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Management Accounting 7th Edition Kim Langfield Smith, Helen Thorne, David Alan Smith, Ronald W. Hilton - Solutions

The Intellectually Disabled Council has the responsibility for distributing government grants to fund support services for intellectually disabled people. The director is concerned that grants be distributed on an equitable basis, and asks Sue Jolley, the Council's management accountant, to
Refer to Case 8.46. Assume that U.B Bright decided to implement an activity-based costing system that included all costs except direct material. She identities the following costs, by cost category, for the past year and selects the following resource drivers:Next, Bright divides the company into
Refer to Cases 8.46 and 8.47 notwithstanding your answer so far, assume the following costs and resource drivers for the Mixing Centre:U.B. Bright has identified the following activities that take place in the Mixing Centre, and estimates that they use the following percentage of labour time and
Referring to Exhibit 8.3. explain the concept of two dimensional activity-based costing. Are the activities in a simple activity-based product costing system likely to be useful for activity management? Explain your answer.Exhibit 8.3
You and your boss have just attended a presentation by the consulting firm, Always Better Costing, which explained how every organisation can benefit from adopting activity-based costing. Your boss is very keen to proceed with activity-based product costing. How would you advise her?
There is not just one approach to activity-based costing; there are many. Describe some of the major differences between various approaches to activity-based costing?
List three factors that are important in selecting activity drivers. Explain why they are important using examples of activity drivers for a bank?
Central Dental Associates is a large dental practice in Brisbane. The firm's accountant is preparing the budget for next year. He projects a total of 48 000 patient visits throughout the year of which 6000 will be in May and 8000 in June. Eighty per cent of the visits will be half-hour
Tanya Williams is the new accounts manager at Southpac Bank. She has just been asked to estimate how many new bank accounts she will generate during the next year. The Australian economy has been growing and the bank has experienced a 10 per cent increase in its number of bank accounts over each of
Veterinary clinic Happy Pets is a veterinary clinic operating in Auckland. Recently John Tilley, the manager of the clinic, has been concerned about cash flow shortages, which arose quite unexpectedly in the last three months of the past year. The clinic bank account went into overdraft and
Dente Ltd prepares annual budgets. The following beginning and ending inventory levels (in units) are planned for next year. Four kilograms of direct material are required to produce each unit of finish product.___________________________1 January _______________ 31 DecemberDirect material
Randwick Medical Centre provides a wide range of hospital services. The hospital's board of directors has recently authorised the following capital expenditure:Neonatal care equipment .......................................... $900 000CT scanner
Organic Foods Ltd, a manufacturer of breakfast cereals and healthy snack bars, has experienced several years of steady growth in sales, profits, and dividends while maintaining a relatively low level of debt. The board of directors has adopted a long-term strategy to maximise the value of the
Kelly manufacturing is a medium-sized company that manufactures and markets a range of products. The divisions of Kelly include White-goods, Kitchenware and Outdoor Furniture Divisions. The senior management team oversees the budgeting process, and includes the managing director, the financial
Alpha Mann Ltd makes and sells computer carry bags. Bill Blake, the company accountant, is responsible for preparing the company's annual budget. In compiling the budget data for next year, Blake has learned that new automated production equipment will be installed on March. This will reduce the
George Ltd manufactures and sells two different types of coils used in electric motors, in September Jessica Martin, the management accountant, compiled the following data for the upcoming annual budget:Use of direct material:Raw material prices and inventory levels: Direct labour requirements and
Number Cruncher Corporation (NCC) manufactures and sells ultrathin tablet computers. Janet Short, who is a budget analyst, coordinated the preparation of the annual budget for this year. The budget was based on the prior year's sales and production activity. The budgeted income statement and
The La Casa Division of Peters Ltd produces an intricate component used in Peter's major product line. Recently, the divisional manager has been concerned by a lack of coordination between purchasing and production personnel and believes that a monthly budgeting system should be introduced to
Comprehensive budget question: wholesaler Universal Electric Company is a small, rapidly growing wholesaler of consumer electrical product. The firm's main product lines are small kitchen appliances and power tools. Marcia Wilcox, Universal's general manager of marketing, has recently completed a
What might an unfavourable direct labour efficiency variance indicate? What actions could be taken to correct this variance?
Describe the factors that managers may consider when assessing the significance of a variance. Why do we need to assess the significance of variance?
Explain why a favourable variance does not necessarily indicate good performance?
What is the meaning of the term interaction between variances?
