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business
cost management 5th
Questions and Answers of
Cost Management 5th
10.20 Prepare cash budget (Appendix 10A) A college student, Brad Worth, plans to sell atomic alarm Q7 clocks with CD players over the Internet and by mail order to help pay his expenses during the
10.19 Flexible budget and variances, performance measurement, reasons for variances Play Time Q1, Q4, Q5 Toys is organized into two major divisions: marketing and production. The production division
10.18 Cash budget for revenues and expenses (Appendix 10A) Myrna Manufacturing is located in France and has projected sales in units for four months of operations as follows: January February March
10.17 Direct materials budgeted payments (Appendix 10A) New Ventures intends to start business on the first of January. Production plans for the first four months of operations are as follows:
10.16 Purchase, cost of goods sold, and cash collection budgets (Appendix 10A) The Zel Company Q2, Q7 operates at local flea markets. It has budgeted the following sales for the indicated months. CHY
10.15 Q2, Q3, Q4 Flexible budget variances, profit effect of market share decline Here are data for the Stove Di- vision of Appliances Now, which produces and sells a complete line of kitchen stoves.
10.14 Production, labor, materials, and sales budgets Bullen & Company makes and sells high- Q2, Q5 quality glare filters for microcomputer monitors. John Crane, controller, is responsible for
10.13 Production, direct materials, and direct labor budgets Seer Manufacturing has projected sales Q2 of its product for the next six months as follows: January February 40 units March April May
10.12 How are budgets related to organizational strategies?
10.11 Discuss the similarities and differences between an- nual budgets and rolling budgets.
10.10 Describe the types of information that managers use to develop budgets.
10.9 (Appendix 10A) Snow Blowers produces and sells snowblowers. Production levels are high in the sum- mer and beginning of fall and then taper off through the winter. Sales are high in the fall and
10.8 What are some of the challenges that organiza- tions face when allocating budget authority and responsibility?
10.7 What adjustments should be made to static budgets before they are used for management performance evaluation?
10.6 What methods do organizations use to minimize budgetary slack?
10.5 How are the master budget and flexible budget related?
10.4 What distinguishes zero-based budgeting from other types of budgeting?
10.3 What are the objectives of participative budgeting?
10.2 How can budgeting assist an organization to effi- ciently use its human resources?
10.1 Explain how the following budgets relate to each other: the revenue budget, the production budget. and the direct materials budget.
9.20 Q2, Q4 Sales value at split-off, physical output, NRV methods; further processing decision Flower- ing Friends is a small nursery. The company grows rhododendrons and azaleas. The plants are dug
9.19 Four joint cost allocation methods with sales mix, further processing decision The Palm Oil Q2, Q4, Q6 Company buys crude coconut and palm nut oil. Refining this oil results in four products at
9.18 NRV method, contribution margin and further processing for a service Deluxe Tours, a tour or Q2, Q3, Q4 ganizer, leased a cruise liner for a special round-the-world tour. The lease cost is
9.17 Identifying joint and separable costs Cowboy Cattle Company raises cattle and sells beef prod- Q1 ucts. Following is a list of costs for the operation. REQUIRED: Identify whether each cost is
9.16 Identifying joint products Q1 REQUIRED: A. Which of the following related products would be considered joint products? Explain your choices. 1. Sand produced with three levels of fineness 2.
9.15 By-product further processing decision For a given by-product, 100 units can be sold at the split- Q4 off point for $8 each, or processed further at a cost of $12 each and sold for $19.
9.14 Information about some by-products is not recorded in the accounting system. However, for other by-products, control systems are instituted and accounting records are kept. How do accountants
9.13 Provide three or more examples of qualitative factors that might influence a decision to process a joint product beyond the split-off point.
9.12 What estimates are required to perform market-based joint cost allocations? Where would accountants ob- tain the information needed for these estimates?
9.11 A specialty chemical company obtains 73 different products of relatively equal value from processing a single input. Should these products be treated as main products or by-products?
9.10 The owner of a business says, "I cannot uniquely de- termine the profitability of one of my joint products, but I can uniquely determine its contribution toward joint costs and profit." Explain.
9.9 The allocation of a joint cost among joint products is essentially an arbitrary process. If this statement is true, then why allocate?
