Questions and Answers of Financial And Management Accounting

What is cost variability? How do we use this concept in analyzing a product’s profitability?
Johnson Hardware offers a range of merchandise for the maintenance of the home and cars. It is a small and simple business, with Pete Johnson doing most of the managerial and office work himself. He
What are the four basic types of cost variability? Please define each term. How does each type of variability impact our ability to develop accurate product costs?
Ruby ’s Bu et offers customers a choice of various dishes for a flat price of $10 per person. While people choose different items, it is remarkable that they all eat roughly the same amount (except
Nancy’s Beauty Salon does mainly haircuts for men and small children. Each haircut is a unique job, but takes about the same amount of time to complete. Nancy charges $25 per haircut regardless of
James Manufacturing wants to estimate its breakeven revenue and level of profitability at different ranges of sales revenue. It provides you with the following table:REQUIRED:a. Calculate the
Provide an example of each type of cost variability using your college as the baseline for your analysis.
What does the term “cost structure” mean? How does it affect the operations of the firm?
Hot Juices, Inc., makes hot sauce for use by various Mexican restaurants in the Northeast. It has asked you to help it do some analysis of its business using the following data:REQUIRED:a. Calculate
Tandry Associates offers a variety of tax and accounting services for local small businesses. It is a simple operation, with high variable costs per job completed but low fixed costs. In fact, it
What is CVP analysis? Why do we use it?
Angus Manufacturing makes basic tools for sale in hardware stores across the country. It is a successful business, with the following unit sales in a month. It faces fixed costs of $225,000 per
What is the basic profit equation? Please state it in terms of fixed and variable costs. How can we use this equation to understand a business?
Peters Pots makes a large ceramic pot that it sells through a nationwide distribution channel. The following table details the sales and costs for the first seven months of this year.REQUIRED:a.
What does the term “breakeven” mean? What is the breakeven formula? When do we use these concepts?
Andrews Manufacturing makes folding chairs that are sold by various retailers across the country. The following table details the company ’s sales and costs for the first six months of this
The board of directors of Kirkside Glassware Ltd is considering the following proposed investment projects:It is estimated that each product will provide benefits in terms of reduced cash outflows,
Today’s task is to review the first stage of budget preparation in a major hospital dealing with a wide range of medical conditions, including accident and emergency services. (There are
Holyrood Products Ltd makes cassette recorders. The management accountant has produced the following summary of the company’s trading in the year ended 30 June Year 3:The following additional
Projects Ltd intends to acquire a new machine costing £50,000 which is expected to have a life of five years, with a scrap value of £10,000 at the end of that time.Cash flows arising from operation
Offshore Services Ltd is an oil-related company providing specialist firefighting and rescue services to oil rigs. The board of directors is considering a number of investment projects to improve the
(a). Imagine you are the finance director of a company which is planning to open a new supermarket chain. Prepare a chart similar to that shown in Figure 16.2 which sets out key aspects of the
The Garden Ornament Company manufactures two types of garden ornament: a duck and a heron. The information presented in Tables T 1 to T 5 has been prepared, as a result of discussions by line
Chris and Alison Weston have been manufacturing and selling children's toys from a workshop attached to their house. Alison has carried out the manufacturing activity and Chris has provided the
The following budgeted accounting statements were submitted to the board of directors of Alpha Ltd on 1 October Year 4:At 31 March Year 5 the following information was available in respect of the
The directors of Craigielaw plc have decided that specialist paints for use on buses and lorries should become the focus of a new digital business strategy. ‘All we have at present is a call centre
Using a suitable computer spreadsheet package, set up a spreadsheet which will calculate net present values and internal rates of return for projects having cash flows for a ten-year period. Test the
Tools Ltd is a new business which has been formed to buy standard machine tool units and adapt them to the specific needs of customers.The business will acquire fixed assets costing £100,000 and a
In a calculation of the internal rate of return of a project it is found that the net present value is +£122m at 22% discount rate and −£58m at 24% discount rate. What is the internal rate of
The directors of Advanced plc are currently considering an investment in new production machinery to replace existing machinery. The new machinery would produce goods more efficiently, leading to
XYZ Ltd is considering purchasing a new machine, and the relevant facts concerning two possible choices are as follows:The company’s cost of capital is 10%.RequiredCalculate, for each machine, the
Now write an evaluation of the spreadsheet you have received from another group.Consider the following:(a) Does it deal with all possible types of cash flows (e.g. a negative flow at some point)?(b)
Marsh Limited has investigated the possibility of investing in a new machine. The following data have been extracted from the report relating to the project:• Cost of machine on 1 January Year 6:
In a calculation of the internal rate of return of a project it is found that the net present value is +£60m at 24% discount rate and −£20m at 26% discount rate. What is the Internal Rate of
A company is reviewing its total quality management programme, which does not appear to be making the progress expected. Problems have been identified in:• Fear of exposing weaknesses in the
A company selling life insurance policies is planning to implement the Balanced Scorecard approach. The board of directors is aware that it should consider four aspects of vision and goals:•
How could planning of business strategy be useful to a public sector organisation such as a public library service? Does the idea of competition have any meaning? How can the management accountant
A manufacturer of toothpaste has estimated the price at which the product will sell, making use of market surveys and consumer analysis. A profit margin has been set. Finally a target cost has been
A company manufacturing specialised medical equipment and supplies is currently having a debate internally about developing an e-business strategy. The sales manager wants to develop an e-commerce
Explain how a low-cost airline can use strategic management accounting in developing a business strategy for competing with the traditional airlines (300 words).
