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Management Accounting 4th Edition Pauline Weetman - Solutions
The purchasing manager of a manufacturing business knows that its total production requirement for raw materials will be 7,200 units per month. Each unit has a price of £10. The cost of holding stocks of raw materials is £3 per unit per month. The cost of ordering is £9 per order.The purchasing
This news item shows how strategic management is helped by surveys that evaluate relative competition.Research and Markets (http://www.researchandmarkets.com/reports/c11963) has announced the addition of Chocolate Confectionery Industry Insights: Future Profit Opportunities And Growth Indicators to
Supply chain analysis is part of value chain analysis. This news item indicates the types of businesses that feel they need to know more about their supply chains.Six leading consumer products companies have joined forces to conduct an in-depth review of the supply chain best practices and metrics
ACT Doorland was founded in 1957 as a small concern whose core business was the supply and installation of garage doors. Since then it has diversified its interests and expanded to become Canberra’s largest speciality door company.ACT Doorland is currently involved with the supply, service and
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.
The Department of Health publishes guidance to those recording the costs of health service activities. This is an extract from the Guidance manual.Costing The principles for costing in the NHS are set out in chapter 2 of the NHS Costing Manual.The fundamental principle is that reference costs
This extract from a newspaper article comments on comparisons between the public sector National Health Service and the private sector provision of healthcare, quoting the British United Provident Association (BUPA) which owns private hospitals that charge fees to patients.Looking at Tory policies
The Guidance Manual of the NHS, quoted in Real world case 5.1, contains a great deal of detail on how to calculate full absorption costs of activities. This section explains the calculation of the cost of each outpatient’s attendance at a clinic providing mental health services, where
What is a job-costing system.
How does a cost account in management accounting relate to an expense account in financial accounting.
What types of transactions are recorded as debit entries in ledger accounts for costs.
What types of transactions are recorded as credit entries in ledger accounts for costs.
Why is there no definitive list of ledger account headings for management accounting purposes.
State the debit and credit entries for each of the following types of transaction:(a) Acquisition of inventory of materials.(b) Return of inventory to a supplier.(c) Payment of wages.(d) Payment for production overhead costs.
State the debit and credit entries for each of the following types of transaction:(a) transfer of inventory of materials to be used as part of work-in-progress.(b) recognition that labour cost has been incurred in creating work-in-progress.(c) transfer of production overhead costs to
State the debit and credit entries for each of the following types of transaction:(a) transfer of completed work-in-progress to finished goods inventory.(b) recognition that finished goods inventory has become part of cost of goods sold when a sale takes place.
What is the purpose of the work-in-progress account and what types of entries would you expect to see there.
Why is the use of control accounts essential in both management accounting and financial accounting.
Why is profit calculated on incomplete contracts, rather than waiting until the contract is completed.
How is the profit on an incomplete contract calculated.
How are payments in advance from the customer recorded.
How are costs of a contract recorded during an accounting period.
How are costs remaining at the end of the accounting period carried forward.
What information is provided in a statement of contract profit.
What is the purpose of a contract ledger account and what types of entry would you expect to see there.
In a job-costing system, the following list of transactions for a month is to be entered in the relevant ledger accounts. In which ledger accounts would each of these figures be located? Purchases of raw materials Wages paid to production employees Salary of personnel manager Sales Heat and light
In a job-costing system, the production department orders 20 components from store at a cost of £4 each, to be used on job 36. Explain how this transaction will be recorded in a debit and credit system where control accounts are in operation.
In a job-costing system, an employee (A Jones) receives a weekly wage of £600. In week 29 this employee’s time has been spent two-thirds on job 61 and one-third on job 62. Explain how this transaction will be recorded in a debit and credit system where control accounts are in operation.
