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managerial accounting
Management Accounting Information for Decision-Making and Strategy Execution 6th Edition Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young - Solutions
Randolph Company’s product mix has become more diverse over the past few years. Consequently the company undertook an activity-based costing initiative to develop accurate costs for production, as well as marketing, selling, distribution, and administration. The company set list prices that would
KEM Company has begun studying customer lifetime value for its customers and has prepared the information below for selected customers. For simplicity, management has assumed that for a given customer, the retention rate is the same every year until the customer departs. For Customer 4, costs (ct)
In which industries would you expect the net promoter score to have the greatest predictive power for repeat purchases and growth? The least predictive power for repeat purchases and growth?
Read the Wall Street Journal article “Survival Strategies: After Cost Cutting, Companies Turn toward Price Increases” by Timothy Aeppel (September 18, 2002, p. A1). The article reports “an all-out search for new ways to charge more money without raising prices.”Required(a) How did Jergens,
The theory of constraints relies on three measures: throughput contribution, investments, and operating costs. Define these three measures in the context of the theory of constraints.
What is the difference between process and product layout systems?
What is group technology?
Describe the lean manufacturing approach.
List three examples for each of the following quality costing categories: (a) Prevention costs (b) Appraisal costs (c) Internal failure costs (d) External failure costs.
How is a just-in-time manufacturing system different from a conventional manufacturing system?
What creates the need to maintain work-inprocess inventory? Why is work-in-process inventory likely to decrease on the implementation of group technology, just-in-time production, and quality improvement programs?
List two types of costs incurred when implementing a group technology layout.
What are two types of financial benefits resulting from a shift to group technology, just-in-time production, or continuous quality improvements?
What is benchmarking, and why is it used?
What are the five stages of the benchmarking process?
What are the three broad classes of information on which firms interested in benchmarking can focus? Describe each.
What is the additional cost of replacing one unit of a product rejected at inspection and scrapped?
What costs and revenues are relevant in evaluating the profit impact of an increase in sales?
1. Why are production cycle time and the level of work-in-process inventory positively related? 2. When is a cost variance investigation undertaken under kaizen costing?
1. What is kaizen costing?2. What are the two general methods of information gathering and sharing when undertaking a benchmarking exercise?
1. What is meant by the phrase cost of nonconformance in relation to quality? 2. Waste, rework, and net cost of scrap are examples of what kinds of quality costs? 3. Quality engineering, quality training, statistical process control, and supplier certification are what kinds of quality costs?
1. Why is it said that a kaizen costing system operates “outside the standard costing system”? 2. What is a benchmarking (performance) gap?
1. What stage of the benchmarking process is the most important for benchmarking management accounting methods? Why? 2. What is the additional cost if a unit rejected at inspection can be reworked to meet quality standards by performing some additional operations?
What are the three types of information gathering and sharing used under the cooperative form of benchmarking?
How would you classify the layout of a large grocery store? Why do you think it is laid out this way? Can you think of any way to improve the layout of a conventional grocery store? Explain your reasoning.
Regarding the quality costing categories, how do prevention costs differ from appraisal costs? How do internal failure costs differ from external failure costs?
Of the four quality costing categories, which quality cost is the most damaging to the organization? Explain
Boris Company introduced JIT manufacturing last year and has prepared the following data to assess the benefits from the change: Inventory financing costs are 12% per year. Support costs are based on a time-driven activity-based costing analysis. Estimate the total financial benefits that resulted
SMY Corporation produces 60,000 videophones per year. The company estimates its direct material costs for the videophone to be $300 per unit and its conversion (direct labor plus support) costs to $400 per unit. Annual inventory carrying costs, not included in these costs, are estimated to be 10%.
Discuss the similarities and differences between activitybased costing and the theory of constraints, as well as situations in which one approach might be preferable to the other.
To facilitate a move toward JIT production, AB Company is considering a change in its plant layout. The plant controller, Anita Bentley, has been asked to evaluate the costs and benefits of the change in plant layout. After meeting with production and marketing managers, Anita has compiled the
Cycle time efficiency and JIT Walker Brothers Company is considering the installation of a JIT manufacturing system in the hope that it will improve the company??s overall processing cycle efficiency. Data from the traditional system and estimates for the JIT system are presented here for their
JIT and group technology You are a manufacturing manager faced with the decision about how to improve manufacturing operations and efficiency. You have been studying both group technology and JIT manufacturing systems. Your boss expects you to prepare a report covering the costs and benefits of
Gurland Valves Company manufactures brass valves that meet precise specification standards. All finished valves are inspected before being packaged and shipped to customers. Rejected valves are returned to the initial production stage to be melted and recast. Such rework requires no new materials
Group technology and processing cycle efficiency Ray Brown??s company, Whisper Voice Systems, is trying to increase its processing cycle efficiency (PCE). Because Ray has a very limited budget, he has been searching for a way to increase his PCE by using group technology. One of Ray??s
One aspect of facilities layout for McDonald’s is that when customers come into the building, they can line up in one of several lines and wait to be served. In contrast, customers at Wendy’s are asked to stand in one line that snakes around the front of the counter and to wait for a server to
Quality costing: balancing category costs Managers concerned with improving quality sometimes have a difficult balancing act, given the four types of quality costs they have to manage. As a new manager, you are trying to figure out a strategy for managing $2 million of quality costs; your total
The following information shows last year's quality-related costs for the Madrigal Company: Total sales for the year were $120,000,000.Required(a) Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a percent of
The following data have just been gathered on last year's quality-related costs at the Ideal Company: Total sales last year were $75,000,000.Required(a) Prepare a cost-of-quality report grouping costs into prevention, appraisal, internal failure, and external failure. Also show costs as a
What factors differentiate kaizen costing from standard costing?
