Questions and Answers of Introduction To Management Accounting

Suppose you are a manager of a manufacturing department. Confirm your understanding of product costing in a job-order environment by indicating the transactions that occurred for each of the
The Plymouth Company differs from the Gibraltar Company (described in problem 13.55) in only one respect: it has both variable and fixed manufacturing costs. Its variable costs are €.14 per liter
Study Appendix 13. Consider the following data for the Rivera Company:From the preceding information, fill in the following blanks. Be sure to mark your variances.F for favorable and U for
Study Appendix Explain the difference between resource-consumption rates and cost per driver unit.
Study Appendix 12. In Exhibits 12.20 and 12.21, the rs represent resource- and activity-consumption rates. Why are these rates important to managers looking for ideas for process improvements?Exhibit
Study Appendix Distinguish between two-stage and multistage ABC systems.
Suppose Winter Park Company has two plants – the Salem plant and the Youngstown plant. The Youngstown plant produces only three components that are very similar in material and production
Chapter 6 explained that joint costs should not be allocated to individual products for decision purposes. For what purposes are such costs allocated to products?
What is a non-volume-related cost driver? Give two examples.
1.(a) What average unit sales price does the Portland division need to obtain its desired rate of return on average total assets?(b) What would be the expected capital turnover?(c) What would be the
The balanced scorecard emphasises the connections between performance measures and financial and nonfinancial goals. Indicate where each of the following goals of Whirlpool fits with the four
The Des Moines Leather Company makes a variety of leather goods. It uses standard costs and a flexible budget to aid planning and control. Budgeted variable overhead at a 45,000-directlabour- hour
A new printing department provides printing services to the other departments of Farmers & Mechanics Insurance Company (FMIC). Before the establishment of the in-house printing department, the
Managers should try to distinguish between controllable and uncontrollable costs when designing segment financial reports. For each of the following costs of a suburban Asda store, indicate whether
A luxury hotel chain called Luxhot is developing performance measures for each of its major goals. Top management established ‘exceed guest expectations’ as one organisation-wide goal.Among the
The Book & Game Company has two bookstores: Auntie’s and Merlin’s. Each store has managers who have a great deal of decision authority over their store. Advertising, market research,
Dave Skold owns and operates a small chain of convenience stores in Waterloo and Poitiers. The company has five stores including a downtown store and a store in the Waterloo division; and a downtown
Use the same four general components but rearrange them a bit to reflect a framework that might help managers of a successful governmental or nonprofit organization.Exhibit 9.3
Wells and Severson are manufacturing companies. Comparative data for 20X1 and 20X7 are as follows:Assume that inflation has totalled 15 per cent during these 6 years so that each 20X1 euro is
The president of North Shore Railroad wants to obtain an overview of the company’s operations, particularly with respect to comparing freight and passenger business. He has heard about
Health Net provides health care to more than 6.7 million members. As a managed healthcare organisation, the company strives to provide high-quality healthcare at a reasonable cost. Many stakeholders
The Italian Pharmaceuticals Company (IPC) recently revised its performance evaluation system The company identified four major goals and several objectives required to meet each goal. Andrea Dossi,
There is increasing pressure on colleges and universities to develop measures of accountability. The objective is to specify goals and objectives and to develop performance measures to assess the
Peter Small of the Harvard Business School undertook to write case material on the budgetary control system of the Empire Glass Company, a manufacturing company with a number of plants located
One company that improved its EVA performance dramatically during the 1990s is IBM. In 1993, its EVA was a negative $13 billion. By 2000, the company improved its EVA to $2.2 billion. Like most
Study the Starbucks store in Exhibit 1.2 on p. 7. Suppose that for next year a particular store budgeted revenue of €330,000, a 10 per cent increase over the current revenue of €300,000. The
For each of the following situations, indicate how ethical standards for management accounting may influence the manager and what the appropriate action should be:1. At a dinner party, a guest asked
Enriquez Food Services Company operates, and services snack vending machines located in restaurants, gas stations and factories in four southwestern states. The machines are rented from the
Nike is an Oregon-based company that focuses on the design, development and worldwide marketing of high-quality sports footwear, apparel, equipment and accessory products. Nike is the largest seller
The central issue in this case concerns product pricing. The analysis requires the estimation of appropriate costs and assessing price-demand information using past sales data.Permaclean Products is
Outback Steakhouse has 970 restaurants offering steak, chicken and seafood served in an Australian-themed atmosphere. Maintaining a clean environment for customers is a key success factor at Outback.