Search the management feature pages of a business newspaper such as the Financial Times for a period of one month. Find articles about management which have a management accounting angle. Select one
As a group you are planning to launch a monthly student newsletter on the university’s website. The roles to be allocated are: editor, reporters, webmaster, university accountant, student
Bright Papers Ltd has established a new subsidiary company to produce extra-large rolls of wall covering. Management forecasts for the first four years of trading are as follows:Further
The monthly budget of Plastics Ltd, manufacturers of specialist containers, was prepared on the following specification:Production and sales ........................................ 30,000
The following report has been prepared for the production department of Cabinets Ltd in respect of the month of May Year 4:The department manufactures storage cabinets. When the budget was prepared,
You are the Student Union management committee representative in charge of student transport affairs. Members have proposed that the Union should operate a campus bus service to operate between the
The upholstery department of a furniture manufacturing business prepared the following statement of standard costs at the start of the calendar year:Standard cost per unit
Fixit Ltd is a manufacturing company which produces a fixed budget for planning purposes. Set out below is the fixed monthly budget of production costs, together with the actual results observed for
You are the Student Union management committee representative in charge of academic affairs. Members have proposed that the Union should publish a study guide for sale to incoming students. It is
Carrypack Ltd manufactures and sells plastic cases for portable computers. Production each month equals sales orders received. The following monthly budget was prepared at the start of Year 6, to
Concrete Products Ltd manufactures heavy paving slabs for sale to local authorities and garden paving slabs for domestic use.The board of directors meets early in each month to review the company’s
DEF Products Ltd manufactures and assembles one type of furniture unit. The following information is available for the year ended 31 August Year 7. The budgeted costs and the actual costs incurred
Nu-Line Ltd purchases manufactured machine tools for conversion to specialist use. The converted tools are sold to the textile industry. The following information relates to the month of July Year
Suggest six non-financial performance measures for a company which offers contract gardening services to companies which have landscaped sites surrounding their offices. Give reasons for your choice.
Standard pine benches are assembled and packed in the bench assembly department of Furniture Manufacture Ltd. The department is treated as a cost centre. Control reports prepared every month consist
Lightwave Radio Ltd produces a range of products at its assembly plant. Due to recent rapid expansion the company’s system of management control is now inadequate. The board has established a
Suggest three financial and three non-financial performance measures for a business which provides training in the workplace for updating wordprocessing and computing skills. Each training course
Dairies Ltd operates a milk processing and delivery business. The retail distribution of milk is controlled by a regional head office which has overall responsibility for five geographical
You are the managing director of Combine Ltd, a company engaged in the manufacture and sale of refrigerators and freezers. The board of directors has agreed to reorganise the company into two
Design a balanced scorecard for a restaurant business which owns three restaurants in the same town. Include three goals and three measurements of performance for each of the four aspects of the
You are the management accountant at the head office of a company which owns retail shoe shops throughout the country. The shops are grouped into areas, each having an area manager. Goods for sale
Obtain the annual report of a large listed company. Look throughout the report for mention of non-financial performance indicators. Having read the report, prepare a list of non-financial performance
Budgeted information relating to two departments of Rydons Tables Ltd for the next period is as follows:Individual direct labour employees within each department earn differing rates of pay according
Plot a break-even chart based on the following data and label the features of interest on the chart: Number of units Fixed cost Variable cost Total cost Sales 10 200 100 300 150 200 200 200 200 300
A company is able to sell four products and is planning its production mix for the next period. Estimated costs, sales and production data are as follows:Required(a). Based on the foregoing
(a). Using the list of transactions at question A5.5 prepare a spreadsheet similar to that presented in Table5.3.(b). Show that the spreadsheet totals satisfy the accounting equation. Table 5.3
Using the totals from the columns of the spreadsheet of question B5.1, prepare for the dental practice in the month of April:(a) A statement of cash flows;(b) A statement of financial position
(a). Using the list of transactions at question B6.2 above, prepare a spreadsheet similar to that presented in Table6.8.(b). Show the resulting impact on the accounting equation and demonstrate that
Using the total from the columns of the spreadsheet of question B6.3(a), prepare for the business in the month of April:(a). A statement of cash flows.(b). A statement of financial position (balance
The biscuit machine in question C8.1 was sold at the end of Year 4 for a price of £3,000. Required(a). Prepare the spreadsheet for Year 4 analysing the transactions and events of the year.(b).