1. According to the kaizen costing approach, who has the best knowledge to reduce costs? Why is this so? 2. Under what condition will the cost savings due to kaizen costing not be applied to production?
What do the terms kaizen and kaizen costing mean?
Kaizen costing is a method that many Japanese companies have found effective in reducing costs.Required (a) What are the biggest problems in using kaizen costing? (b) How can managers overcome these problems?
What are the key factors in identifying benchmarking partners? Explain why these factors are important.
As a manager asked to benchmark another organization’s mobile web experience provided to users, on what factors would you gather information? Why?
Many companies are interested in adopting a kaizen costing approach to reducing costs. However, they are not sure how their current standard costing system will fit with the kaizen costing approach. How do the standard costing system and the kaizen costing system differ? Can the two systems
Your organization, located in Worthington, Ohio, is contemplating introducing kaizen costing to help with cost reduction. As someone who has an understanding of management accounting, you have been asked for your opinion. Specifically, some of your colleagues are wondering about the differences
Assume that you are an average student who has a desire to be one of the best students in class. Your professor suggests that you benchmark the working habits of the best student in the class. You are somewhat skeptical but decide to take on the challenge.RequiredHow would you go about this
Benchmarking: field exercise in a company Benchmarking a product, process, or management accounting method takes a great deal of time and effort. Companies have many choices when it comes to conducting a benchmarking study. For example, in following the five stages of the benchmarking process,
Woodpoint Furniture Manufacturing produces various lines of pine furniture. The plant is organized so that all similar functions are performed in one area, as shown in Exhibit 7-17. Most pieces of furniture are made in batches of 10 units.Raw materials are ordered and stored in the raw materials
Johnson & Johnson, a major health care and pharmaceutical firm, voluntarily recalled a number of its products in 2010 because of quality problems. These products included hip-repair implants, contact lenses, and over-the-counter medications. Required Using information from the company’s website,
Kwik Clean handles both commercial laundry and individual customer dry cleaning. Kwik Clean’s current dry cleaning process involves emitting a pollutant into the air. In addition, the commercial laundry and dry cleaning processes produce sediments and other elements that must receive special
Daniel Morris purchased a 42-inch plasma television, manufactured by TVCO, from a local electronics store that permits customers to return defective products within 30 days of purchase. Approximately 45 days after Daniel’s purchase, the TV began to malfunction periodically. Because Daniel could
Rossman Instruments, Inc., is considering leasing new state-of-the-art machinery at an annual cost of $900,000. The new machinery has a fouryear expected life. It will replace existing machinery leased one year earlier at an annual lease cost of $490,000 committed for five years. Early termination
What is management accounting?
Why do a company’s operators/workers, managers, and executives have different informational needs than shareholders and external suppliers of capital?
Why may financial information alone be insufficient for the ongoing informational needs of operators/workers, managers, and executives?
Why might senior executives need measures besides financial ones to assess how well their business performed in the most recent period?
Provide examples of how management accounting systems have changed in response to information needs as companies have become more complex, technologies have changed, or new competitors have appeared.
Given a selected strategy, how do organizations use management accounting information to implement the strategy?
Briefly explain each of the four steps of the plan–do–check–act cycle.
How can management accounting information produce behavioral and organizational reactions?
Consider the descriptions of management accounting provided in the chapter. Discuss why the associated responsibilities are viewed as “accounting” and how people handling those responsibilities interface with other functional areas in fulfilling the stated responsibilities. What skills and
For each of the four steps of the plan–do–check–act cycle, describe examples of possible uses of management accounting information.
Consider the operation of a fast-food company with hundreds of retail outlets scattered about the country. Consider the descriptions of management accounting provided in the chapter to identify management accounting information needs for the following: a. The manager of a local fast-food outlet
Consider the descriptions of management accounting provided in the chapter to identify management accounting information needs for the following:a. The managers of (1) a patient unit, where patients stay while being treated for illness or while recuperating from an operation, and (2) the radiology
For each of the following products, suggest three measures of quality: a. Television set b. University course c. Meal in an exclusive restaurant d. Carryout meal from a restaurant e. Container of milk f. Visit to the doctor g. Trip on an airplane h. Pair of jeans i. Novel j. University textbook.
