“The inspection point is the key to the allocation of spoilage costs.” Do you agree? Explain.
> Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting monthly activity costs for each month of 2018. Each successive month, the budgeted cost-driver rate decreases by 0.4% relative to the preceding month. So, for example, February’s budg
> The Jerico store of Jiffy Mart, a chain of small neighborhood convenience stores, is preparing its activity-based budget for January 2018. Jiffy Mart has three product categories: soft drinks (35% of cost of goods sold [COGS]), fresh produce (25% of COGS
> DeWitt Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Bahar, the controller, is responsible for preparing DeWitt’s master budget and has accumulated the following information
> Ever Clean Company provides gutter cleaning services to residential clients. The company has enjoyed considerable growth in recent years due to a successful marketing campaign and favorable reviews on service-rating Web sites. Ever Clean owner Joanne Cla
> Xander Manufacturing Company manufactures blue rugs, using wool and dye as direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $2 per skein and 0.8 gallons of dye at a cost of $6 per gallon. All other materials are indirect. At th
> Describe two potential problems that should be avoided in relevant-cost analysis.
> Saphire, Inc., bottles and distributes mineral water from the company’s natural springs in northern Oregon. Saphire markets two products: 12-ounce disposable plastic bottles and 1-gallon reusable plastic containers. Required: 1. For 2018, Saphire market
> The Yucatan Co. in Mexico has a division that manufactures bicycles. Its budgeted sales for Model XG in 2018 are 95,000 units. Yucatan’s target ending inventory is 7,000 units, and its beginning inventory is 11,000 units. The company’s budgeted selling p
> What are the three methods for determining transfer prices?
> “Organizations typically adopt a consistent decentralization or centralization philosophy across all their business functions.” Do you agree? Explain.
> What is the relationship among motivation, goal congruence, and effort?
> Describe three criteria you would use to evaluate whether a management control system is effective.
> The McGrath Company has prepared a sales budget of 42,000 finished units for a 3-month period. The company has an inventory of 13,000 units of finished goods on hand at December 31 and has a target finished-goods inventory of 15,000 units at the end of t
> What is a management control system?
> “All transfer-pricing methods give the same division operating income.” Do you agree? Explain.
> What properties should transfer-pricing systems have?
> Give an example of how, under absorption costing, operating income could fall even though the unit sales level rises.
> The main trouble with variable costing is that it ignores the increasing importance of fixed costs in manufacturing companies. Do you agree? Why?
> Describe the difference between a direct materials efficiency variance and a variable manufacturing overhead efficiency variance.
> Assume variable manufacturing overhead is allocated using machine-hours. Give three possible reasons for a favorable variable overhead efficiency variance.
> Name four approaches to estimating a cost function.
> Do companies in either the service sector or the merchandising sector make choices about absorption costing versus variable costing?
> When using the high-low method, should you base the high and low observations on the dependent variable or on the cost driver?
> In 2017, Hart & Sons, a small environmental-testing firm, performed 11,400 radon tests for $260 each and 15,000 lead tests for $210 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 12% next ye
> Describe the account analysis method for estimating a cost function.
> “Multicollinearity exists when the dependent variable and the independent variable are highly correlated.” Do you agree? Explain.
> What are the four key assumptions examined in specification analysis in the case of simple regression?
> “The difference between practical capacity and master-budget capacity utilization is the best measure of management’s ability to balance the costs of having too much capacity and having too little capacity.” Do you agree? Explain.
> Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the denominator-level capacity concept?
> What are the variances in a 4-variance analysis?
> Describe three criteria for evaluating cost functions and choosing cost drivers.
> What denominator-level capacity concepts emphasize the output a plant can supply? What denominator-level capacity concepts emphasize the output customers demand for products produced by a plant?
> Explain how the analysis of fixed manufacturing overhead costs differs for (a) planning and control and (b) inventory costing for financial reporting.
> How do managers plan for variable overhead costs?
> United Savings Bank (USB) is examining the profitability of its Premier Account, a combined savings and checking account. Depositors receive a 2% annual interest rate on their average deposit. USB earns an interest rate spread of 3% (the difference betwe
> Match each of the following numbered descriptions with one or more of the denominator-level capacity concepts by putting the appropriate letter(s) by each item: a. Theoretical capacity b. Practical capacity c. Normal capacity utilization d. Master-bu
> Give three definitions of investment used in practice when computing ROI.
> Describe EVA.
> What factors affecting ROI does the DuPont method of profitability analysis highlight?
> Describe moral hazard.
> How can sensitivity analysis be incorporated in DCF analysis?
