What are the types of sales variances?
> What does expropriation mean, and what is the role of transfer pricing in this regard?
> What is meant by the term investment center? How is the financial performance of investment centers measured?
> What is the role of cost allocation in strategic performance measurement?
> What are some important behavioral and implementation issues in strategic performance measurement? How does the management accountant deal with these issues?
> Because full costing is accepted for financial reporting purposes and variable costing is not, why should we be concerned about the difference between them? What is the difference, and why is it important?
> What are four types of SBUs, and what are the goals of each?
> Name two types of organizational design and explain how they differ.
> Explain the difference between informal and formal control systems. What type of control system is strategic performance measurement?
> Does an effective performance evaluation focus on individual or team performance?
> What is strategic performance measurement, and why is it important for effective management?
> The firm in Brief Exercise 13-20 ignores competitive prices because it has a differentiated product. It uses life-cycle cost–based pricing with a 10 percent markup. What is the firm’s price?
> Explain the difference between the engineered-cost and discretionary-cost approaches to evaluating support departments.
> What is the role of risk preference in performance evaluation?
> Which type of cost center has a planning focus, and which type has an evaluation focus?
> Can the marketing department be both a revenue center and a cost center? Explain.
> How do centralized and decentralized firms differ? What are the advantages of each?
> In what situations is a cost center most appropriate? A profit center? A revenue center?
> Can strategic performance measurement be used for service firms and not-for-profit organizations? How?
> What are the differences among performance evaluation, management control, and operational control?
> Of the four categories in a typical COQ report, which category of quality cost is the most damaging to the organization? Why is this the case?
> What functions does a cost of quality (COQ) report play in a quality improvement program?
> The firm in Brief Exercise 13-20 ignores competitive prices because it has a differentiated product. It uses full manufacturing cost–based pricing with a 40 percent markup. What is the firm’s price?
> Taguchi argues that being within specification limits is not enough to be competitive in today’s global economy. Explain his argument.
> There are two basic approaches to setting quality standards (expectations). Discuss the difference between goalpost conformance and absolute quality conformance.
> What is meant by Six Sigma? What five steps are usually associated with Six Sigma applications?
> Describe the major elements of a comprehensive framework for managing and controlling quality, such as the framework presented in text Exhibit 17.3.
> In what respect are traditional accounting systems deficient for the goal of managing and controlling quality?
> Define quality. For management accounting and control purposes, define the two primary components of quality.
> Name and briefly describe three methods that companies can use to either identify or correct quality problems.
> From a design standpoint, what are some desirable characteristics of a COQ reporting system? That is, if you were to design such a system from scratch, what would be the key attributes of the system?
> Provide a brief explanation of the conceptual relationship between improvements in quality and improvements in financial performance.
> Why do manufacturing personnel prefer operational productivity measures to financial productivity measures?
> The market price for a product has been $50 per unit, but competitive pressures have reduced the market price to $45. The firm manufactures 10,000 of these products per year at a manufacturing cost of $38 per unit (including $22 fixed cost and $16 variab
> “Partial productivity measures should be calculated only for high-value-added activities.” Do you agree, and why or why not?
> “A total productivity measure encompasses all partial productivity measures.” Do you agree, and why or why not?
> “A financial productivity measure contains more information than an operational productivity measure does.” Do you agree, and why or why not?
> What is partial productivity? Total productivity?
> What is operational productivity? Financial productivity?
> List benchmarks or criteria often used in assessing productivity, and discuss their advantages and disadvantages.
> “An improvement in earnings growth can be achieved at the expense of market share (i.e., an unfavorable market share variance).” Do you agree, and why or why not?
> What are the relationships between a market size variance, a market share variance, a sales quantity variance, and a sales volume variance?
> Discuss why improving productivity is important for a firm that competes on a cost leadership strategy.
> “A favorable sales quantity variance indicates that the marketing manager has done a good job.” Do you agree? Can you give an example in which a market size variance or market share variance is opposite to that of the sales quantity variance?
> Given the following attributes of an investment project with a five-year life: investment outlay, year 0, $5,000; after-tax cash inflows, year 1, $800; year 2, $900; year 3, $1,500; year 4, $1,800; and year 5, $3,200. (a) Use the built-in NPV function o
> Distinguish between a market size variance and a market share variance.
> What are the relationships among a selling price variance, a sales mix variance, a sales quantity variance, and a sales volume variance?
> “As long as a firm sells more units than the units specified in the master budget, it will not have an unfavorable sales volume variance.” Do you agree? Why or why not?
> What is the difference between a sales quantity variance and a sales volume variance?
> Distinguish between a selling price variance and a sales volume variance.
> List important measures in assessing marketing effectiveness.
> Which of the following statements is true? a. The lower the partial productivity ratio, the greater the productivity. b. Productivity improves when partial productivity increases. c. Prices of inputs are incorporated in the partial operational product
> “A productivity measure such as machine-hour productivity is more important in a JIT environment than in a non-JIT environment.” Do you agree, and why or why not?
> What is productivity? What does it measure?
> Create an Excel spreadsheet for Brief Exercise 12-20 and demonstrate that the PV of the depreciation deductions, when the income tax rate is 40%, is $3,218 (rounded to the nearest dollar). Given an after-tax discount rate of 12%, what tax rate (rounded t
> Why do some firms choose to use a two-variance analysis instead of a three-variance or a four-variance analysis of the total overhead cost variance for the period?
