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Outline the five-step sequence in a decision process.
Define relevant costs. Why are historical costs irrelevant?
All future costs are relevant do you agree? Why?
Distinguish between quantitative and qualitative factors in decision making.
Describe two potential problems that should be avoided in relevant-cost analysis.
Variable costs are always relevant, and fixed costs are always irrelevant. Do you agree? Why?
A component part should be purchased whenever the purchase price is less than its total manufacturing cost per unit. Do you agree? Why?
Define opportunity cost.
Managers should always but inventory in quantities that result in the lowest purchase cost per unit. Do you agree? Why?
Management should always maximize sales of the product with the highest contribution margin per unit. Do you agree? Why?
A branch office or business segment that shows negative operating income should be shutdown. Do you agree? Why?
Cost written off as depreciation on equipment already purchased is always irrelevant. Do you agree? Why?
Managers will always choose the alternative that maximizes operating income or minimizes costs in the decision model. Do you agree? Why?
Describe the three steps in solving a linear programming problem
How might the optimal solution of a linear programming problem be determined?
Why is there an unmistakable trend in manufacturing to improve quality?
Distinguish among spoilage, rework, and scrap.
Normal spoilage is planned spoilage. Discuss.
Costs of abnormal spoilage are losses. Explain
What has been regarded as normal spoilage in the past is not necessarily acceptable as normal spoilage in the present or future. Explain.
Units of abnormal spoilage inferred rather than identified. Explain.
In accounting for spoiled units, we are dealing with cost assignment rather than cost incurrence. Explain.
Total input includes abnormal as well as normal spoilage and is, therefore, inappropriate as a basis for computing normal spoilage;. Do you agree? Explain.
The inspection point is the key to the allocation of spoilage costs. Do you agree? Explain.
The unit cost of normal spoilage is the same as the unit cost of abnormal spoilage. Do you agree? Explain.
In job costing, the costs of normal spoilage that occur while a specific job is being done are charged to the specific job. Do you agree? Explain.
The costs of rework are always charged to the specific jobs in which the defects were originally discovered. Do you agree? Explain.
Abnormal rework costs should be charged to a loss account, not to manufacturing overhead. Do you agree? Explain.
When is a company justified in inventorying scrap?
How do managers use information about scrap?
How does management accounting differ from financial accounting?
Management accounting should not fit the straitjacket of financial accounting? Explain and give an example.
How can a management accountant help formulate a strategy?
Describe the business functions in the value chain?
Explain the term “supply chain” and its importance to cost management?
Management accounting deals only with costs “do you agree? Explain.
How can management accountants help improve quality and achieve timely product deliveries?
Describe the five-step decision-making process?
Distinguish planning decision from control decision?
What three guidelines help management accountants provide the most value to managers?
Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant. “Do you agree why?
As a new controller, reply to this comment by a plant manager; “As I see it, out accountants may be needed to keep records for shareholders and Uncle Sam, but I don’t want them sticking their noses in my day-to-day operations. I do the best I know how. No bean counter knows enough about my responsibilities to be of any use to me.
As used in accounting, what do IMA and CMA stand for?
Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets forth these standards?
What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?
Define cost object and give three examples.
Define direct costs and indirect costs.
Why do managers consider direct costs to be more accurate than indirect costs?
Name three factors that will affect the classification of a cost as direct or indirect.
Define variable cost and fixed cost. Give an example of each.
What is a cost driver? Give one example.
What is the relevant range? What role does the relevant-range concept play in explaining how costs behave?
Explain why unit costs must often be interpreted with caution.
Describe how manufacturing, merchandising, and service-sector companies differ from each other.
What are three different types of inventory that manufacturing companies hold?
Distinguish between inventoriable costs and period costs?
Do service-sector companies have inventoriable costs? Explain.
Define the following; direct material costs, direct manufacturing-labor costs, manufacturing over-head costs, prime costs, and conversion costs?
Describe the overtime-premium and idle-time categories of indirect labor.
Define product cost describe three different purposes for computing product costs?
Define cost-volume-profit analysis?
Describe the assumptions underlying CVP analysis.
Distinguish between operating income and net income.
Define contribution margin, contribution margin per unit, and contribution margin percentage.
Describe three methods that can be used to express CVP relationships.
Why is it more accurate to describe the subject matter of this chapter as CVP analysis rather than as breakeven analysis?
CVP analysis is both simple and simplistic if you want realistic analysis to underpin your decisions, look beyond CVP analysis. Do you agree? Explain.
How does an increase in the income tax rate affect the breakeven point?
Describe sensitivity analysis how has the advent of the electronic spreadsheet affected the use of sensitivity analysis?
Give an example of how a manager can decrease variable costs while increasing fixed costs?
Give an example of how a manager can increase variable costs while increasing fixed costs?
What is operating leverage how is knowing the degree of operating leverage helpful to managers?
There is no such thing as a fixed cost all costs can be unfixed given sufficient time. Do you agree? What is the implication of you answer for CVP analysis?
How can a company with multiple products compute its breakeven point?
In CVP analysis gross margin is a less-useful concept than contribution margin. Do you agree? Explain briefly.
Define cost pool cost tracing cost allocation and cost-allocation base.
How does a job-costing system differ from a process-costing system?
Why might an advertising agency use job costing for an advertising campaign by Pepsi, whereas a bank might use process costing to determine the cost of checking account deposits?
Describe the seven steps in job costing?
What are the two major cost objects that managers focus on in companies using job costing?
Describe three major source documents used in job-costing systems.
What is the main concern about source documents used to prepare job-cost records?
Give two reasons why most organizations use an annual period rather than a weekly or monthly period to compute budgeted indirect-cost rates?
Distinguish between actual costing and normal costing.
Describe two ways in which a house construction company may use job-cost information.
Comment on the following statement. In a normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated account?
Describe three different debit entries to the Work-in-Process Control T-account under normal costing?
Describe three alternative ways to dispose of under or over allocated overhead costs.
When might a company use budgeted costs rather than actual costs to compute direct-labor rates?
Describe briefly why modern technology such as Electronic Data interchange (EDI) is helpful to managers.
What is broad averaging and what consequences can it have on costs?
Why should managers worry about product over costing or under costing?
What is costing system refinement? Describe three guidelines for refinement.
What is an activity-based approach to designing a costing system?
Describe four levels of a cost hierarchy?
Why is it important to classify costs into a cost hierarchy?
What are the key reasons for product cost differences between simple costing systems and ABC systems?
Describe four decisions for which ABC information is useful.
Department indirect-cost rates are never activity-cost rates. Do you agree? Explain.
Describe four signs that help indicate when ABC systems are likely to provide the most benefits.
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