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management and cost accounting
Questions and Answers of
Management And Cost Accounting
McCarthy Potatoes processes potatoes into chips at its highly automated Longford plant. For many years, it processed potatoes for only the retail consumer market where it had a superb reputation for
Wolfgang Iser, the accountant of Starkuchen, wants to further examine the relative profitability of raisin cake and layered carrot cake. He questions the accuracy of the activity-based normal costing
Langholmen-Sverige AB crushes and refines mineral ore into three products in a joint-cost operation. Costs and production for 2018 were as follows: ● Department 1, at initial joint costs of
Nor-Pharma AS manufactures three joint products from a joint process: Altox, Lorex and Hycol. Data regarding these products for the fiscal year ended 31 May 2018 are as follows: The joint
Forza San Marino Srl installed standard costs and a flexible budget on 1 January 2018. The president had been pondering how fixed manufacturing overhead should be allocated to products. Machine-hours
Pinafore Ltd manufactures and sells a single product. The budgeted profit statement for this month, which has been prepared using marginal costing principles, is as follows: The normal monthly
Archibald Ltd manufactures and sells one product. Its budgeted profit statement for the first month of trading is as follows: The budget was prepared using absorption costing principles. If
Langdale Ltd is a small company manufacturing and selling two different products – the Lang and the Dale. Each product passes through two separate production cost centres – a machining
X Ltd has two production departments, Assembly and Finishing, and two service departments, Stores and Maintenance. Stores provides the following service to the production departments: 60% to Assembly
Starzmann GmbH assembles and sells motor vehicles. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to April and May of 2018 are: The
Bières Ronsard SA recently purchased a brewing plant from a bankrupt company. The brewery is in Montpazier, France. It was constructed only two years ago. The plant has budgeted fixed manufacturing
Ericsson AB manufactures and sells a single product. The following data cover the two latest years of operations: The denominator level is 30,000 output units per year. Ericsson’s accounting
Svenborg AS manufactures and sells wide-screen television sets. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to January, February and March
Exercise 11.11 reports ABC data for the three activity areas (cleaning, cutting and packaging) on a per output-unit basis (per kilogram of chips). This format emphasises product costing. An
Starkuchen GmbH has been in the food-processing business for three years. For its first two years (2017 and 2018), its sole product was raisin cake. All cakes were manufactured and packaged in 1 kg
CJD Ltd manufactures plastic components for the car industry. The following budgeted information is available for three of their key plastic components: Required 1. Calculate the budgeted
Baden-Möbel GmbH manufactures a variety of prestige boardroom chairs. Its job-costing system was designed using an activity-based approach. There are two direct-cost categories (direct materials and
Aircomposystèmes SA has a machining facility specialising in work for the aircraft components market. The prior job-costing system had two direct-cost categories (direct materials and direct
Give two examples each of a value-added cost and a non-value-added cost.
‘It is not important for a firm to distinguish between cost incurrence and locked-in costs.’ Do you agree? Explain.
Describe three alternative cost-plus methods.
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: Xuclà Mecàniques Fluvià SA, an
Pagnol-Carrelages SNC is a small distributor of marble tiles. Pagnol-Carrelages identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and reports the
Hospedeiras de Portugal Lda, a large labour contractor, supplies contract labour to building construction companies. For 2018, Hospedeiras has budgeted to supply 80,000 hours of contract labour. Its
Østerbro AS cans peaches for sale to food distributors. All costs are classified as either manufacturing or marketing. Østerbro prepares monthly budgets. The March 2018 budgeted absorption-costing
Ella Ltd recently started to manufacture and sell product DG. The variable cost of product DG is £4 per unit and the total weekly fixed costs are £18,000. The company has set the initial selling
Decision Support Systems (DSS) is examining the profitability and pricing policies of its software division. The DSS software division develops software packages for engineers. DSS has collected data
Overloon BV is a repair-service company specialising 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
Describe the accounting rate of return method. What are its main strengths and weaknesses?
How is the accounting rate of return method different from the payback method?
