What two assumptions are frequently made when estimating a cost function?
> 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?
> DLN is an architectural firm that designs and builds buildings. It prices each job on a cost plus 20% basis. Overhead costs in 2017 are $8,100,000. DLN’s simple costing system allocates overhead costs to its jobs based on number of jobs
> Describe three alternative cost-plus pricing methods.
> “Management should always maximize sales of the product with the highest contribution margin per unit.” Do you agree? Why?
> Describe the five key forces to consider when analyzing an industry.
> Define opportunity cost.
> Define strategy.
> “Variable costs are always relevant, and fixed costs are always irrelevant.” Do you agree? Why?
> What is reengineering?
> What is a customer preference map, and why is it useful?
> “All future costs are relevant.” Do you agree? Why?
> Define relevant costs. Why are historical costs irrelevant?
> Sander Company produces mathematical and financial calculators and operates at capacity. Data related to the two products are presented here: Total manufacturing overhead costs are as follows: Total Machining costs…â€&brvb
> Outline the five-step sequence in a decision process.
> List the six steps in estimating a cost function on the basis of an analysis of a past cost relationship. Which step is typically the most difficult for the cost analyst?
> Describe the conference method for estimating a cost function. What are two advantages of this method?
> “High correlation between two variables means that one is the cause and the other is the effect.” Do you agree? Explain.
> What is the difference between a linear and a nonlinear cost function? Give an example of each type of cost function.
> Describe three alternative linear cost functions.
> “All the independent variables in a cost function estimated with regression analysis are cost drivers.” Do you agree? Explain.
> Discuss four frequently encountered problems when collecting cost data on variables included in a cost function.
> Define learning curve. Outline two models that can be used when incorporating learning into the estimation of cost functions.
> Acclaim Inc. makes two styles of trophies, basic and deluxe, and operates at capacity. Acclaim does large custom orders. Acclaim budgets to produce 10,000 basic trophies and 5,000 deluxe trophies. Manufacturing takes place in two production departments:
> Critics of absorption costing have increasingly emphasized its potential for leading to undesirable incentives for managers. Give an example.
> What are the factors that affect the breakeven point under (a) variable costing and (b) absorption costing?
> “Companies that make no variable-cost/fixed-cost distinctions must use absorption costing, and those that do make variable-cost/fixed-cost distinctions must use variable costing.” Do you agree? Explain.
> What is the IRS’s requirement for tax reporting regarding the choice of a denominator-level capacity concept?
> Describe how flexible-budget variance analysis can be used in the control of costs of activity areas.
> “Overhead variances should be viewed as interdependent rather than independent.” Give an example.
> Describe the downward demand spiral and its implications for pricing decisions.
> “The production-volume variance should always be written off to Cost of Goods Sold.” Do you agree? Explain.
> Provide one caveat that will affect whether a production-volume variance is a good measure of the economic cost of unused capacity.
> What are two ways of reducing the negative aspects associated with using absorption costing to evaluate the performance of a plant manager?
> Roadster Company (RC) designs and produces automotive parts. In 2017, actual variable manufacturing overhead is $280,000. RC’s simple costing system allocates variable manufacturing overhead to its three customers based on machine-hours
> Why is the flexible-budget variance the same amount as the spending variance for fixed manufacturing overhead?
> What are the steps in developing a budgeted fixed overhead rate?
> Explain the main conceptual issue under variable costing and absorption costing regarding the timing for the release of fixed manufacturing overhead as expense.
> Why is the term direct costing a misnomer?
> What are the factors that affect the spending variance for variable manufacturing overhead?
> What are the steps in developing a budgeted variable overhead cost-allocation rate?
> How does standard costing differ from actual costing?
> How does the planning of fixed overhead costs differ from the planning of variable overhead costs?
> Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.