9.8 A decision about processing a product further should not be influenced by joint cost allocation, but should be based on incremental costs and qualitative factors. Explain.
9.7 Give an example of joint products in a service industry and describe the main products and by-products.
9.6 Describe the split-off point and explain its significance for joint product costing.
9.5 How are joint product costs and indirect costs similar? How are separable costs and direct costs similar?
9.4 Describe a group of main products and by-products for an industry located near your home or college.
9.3 In your own words, explain the two methods for rec- ognizing revenue from a by-product.
9.2 One of the products from a joint process, Product A, can be sold at the split-off point for $10. The other products can all be sold at the split-off point for $200 or more. Would you categorize
9.1 In your own words, explain what determines whether a product is a main product or by-product.
8.23 Step-down and reciprocal methods, uncertainties, pricing Kovacik manufactures two types of piggy banks in two different departments, a plain piggy bank and a javelina bank. The plant is highly
8.22 Q7 REQUIRED: Stand-alone and incremental cost allocation methods Monty is the CFO of a large organization with fast-food outlets in London, Paris, and Frankfurt. When the manager at an outlet
8.21 Direct, step-down, and reciprocal methods; assign costs to departments Cost information for Lake County Library is as follows. Support Operating Direct Costs Janitorial Administration Books
8.19 Reciprocal method Paul's Valley Protection Service has three support departments (S1, S2, and Q2, Q5 S3) and three operating departments (P1, P2, and P3). The direct costs of each department are
8.18 Reciprocal method The Brown and Brinkley Brokerage firm is organized into two major sales di- Q2, Q5 visions: institutional clients and retail clients. The firm also has two support departments:
8.17 Direct and step-down methods with dual rates Petro-X uses the direct method for allocating both fixed and variable costs from the physical plant and equipment maintenance support depart- ments
8.16 Q1, Q3, Q7 Direct method using estimated costs, benchmarking Devon allocates support department costs using the direct method and estimated costs. The support department costs are budgeted at
8.15 Allocating support costs to units A local hospital is required to account for the total cost of pa- Q2 tient care, including support costs. Patients are assigned all direct costs. Support costs
8.14 Allocation rates A housekeeping support department budgets its costs at $40,000 per month plus Q2, Q7 $12 per hour. For November the following were the estimated and actual hours provided by the
8.13 Describe GAAP as it applies toa. Manufacturing overhead.b. Support department costs.
8.12 List at least three possible allocation bases that could be used to allocate accounting department costs to other departments. Give one advantage and one dis- advantage of using each allocation
8.11 What are the advantages and disadvantages of using estimated support cost allocation rates?
8.10 Would better decisions be made with information from single-rate or dual-rate cost allocation systems? Explain your reasoning.
8.9 Explain several problems that arise when allocated costs are used to charge for support services.
8.8 List at least two advantages of the dual-rate method.
8.7 Explain the difference between operating depart- ments and support departments.
8.6 A product is started in department I and completed in department 2. Is department I a support department or an operating department? Explain.
8.5 What factors should be considered when choosing al- location bases?
8.4 Sometimes costs that include support department allocations are used in short-term decision making. List several limitations of these costs when used in decision making and discuss ways to
8.3 What should determine the choice of cost allocation method (direct, step-down, and reciprocal) discussed in this chapter?
8.2 Explain the similarities and differences between sup- port department costs and manufacturing overhead costs
8.1 Explain the differences and similarities among the di- rect, step-down, and reciprocal methods.
7.20 ABC costing, ABM Applewood Electronics manufactures two large-screen television models, the Q1, Q3, Q5 Monarch, which has been produced since 2000 and sells for $900, and the Regal, a new model
7.19 Traditional versus ABC costing Kalder Products manufactures two component parts, AJ40 and AJ60. AJ40 components are being introduced currently, and AJ60 parts have been in production for several
7.18 Cost pools and cost drivers Following are lists of potential cost pools and cost drivers. Q4 Machining Cost Pool Purchasing activities Inspection Assembly Payroll A special quick-freezing
7.17 Q2 ABC cost hierarchy In ABC systems, activities are often separated into a hierarchy of six categories. REQUIRED: In your own words, define and give examples of the following types of
7.16 Identifying costs using the ABC cost hierarchies MicroBrew Northwest is a successful brewery Q2 engaged in the development and production of specialty micro brews. It uses an activity-based Co
7.15 Mapping costs to the cost hierarchy Each of the following is a cost incurred by Fairgood & Hemandez, a small CPA firm. Q2 REQUIRED: Identify whether each of the following costs most likely