Many churches sponsor bingo games, a tradition stemming from the time when only specific nonprofit institutions were allowed to sponsor games of chance. Reverend Justin Olds, the pastor of a new
A cost function is a mathematical expression of how cost drivers affect a particular cost. However, an intuitive understanding of cost functions is just as important as being able to write the
Martina Fernandez, Managing Director of Evert Tool Co. Ltd, has asked for information about the cost behaviour of manufacturing support costs. Specifically, she wants to know how much support cost is
Study Appendix 3. The Tent Division of The Great Outdoor Equipment Company has had difficulty controlling its use of supplies. The company has traditionally regarded supplies as a purely variable
Suppose BT’s management retains its traditional cost accounting system but believes that a more plausible and reliable cost driver is ‘number of printed lines’. Each residential bill averages
Reto Bank is a local bank located in a residential area and it services mostly individuals and local businesses. Reto’s four main services are transaction processing (withdrawals, cheques, currency
The wireless phone manufacturing division of a Spanish consumer electronics company uses activity-based costing. For simplicity, assume that its accountants have identified only the following three
The Garcia Manufacturing Company has two producing departments, machining and assembly.Mr Garcia recently automated the machining department. The installation of a CAM system, together with robotic
The Liverpool Company produces three types of circuit boards; call them Alpha, Beta and Gamma. The cost accounting system used by Liverpool until 2009 applied all costs except direct materials to the
Emilio Moreno, the administrator of Turin Community Hospital, has become interested in obtaining more accurate cost allocations on the basis of cause and effect. The €210,000 of laundry costs had
The following information is taken from the records of the Kingland Manufacturing Company for the year ending 31 December 20X1. There were no beginning or ending inventories.1. Prepare a contribution
Why are historical or past data irrelevant to special decisions?
Today you are planning to see a film and you can attend either of two cinemas. You have only a small budget for entertainment, so prices are important. You have attended both cinemas recently. One
Southeast Equipment makes a variety of motor-driven products for homes and small businesses. The market research department recently identified power lawn mowers as a potentially lucrative market. As
Fargo Manufacturing Company produces two industrial solvents for which the following data have been tabulated. Fixed manufacturing cost is applied to products at a rate of €1.00 per
Zurich American School is an international private elementary school. In addition to regular classes, after-school care is provided between 3:00 PM and 6:00 PM at CHF 12 per child per hour. Financial
Lehr is a global manufacturer of highly engineered products that serve industrial, vehicle, construction, commercial, aerospace and semiconductor markets. Lehr’s sales last year were €10.3
Home Appliances Company manufactures small appliances, such as electric can openers, toasters, food mixers and irons. The peak manufacturing season is at hand and the president is trying to decide
Jacque de Paris, a high-fashion women’s dress manufacturer, is planning to market a new cocktail dress for the coming season. Jacque de Paris supplies retailers in Europe and the United States.Four
Ronco Products, a wholesaler of fishing equipment, budgeted the following sales for the indicated months:All merchandise is marked up to sell at its invoice cost plus 25 per cent. Target merchandise
All sales of Jenny’s Jeans and Uniforms (JJU) are made on credit. Sales are billed twice monthly, on the fifth of the month for the last half of the prior month’s sales and on the twentieth of
A Kyoto clothing wholesaler was preparing its sales budget for the first quarter of 20X8.Forecast sales are as follows (in thousands of yen):Sales are 20 per cent cash and 80 per cent on credit.
Suppose a lumber yard has the following data:●. Accounts receivable, 31 May: (.3 × May sales of €350,000) = €105,000 ●. Monthly forecasted sales: June, €430,000; July, €440,000; August,
Linkenheim GmbH has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be €15,000 plus 90 per cent of the cost of goods to
Prepare a statement of estimated cash receipts and disbursements for October 20X7 for the Botanica Company, which sells one product, herbal soap, by the case. On 1 October 20X7, part of the trial
Mathew Philp, president of North Mining Ltd, has made budgets a major focus for managers. Making budget was such an important goal that the only two managers who had missed their budgets in 20X7 (by
The High Definition LCD Division (HDLD) of Fisher Displays produces displays for HD LCD televisions. The displays are assembled from purchased components. The costs (value) added by HDLD are indirect
Evergreen Hospital provides a wide range of health services in its community. Evergreen’s board of directors has authorised the following capital expenditures:The expenditures are planned for 1
Suppose you are the accountant for Bristol Metro University which is a privately funded university. The university president, Lisa Larsson, is preparing for her annual fund-raising campaign for
Consider a company that plans to sell 1,000 units for €3 per unit. Budgeted variable costs are €2 per unit, budgeted fixed costs are €700 and the static-budget profit is €300. Suppose the
Refer to the data in Exhibits 8.1 and 8.2. Suppose actual production and sales were 8,500 units instead of 7,000 units; actual variable costs were €188,800; and actual fixed costs were €71,200.
