Questions and Answers of Introduction To Management Accounting

Name the three types of comparisons made with ratios.
Name two short-term ratios and five profitability ratios.
What two ratios are multiplied together to give the pretax operating rate of return on average total assets?
Ratios are mechanical and incomplete.” Explain.
An efficient capital market is one where securities are traded through stockbrokers.” Do you agree? Explain.
Alpha Company acquired 20% of the voting stock of Beta Company for €80 million cash. In year 1, Beta had a net income of €40 million and paid cash dividends of €20 million. At the end of the
Silver Bricks Inc. bought a new £25,000 skid steer loader for its construction business on January 3, 2020. The loader has a 5-year economic life and recovery period. The cost of capital of the
Master budgets are always static master budgets.” Do you agree? Explain.
1. Compute the actual hours worked, rounded to the nearest hour.2. Compute the actual purchase price per unit of materials, rounded to the nearest euro cent. Standard direct-labor rate Actual
The ATK Club in Kolkata, India, organizes an annual get-together of its members on the eve of its foundation day. The original (static) budget and actual results for this year’s program were as
In 2020, Procter & Gamble produced 60,000 units of a mid-range electric toothbrush, 12,000 more than budgeted. Production data are as follows. Except for physical units, all quantities are in
Why is the use of perfection standards not advocated widely?
What are two possible approaches to setting “currently attainable standards”?
What are some common causes of unfavorable quantity variances?
What decides the variable-overhead efficiency variance?
Would you recommend conducting an investigation for each and every variance?
Kookaburra Sports, Australia, produced 88,000 cricket balls in 2020. Its manufacturing costs included A$1,760,000 variable and A$88,000 fixed. Assume that no price changes will occur in 2021 and that
The manager of Mobility Transport Company in Bradford, United Kingdom, is attempting to predict the costs of operating a fleet of cars hired by a local college administration. Among the items of
Ben Schmidt, the manager of Hanover Bridge Construction Company, Germany, uses standards to evaluate the performance of labor. Due to a recent fire breakout in its office, a considerable number of
St. Lawrence Iron Works, Ontario, Canada, uses standard costs and a flexible budget to control its manufacture of cast iron. The purchase manager of the company is responsible for the material price
In early 2020, Trio Communications, an India-based wireless broadband service provider, acquired the controlling stake in Excel Web, a cable broadband service provider in semi-urban areas of southern
What is a management control system?
What is a key success factor?
How do profit centers and investment centers differ?
List four nonfinancial measures of performance that managers find useful.
How is responsibility accounting helpful in discharging effective management control in any organization?
The distinction between controllable and uncontrollable costs is used in evaluating the performance of a manager.” Do you agree? Explain.
The challenge in choosing productivity measures is to avoid motivating decisions that improve one dimension of performance but hurt another dimension.” Explain.
Hexa Electricals is one of the highly reputed players in the home UPS industry. According to the company’s annual report, “At Hexa, we believe that the value of our company is enhanced only if
Give four examples of segments.
PCC Jewelers is a Kolkata-based jeweler that has been manufacturing customized gold and silver jewelry over 80 years and has an industry-wide reputation for state-of-the-art designs and quality
Bharti Airtel provides telecom services in many parts of India and also in other countries including East, West, and Central Africa and Bangladesh through its subsidiaries. As a leading telecom
Hindustan Unilever does business in three different business segments: (1) Beauty products, (2) Beverages,(3) Oral care.The following are the results of the company in 2020 (figures are million
As a performance measurement tool, EVA is oriented more toward cash flows than operating income. Therefore, while calculating EVA, several adjustments are made to operating income from the income
Customers’ Delight is a well-known confectionery shop in Chester. The shop has a branch in Coventry, opened only 2 years ago. Both the shops are owned by Henry Brown, who retired recently from the
Burnard Kaiser, the CEO of Atlantis Inc., evaluates the information available on three of Atlantis’s major product divisions (in thousands of euros):1. Calculate for each division the rate of
What is the importance of segment autonomy in decentralization?
What should be the feature of an ideal performance metric?
When is a market price-based transfer price ideal?
Describe management by objectives (MBO).
How can performance measurement lead to unethical behavior by managers?
Xenon Company has assets of $6 million and long-term, 14% debt of $2,480,000. Neon Company has assets of $6 million and no long-term debt. The annual operating income (before interest) of both
The Detroit unit of Michigan Company just purchased an asset for $180,000. The asset has a 3-year life. Michigan’s top management evaluates Charlotte Anderson, manager of the Detroit unit, based on
Delta Iron Works Inc. has adopted a responsibility accounting approach in evaluating the performance of its works managers. It has several workshops across the state. In one of such workshop, the
A large computer hardware manufacturing company in China is installing a responsibility accounting system. The company sells computers as per customer specification on some standardized parameters
Oscar Industries requires 2,400 units of turntables. The glass and ceramic products division already produces similar turntables for the external market and sells them at an industry-wide established
Orient Computers produces desktop and laptop computers for home and business use. The company has its plant at Whitsett, North Carolina in the United States. However, the company has sales divisions
The real option framework has some nonintuitive implications.” Explain.
Distinguish between average and marginal tax rates.
How does depreciation lead to tax savings?
Compu-Tech Company produces LCD monitors for desktop computers at its manufacturing facility at Petechannappa, Bangalore, India. The company currently ships its products to a warehouse 1,900
Higher allocation of the cost of an asset during initial years improves the tax shield.” Explain.