> “Capital budgeting has the same focus as accrual accounting.” Do you agree? Explain.
> Give examples of costs included in annual carrying costs of inventory when using the EOQ decision model.
> Name six cost categories that are important in managing goods for sale in a retail company.
> Give two examples of appraisal costs.
> The job-costing system at Melody’s Custom Framing has five indirect cost pools (purchasing, material handling, machine maintenance, product inspection, and packaging). The company is in the process of bidding on two jobs: Job 220, an or
> Name two items classified as prevention costs
> How does conformance quality differ from design quality? Explain.
> Describe two benefits of improving quality.
> “In accounting for spoiled units, we are dealing with cost assignment rather than cost incurrence.” Explain.
> “Units of abnormal spoilage are inferred rather than identified.” Explain.
> “What has been regarded as normal spoilage in the past is not necessarily acceptable as normal spoilage in the present or future.” Explain.
> “Costs of abnormal spoilage are losses.” Explain.
> “Normal spoilage is planned spoilage.” Discuss.
> When is a company justified in inventorying scrap?
> Veritek Wholesalers operates at capacity and sells furniture items to four department-store chains (customers). Mr. Veritek commented, “We apply ABC to determine product-line profitability. The same ideas apply to customer profitability
> “The costs of rework are always charged to the specific jobs in which the defects were originally discovered.” Do you agree? Explain.
> “The unit cost of normal spoilage is the same as the unit cost of abnormal spoilage.” Do you agree? Explain.
> Why is there an unmistakable trend in manufacturing to improve quality?
> Why should the FIFO method be called a modified or department FIFO method?
> Describe the distinctive characteristic of weighted-average computations in assigning costs to units completed and to units in ending work in process.
> Name the three inventory methods commonly associated with process costing.
> “Transferred-in costs are those costs incurred in the preceding accounting period.” Do you agree? Explain.
> Identify the main difference between journal entries in process costing and job costing.
> Identify a major advantage of the FIFO method for purposes of planning and control.
> Give three examples of industries that use process-costing systems.
> Fitzgerald Supermarkets (FS) operates at capacity and decides to apply ABC analysis to three product lines: baked goods, milk and fruit juice, and frozen foods. It identifies four activities and their activity cost rates as follows: Orderingâ€
> Why does the sales value at splitoff method use the sales value of the total production in the accounting period and not just the revenues from the products sold?
> What is a joint cost? What is a separable cost?
> Describe two major methods to account for byproducts.
> How might a company simplify its use of the NRV method when final selling prices can vary sizably in an accounting period and management frequently changes the point at which it sells individual products?
> Give two examples of industries in which joint costs are found. For each example, what are the individual products at the splitoff point?
> What is conceptually the most defensible method for allocating support-department costs? Why?
> “To ensure unbiased cost allocations, fixed costs should be allocated on the basis of estimated long-run use by user-department managers.” Do you agree? Why?
> Give examples of allocation bases used to allocate support-department cost pools to operating departments.
> How do budgeted cost rates motivate the support-department manager to improve efficiency?
> Describe how the dual-rate method is useful to division managers in decision making.
> Decorative Doors, Inc., produces two types of doors, interior and exterior. The company’s simple costing system has two direct-cost categories (materials and labor) and one indirect-cost pool. The simple costing system allocates indirec
> Describe how companies are increasingly facing revenue-allocation decisions.
> What is one key way to reduce cost-allocation disputes that arise with government contracts?
> What role does the Cost Accounting Standards Board play when companies contract with the U.S. government?
> What information does the whale curve provide?
> How can a company track the extent of price discounting on a customer-by-customer basis?
> Why is customer-profitability analysis an important topic for managers?
> Explain why a favorable sales-quantity variance occurs.
> “It is not important for a company to distinguish between cost incurrence and locked-in costs.” Do you agree? Explain.
> Describe value engineering and its role in target costing.
> What is a target cost per unit?
> Speediprint Corporation owns a small printing press that prints leaflets, brochures, and advertising materials. Speediprint classifies its various printing jobs as standard jobs or special jobs. Speediprint’s simple job-costing system h
> Distinguish between quantitative and qualitative factors in decision making.
> How is activity-based costing useful for pricing decisions?
> Describe four purposes of cost allocation.
> What is life-cycle budgeting?
> What is cost-plus pricing?
> What are the three major influences on pricing decisions?
> What is a partial-productivity measure?
> How might the optimal solution of a linear programming problem be determined?
> Describe the three steps in solving a linear programming problem.
> What is downsizing?
> “Cost written off as depreciation on equipment already purchased is always irrelevant.” Do you agree? Why?