> What are the justifications for using practical capacity as the denominator volume when calculating the fixed overhead application rate?
> Would the choice of denominator level affect the amount of the fixed factory overhead budget variance? Fixed overhead production volume variance? Explain.
> List causes that could lead to a fixed overhead production volume variance.
> List causes that could lead to a fixed overhead spending variance.
> List causes that could lead to a variable overhead efficiency variance.
> List causes that could lead to a variable overhead spending variance.
> What is the difference between the applied variable overhead cost and the total variable overhead cost in the flexible budget? What is the difference between the applied factory overhead cost and the total flexible budget cost for fixed overhead?
> “The direction of a variance (favorable or unfavorable) is irrelevant in decisions regarding whether or not to investigate the variance.” Do you agree? Why or why not?
> What factors should be considered in determining whether to investigate a variance?
> MicroTech Corporation is subject to a 35% income tax rate. Given the following information about the firm’s capital structure, calculate the corporation’s weighted-average cost of capital (WACC), rounded to 1 decimal p
> What provisions of U.S. GAAP (viz., FASB ASC 330-10-30, previously SFAS No. 151—available at www.fasb.org) pertain to the issue of end-of-period disposition of overhead cost variances? Be specific.
> Explain two available treatments for disposing of overhead cost variances at the end of a period.
> “As long as the total actual factory overhead cost is not significantly different from the total standard applied factory overhead cost for the period, there is no need to conduct further analyses of the factory overhead variance.” Do you agree? Why or w
> Discuss behavioral concerns in establishing and implementing a standard cost system.
> Which of the following should a firm use as the standard in assessing production efficiencies: standards based on ideal performance, standards based on attainable performance, or standards based on the average of recent historical performance?
> Will overtime premiums affect direct labor variances? If so, which ones?
> Explain some of the possible causes of direct labor rate and direct labor efficiency variances. Who normally has responsibility for or influence over each of these variances?
> Explain the possible causes for direct materials price and direct materials usage (efficiency) variances. Who in the organization normally has influence over or responsibility for each of these variances?
> Should the performance of a division be deemed less than satisfactory if all of its variances are “unfavorable”? Explain.
> Explain what is meant by the term management by exception(see, for example, www.myaccountingcourse. com/accounting-dictionary/management-by-exception). What is the relationship between the process of standard cost variance analysis and management by exce
> Given the following attributes of an investment project with a 5-year life and an after-tax discount rate of 12%, calculate both the IRR and MIRR of the project using the built-in functions in Excel: investment outlay, time 0, $5,000; after-tax cash infl
> Explain how standard costs and flexible budgets can be used for short-term profit analysis—that is, for financial control purposes.
> One of the purported benefits of moving to a JIT system is improvements in customer response time (CRT). Define the following terms: total customer response time, manufacturing (production) cycle time, manufacturing cycle efficiency (MCE), value-added ti
> Describe how a just-in-time (JIT) manufacturing system is fundamentally different from a conventional manufacturing system. List two primary financial benefits associated with a shift to JIT manufacturing. What effect does the adoption of JIT have on the
> This chapter deals with control systems associated with business processes, such as operating processes. Provide a definition and some examples of operating processes. In what other processes would an organization engage in the normal course of business?
> What is the difference among a master budget, pro forma budgets, and a flexible budget? Explain.
> Name the five steps of the theory of constraints and explain the purpose of each. Which is the most important step and why?
> What is life-cycle costing? Why is it used?
> For what types of firms is target costing most appropriate and why?
> What does the concept of value engineering mean? How is it used in target costing?
> Do cost management practices change over the product’s sales life cycle? Explain how.
> What is the present value of a stream of 5 end-of-year annual cash receipts of $500 given a discount rate of 14%? (a) Use the appropriate table in the text (i.e., Appendix C, Table 2) and (b) the appropriate function in Excel (= PV) to answer this ques
> Do pricing strategies change over the different phases of the sales life cycle? Explain how.
> What does the term sales life cycle mean? What are the phases of the sales life cycle? How does it differ from the cost life cycle?
> Explain the two methods for reducing total product costs to achieve a desired target cost. Which is more common in the consumer electronics industries? In the specialized equipment manufacturing industries?
> At what phase in the product sales life cycle will prices likely be the highest: introduction, growth, maturity, or decline?
> Distinguish pricing based on the cost life cycle and pricing based on the sales life cycle, and give an example method for each.
> How is Takt time calculated, and what is it used for?
> Explain the difference in intended application between strategic pricing and life-cycle costing.
> For what types of firms is life-cycle costing most appropriate? Why?
> How important is product design in life-cycle costing? Why?
> For what types of firms is the theory of constraints analysis most appropriate? Why?
> What is the present value of $1,000 to be received 2 years from now, if the discount rate is (a) 10%, (b) 14%, and (c) 20%? Do the calculations first using the present value factors given in Appendix C, Table 1, then using the formula that appears at
> Brief Exercises 7-11 through 7-14 involve departmental cost allocation with two service departments and two production departments. Use the following information for these four exercises: How does your answer to 7-11 change if the cost in P1 is changed
> What type of professional certification is most relevant for the management accountant and why?