Burton Transportation Company’s general manager reports quarterly to the company president on the firm’s operating performance. The company uses a budget based on detailed expectations for the
This case is concerned with the use of ROI to measure divisional performance. It also addresses the use of an integrated standard costing system to produce meaningful profit statements where standard
Managers can apply the concepts of variance analysis to construct new variance definitions to fit new situations. For example, consider a production plant that plans to produce 50 units per hour and
The following questions are based on the data contained in the Dominion Company illustration used in this chapter.– Direct materials: standard, 5 kg per unit at €2 per kg – Direct labour:
Barber Brass manufactures trumpets, trombones, tubas and other brass instruments. The following standards were developed for a line of trumpets:During April, Barber scheduled 550 trumpets for
The superintendent of police of the city of Rollag is attempting to predict the costs of operating a fleet of police cars. Among the items of concern are fuel, €.24 per kilometre and depreciation,
Consider the following data:Compute the price, quantity and flexible-budget variances for direct materials and direct labour. Use U or F to indicate whether the variances are unfavorable or favorable
Bangkok Custom Shirt Company uses a special fabric in the production of dress shirts. During August, Bangkok Custom Shirt purchased and used 7,900 square yards in the production of 3,800 shirts at a
London Business School’s Entrepreneur Society recently held a dinner dance. The original (static) budget and actual results were as follows:1. Subdivide each variance into a sales-activity variance
Tanzania Toy Company produced 10,000 stuffed bears. The standard direct-material allowance is 1.75 kilograms per bear, at a cost per kilo of Sh3. Actually, 16,500 kilos of materials (input) were used
Suppose a chain of KFC franchises in Beijing had budgeted sales for 2009 of RMB 7.3 million (where RMB stands for the Chinese unit of currency, officially the renminbi, also called the yuan). Cost of
The Zurich Chocolate Company uses standard costs and a flexible budget to control its manufacture of fine chocolates. The purchasing agent is responsible for material price variances and the
Suppose a small division of Safaricom has assets of KSh2,000,000, invested capital of KSh1,800,000 and net operating income of KSh600,000. Ignore taxes.1. What is the division’s ROI?2. If the
Reconsider Macron’s fabric division and sportswear division described on p. 433. In addition to the data there, suppose the fabric division has annual fixed manufacturing costs of €800,000 and
Bern Equipament, SA, a Swiss transportation equipment manufacturer, is heavily decentralized. Each division head has full authority on all decisions regarding sales to internal or external customers.
Refer to problem 10.A2, number 1 only. Suppose the Ticino division could modify the component at an additional variable cost of CHF 17 per unit and sell the 3,000 units to other customers for CHF
‘Companies that try to avoid taxes are unethical.’ Do you agree? Discuss.
Consider the following data concerning a subassembly that Willamette Manufacturing Company produces in its fabricating division and uses in products assembled in its assembly division.If you were the
The president of E-Games, an online gaming company, is considering the purchase of some equipment used for the development of new games. The cost is €400,000, the economic life and the recovery
Examine the correct analysis in Exhibit 11.6. Suppose the cash-operating inflows persisted for an extra year. Compute the PV of the inflow for the sixth year. Ignore depreciation.Exhibit 11.6
Consider Toyota’s purchase of the £125,000 machine analyzed in Exhibits 11.3 and 11.4. Suppose the machine had a useful life of 6 years, but the recovery period remains 5 years. What is the net
Use the appropriate table to compute the following:1. You have always dreamed of taking a safari in Africa. What lump sum do you have to invest today to have the €16,000 needed for the trip in 3
On 1 January 20X1, Brisbane Company sold an asset with a book value of $50,000 for cash. Assume two selling prices: $65,000 and $40,000. For each selling price, prepare a tabulation of the gain or
Assume that the combined federal and state income tax rate for Quixote Company is 40 per cent.1 The book value of an old machine is €25,000. Quixote sold the machine for €10,000 cash. What is the
‘An investment in equipment really buys two streams of cash.’ Do you agree? Explain.
Suppose Subaru UK Limited wishes to borrow money from UBS. They agree on an annual rate of 10 per cent.1. Suppose Subaru agrees to repay £500 million at the end of 4 years. How much will UBS lend
Suppose you are a loan officer for a bank. A start-up company has qualified for a loan. You are pondering various proposals for repayment:1. Lump sum of £500,000 four years hence. How much will you
Fill in the blanks. Amount of annual cash inflow* Required initial investment Minimum desired rate of return NPV 8 €12,000 € 14% € 5,613 Number of Years 18 20 € €80,000 20% (€13,835) €
Fill in the unknowns (in thousands of euros): මෙම පිපි Sales Expenses excluding depreciation Depreciation Total expenses Income before income taxes Income taxes at 30% Net income Cash
Gupta and Bonini a firm of solicitors, is considering the replacement of its old accounting system with new software that should save £6,000 per year in net cash operating costs. The old system has
TexaTaco is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the system (including installation of special windows
Virgin Trains (VT) has included a cafeteria car on the passenger train it operates. Yearly operations of the cafeteria car have shown a consistent loss, which is expected to persist, as follows:The
Consider a new video game developed by Dynamic Gaming Innovations (DGI). DGI’s development team was formed at the end of 2006 and has been working on the development of the game for several years.
Southampton University is considering replacing some Xerox copiers with faster copiers purchased from Cannon. The administration is very concerned about the rising costs of operations during the last
Manriquez Tool and Die has three service departments:1. Manriquez allocates all service department costs directly to the production departments without allocation to other service departments. Show
Consider our example of the manufacturer’s display facility. Exhibits 12.8 and 12.9 on p. 536 and 537 show how the company used the ABC approach to determine the cost of goods sold for custom and
Nonmanufacturing organisations often find it useful to allocate costs to products or services. Consider a hospital. The output of a hospital is not as easy to define as the output of a factory.
Aswega AS is an Estonian manufacturer of electromagnetic flowmeters, heat meters and calibration equipment located in Tallinn. Suppose that it is considering the installation of a computer-aided

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