7.14 In your own words, describe the four types of quality- related activities.
7.13 Why might ABC and ABM be useful in reducing en- vironmental costs?
7.12 Explain the difference between activity-based costing and activity-based management.
7.11 Explain how traditional and ABC cost systems differ.
7.10 Is ABC appropriate for an organization that sells a wide range of customized products manufactured us- ing flexible manufacturing systems? Why or why not?
7.9 Suppose that you are part of a student consulting team working for your university. You need to ana- lyze accounting department activities and set up cost pools for these activities. Explain how
7.8 List several costs and several benefits of implement- ing an ABC system.
7.7 Does measurement error increase or decrease when ABC systems are implemented? Explain your answer.
7.6 Should ABC be used in service industries? Why or why not?
7.5 Is an ABC system appropriate for every industry and every type or organization? Explain your answer.
7.4 Does increasing the number of cost pools always in- crease the accuracy of allocations under an ABC sys- tem? Explain your answer.
7.3 The results from allocations using ABC are usually different from the results using traditional cost sys- tems. Explain why these differences arise.
7.2 Describe the six ABC cost hierarchies.
7.1 Mannon Company's accountant exclaimed, "Our cost accounting system allocates overhead based on direct labor hours, but our overhead costs appear to be more related to setup activities than to the
6.22 Account for costs under FIFO Refer to the information presented in Exercise 6.19. Q1, Q4 REQUIRED: Prepare a process cost report under the FIFO method.
6.21 Cost per equivalent unit under FIFO Refer to the information presented in Exercise 6.19. Q1, Q4 REQUIRED: Using the FIFO method, prepare a schedule calculating the cost per equivalent unit for
6.20 Account for costs under weighted average Refer to the information presented in Exercise 6.19. Q1, Q3 REQUIRED: Prepare a process cost report under the weighted average method.
6.19 Cost per equivalent unit under weighted average Felix and Sons is a toy maker and produces Fly- ing Flingbats, a soft foam rubber weapon. All direct materials are added at the beginning of
6.18 Journal entry for normal and abnormal spoilage A department started 10,000 units last month, and the total cost per equivalent unit was $5.00. The department completed and transferred 8,000
6.17 Journal entry for abnormal spoilage Rejected castings in a foundry are treated as spoilage. During Q7 the current period, 80 castings (costing $200 each to produce) were spoiled and sold at a
6.16 Q2, Q3, Q4 Equivalent unit cost under weighted average and FIFO Fine Fans mass-produces small elec- tric fans in Taiwan for home use. All direct materials are added at the beginning of
6.15 Equivalent units under weighted average and FIFO Francisco's mass-produces folding chairs Q2, Q3, Q4 in Mexico. All direct materials are added at the beginning of production, and conversion
6.14 List three factors that managers might consider in deciding whether to expend resources to reduce spoilage.
6.13 List two factors that could affect managers' choices for the number of times and points in processing to inspect units.
6.12 A firm has one machine through which is drawn a standard type of wire to make nails. With minor ad- justments, different sized nails are produced with different sized wire. Would you recommend
6.11 When units are transferred from one department to another, how are normal spoilage costs recorded?
6.10 In processes involving pipeline operations or as- sembly line operations, if the pipeline or assembly line is always full, then beginning and ending WIP inventories are always 50% complete with
6.9 A department within a processing operation has some finished units physically on hand. Should they be counted as completed units or as ending inventory in the department? Explain.
6.8 Describe the differences between mass production and custom production of goods and services. Explain how these differences influence the costing method.
6.7 Explain the difference between the weighted average and FIFO methods for process costing. Explain why an organization might choose one method over the other.
6.6 Suppose the percent completion of ending WIP is overestimated at the end of year 1. How does this measurement error affect the process costing results in year I and year 2?
6.5 Although process costing appears to use precise measurements, it requires several estimates. Discuss where judgment is needed in collecting information for process costing.
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