Questions and Answers of Management Accounting 4th edition

Define, and explain the use of, return on investment as a measure of divisional performance.
Define, and explain the use of, residual income as a measure of divisional performance.
Explain the circumstances in which return on investment is preferable as a measure of divisional performance.
Explain the circumstances in which residual income is preferable as a measure of divisional performance.
Explain what is meant by a ‘transfer price’.
Explain the methods of transfer pricing.
Explain what is meant by ‘economic value added’.
What is zero-based budgeting?
Define current assets and give three examples.
Define current liabilities and give three examples.
Explain how the stockholding period is calculated.
Define working capital.
What have researchers found about the use of EVA bonus schemes?
Explain why companies regard economic value added as a useful tool for assessing managerial performance.
What have researchers found about the use of EVA?
Explain how the customers collection period is calculated.
Explain how the suppliers payment period is calculated.
Explain what is meant by the accrual of liabilities.
Describe the working capital cycle.
Explain how the current ratio is calculated.
Explain how the liquid ratio is calculated.
Explain how the working capital cycle is calculated.
Explain the meaning of overtrading.
What is the just-in-time approach to purchasing inventory?
What have researchers found about the length of the working capital cycle in practice?
What have researchers found about the idea that different types of business have different types of working capital?
What are bankers looking for when they evaluate working capital?
What kinds of organisation are likely to use JIT production?
Define ‘business strategy’.
How do the managers of a business maintain its competitive position ?
What have researchers found about the definition of what strategic management accounting means?
How does target costing help maintain competitive advantage?
What is customer profitability analysis?
How does life-cycle costing help maintain competitive advantage?
How does lean accounting help maintain competitive advantage?
How does value chain analysis help maintain competitive advantage?
How does activity-based management develop out of activity-based costing?
What is e-business?
What is e-commerce?
What are the costs of holding inventory?
What are the costs of ordering inventory?
How is the economic order quantity calculated?
Describe the main contents of a business plan for presenting to a bank providing finance for a small business.
What have researchers found about the frequency of review of working capital in small businesses?
What are the disadvantages of divisionalisation?
What are the advantages of divisionalisation?
What is a division?
What have researchers described as the factors required for a successful performance management system?
What have researchers found about the benefits of using a Balanced Scorecard?
What is the ‘Six Sigma’ approach to performance measurement?
Define a ‘non-controllable cost’.
Define ‘feed forward control’.
How are fixed overhead cost variances calculated?
How are variable overhead cost variances calculated?
How are sales margin variances calculated?
What have researchers found about the range of methods of overhead absorption used in practice?
Look at Figure 7.1 and follow the flow of transactions down the diagram. Then use the diagram to explain how costs are collected in the profit and loss account. Figure 7.1 Diagrammatic representation
Purchasing manager, agent, and buyer career overview and job description Companies hire purchasing managers, buyers, and purchasing agents to find the best merchandise at the lowest possible purchase
Look at some item in the room where you are sitting as you read this chapter (perhaps a table or a desk or a window). What words would you use to describe the cost of materials and labour used in
The following information was recorded during the month of May by the central warehouse of Stores Co. The warehouse issues goods to retail outlets owned by Stores Co. to allow the retail outlets to
You are the newly appointed secretary of a primary school employing 20 teachers and having 300 pupils. The head teacher has asked you to design a system for ordering books and stationery and
The following extract is from an article discussing the problems faced by General Motors in 2008 and compares the full cost of labour with the wages paid.Management and the union are under pressure
You have been employed as a storekeeper at a superstore selling vehicle accessories.Write down the main procedures you would carry out to ensure that:l the materials in store are held securely;l the
Explain which document you would expect to find in the records of Chocolate Ltd as evidence of each of the following transactions or events which took place during the month of June:(a) Evidence that
You have been asked to plan the labour force for a job of work that will require the equivalent of five skilled workers for a period of 30 days. Within that period there is an expectation of 25 days
The following extract is taken from an editor’s introduction to consultation on the future direction of a regional newspaper.So what could a new Birmingham Post look like, one to weather the
You are employed in the personnel department of a large organisation. Explain how the records kept by the personnel department would be useful to the accounting department in preparing the monthly
The Electric Wiring Company employs staff to repair electrical equipment in customers’ homes under maintenance contracts. Each job of work is the cost unit for which costs are recorded and
How are direct and indirect materials costs distinguished?
How are fixed and variable materials costs distinguished?
What is meant by the term ‘LIFO’, when used in deciding on the cost price of goods issued to production?
What types of pay scheme may be found?
How are direct and indirect labour costs distinguished?
How are fixed and variable labour costs distinguished?
What conditions may help to make outsourcing of labour successful?
The following advice is offered to businesses that wish to provide coffee as part of their customer service.The cost of a cup of coffee consists of more than the ingredients and the coffee machine.
Think about a journey you have made on public transport. What are the labour costs of operating one journey? What overhead costs are incurred by the organisation providing the transport? How might
For each of your answers to the previous question, say whether the cost is a fixed cost or a variable cost.Previous QuestionGive three examples of production overheads in each of the following: (a) a
A company manufactures golf bags. Golf bags have the following manufacturing costs:Required Prepare a statement of total product cost for a batch of 5,000 golf bags which shows prime cost and
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
Return to the start of Exhibit 4.1 and try to work the example for yourself. It is very important for later chapters that you understand the purpose of Exhibit 4.1 and the method of calculation used.
The following extract is taken from a website on which the UK government explains how actvitybased costing can help estimate the costs of providing a police service.Activity-based costing (ABC) is a
The following extract continues the law and order’ theme of Real world case 4.2. It explains the use of activity based costing in the Crown Prosecution Service, where decisions are taken on whether
A private college has two teaching departments: languages and science. The college also has a library and a staff refectory, both of which provide services to the teaching departments. The library
Imagine you are the owner of a business which rents ice-cream stalls from the local council. You employ persons to run each stall. Write down a list of the costs you would expect to incur. Write
(a) The following information relates to the budget for the year ahead.The following table shows the total budgeted activities of the company (it manufactures many different types of products) and
A company operates a standard absorption costing system and absorbs fixed production overheads based on machine hours. The budgeted fixed production overheads for the company for the previous year
Compare the relative merits of calculating overhead costs per unit of products using each of the following methods:(a) Cost per direct labour hour.(b) Cost per unit of output.(c) Cost per direct
Explain the meaning of overhead cost recovery.
What are the benefits and what are the possible problems of using predetermined overhead cost rates?
Explain what is meant by under-recovery and over-recovery of overhead cost.
What are the problems of using blanket overhead cost rates?
What is meant by ‘cost driver’?
What are the four stages in establishing an activity-based costing system?
What is the nature of an activity?
What are the main points of difference between traditional overhead cost allocation and activity-based costing?
What are the benefits claimed for activity-based costing?
How have researchers used a case study in long-term observation of a change to ABC?
How can an ABC framework help in modelling the costs of a public service?
Bookcases Ltd produces packs of book shelves for self-assembly. The budgeted selling price and costs are as follows:The fixed production overhead cost for one month is budgeted as £40,000. The

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