Management Accounting 4th Edition Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey - Solutions

Variance analysis is only useful for organisations using a standard costing system. Discuss.
Should management be excited if all variances for the period are favourable?
Should management be upset if all variances for the period are unfavourable?
Why might the role of the accountant be referred to as one of a ‘detective’ in relation to variance analysis?
Explain what a favourable variance and an unfavourable variance mean in relation to revenue and costs.
Discuss the different types of budget variances that can be calculated.
Which item has the same value for both the static budget and the flexible budget?
Discuss the behavioural issues that need to be considered when establishing a standard cost.
Discuss the different methods that an organisation can use to determine standard costs.
How can the use of absorption costing lead managers to make dysfunctional decisions for the entity?
Why do the accounting standards require absorption costing for financial reporting?
Explain how the breakeven point would be affected under both absorption and variable costing.
The volume of manufacturing in a period has an effect on income calculated using absorption costing but has no effect on income calculated using variable costing. Explain.
Explain how income could fall even though the unit sales level rises.
Explain the similarities and differences among absorption and variable costing.
Initially Techtra bid for any type of electronic assembly work that became available (mostly subcontract work from other entities experiencing temporary capacity problems). But over the years the entity narrowed its focus. It now produces essentially three products, although minor variations within
Refer to the information provided in problem 8.23.Required(a) Prepare a process cost report using the FIFO method.(b) Explain how a standard cost report would differ from the FIFO report you just produced.(c) Under what circumstances would a standard cost report be preferable to a FIFO cost report?
Humphrey Manufacturing produces car parts and batteries. All direct materials are added at the beginning of production, and conversion costs are incurred evenly throughout production. The following production information is for the month of April:Required(a) Using the weighted average method,
Refer to the information presented in exercise 8.17.RequiredPrepare a process cost report under the FIFO method for December.Exercise 8.17.Fox and Sons is a toy maker that produces Flying Flingbats, a soft foam rubber boomerang. All direct materials are added at the beginning of production, and
Refer to the information in exercise 8.17.RequiredUsing the FIFO method, prepare a schedule calculating the cost per equivalent unit for December.Exercise 8.17.Fox and Sons is a toy maker that produces Flying Flingbats, a soft foam rubber boomerang. All direct materials are added at the beginning
Refer to the information in exercise 8.17.RequiredPrepare a process cost report under the weighted average method for December.Exercise 8.17.Fox and Sons is a toy maker that produces Flying Flingbats, a soft foam rubber boomerang. All direct materials are added at the beginning of production, and
Fox and Sons is a toy maker that produces Flying Flingbats, a soft foam rubber boomerang. All direct materials are added at the beginning of production, and conversion costs are incurred evenly throughout production. Conversion was 75 per cent complete for the 8000 units in WIP on 1 December and 50
Fine Fans mass-produces small electric fans in Hawley Beach for home use. All direct materials are added at the beginning of production, and conversion costs are incurred evenly throughout production. The following production information is for the month of October:Physical unitsStarted in October
Langley uses a job costing system. At the beginning of June, two orders were in process as follows:There was no inventory in finished goods on 1 June. During June, orders numbered 106 to 120 were put into process.Direct materials requirements amounted to $13 000, direct labour costs for the month
Jasper Company uses a job costing system. Overhead is allocated based on 120 per cent of direct labour cost. Last month’s transactions in the work in process account are shown here:Only one job, number 850, was still in process at the end of the month. Job 850 was charged with $9000 in overhead
One Glass Brewery estimates the following activity for the coming year:Expected production ............................................ 10 000 unitsExpected direct labour hours ............................. 10 000 hoursExpected manufacturing overhead .......................... $100 000Manufacturing
To what extent do the costs used to value inventories for external financial reporting support internal management decisions on issues such as whether to accept a special, one-off order or whether to outsource part or all of the production process?
List three examples of job cost records you would receive if you were building a new home.
Describe an inventoriable product cost.
(a) With reference to Merino Designs in self-study problem 2, demonstrate the meaning of the structural cost drivers’ scope, technology and experience.(b) Classify Merino Designs’ likely strategy as low cost or product differentiation. Explain.Self-study problem 2 Merino Designs The Merino
Point Piper prepares monthly cash budgets. Provided below is a set of relevant data extracted from existing reports, and the sub-budgets for the months of September and October.All sales are on credit. Collections from debtors normally have the following pattern: 60 per cent in the month of sale,
Ken Martin, manager of Lonnie Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task.• Projected cash balance at the end of November is $30 000.• Actual revenue for October and November
Organic Industries intends to start business on 1 January. Production plans for the first four months of operations are as follows.January ................ 20 000 unitsFebruary .............. 50 000 unitsMarch ................... 70 000 unitsApril ...................... 70 000 unitsEach unit
While preparing the cash budget for next year, the accountant at Mines Ltd. identified a $20 million shortfall. This shortfall was due to a capital expenditure item of the same value. The CEO has identified that the purchase must be made to ensure competitive advantage for the business. Identify
Discuss the sources of information used to prepare a cash budget for a manufacturing entity.
