in September to carry the
> The following information is for the Newport Stationery Store. Balance Sheet Information as of September 30 Current assets: Cash ……………â€&brvba
> Dinettes Inc. operates at capacity and makes glass-topped dining tables and wooden chairs that are typically sold as sets of four chairs with one table. However, some customers purchase replacement or extra chairs, and others buy some chairs or a table o
> Tofino Furniture is an elite desk manufacturer. It manufactures two products: ■Executive desks: 0.91 m × 1.5 m oak desks = 1.365 m 2 ■Director desks: 1.8 m × 1.2 m red oak desks = 2.16 m 2
> Applewood Electronics, a division of Elgin Corporation, manufactures two large-screen television models: the Monarch, which has been produced since 2012 and sells for $1,700, and the Regal, a new model introduced in early 2012, which sells for $2,200. Ba
> Strategy usually includes some formal processes. Required: 1. How can managers choose between different strategies? 2. How is strategy different from an operating decision?
> Ace Bicycle Company produces bicycles. This year’s expected production is 10,000 units. Currently, Ace makes the chains for its bicycles. Ace’s accountant reports the following costs for making the 10,000 bicycle chain
> Pumpkin Bags (PB) is a designer of high-quality backpacks and purses. Each design is made in small batches. Each spring, PB comes out with new designs for the backpack and for the purse. They use these designs for one year and then move on to the next tr
> Cartwright Ltd. manufactures two models of saddles, the Jordan and the Shenandoah. The Jordan is a more basic model and sells for $900. The Shenandoah is a professional-model saddle and sells for $1,500. At the beginning of the year, the following budget
> Pharmacare Inc. specializes in the distribution of pharmaceutical products. Pharmacare operates at capacity and has three main market segments: a. General supermarket chains b. Drugstore chains c. “Mom and Pop” single-
> Radhika’s Radiology Centre (RRC) performs X-rays, ultrasounds, CT scans, and MRIs. RRC has developed a reputation as a top radiology centre in the area. RRC has achieved this status because it constantly re-examines its processes and pr
> Family Supermarkets (FS) found that its ABC analysis (see the Pulling It All Together problem in this chapter) provided important insights. FS extends the analysis to cover three more product lines: baked goods, milk and fruit juice, and frozen products.
> Halifax Test Laboratories does heat testing (HT) and stress testing (ST) on materials. Under its current costing system, Halifax aggregates all operating costs of $1,440,000 into a single overhead cost pool. Halifax calculates a rate per test-hour of $18
> Wigan Associates has two classifications of professional staff—partners and managers. Hanley asks his assistant to examine the relative use of partners and managers on the recent Widnes Coal and St. Helen’s cases. The
> Hanley asks his assistant to collect details on those costs included in the $21,000 indirect-cost pool that can be traced to each individual case. After further analysis, Wigan is able to reclassify $14,000 of the $21,000 as direct costs: Hanley decide
> Wigan Associates is a recently formed law partnership. Ellery Hanley, the managing partner of Wigan Associates, has just finished a tense phone call with Martin Offiah, president of Widnes Coal. Offiah complained about the price Wigan charged for some le
> Financial accountants use estimates of financial value differently than either cost or management accountants. Required: 1. Identify two differences in use. 2. Identify a similarity among accountants.
> Naf Radiator Company uses a normal costing system with a single manufacturing overhead (MOH) cost pool and machine-hours (MH) as the cost allocation base. The following data are for 2016: Budgeted manufacturing overhead (MOH) …â
> J. Watson Kalor Ltd. uses a normal job-costing system with two direct cost categories, direct materials and direct labour, and one indirect cost pool. Manufacturing overhead is allocated based on direct labour costs. Any overallocated or underallocated o
> S. Sridhar, adapted Northley Industries is a manufacturer of sailboats. The following partial information for 2016 is available: Additional Information 1. Direct manufacturing labour wage rate was $16 per hour. 2. Manufacturing overhead (MOH) is alloca
