Questions and Answers of Introduction To Management Accounting

Suppose you are a warehouse manager at Lego, the toy company. Ace Hardware approaches you asking to rent warehouse space for January–April for storage of garden tools for the spring sales season.
Exhibit 6.1 contains data for the Block Company for the year just ended. The company makes industrial power drills. Exhibit 6.1 shows the costs of the plastic housing separately from the costs of the
The Ibunez Tool Company has two products: a plain circular saw and a professional circular saw. The plain saw sells for €70 and has a variable cost of €55. The professional saw sells for €100
Suppose a company uses its facilities, on average, 80 per cent of the time. However, because of seasonal changes in the demand for its product, the actual demand for the facilities varies from 60 per
Exhibit 6.5 looks beyond 1 year. Examining the alternatives over the equipment’s entire life ensures that peculiar nonrecurring items, such as loss on disposal, will not obstruct the long run view
When managers face a decision about whether to add or delete a product, service or department, it is useful to classify the associated fixed costs as avoidable or unavoidable. Indicate whether the
Consider the data regarding Douglas County’s photocopying requirements below. The county administrator is trying to decide whether to replace the old equipment. Because of rapid changes in
It is sometimes difficult to accept the proposition that past or sunk costs are irrelevant to decisions. Consider the ticket you have to a major football game in December. After getting the ticket,
Zimmerman Manufacturing Limited produces and sells one product, a three-foot Austrian flag. During 20X0, the company manufactured and sold 50,000 flags at €26 each. Existing production capacity is
Lisboa Electrical makes small electric motors for a variety of home appliances. Lisboa sells the motors to appliance makers, who assemble and sell the appliances to retail outlets. Although Lisboa
The African Tire Company prepares an annual master budget each November for the following year. At the end of each year, it compares the actual costs incurred to the budgeted costs. How can African
Give two rules of thumb to use when analyzing cost behaviour.
Managers use CVP analysis to predict effects of changes in sales or costs on the break-even point. Using shortcut formulas (2) and (3), answer the following questions. Remember that the contribution
A summary of the budgeted income statement of Williams Irish Gift Shop follows:The manager believes that an additional outlay of €200,000 for advertising will increase sales substantially.1. At
This is a general case on the design of a management and cost accounting system for a firm operating in a high-tech environment. It provides an opportunity for a broad discussion not only of the
Refer to the previous discussion of the receiving activity at the Boeing plant and Exhibit 2.4. The plant manager is looking at a monthly report of plant costs and notices that the receiving activity
A recent directive from Sandy Jensen, Managing Director of Duluth Manufacturing, had instructed each department to cut its costs by 10 per cent. The traditional functional budget for the shipping and
Managers use accounting information for many different types of decisions. Accountants must make sure that they produce information that is useful for these various decisions. What type of
Yang Electronics Company (YEC) developed a high-speed, low-cost copying machine marketed primarily for home use. However, as YEC customers learned how easy and inexpensive it was to make copies with
The case assumes no technical knowledge of management and cost accounting but deals with ethical issues that often face accounting professionals. It engages in a discussion of how far the notion of
Measuring costs at various stages of the value chain is important to Starbucks. Suppose that you are a Starbucks manager or accountant. For each of the following activities, indicate the value-chain
Student Accounting Club (SAC), the accounting society, held a party. The society expected attendance of 70 persons and prepared the following budget:After SAC paid all the bills for the party, the
Suppose you are a manager of a BASF chemical plant. The plant has just undertaken a business process reengineering project and, as a result, has substantially changed its production process. It is
‘Accounting principles assist the development of management accounting systems.’ Do you agree? Explain.
A key factor in helping managers understand cost behaviour is distinguishing between variable and fixed costs. Test your understanding by answering the following questions.1. A producer of premium
Consider a particular Boeing plant. Maintaining a clean working environment is important to Boeing. Cleaning the plant is the responsibility of the maintenance department. Two of the resources needed
Suppose Hernandez Construction Company has a 30% income tax rate, a contribution-margin ratio of 25 per cent and fixed costs of €440,000. What sales volume is necessary to achieve an after-tax
What is the relationship between the margin of safety and the break-even point?
Children’s Hospital predicts variable costs of 70 per cent of total revenue and fixed costs of ₤42 million per year for 2011.1. Compute the break-even point expressed in total revenue.2. In 2011
Hospitals measure their volume in terms of patient-days. We calculate patient-days by multiplying the number of patients by the number of days that the patients are hospitalized. Suppose a large
What is cash flow from financing activities? Give examples.
The Matrix Company purchased a fixed asset for $2.5 million. How should this be reported in the investing activities section of a statement of cash flows?
How is factory overhead applied to production?
What should be the principle behind selecting a cost-allocation base?
Identify four cost-allocation bases that a manufacturing company might use to apply factory overhead costs to jobs.
Is the comparison of actual overhead costs to budgeted overhead costs part of the product-costing process or part of the control process? Explain.
What is the composition of the cost of a manufactured product under normal costing?
Sysko Electricals began operation on January 1, 2017, to produce and sell a single product. Reported operating income figures under both absorption and variable costing for the first four years of
Compare variable and absorption costing regarding the treatment of fixed manufacturing costs.
Compare variable and absorption costing regarding the treatment of production-volume variance.
Why are more and more companies migrating to variable costing from absorption costing?