Blowervacs produces and sells leaf blowers. Production levels are high in the summer and beginning of autumn and then taper off through the winter. Sales are high in the autumn and early winter and then taper off in the spring. Explain why preparing a cash budget might be particularly important for
What methods do organisations use to minimise budgetary slack?
How can budgeting assist an entity to efficiently use its human resources?
How are budgets related to organisational strategies?
The Fairyland Children’s Centre is a community-based, not-for-profit childcare service. A committee of management oversees its operations, with the elected members being parents of children attending the centre. The centre is licensed to operate with 50 effective full-time places. Due to the
Refer to the Paige’s Fashion House case in self-study problem 1.Paige ensures that members of her staff regularly attend international fashion shows (for design ideas) as well as become involved in Australian fashion shows. While these are costly events to attend, Paige considers it a necessary
The Dancing Goat is a small coffee operation with ten cafes located around Melbourne. Each has a manager and up to five full-time employees to cover the 7.30 am to 4.30 pm, Monday to Saturday opening hours. Logan, the owner, employs a total of 60 full-time employees and three part-time employees
Green Building Group specialises in a range of construction services including design services, shop and office fitouts, and recently developed environmental consulting services for architects and local government. Summarised statement of profit or loss and key performance metrics are provided
‘I’m really not sure our information systems are as well placed as they could be to help us drive our performance. The industry data and my own observations suggest we need to do better in this regard. I really want to be ready when the market and the economy recovers and make sure we are doing
Cowmilka is a dairy products producer. Its logistics cost centre has 65 employees and a fleet of 25 milk tankers. It is a cross-functional cost centre with administrative staff (customer service and order processors), mechanics and tanker drivers. Tanker drivers collect milk daily from farmers and
The Organic Corn Company processes and distributes corn packed in 500-gram plastic bags that are sold to supermarkets for 50 cents each in boxes of 100 bags. The most recent statement of profit or loss and key financial metrics of the Organic Corn Company are provided below.Management at Organic
Data Processors provides credit card services for the banking industry. It is preparing its budget for 2020 and, as it has been using activity-based costing, it intends to develop an activity-based budget for 2020. The table below provides the actual cost driver rate for 2019, and the expected
The manager of the HR department of Nancy Accountants has been asked to prepare her annual budget on a zero-based budgeting basis.RequiredOutline why this request for a zero-based budget may have been made.
Discuss how a hospital could use activity-based budgeting to assist with planning for the coming year.
Trinity Records is a company that finds and signs a new artist, develops a marketing strategy, records the music, and distributes the music to retailers. Data for the CD division of Trinity Records, which distributes CDs to large retailers, are shown in the following table.The budget, set at the
Ange Pala, the chief financial officer of a national tourist company, has become increasingly dissatisfied with the current budget process in the organisation. Much of her dissatisfaction relates to the amount of time and resources consumed in the budget process; the relatively poor efforts at
At a recent management meeting looking at the entity’s achievements against its strategic objectives, an operational manager was heard making the following comment: ‘I look after operations on a dayto-day basis. I have the operational budget for the coming year. I don’t need to be concerned
Stevan Donald, the marketing manager for Organic Brewing Company, has projected a 20 per cent increase in sales of hop beers next year.RequiredComment on how this increase in sales will impact on profit, assets and cash flow.
Jordy is the CEO of a scaffolding construction company. He is about to begin preparing the budget for the coming financial year for the entire organisation. Last year he was disappointed by the animosity he received from his divisional managers. They were not happy with their individual budgeted
Explain how zero-based budgeting assists with planning in discretionary cost centres.
Explain how program budgeting assists with planning in discretionary cost centres.
Classify the following cost centres as more likely to be engineered cost centres or discretionary cost centres.• R&D department• HR department• Manufacturing plant
Why do proponents of the Beyond Budgeting movement recommend abandoning traditional budgets?
Outline the key components of Beyond Budgeting.
Explain why the budgeting process might not necessarily be successfully implemented in an organisation.
Briefly describe the attributes of activity-based and kaizen budgeting.
Explain the key concepts of zero-based budgeting.
Explain the key concepts of program budgeting.
Distinguish between a discretionary cost centre and an engineered cost centre.
Explain why it is important that an organisation’s budget be linked to strategy.
How do organisations identify the costs of a cost object?
Yummy Yoghurt sells yoghurt cones in a variety of natural flavours. Data for a recent month follow:Required(a) Categorise each cost as fixed or variable.(b) Create a cost function. Revenue $9 000 Cost of ingredients $4 500 Rent 1000 Store attendant salary 2300 7800 Profit $1 200
In the planning or strategic budgeting process, explain how a sales revenue budget can be determined.
Outline the meaning of the profit planning or strategic budgeting process.