> Rob Kapito, the controller of Blackstar Paint Supply Company, has been exploring a variety of internal accounting systems. Rob hopes to get the input of Blackstar’s board of directors in choosing one. To prepare for his presentation to
> The Ride-On-Wave Company (ROW) produces a line of non-motorized boats. ROW uses a normal-costing system and allocates manufacturing overhead using direct manufacturing labor cost. The following data are for 2017: Budgeted manufacturing overhead cost&acir
> Tesla Motors assembles the fully electric Model S-85 automobile at its Fremont, California, plant. The standard variable manufacturing cost per vehicle in 2017 is $58,800, which consists of: Direct materials……&acir
> In 2018, only 876,000 Mealman meals were produced and sold to the hospitals. Wright suspects that hospital controllers had systematically inflated their 2018 meal estimates. Required: 1. Recall that Mealman uses the master-budget capacity utilization t
> Meals To Go operates a chain of 10 hospitals in the Los Angeles area. Its central food-catering facility, Mealman, prepares and delivers meals to the hospitals. It has the capacity to deliver up to 1,460,000 meals a year. In 2017, based on estimates from
> The Iron City Company started business on January 1, 2017. Iron City manufactures a specialty honey beer, which it sells directly to state-owned distributors in Pennsylvania. Honey beer is produced and sold in six-packs, and in 2017, Iron City produced m
> Planet Light First (PLF), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, PLF has decided to evaluate its financial performance using absor
> Planet Light First (PLF), a producer of energy-efficient light bulbs, expects that demand will increase markedly over the next decade. Due to the high fixed costs involved in the business, PLF has decided to evaluate its financial performance using absor
> Market.com is about to enter the highly competitive personal electronics market with a new type of tablet. In anticipation of future growth, the company has leased a large manufacturing facility and has purchased several expensive pieces of equipment. In
> LLAP Company manufactures a specialized hoverboard. LLAP began 2017 with an inventory of 240 hoverboards. During the year, it produced 1,200 boards and sold 1,300 for $800 each. Fixed production costs were $319,000, and variable production costs were $37
> Magic Me is a manufacturer of magic kits. It uses absorption costing based on standard costs and reports the following data for 2017: There is no price, spending, or efficiency variances. Actual operating costs equal budgeted operating costs. The produc
> Castle Lager has just purchased the Jacksonville Brewery. The brewery is two years old and uses absorption costing. It will “sell” its product to Castle Lager at $47 per barrel. Peter Bryant, Castle Lagerâ€&
> Creative Solutions designs Web pages for clients in the education sector. The company’s job-costing system has a single direct cost category (Web-designing labor) and a single indirect cost pool composed of all overhead costs. Overhead costs are allocate
> Castle Lager has just purchased the Jacksonville Brewery. The brewery is two years old and uses absorption costing. It will “sell” its product to Castle Lager at $47 per barrel. Peter Bryant, Castle Lagerâ€&
> Mountain Press produces textbooks for high school accounting courses. The company recently hired a new editor, Jan Green, to handle production and sales of books for an introductory accounting course. Jan’s compensation depends on the gross margin associ
> Gammaro Company uses standard costing. Tim Sweeney, the new president of Gammaro Company, is presented with the following data for 2017: Required: 1. At what percentage of denominator level was the plant operating during 2017? 2. How much fixed manufac
> Carpenter Company uses standard costing. The company has a manufacturing plant in Georgia. Standard labor-hours per unit are 0.50, and the variable overhead rate for the Georgia plant is $3.50 per direct labor-hour. Fixed overhead for the Georgia plant i
> The Greenspace Company started business on January 1, 2017. The company adopted a standard costing system for the production of ergonomic backpacks. Greenspace chose direct labor as the application base for overhead and decided to use the proration metho
> Cavio is a cloud service provider that offers computing resources to handle enterprise-wide applications. For March 2017, Cavio estimates that it will provide 18,000 RAM hours of services to clients. The budgeted variable overhead rate is $6 per RAM hour
> Kathy’s Kettle Potato Chips produces gourmet chips distributed to chain sub shops throughout California. To ensure that their chips are of the highest quality and have taste appeal, Kathy has a rigorous inspection process. For quality control purposes, K
> The Beal Manufacturing Company’s costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct m
> The Gallo Company uses a flexible budget and standard costs to aid planning and control of its machining manufacturing operations. It’s costing system for manufacturing has two direct-cost categories (direct materials and direct manufacturing labor—both
> The Saluki Company specializes in making fraternity and sorority T-shirts for the college market. Due to the high setup costs for each batch printed, Saluki holds the T-shirt requests until demand is approximately 100 shirts. At that point Saluki will sc
> Cheney & Partners, a Quebec based public accounting partnership, specializes in audit services. Its job-costing system has a single direct-cost category (professional labor) and a single indirect-cost pool (audit support, which contains all costs of
> The Roller Bag Company manufactures extremely light and rolling suitcases. It was one of the first companies to produce rolling suitcases and sales have increased for the past several years. In 2017, Roller Bag budgeted to sell 150,000 suitcases for $80
> Audrina’s Fleet Feet, Inc., produces dance shoes for stores all over the world. While the pairs of shoes are boxed individually, they are crated and shipped in batches. The shipping department records both variable direct batch-level co
> Wilson Products uses standard costing. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labor-hours (DLH). Wilson Products develops its manufacturing overhead rate from the current an
> Consider the following two situations—cases A and B— independently. Data refer to operations for April 2017. For each situation, assume standard costing. Also assume the use of a flexible budget for control of variable
> Best Around, Inc., is a manufacturer of vacuums and uses standard costing. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of budgeted machine-hours. In 2017, budgeted fixed manufacturing overhead cost was $17,000,0
> Cooking Whiz manufactures premium food processors. The following are some manufacturing overhead data for Cooking Whiz for the year ended December 31, 2017: Budgeted number of output units: 915 Planned allocation rate: 2 machine-hours per unit Actual