You have been invited to write a proposal for the development of a new production line to process dog food. The production of dog food will take up space previously devoted to cat food. Write 250
Form a study group of four to six persons who are to act out the role of the finance director and related staff on the accounting team of a company planning to open a new supermarket chain at an
Form a study group of four to six persons who are to negotiate the development of a new production line to process canned peas. The canned peas will replace an existing product, canned carrots. Half
Set out below is a selection of advertisements for posts in management accounting. Read the text of the advertisement and relate the specified requirements to the three management accounting roles
A group of doctors operates a joint surgery. They are planning to provide a private clinic where minor surgery can be performed on a day basis (no overnight facilities will be offered). The project
A recently retired police officer has received a lump sum award and a pension. She has a hobby of making soft toys which have for some years been sold to friends and colleagues at a price to cover
Give an example of a management planning question for which it would be useful to classify costs as fixed and variable.
You are the management team in a business which makes self-assembly kitchen units and sells them to large do-it-yourself stores. One person should take on the role of the financial controller but the
Give an example of a management planning question for which it would be useful to classify costs as direct and indirect.
The group is the management team of a supermarket chain operating ten shops in out-of-town locations. Each member of the group should choose a management role, one of which must be the financial
Give an example of a management control question for which it would be useful to classify costs as direct and indirect.
Give an example of a management control question for which it would be useful to classify costs as period and product costs.
A factory manufactures garden huts. The production process is classified into two production departments, Assembly and Joinery. There is one service department, the canteen. The relevant forecast
Oven Pies Ltd plans to buy a delivery van to distribute pies from the bakery to various neighbourhood shops. It will use the van for three years. The expected costs are as follows: *
In a general engineering works the following routine has been followed for several years to arrive at an estimate of the price for a contract.The process of estimating is started by referring to a
As a group you are the senior teaching staff of a school where each subject department is regarded as a cost centre. The direct costs of each cost centre are teachers’ salaries, books and
A company manufactures golf bags. Golf bags have the following manufacturing costs:
You have been asked for advice by the owner of a small business who has previously estimated overhead costs as a percentage of direct labour cost. This method has produced quite reasonable results
Two bus companies are competing for passengers on the most popular routes in a major city. The long-established company has strong customer loyalty, provides weekend and evening services as well as
As a group, you are planning to establish a partnership supplying examination advice and tuition to school pupils in their homes. Each course of lessons will be regarded as a single ‘job’.
Restoration Ltd buys basic furniture units and creates period layouts in clients’ homes. The following transactions relate to jobs 801, 802 and 803 in the month of May. Prepare job cost records for
Insulation Ltd has been established to manufacture insulation material for use in houses. At present, one machine is installed for production of insulation material. A further similar machine can be
As a group you are planning a garden renovation service to take advantage of the current popularity of television programmes dealing with garden design. Within the group, allocate the following
Fixed costs are £5,000. Variable cost per unit is £3 and the unit selling price is £5.50. What is the break-even volume of sales?
Dairy products Ltd has recently developed sales of cream in aerosol dispensers which are sold alongside the company’s traditional products of cartons of cream and packets of cheese. The company is
Leisure Furniture Ltd produces furniture for hotels and public houses using specific designs prepared by firms of interior design consultants. Business is brisk and the market is highly competitive
In groups of three, take the role of finance director, production director and sales director in a company manufacturing pressure die castings, gravity die castings and sand castings. The three types
Montrose Glass Products Ltd manufactures three ranges of high-quality paperweights – Basic, Standard and Deluxe. Its accountant has prepared a draft budget for Year 7:Fixed overheads are allocated
Your company manufactures furniture units to customers’ specifications. In groups of three, take the role of sales director, production director and finance director. You have met to decide on the
Chris Gibson Kitchenware Limited sells kitchen appliances to department stores. Product costs are ascertained using an absorption costing system from which the following statement has been prepared

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