Questions and Answers of Management Accounting Information

In the National Health Service (NHS) in England, Primary Care Trusts (PCTs) are allocated funds by the Department of Health.The PCTs are responsible for the first line of patient care (e.g. when
How do budgets help with motivation? How might budgets discourage motivation.
Why is it considered important to have employees participate in preparation of budgets section.
What kind of feedback is needed on performance against budget.
How does negative feedback differ from positive feedback.
What are the problems for management in creating budgets that affect groups of employees.
What is budget slack? What are the problems of having (a) too much and (b) too little budget slack.
How may the use of budgets be affected by the ‘politics’ of an organisation.
How are (a) variable costs and (b) fixed costs treated in a flexible budget.
How are adverse and favourable variances calculated.
What is a line item budget.
What is an incremental budget.
What is zero-based budgeting.
What is an output-based budget (programme budget).
What are the arguments against periodic preparation of budgets.
What have researchers found in surveying opinions on the usefulness of budgeting.
What have researchers found about the reasons for budget preparation.
What have researchers found about the support for traditional budgets.
What have researchers found about the links between budgets and job satisfaction.
When the financial controller of Bakers Company set the budget for the year ahead, it was expected that monthly output of cake packages would be 12,000 units. In March the output was increased to
The financial controller of the local town council set a budget for street cleaning in one estate as shown in the first column below. In the month of April the cleaning supervisor cut back on 20
Write a short essay (250–300 words) on the following subject: ‘What are the arguments for and against using budgets for planning and control?’
Write a short essay (250–300 words) on the following subject: ‘Budgeting is a technical accounting exercise with no behavioural aspects.’
Seats Ltd (‘Seats’) manufactures seats for installation in buses. It obtains its raw materials from Comfort Ltd (‘Comfort’), a wholly owned subsidiary which sells only to Seats. The raw
You have been appointed financial controller of Constructabus plc, a coach building company, which specialises in two types of bus, a standard double-deck vehicle and a luxury coach model.The chassis
Set out below is a selection of advertisements for posts in management accounting. Read the text of the advertisement and relate the specified requirements to the three management accounting roles
This case study describes the role of the management accountant. Read it now, but only attempt the discussion points after you have finished studying the chapter.The day of the ‘bean counter’ has
Today’s Focus Farm host, Sean Cambridge, who runs a mixed beef and sheep enterprise near Fair Head, believes that livestock farmers must have a firm knowledge of their cost base before they can
The Chartered Institute of Public Finance and Accounting (CIPFA) is the leading accountancy body for public services, whether in the public or private sectors. Many existing members occupy positions
The following extract is describing the problems of a company which manufactures high quality glass and china pottery.Waterford Wedgwood, the luxury goods company, has warned it may have to cut jobs
In rural Wales it has been estimated that walkers spend £55m a year, which creates 3,000 full- and part-time jobs. Mountaineering in area such as Snowdonia adds £22m in terms of annual spending and
This case study shows a typical situation in which management accounting can be helpful. Read the case study now, but only attempt the discussion points after you have finished studying the
Milk producers have been underestimating the real costs of production by more than 20%, according to an industry working party representing production and recording interests.Initiated by the Royal
Diageo, the British drinks group, looked at 19 cities when planning to establish a European business service centre. It chose Budapest for its low costs, good language skills, convenient location and
The acquisition of the international yeast and bakers’ ingredients business from Burns Philip was completed after the year end. The bakers’yeast business is market leader in North America, Latin
For years, the plumbers, painters, carpenters and maintenance people who worked for the Texas General Services Commission (GSC) shuttled back and forth between the department’s administration
This text book follows the common practice of describing indirect costs as overhead costs.The following extract from the NHS costing manual gives separate definitions to indirect costs and overhead
‘Managers evaluating capital expenditure projects only need to consider social and environmental concerns to the extent that they affect the firm’s cash flows.’ Do you agree? Discuss.
In an investment proposal involving new technology, the cash flows related to the proposed investment are sometimes compared to the wrong baseline. Explain this statement.
Give two examples of cash flows relevant to capital expenditure decisions that are not included in a firm’s income statement. Explain why these cash flows are omitted from the income statement.
Explain how to calculate the after-tax amount of an increase in sales and an increase in expenses in capital expenditure analysis.
Razzle Ltd is developing a new clothes dryer, Dry Master, that it plans to sell to coin-operated laundries. Currently, the market leader is a product called DryWell, which is sold by a competitor.
Explain the meaning of the following terms: constraints, decision variables, feasible region and objective function. Explain their relevance to product mix decisions.
Explain some ways that a markup can be determined when using cost-plus pricing.
In the ‘Real life’ titled ‘Ticket pricing in the Australian Football League’ in the section ‘Pricing strategies’, the AFL’s variable ticket pricing strategy was discussed. Explain why
What are unitised fixed costs, and how can these cause errors in decision making?
‘Classifying an output as a product or as a by-product has implications for the allocation of joint production costs.’ Explain this statement, drawing on one of the examples provided in the
Briefly describe the appropriate approach for making a decision about adding or deleting a department. Is this a tactical or long term decision? Explain your answer.
Using examples from the first ‘Real life’ in ‘Relevant information for some common decisions’, outline some of the advantages and disadvantages of outsourcing. Can you think of any other
List the seven steps in the decision-making process. Apply this framework to the decision about whether or not to replace your Apple iPhone 6S.