What is the tax effect of gains or losses on disposal at termination?
Why should companies take tax deductions sooner rather than later?
The MACRS half-year convention causes assets to be depreciated beyond the lives specified in the MACRS recovery schedules.” Do you agree? Explain.
Bata Corporation is one of the largest producers of footwear in the world. It specializes in both traditional leather footwear and modern non-leather footwear. The company has two separate producing
What is the tax affect if any asset is sold before the end of the recovery period?
Emily Adams wishes to purchase a €350,000 car. She has accumulated a €30,000 down payment, but she wishes to borrow €320,000 on a 10-year mortgage. For simplicity, assume annual mortgage
Land Rover wants to extend its product line further. For this purpose, it has approached the Bank of England. They agreed on an annual rate of 5%. 1. Suppose Land Rover agrees to repay £900
As per the contract with her modeling agency, Emma Watson is to receive $60,000 at the end of every year that she works for the agency and $350,000 on termination beyond the second year. If Emma
Jerry operates a cybercafé-cum photocopy center near a college in Tucson, Arizona. Due to the high demand for photocopying, he is considering installing a second photocopier. The new machine will
Kolkata Municipal Corporation (KMC) is considering the purchase of refuse collection vehicles (RCV). Each such vehicle will cost ₹700,000. It should save ₹140,000 in cash operating costs per
Talladega Lumber Mill of Georgia Pacific is considering the replacement of one of its feller bunchers with a net disposal value of $24,000 now and $8,000 five years from now. A new feller buncher is
The 2020 annual financial results of Apollo Diagnostics have revealed a decline in operating income. To overcome such a decline, an organization-wide cost control drive has been initiated by the
How will you treat a cost for which it is not possible to identify its base cause?
Whether a particular cost of a department is a direct cost or an indirect cost depends on the cost object.” Explain.
Why should fixed costs be allocated based on the capacity available rather than the actual usage?
Bitburger Brewery, Germany, allocates all central corporate overhead costs to its divisions. Some costs such as specified internal auditing and legal costs are identified on the basis of time spent.
How will you treat costs that are not related to a single cost driver?
A diverse operating environment necessitates the implementation of an ABC system.” Explain.
How can an organization lower its cost to serve the customers?
What is the “ability-to-bear” philosophy of cost allocation?
Many companies are allocating more nonproduction costs because of the increasing magnitude of these value-chain costs. One value-chain function that is receiving more attention is marketing. How
Rice husk, the coating that is left over after milling, is sold as livestock food. This livestock food is accounted for as a by-product. During the 2020 fiscal year, BDK Rice, Inc., paid
On January 24, 2020, Mr. Clark, the newly appointed cost analyst at Best Price, a discount store operating in Sydney, Australia, was asked to predict the receiving cost, an overhead cost associated
Manifestation, a leading fashion boutique in Singapore, is planning to use the services of a digital marketing solution provider to increase its online sales. It has shortlisted two digital marketing
Why is break-even analysis a misnomer?
How is spreadsheet-based CVP modeling beneficial in break-even analysis?
Marico Engineering is a leading producer of Megatron Tubes for microwave manufacturers and the replacement market, with their annual revenue reaching ₤2.5 billion. After reporting weak earnings and
Andrew Miller recently opened a new doughnut shop near Cornwall, England. He sells doughnuts in packets of four each. The average price of a doughnut box is $4.00 and each box costs Andrew an average
Why are fixed costs also called capacity costs?
Discretionary fixed costs are part of a company’s periodic planning process and hence considered fixed only for the relevant period.” Do you agree? Explain.
What is activity analysis?
What is engineering analysis? Account analysis?
High-low method makes inefficient use of information.” Do you agree? Explain.
Airgo Inc. is an international airline company headquartered in New Delhi, India. The company was incurring losses for several quarters until the first quarter of 2021. During the first quarter of
Predict total cost based on the cost behavior and expected cost driver activity in each of the following cases: 1. Lease rental fees for hydraulic cranes in a construction company, €5,000 per
In March 2020, Pure Breath, an air purifier manufacturer based in the United Kingdom, produced 5,500 purifiers at a cost of £115,000. In April 2020, the company produced 3,500 purifiers at a cost of
Imperial Law College, a private university in Bangladesh, is preparing a planned income statement for the academic year ending on July 31, 2021. The course fees for the past two years ending July 31
Name four examples of cost objects.
Products are the main cost objects. Departments are seldom cost objects.” Do you agree? Explain.
Why do companies assign all production costs and only production costs to products for external reporting purposes?
Osaka Electronics, headquartered in Japan, produces consumer durables. It has two departments— component manufacturing and assembling. For the April–June quarter, 2020, the following costs were
Distinguish between “tracing of costs” and “cost allocation.”
Distinguish between costs and expenses.
Why is there a direct-materials inventory account but no direct-labor inventory account on a manufacturing company’s balance sheet?
What is benchmarking? What do companies use it for? How do they determine benchmarks?
Mobility Inc., headquartered in Singapore, produces netbooks. The company manufactured and sold 3000 netbooks during January 2020. Selected data for the month are given below (in Singaporean Dollar,
LivPure Water Purifiers had the following data (in million ¥, the official currency of Japan) for December 2021.There were no beginning or ending inventories. Compute the (1) Variable manufacturing
Smart Storage Company manufactures and sells external hard disk storage devices. The company had the following data (in thousands) for the year 2021. There were no beginning or ending inventories.

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