Euro-Jouets SNC sells neon-coated ‘Feu-Follet’ cars to several local toy stores. It has the capacity to make 250,000 of these units per year, but during the year ending 31 December 2018, it made
Bread Products Ltd is considering the replacement policy for its industrial size ovens which are used as part of a production line that bakes bread. Given its heavy usage, each oven has to be
Meer has been offered a special-purpose metal-cutting machine for €110,000. The machine is expected to have a useful life of eight years with a terminal disposal value of €30 000. Savings in
Aalesund Fotballklubb is a Norwegian football team with a long tradition of winning. However, the last three years have been traumatic. The team has not won a major championship, and attendance at
Assume that six projects, A–F in the table that follows, have been submitted for inclusion in the coming year’s budget for capital expenditures: Required 1. Calculate the internal rates of
The board of directors of a company is considering two mutually exclusive projects. Both projects necessitate buying new machinery, and both projects are expected to have a life of five
Hraxin Co is appraising an investment project which has an expected life of four years and which will not be repeated. The initial investment, payable at the start of the first year of operation, is
ST operates in a highly competitive market and is considering introducing a new product to expand its current range. The new product will require the purchase of a specialised machine costing
Define master budget.
What are the elements of the budgeting cycle?
Define kaizen budgeting.
Embutidos Vallina SA has two direct-cost categories: direct materials and direct manufacturing labour. Its single indirect-costcategory (manufacturing overhead) is allocated on the basis of
Lux-Ernster expects 2018 sales of 100,000 units of serving trays. Lux-Ernster’s opening stock for 2018 is 7000 trays; target closing stock, 11,000 trays. Required Calculate the number of trays
Europa-Dyonisos SA produces wine. The company expects to produce 1.5 million two-litre bottles of Chablis in 2018. Europa-Dyonisos purchases empty glass bottles from an outside supplier. Its target
Jacek Zielinski, the budget manager at Jelenia-Silesia, a manufacturer of child furniture and carriages, is working on the 2018 annual budget. In discussions with Sylwester Czereszewski, the sales
Castelo Branco Lda is a manufacturer of video-conferencing products. Regular units are manufactured to meet marketing projections, and specialised units are made after an order is received.
On 1 December 2018, Tire-Lire, SNC, is attempting to project cash receipts and disbursements to 31 January 2019. On this latter date, a note will be payable in the amount of €100,000. This amount
M plc designs, manufactures and assembles furniture. The furniture is for home use and therefore varies considerably in size, complexity and value. One of the departments in the company is the
Nyborg Supermarkets AS is preparing its activity-based budget for January 2018 for its operating costs (that is, its non-cost of goods purchased for resale costs). Its current concern is with its
Nyborg Supermarkets has a kaizen (continuous improvement) approach to budgeting monthly activity area costs for each month of 2018. February’s budgeted cost driver rate is 0.998 times the budgeted
Poitou-Chemises SARL manufactures shirts for retail chains. Armand Plessis, the accountant, is becoming increasingly disenchanted with Poitou-Chemises’ six-month-old standard costing system. The
FG is preparing its cash budgets for January, February and March. Budgeted data are as follows: The selling price per unit is £200. The purchase price per kg of raw material is £25. Each unit
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
British Beverages bottles two soft drinks under licence to Cadbury Schweppes at its Manchester plant. Bottling at this plant is a highly repetitive, automated process. Empty bottles are removed from
How might the continuous improvement theme be incorporated into the process of setting budgeted costs?
Abulafia Srl manufactures tyres for the Formula 1 motor racing circuit. For August 2018 Abulafia budgeted to manufacture and sell 3000 tyres at a variable cost of €74 per tyre and a total fixed
Consider the following data collected for Helsingør: Required Calculate the price, efficiency and flexible-budget variances for direct materials and direct manufacturing labour. Direct
Sharmila Khan is manager of TaxExperts.co.uk, a firm that provides assistance in the preparation of individual tax returns via the internet. Because of the highly seasonal nature of her business,
AKEI is an elite desk manufacturer. At the start of May 2018, the following budgeted unit amounts (based on a standard costing system) related to its manufacture of executive desks (made out of
Ched Ltd manufactures Cheddar cheese pies. For January 2018, it budgeted to purchase and use 15,000 kg of Cheddar cheese at £0.89 per kg; budgeted output was 60,000 pies. Actual purchase and use for
Norland-Norge AS produces corporate notebooks. Each notebook is designed for an individual customer. The company’s operating budget for September 2018 included these data: Number of notebooks
Drogheda Chemical Ltd has set-up the following standards per finished output unit for direct materials and direct manufacturing labour. Direct materials: 10 kg at €3.00 per kg
Drogheda Chemical adopts a continuous improvement approach to setting monthly standards’ costs. Assume the direct materials standard quantity input of 10 kg per output unit and the direct
The managing partner of Hoofdorp Music Box Fabricators has become aware of the disadvantages of static budgets. She asks you to prepare a flexible budget for October 2018 for the main style of music
Sam Chase is the Finance Director of Flowers.co.ke, an internet company that enables customers to order home deliveries of flowers by accessing its website. Flowers.co.ke has a network of florists
Münzel GmbH helps prospective homeowners of substantial means to find low-cost financing and assists existing homeowners in refinancing their current loans at lower interest rates. Münzel works
Lavertezzo Srl is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labour costs and manufacturing overhead
A company manufactures and sells a single product. The company operates a standard marginal costing system that enables the reporting of planning and operational variances. The original standard
Assume variable manufacturing overhead is allocated using machine-hours. Give three possible reasons for a €25,000 favourable variable-overhead efficiency variance.