‘The obvious strategy to increase profitability is to focus on cost structure and ensure high operating leverage. I just don’t understand why more firms don’t go this way.’ Do you agree?
Activity-based costing can be used to increase the accuracy of CVP analysis. Briefly explain how.
Suppose the fixed costs of a sporting organisation, like the Melbourne Cricket Club, increase. What types of fixed costs might these be? How will this change the break-even point, measured as the
The second ‘Real life’ in ‘Corporate sustainability’ indicates that adoption rates of integrated reporting are low. What are some of the reasons for this? Discuss.
Pickwick Paper Company’s Mount Gambier plant manufactures paperboard. Its production process involves the following operations:(a) Harvested trees arrive by rail in the woodyard and are stored
Integral Data Dynamics Ltd manufactures components for personal computers. It is planning to develop a new Blu-ray burner, BRII, to improve the quality of data retrieval. On the basis of its current
Explain the possible interactions between the four categories of quality costs.
Describe the four types of quality costs and provide two examples for each type.
What is kaizen costing? How does it relate to target costing?
What is business process re-engineering? How does it differ from process improvement?
Explain the role of activity-based performance measures in reducing costs.
The ‘Real life’ in ‘Managing quality’ outlines techniques used to manage costs and quality at the Flinders Medical Centre. Explain how spare capacity might arise as a result of reducing
What are value-added activities and non-value-added activities? Give three examples of each for an accounting firm.
Dazzle Lighting Corporation manufactures a wide range of lighting fixtures for the housing industry. The company recently adopted backflush costing. The following events occurred in June:(a) Raw
Explain how activity-based approaches can be used to calculate customer profitability.
Comment on this statement: ‘JIT doesn’t make sense. Companies that implement JIT are putting themselves in danger of downtime and stock outs’.
Using your own words, explain the meaning of supply chain management (SCM), and why some organisations see SCM as valuable.
Explain why improved performance in customer service and wait time for a fast food chain may not necessarily flow through to improved financial returns.
Review the second ‘Real life’ in ‘The balanced scorecard’. Explain some of the barriers that may prevent some not-for-profit organisations from adopting an SPMS, such as the balanced
What problems and challenges can contribute to a poorly functioning balanced scorecard?
The balanced scorecard is often described as an important tool for translating strategy into action. Explain how the balance scorecard fulfils this role.
PlumbWare Corporation has three divisions. The home plumbing division manufactures copper pipes for tradespersons and home renovators. These areas of the economy are in decline. The home plumbing
How can using ROI as a performance measure for investment centres lead to bad decision making? What steps can be taken to mitigate this effect?
When is it more appropriate to use cost-based transfer prices rather than market-based transfer prices?
What are shared services? What benefits can result from creating shared services units?
Explain the differences between a cost centre, revenue centre, profit centre and an investment centre and explain what type of financial performance measure is suitable for the evaluation of each
What benefits potentially accrue to organisations that decentralise? What negative consequences can arise from decentralisation?
Stephen Ltd is engaged in aerial spraying of vegetables. Operating costs are difficult to control, so standard costs and standard cost variances are reported. The following standards were developed
Explain how and why standard costs are used in product costing.
The ‘Real life’ titled ‘Cost pressures and variance analysis in hospitals’ in the section ‘Calculating standard cost variances’ explains how labour cost variances are used in a hospital.
What is the meaning of the direct material price variance? What are some possible causes?
Describe how a law firm might use standard costs.
Describe the two methods for setting standards and explain why you would choose to use one approach over the other.
Provide an example that demonstrates how the three parts of a control system work to achieve control. (Do not use a thermostat, a budget or standard costing.)
South Coast University is preparing its budget for the upcoming academic year. This is a specialised private university that charges fees for all degree courses. Currently, 15 000 students are
What is program budgeting? Based on the ‘Real Life’ titled ‘The benefits of program budgeting’ in the section ‘Program budgeting’, identify some of the advantages of program budgeting.
Explain the advantages of zero-base budgeting.
Explain whether setting more-challenging budget targets will always result in improved performance.
Explain what is meant by top-down budgeting and bottom-up budgeting. Explain whether both practices can be used in the one budgeting system.
Describe the typical role of the accountant in the budgeting process.
A manager of a market research company made the following comment:"The whole budgeting process is a waste of time. I would rather my managers and finance staff focus on improving the business than
Give three examples of how a university student club could use a budget for planning purposes.
Distinguish between operating budgets and financial budgets. Explain this within the context of formulating the annual budget for a university.
In the ‘Real Life’ titled ‘Budgeting for major events: the Olympic Games’ in the section ‘Budgeting at AVJennings Ltd’, the difficulty of budgeting for the Olympic Games is outlined.
Explain how economic trends and changing consumer preferences may impact on the sales forecasting of the Australian Ballet.
Explain why many companies believe that cash flow budgeting is important.
Draw flowcharts, similar to those in Exhibits 9.1 and 9.2 , to represent the budgeting process used by a fashion retailer.Exhibit 9.1Exhibit 9.2 Strategic planning Budget assumptions Sales budget
Explain how the budgeting process can be used to achieve accountability within a responsibility accounting framework.
In the ‘Real Life’ titled ‘“Beyond budgeting” and other budget adaptations’ in the section ‘Responsibility accounting’, the Beyond Budgeting movement is mentioned. Search the internet
Explain how a budget can be used to evaluate a manager’s performance and provide incentives.

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