Explain how participation in setting standards can sometimes lead to more accurate standards and sometimes to less accurate standards?
Explain the difference between the traditional direct labour rate variance and a pure rate variance?
Tahmar Valley Chemical Company manufactures industrial chemicals. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The new chemical solution is made by combining a chemical compound (nyclyn) with a solution (salex), heating the mixture to boiling
Search the Internet to find a manufacturer's website that outlines new products the company has recently introduced or plans to introduce.Required:Discuss the steps you think the company would go through to develop standard costs for its new product?
During June, Andrew Ltd's material purchases amounted to 6500 kilograms at a price of $8 per kilogram. Actual costs incurred in the production of 2000 units were as follows:Direct labour ............................ $177 375.................... ($27.50 per hour)Direct material
Apollo Can Ltd manufactures recyclable soft drink cans. A unit of production is a box of 12 cans. The following standards have been set by the production engineering staff and the factory accountant:Direct material _________________________________ Direct labourQuantity: it kilograms
Refer to the data in Exercise 10.24, above. (Ignore the new data in requirement 2.)Apollo Can Ltd manufactures recyclable soft drink cans. A unit of production is a box of 12 cans. The following standards have been set by the production engineering staff and the factory accountant:Direct material
The accountant for Lane and Company uses a statistical control chart to help management to decide when to investigate variances. The critical value is one standard deviation from the mean. The company incurred the following direct labour efficiency variances during the second half of the year:The
You have just been appointed the cost accountant for a new company called Amazing Joy Flights. In its first few years the company will provide three types of scenic flights: 'Over and Around Melbourne, 'Up the Yarra', and 'The Surf Coast'. Each takes a different length of time, involves different
Refer to the data in Exercise 10.23. Calculate the pure rate variance and joint rate efficiency variance for direct labour. Draw a graph of the direct labour variances similar to the graph in Exhibit 10.11Refer to data in exercise 10.23During June, Andrew Ltd's material purchases amounted to 6500
During January, Microchem Ltd produced 1000 units of special product called Stylex, and the counting records indicated the following:Direct material purchased .................. 36 0000 kilograms @ $1.38 per kilogramDirect material used ..................................................... 19 000
Rural Support Ltd has been successful in gaining a major contract to prepare and deliver meals to elderly and disabled people who reside in Windsor. These operations were previously managed by the Windsor Council, and the services were outsourced by the council as a cost-saving measure. Rural
George Siam runs a landscaping business in a wealthy suburb of Wellington. He provides a high quality service and focuses on the design and installation of top of the market landscaping plans that include fountains, trees, paving, lighting and exotic plants. However, his clients are continually
The accountant for Lovely Manufacturing Company compares each month's actual results with a monthly Plan. The standard direct labour rates and the standard hours allowed, given the actual output in April, are shown in the following schedule:A new union contract negotiated in March resulted in
Office Magic Ltd manufactures ergonomic office equipment. The standard cost for material and labour is $190 per unit. This includes 8 kilograms of direct material at a standard cost of $5 per kilogram, and 6 hours of direct labour at $25.00 per hour. The following data relate to November:Work in
Zappy Kitchens manufactures a range of household products. Susan Masters, the company's management accountant, plans to implement a standard costing system. Masters has collected information from several people in the company that will assist her in developing standards.One of Zappy's products is a
Explain the type of environment in a service organization that best suits the use of standard costs for control?
Madeleine Appliances manufactures washers and dryers on a single assembly line in its main factory. The market has deteriorated over the last five years and competition has made cost control very important. Management has been concerned about the material cost of both washers and dryers. There have
Green Ltd produces a special valve used in the burners of gas stoves. The firm uses the first-in, first-out (FIFO) process costing method for product costing. The costs entered into work in process inventory are standard costs, which are set annually. The standards for direct material and direct
Allan Ltd manufactures gardening equipment. At a recent staff meeting, the following direct labour variance report for the past year was presented by the management accountant:Allan Ltd's management accountant uses the following rule of thumb: investigate all variances equal to or greater than $60
Mountain View Hospital has adopted a standard costing system for evaluation and control of nursing labour, Diagnosis Related Groups (DRGs) are used as the output measure in the standard costing system.A DRG is a classification scheme for treatments, and hospitals are reimbursed by the government
During July, Nemo Ltd manufactured 500 units of a special multiplayer fabric called Everflex following information from the everflex production department pertains to July:Direct material purchased: 18 000 metres @ $5.20 per metre ............ $93 600Direct material used: 9500 metres @ $5.20 per
Business Wear Fashions manufactures one type of women's jacket, production in jobs to fill each customer order. These jackets are supplied to various department stores, and Business Wear sews the label of each store onto the jackets.During November, Business Wear worked on three orders. The job
Explain how Toyota could use standard costing for control. Focus on the cost of producing car doors to illustrate standard costing for control. (Car doors are produced by cutting sheet metal to a pattern, stamping it into segments and welding the segments together to form the door)?