Manchester Automobiles Inc. has the following budgeted overhead cost and other data for its assembly department for the month of June 2020: Compute the budgeted factory overhead rate, actual machine
NaturePure Company differs from the Domenico (described in Problem 13-56) in only one respect: It has both variable and fixed manufacturing costs. Its variable costs are $0.035 per liter and its
In an absorption costing income statement fixed factory overhead appears in two places.” Explain.
Variable costing is consistent with cost volume-profit analysis.” Explain.
Compare the contribution margin with the gross margin.
How is fixed overhead applied to products?
The flexible budget for budgeting and control differs from the costs applied for product costing.” What type of cost is being described? Explain.
What is known as denominator level?
An unfavorable production-volume variance means that fixed manufacturing costs have not been well controlled.” Do you agree? Explain.
The fixed cost per unit is directly affected by the expected volume selected as the denominator.” Do you agree? Explain.
Absorption-costing income exceeds variable-costing income when the number of units sold exceeds the number of units produced.” Do you agree? Explain.
The Detroit Manufacturing Company has the following balances (in millions) as of December 2020: The cost of direct materials purchased during 2020 was $897. The cost of direct materials
What are the possible reasons for an adverse production volume variance?
Do all overhead variances appear in both variable-costing and absorption-costing systems?
The following data pertain to the galvanized steel department of Ontario Iron and Steel Works Inc. for January 2020: The metallic component is introduced at the start of the process, while the zinc
Suppose a refrigerator manufacturing firm has 12,000 fully completed units and 6,000 units that are 60% complete. Using the concept of equivalent units, compute the number of equivalent units.
How are transferred-in costs treated in process costing?
Suppose you are the managing partner of an audit firm. In a recent meeting on the annual budget and cost allocation policy of your firm, one of the senior managers has advocated that while making
All product costing uses averages to determine costs per unit of product produced. In job-order production systems, the averages are based on a relatively small number of units. In a process
Companies using JIT production systems usually have very small inventories or no inventories at all. As a result, a traditional accounting system may be inappropriate. Many of these companies
Swift, Inc. is a global engineering consultancy company headquartered in Toronto, Canada. The following is a reproduction of the terms and amounts in the financial statements contained in the
Standard Chartered Bank, one of the largest financial institutions in the United Kingdom with total assets of £550 billion, showed the following items (among others) on its balance sheet at January
A department of Imperial Chemical Company produces a special type of chemical for industrial use. All direct materials are introduced at the start of the process. Conversion costs are incurred
Distinguish between acquisition and expiration.
Depreciation is cost allocation, not valuation.” Do you agree? Explain.
Can a company having a large retained earnings balance always pay cash dividends?
Audit opinions are not infallible guarantees of financial truth.” Do you agree?
Why are ethics and integrity important to accountants?
What is the major limitation of a basic measurement unit?
Matrix Company had retained earnings of £113,560 at the beginning of 2020. During the year the company had total revenue of £1,060,000, total expenses (including taxes) of £990,000, bought
Suppose Amazon decided to hold its next Annual General Meeting in Fremont Studios in May. To take advantage of a special offer, Amazon booked the studio in advance at a total cost of $100,000. Amazon
In the area under Kolkata Municipal Corporation, property taxes are payable by the property owner at a fixed rate on the municipal value of the property. The taxes are levied on a quarterly basis,
Why should short-term prepaid expenses be classified as current assets?
Enumerate the items most commonly classified as current assets.
State the factors that determine the amount of depreciation charged as expense.
To capitalize an amount spent means that it will not be charged as an expense.” Do you agree? Explain.
Goodwill may have nothing to do with the personality of the manager or employees.” Do you agree? Explain.
Working capital helps tell potential investors whether a company has enough current assets to pay current liabilities as they become due.” Do you agree? Explain.
What is the purpose of convertible debt instruments?
Common shareholders have limited liability.” Explain.
What is the role of the par value of stocks or bonds?
Treasury stock is negative stockholders’ equity.” Do you agree? Explain.
What advantages does a multiple step income statement have over a single-step statement?
Name the three items that most often cause changes in retained earnings as shown in the statement of changes in stockholders’ equity.
What three types of activities are summarized in the statement of cash flows?
What is cash flow from operating activities? Give examples.
Delta Inc. borrowed $15.2 million in 2020 to arrange the cash needed for some investment. How will the transaction be reported in the statement of cash flows? If the loan carries an interest at 8%
What is the need for a reconciliation statement when a company prepares cash flow statements under the direct method?
Sales for Metallic Paints in 2020 were £300,000, 70% of them on credit and 30% for cash. During the year, accounts receivable increased from £28,000 to £33,500, an increase of £5,500. What amount
Cost of goods sold for Metallic Paints during 2020 was £200,000. Beginning inventory was £32,000 and ending inventory was £44,500. Beginning trade accounts payable were £6,500 and ending trade
When should a company follow the market-value method for accounting investments?
Metallic Paints reported wage and salary expenses of £77,500 on its 2020 income statement. It reported cash paid to employees of £68,000 on its statement of cash flows. The beginning balance of
What are the benefits to a parent company of keeping subsidiaries rather than merging them with it self?
A consolidated financial statement simply adds together the separate accounts of a parent company and its subsidiaries.” Do you agree? Explain.
Consolidated income statements show more income than parent-company-only statements if the subsidiary has a positive net income.” Do you agree? Explain.
What is a noncontrolling interest?
When the fair value of assets is higher than the book value, how would you recognize goodwill in the books of the acquirer?
When will goodwill on a balance sheet be reduced?
How are pro forma statements different from the formal financial statements?

Showing 200 - 300 of 443