All-Day Lolly Company is a wholesale distributor of confectionery. The entity services grocery and convenience stores in the metropolitan area. Small but steady growth in sales has been achieved by the All-Day Lolly Company over the past few years, but confectionery prices also have been
Janna Processing is a single-product entity, and provides the summary data shown relating to its product for the current year.Selling price per unit .................................................................... $ 50Variable manufacturing costs
SmallScale Publishing are considering offering eBooks. Market analysis has been undertaken and the breakdown of sales together with financial information follows. Due to the change in business model, fixed costs are expected to increase to $1 000 000.Required(a) Calculate the breakeven in total
SmallScale Publishing has now been operating for a couple of years. Sales have been growing and management have been excited about business performance. Currently the business sells two very popular books that are gaining international recognition; ‘New to Business’, and ‘How to Make Yourself
SmallScale Publishing has just commenced business and will sell only one title, ‘New to Business’. Market analysis has indicated that sales for the next 6 months should be 5 000 copies. The accountant has provided information that shows variable costs are $100 per title with fixed costs
Identify an industry that would have a high level of operating leverage. Briefly comment on your selection.
Give an example of how a business can reduce variable costs by increasing fixed costs.
How do different cost structures affect the breakeven point and operating leverage?
An organisation experiences a 20 per cent increase in pre-tax profits when revenues increase 20 per cent. Assuming linearity, what do you know about the organisation’s cost function?
You are an accountant for the Department of Defence. The government is considering a change of rules for the allocation of research and development costs. The government is asking contractors to submit a list of potential cost pools and allocation bases for activities within research and
Food on Wheels is a charitable organisation that provides meals for low-income individuals who are unable to leave their homes. To support its services, the organisation solicits contributions from individuals and businesses. Food on Wheels needs to submit financial statements to its major
Wright Medical Centre has identified the following activities and cost drivers for the coming financial year.RequiredCalculate the activity cost rate for each activity. Total expected use Activity Cost Cost driver of cost driver $ 600000 $5 000 000 Patient admission Number of patients 10000
Venture Buses operates throughout the south-eastern suburbs of Melbourne, with its depot located in Cheltenham. Every day, fuel is delivered and stored in tanks located in the depot. This fuel is used by all the buses and administration vehicles. The accountant has been requested to develop a
For each of the following activities undertaken to bake pastries and cakes, identify a suitable cost driver to allocate costs.(a) Mixing ingredients(b) Baking pastries and cakes(c) Decorating cakes(d) Packing pastries and cakes on trays(e) Sales(f) Dispatch to customers
During a recent management meeting at Sunset Consulting Services, a team member questioned why the costing system had multiple indirect cost pools given it would be easier just to have one. Provide a brief response to explain why the business has adopted multiple indirect costs pools.
Refer to the Partridge Insurance example (comprehensive example 1) in the chapter. Explain how the support departments can be classified as both cost objects and cost pools in the costing system.
Outline the key steps in a costing framework.
Explain how cost data is sourced in a costing framework.
What is a cost object? Give three examples.
For what purposes do organisations need cost information?
Mernda Health Care Centre recently began to offer day surgery procedures. The Centre was not experienced in the costing of such services and, as a temporary measure, the subsidised patientday charge was set at $100. This charge was similar to other providers in the region. Management decided to
Wentworth Ltd sold 100 000 1 litre bottles of mineral water last year at $4 per unit and made a profit of $50 000. This year the costs for Wentworth Ltd remained the same, it sold 120 000 units at the same price, and made a profit of $80 000.Required(a) Determine the total fixed costs per year and
The Elder Clinic, a not-for-profit entity, provides limited medical services to low-income elderly patients. The manager’s summary report for the past four months of operations is reproduced here.The clinic receives an operating subsidy from the city, but unfortunately, the operating loss that
The following is the description of a cost: total fixed costs are $50 000 per month and the variable cost per unit is $10 when production is under 1000 units. The variable cost drops to $9 per unit after the first 1000 units are produced.Required(a) Write the algebraic expression of the cost
Express Lunch operates a small food van that sells a variety of sandwiches and beverages. Total fixed costs are $20 000 per month. Last month total variable costs were $8000 when total sales were$32 000.Required(a) Write out the algebraic expression for the cost function.(b) What assumptions do we
(a) Total fixed costs are $10 000 per week and the variable cost per unit is $8. Write the algebraic expression for the cost function and graph it. What are the assumptions of the cost function?(b) Total fixed costs are $25 000 per week up to 2000 units a week and then jump to $35 000 per week. The
Bridges and Roads is an entity engaged in road construction. Some selected items from its chart of accounts are listed below.RequiredFor each account, indicate whether the account represents a fixed, variable or mixed cost for the operation of road construction activity. If mixed, indicate whether
Why might some have trouble classifying costs as fixed or variable?
List two examples of non-linear cost functions and describe a method of developing a cost function for each one.
You are about to start a coffee shop business. What do you understand by ‘cost behavior’? Explain how your accountants could help you in building an understanding of cost behavior. Identify the likely key costs and classify each as fixed or variable.
You have been asked to provide the managing director with an approximate cost function for the entity’s activities, and it must be done by this afternoon. Some members of the board of directors want to understand why performance varies so much across store locations. They have asked for a quick

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Management Accounting 4th Edition Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey - Solutions

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