Lavertezzo allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labour-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2018 are
L’Evénement du Dimanche budgets to produce 300,000 copies of its monthly newspaper for August 2018. It is budgeted to run 1,5000,000 print pages in August with 50 print pages per newspaper. Actual
Murgatroyd Ltd, which manufactures a single product, uses standard absorption costing.A summary of the standard product cost is as follows: Required 1. Prepare a statement that reconciles the
Coledale Ltd manufactures and sells product CC. The company operates a standard marginal costing system. The standard cost card for CC includes the following: Required 1. Calculate the total
Braithwaite Ltd manufactures and sells a single product. The following data have been extracted from the current year’s budget: The company’s production capacity is not being fully utilised
PP Ltd operates a standard absorption costing system. The following information has been extracted from the standard cost card for one of its products: Budgeted production
Mondragon SA assembles its CardioX product at its Toledo plant. Manufacturing overhead (both variable and fixed) is allocated to each CardioX unit using budgeted assembly-time hours. Budgeted
Paix-Trolls SARL produces a petrol additive, Elysium, which increases engine efficiency and reduces petrol consumption. The actual and budgeted quantities (in litres) of materials required to produce
Liberaki SA has two divisions, A and B, which manufacture bicycles. Division A produces the bicycle frame, and Division B assembles the bicycle components onto the frame. There is a market for both
ZP Plc operates two subsidiaries, X and Y. X is a component manufacturing subsidiary and Y is an assembly and final product subsidiary. Both subsidiaries produce one type of output only. Subsidiary Y
The ZZ Group has two divisions, X and Y. Each division produces only one type of product: X produces a component, C and Y produces a finished product, FP. Each FP needs one C. It is the current
Refer to Exercise 18.19. Data From Exercise 18.19 Liberaki SA has two divisions, A and B, which manufacture bicycles. Division A produces the bicycle frame, and Division B assembles the
A company, which operates from a number of different locations, uses a system of centralised purchasing. The directors of the company are considering whether to change to a system of decentralised
AA and BB are two divisions of the ZZ Group. The AA division manufactures electrical components, which it sells to other divisions and external customers. The BB division has designed a new
Why is it important to distinguish between the performance of a manager and the performance of the organisation subunit for which the manager is responsible? Give examples.
Serra-Mica Srl is a maker of ceramic coffee cups. It imprints company logos and other sayings on the cups for both commercial and wholesale markets. The firm has the capacity to produce 3,000,000
Intervilles SA operates two divisions, a Lorry Rental Division that rents to individuals and a Transportation Division that transports goods from one city to another. Results reported for the last
Thor-Equip AS specialises in the manufacture of medical equipment, a field that has become increasingly competitive. Approximately two years ago, Knut Solbær, president of Thor-Equip, decided to
Mikkeli Oy has three operating divisions. The managers of these divisions are evaluated on their divisional operating profit, a figure that includes an allocation of corporate overhead proportional
User Friendly Computer is one of the largest personal computer companies in the world. The board of directors was recently (March 2019) informed that User Friendly’s president, Felix Lechat, was
Faulkenheim GmbH is a manufacturer of tool and die machinery. Faulkenheim is a vertically integrated company that is organised into two divisions. The Frankfurt Steel Division manufactures alloy
Describe two generic strategies.
What are the four key perspectives in the balanced scorecard?
What is strategic management accounting?
Describe some of the benefits of improving quality.
La Quinta Ltd manufactures corrugated cardboard boxes. It competes and plans to grow by producing high-quality boxes at a low cost that are delivered to customers in a timely manner. There are many
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
Snyder & Partners is a small information systems consulting firm that specialises in helping companies implement sales management software. The market for Snyder’s products is very competitive.
Caltex GmbH refines petrol and sells it through its own Caltex petrol stations. On the basis of market research, Caltex determines that 60% of the overall petrol market consists of
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
Alcazarquivir Lda manufactures and sells industrial grinders. The following table presents financial information pertaining to quality in 2017 and 2018 (in €000): Required 1. Classify the
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