Describe how a parcel delivery company might use standard costs?
List some of the possible causes of a favourable direct material quantity variance?
What is the meaning of the direct labour rate variance? What are some possible causes?
How do two-way, three-way and four-way analyses of manufacturing overhead different would some managers prefer to use a two-way analysis or three-way analysis, compared to four-way analysis?
Explain the difference between the control purpose and the product costing purpose of standard costing?
Use ledger accounts to show how manufacturing overhead is added to work in process inventory and how manufacturing overhead variances are closed to cost of goods sold, when standard costing is used?
When should manufacturing overhead variance be closed to cost of goods sold? Explain your answer.
Provide two examples of service organizations that may use flexible budgets to control overhead costs, and for each organization suggest an activity that might form the basis for the flexible overhead budget?
The 'Real life' on page 504 explains how standard costing systems may be adopted to better suit managers' decision needs. This includes using different definitions of standard costs to suit different types of decisions. Provide some examples to explain what definitions of standard costs might be
In your own words, explain two of the sources of inaccuracies in an ABB system?
Explain how the sales price variance and the sales volume variance can assist manages to control costs?
The chief accountant for Rainbow Community Hospital estimates that the hospital uses $0.60 kilowatt hours of electricity per patient-day, and that the cost of electricity will be $30 per kilowatt hour. The hospital also pays a fixed monthly charge of $15 000 to the electricity supplier to rent
The data below relate to Super Fit Ltd, a manufacture of exercise equipment, for the month of August:Standard variable overhead rate .............................. $18 per machine hourStandard quantity of machine hours ........................... 2 hours per unit of outputBudgeted fixed overhead
Bright Spark Ltd is a manufacturer of electrical switchers, and uses a standard costing system standard manufacturing overhead costs per switch are based on direct labour hours and are allows:Variable overhead (5 hours @ $24 per hour) ........................................ $ 120Fixed overhead (5
Suggest three activities and a possible activity driver for each activity that might be used as part of an activity-based budgeting system in each of the following industries: (a) Automated car was service. (b) Express parcel delivery service. (c) Restaurant. (d) Bank?
The following data relate to R.M. Williams' operations for the month of July. Actual number of activity drivers: Machine hours ......................................................... 200 Number of material moves ........................................... 280 Production batches
Cottesloe Boogie manufactures boogie boards. The company's performance report for November is as follows:____________________________ Actual ______________________ BudgetBoogie boards sold .................. 6 000 ..................................... 8 000Variable costs ....................... 145
Describe the components of a formula flexible budget and explain how it may be used to control costs?
The data below relate to Macquarie Ltd for the month of June:____________________________________ Static budget _______________ ActualUnits sold .............................................. 10 000 .............................9 000Sales revenue ......................................... $120 000
Allsorts Insurance Company uses a flexible overhead budget for its New Policy Department firm offers five types of policy, with the following standard hours allowed per policy for clerical possessing?Health ........................................ 1 hourLife .......................................
Otago Stationery Company manufactures cardboard folders. The company has developed standard overhead rates based on a monthly capacity of 180 000 direct labour hours (DLHs) as follows:Standard costs per unit (one box of folders):Variable overhead (2 hours • $3 per DLH) ..........................
Rhythm & Blues is a recording studio in Geelong. It budgets and applies overhead costs on the basis of production time. The studio's accountant anticipates 10 000 hours of production time next year. The following overhead amounts have been budgeted for next year:Variable overhead
Broome Instruments Company manufactures a control valve used in air-conditioning systems. The firm uses a standard costing system for product costing. The manufacturing overhead rate is based on a normal annual activity level of 600 000 machine hours. The company planned to produce 25 000 units
Blue Gum Ltd uses a standard costing system. The firm estimated that it will operate its manufacturing facilities at 800 000 machine hours for the year. The estimated for total budgeted overhead is $2 000 000.The standard variable overhead rate is estimated to be $2 per machine hour or $6 per unit.