Many German companies have their management accounting department as part of the manufacturing operations group rather than as part of the corporate finance department. These German companies operate two separate accounting departments. One performs financial accounting functions for shareholders
The controller of a German machine tool company believed that historical cost depreciation was inadequate for assigning the cost of using expensive machinery to individual parts and products. Each year, he estimated the replacement cost of each machine and included depreciation based on the
Consider an organization that has empowered its employees, asking them to improve the quality, productivity, and responsiveness of their processes that involve repetitive work. This work could arise in a manufacturing setting, such as assembling cars or producing chemicals, or in a service setting,
Julie Martinez, manager of the new retail outlet of Super Printing, is pondering the management challenges in her new position. Super Printing is a long-established printing company in a major metropolitan area. The new Super outlet, located at the edge of the parking lot for Western Business
A U.S. automobile components plant had recently been reorganized so that quality and employee teamwork were to be the guiding principles for all managers and workers. One production worker described the difference: In the old production environment, we were not paid to think. The foreman told us
The manager of a large semiconductor production department expressed his disdain for the cost information he was presently given: Cost variances are useless to me. 2 I don’t want to ever have to look at a cost variance, monthly or weekly. Daily, I look at sales dollars, bookings, and on-time
Organizations in the public and nonprofit sector, such as government agencies and charitable social service entities, have financial systems that budget expenses and monitor and control actual spending. Explain why these organizations should consider developing a comprehensive set of performance
What are some different managerial uses of cost information?
Explain the difference between variable costs and fixed costs.
What does the term contribution margin per unit mean? How is the contribution margin used in cost analysis to support managerial decisions?
Explain the difference between the contribution margin ratio and contribution margin per unit.
How are mixed costs and step variable costs similar and different?
How do step variable costs differ from fixed costs?
What does the term incremental cost mean?
Why should decision makers focus only on the relevant costs for decision making?
What behavioral factors may influence some managers to consider sunk costs as being relevant in their decisions?
Are fixed costs always irrelevant?
Provide an example of a fixed cost that would be relevant to a make-or-buy decision, and an example of a fixed cost that would not be relevant to such a decision.
What qualitative considerations are relevant in a make-or-buy decision?
In analyzing whether to drop a product or department, what are two difficulties that arise related to the impact on costs or revenues?
“Prices must cover both variable and fixed costs of production.” Do you agree with this statement? Explain.
“When production capacity is limited and it is possible to obtain additional customer orders, a firm must consider its opportunity costs to evaluate the profitability of these new orders.” Do you agree with this statement? If so, what are the opportunity costs in this context?
Classification of variable and fixed costs Classify each of the following as a variable or fixed cost with respect to a unit of production:a. Salaries of production supervisors.b. Steel used in automobile production.c. Wood used in furniture production.d. Salaries for factory custodial staff.e.
Classification of variable and fixed costs Classify each of the following as a variable or fixed cost with respect to a unit of product that is sold:a. Commissions paid to sales personnel.b. Advertising expenses.c. Salaries of staff processing orders.d. Salary of the chief executive officer.e.
Cost classification Percy’s is a small hamburger shop catering mainly to students at a nearby university. It sells hamburgers and vegetarian burgers and is open for business from 11:00 A.M. until 11:00 P.M., Monday through Friday. The owner, Percy Luk, employs two cooks, one server, and a
Breakeven analysis Klear Camera Company is considering introducing a new video camera. Its selling price is projected to be $1,000 per unit. Variable manufacturing costs are estimated to be $500 per unit. Variable selling costs are 10% of sales dollars. The company expects the annual fixed
Breakeven analysis and target profit for a hospital Morton Medical Institute operates a 300-bed hospital and offers a number of specialized medical services. Morton’s hospital facility and equipment are leased on a long-term basis. The hospital charges $2,000 per patient day. On the basis of past
Breakeven analysis and target profit, taxes Patterson Parkas Company’s sales revenue is $30 per unit, variable costs are $19.50 per unit, and fixed costs are $147,000. Required(a) Compute Patterson’s contribution margin per unit and contribution margin ratio.(b) Determine the number of units
Breakeven analysis, target profit Last year, Able Co. recorded sales revenues of $1,260,000, variable costs of $570,000, and fixed costs of $480,500.Required(a) At what sales dollar level will Able earn a before-tax target profit of $250,000?(b) At what sales dollar level will Able break even?
Multiple-product target profit A&Z Company sells products both domestically and internationally. Fixed costs totaled $5,000,000 last year. In an effort to increase its total sales volume, A&Z plans to spend an additional $1,280,000 in advertising next year. Expected average prices and
Multiple-product breakeven analysis Florida Favorites Company produces toy alligators and toy dolphins. Fixed costs are $1,290,000 per year. Sales revenue and variable costs per unit are as follow: Required (a) Suppose the company currently sells 140,000 alligators per year and 60,000 dolphins per
Pricing and impact on demand Andrea Kimball has recently acquired a franchise of a well-known fast-food restaurant chain. She is considering a special promotion for a week during which hamburger prices would be reduced $0.40 from the regular price of $1.09 to $0.69. Local advertising expenses for
Variable and fixed costs, profitability of order, opportunity cost Healthy Hearth specializes in lunches for health-conscious people. The company produces a small selection of lunch offerings each day. The menu selections may vary from day to day, but Healthy Hearth charges the same price per menu
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