Waverley Hospital runs an outpatient clinic, Jenny Holt, the Hospital's CEO, is very concerned about cost control and has asked that performance reports be prepared that compare budgeted and actual amounts for the clinic. She wants these reports to focus on three problem areas: the cost of medical
Clarke Auto Parts Company manufactures replacement parts for car repairs. The company recently installed a flexible manufacturing system (FMS), which has significantly changed the production process The installation of the new FMS was not anticipated when the current year's budget and cost
Explain why it is important that the activities used to develop a flexible overhead budget are accurate cost drivers?
Frosty Menu Company produces cases of frozen food. During April, the company produced 1450 cases of food and incurred the following actual costs:Variable overhead ....................................................... $11 000Fixed overhead
Sandra Smith is the financial controller of Fluffy Clouds, which is a manufacturer of baby clothes. The company is considering implementing an activity-based budgeting system and Sandra has asked for your advice on how to proceed. Required Write a report for Sandra that covers the following
Quill Pen Company manufactures two lines of pens: Super and Executive. Budgeted and actual contribution margin statements follow:Required:1. The budgeted total volume of 250 000 units was based on the company achieving a market share of 20 per cent. Actual industry volume reached 1290 000 units.
Explain how you would interpret a variable overhead spending variance?
The only variable overhead cost at Jackson Sporting Club is electricity. Does an unfavorable variable overhead spending variance imply that the club paid more than the anticipation per kilowatt hour?
Explain the meaning of the variable overhead efficiency variance?
Define the fixed overhead budget variance, and explain how it may assist manager control costs?
Outline the four purposes of performance measurement systems. Explain how these purposes relate to responsibility accounting?
Why might some companies decide not to distinguish the performance of managers from that of their department or division?
Explain how the terms controllability and attributability are relevant when evaluating the performance of business unit managers and business units?
Provide four examples of common costs that might occur in a fast food chain?
How might real-time reporting contribute to improving the competitive advantage of an organization?
Explain the benefits of using transfer pricing within organizations?
Explain how negotiation between the supplying and buying units may be used to set transfer prices. How does this relate to the general transfer pricing rule?
Explain why it may not be desirable for head office management to dictate transfer prices. Can you provide an example of a situation where this may be appropriate?
Explain why some organizations might prefer to use variable cost rather than absorption cost as a basis for setting transfer prices?
Outline the characteristics of an effective performance measurement system?
(a) For each of the following organizations list the advantages and disadvantages of adopting a decentralized organizational structure. (b) If you were the chief executive, would you choose a centralized or decentralized structure for each of the following organizations? 1. Hospital. 2. High school
Indicate the type of responsibility centre that is most appropriate for each of the following: 1. A cinema in a company that operates a chain of theatres. 2. A television station owned by a large broadcasting network. 3. The sales department in an insurance company. 4. The ticket sales division of
Alston Electronics Company manufactures complex circuit boards for the aerospace Industry Demand for the company's products has fallen in recent months, and the firm has cut its production significantly. Many unskilled workers have been temporarily laid off. Top management made a decision, was to
Happy Returns Investment Advisors has three divisions. Each division is a profit centre and effectively operates as a stand-alone business. The Retirement Advice Division is located in Brisbane, the Corporate Advice Division is in Sydney, and the Homeowners Advice Division is in Launceston. The
Duplex Paints manufactures paint in its factory in Canterbury. Until recently, the manufacturing plant, consisted of three processing departments: blending, mixing and packaging. The manufacturer manager has now restructured the plant into self-managed work teams. Each team is responsible for all
Bell Electrical Services is organized into three division: Metro, Suburan and Regional. Data for these divisions for last year were as follows:In addition to the expenses listed above, the company had $90 000 of common fixed expenses. Income tax expense for the year was $490 000. Required: 1.
The lowing data pertain to the Byron Bay Hotel for the month of MarchRequired:Prepare a March performance report similar to the lower portion of Exhibit 12.6. The report should have six numerical columns with headings similar to those in Exhibit 12.6. Your performance report should cover only the
The Assembly Division's absorption cost of a component is $0, includes $60 of applied fixed overhead costs. The transfer price has been set at $561, which is the Assembly Division's absorption cost plus a 10 per cent markup. The Electrical Division has a special offer of $697.50 for its product.
Reliable Cleaning services was started a number of years ago by Pick Elber to provide cleaning services to both large and small businesses in his home city. Over the years, as local businesses reduced their in house building maintenance staff, more and more cleaning services were subcontracted to

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