On 16 June, job 94 is finished at a total cost of £3,500. The job consisted of printing brochures for a supermarket advertising campaign. Explain how this transaction will be recorded in a debit and credit system where control accounts are in operation and the printing of brochures is one of three
The following transactions relate to a dairy, converting milk to cheese, for the month of May.Prepare ledger accounts which record the transactions. 1 May 1 May 2 May 3 May 4 May 14 May 14 May 16 May 28 May 28 May 31 May 31 May 31 May Bought 600 drums of milk from supplier on credit, invoiced price
Write journal entries for the following transactions:Transfer production overhead cost of £27,000 to work-in-progress account.Transfer work-in-progress of £12,000 to finished goods inventory account.Pay £1,500 cash for production overhead costs.Return to a supplier items of inventory having a
Set out below are three job cost records. Prepare the work-in-progress control account in the general ledger which represents the total of these three separate records. Month of April Direct materials used Direct labour worked Allocation of production overheads: Rent Rates Electricity Indirect
The following statement shows a note of information relating to materials inventory during the month of May. Prepare the materials inventory control account in the general ledger. 1 May 2 May 5 May 31 May 31 May 31 May Purchased direct materials on credit, for various jobs: Job 901 Job 902 Job 903
Bridge Builders Ltd undertook a contract to build a pedestrian footbridge for a fixed price of£400,000 during the period from May Year 1 to July Year 2. This table sets out transactions up to the company’s year end in December, Year 1.Required:(a) Prepare relevant ledger account records.(b)
Builders Ltd has undertaken to refurbish the Black Swan Hotel. The contract price was agreed at £480,000 based on estimated total costs of £440,000. The contract work began on 1 January Year 8. The accounting year of Builders Ltd ended on 31 August Year 8 at which date the contract was not
This extract is taken from a case study of a company making windows and side shutters.The company has started using a product from Best Software, a company in the Sage group.‘Our office is so much more relaxed these days,’ smiles Pam. ‘Now when a salesperson brings in a contract, I record the
Bell Microsystems Limited Established in 1997, Bell Microsystems is an IT infrastructure solution provider, based in Portsmouth. Bell Microsystems use several Sage products including Sage Line 50, Forecasting, Personnel and Job Costing.Amy said: ‘We chose Sage products because they are a well
The following features are advertised by SAGE as being available within its ‘job costing’ software module:l Define and track all cost elements of every job.With up to 10 analysis codes you can accurately track and analyse your costs.l Split costs by their constitution component, e.g.labour,
Which industries might need to use the techniques of process costing.
What are the steps to follow in calculating the cost of finished goods and the value of closing work-in-progress in respect of a reporting period.
Where there is work-in-progress at the start of any reporting period, how is this accounted for using the weighted average approach.
Why may it be necessary to account for materials and conversion costs separately.
What is the difference between a joint product and a by-product.
How may joint costs be allocated to joint products using a basis of physical measures.
How may joint costs be allocated to joint products using a basis of relative sales value.
How is relative sales value at the point of separation determined when there are further processing costs of each joint product after the separation point.
What is the accounting treatment of cash collected from the sale of a by-product.
Why should care be taken when using process costing information for decision making in respect of joint products.
Why is it necessary to use incremental revenues and costs in making a decision on whether to sell or to process further in the case of joint products.
What have researchers found about the potential for linking process costs, standard costs and activity-based costs.
What have researchers found about the impact of joint cost problems in a not-for-profit situation.
Work-in-progress at the end of the month amounts to 2,000 physical units. They are all 40 per cent complete. What are the equivalent units of production? The cost of production is £3 per equivalent unit. What is the value of work-in-progress?
In process X there are 12,000 units completely finished during the month and 3,000 units of work-in-progress. The work-in-progress is 60 per cent complete for materials and 20 per cent complete for conversion costs (labour and overhead). What are the equivalent units of production for the
XYZ Ltd processes and purifies a basic chemical which is then broken down by reaction to give three separate products. Explain the approaches to joint cost allocation using the following information:Joint costs incurred up to the split-off point are £2,000. Product ABC Units produced 3,000 1,000
In a continuous flow process, the following information was collected in relation to production during the month of May:Opening work-in-progress was valued at cost of £42,000. Costs incurred during the month were £140,000.Required Calculate the value of finished output and work-in-progress using
Clay Products Ltd produces handmade decorative vases. A process costing system is used. All materials are introduced at the start of the process. Labour costs are incurred uniformly throughout the production process.The following information is available for the month of July:The value of
Refinery Ltd buys crude oil which is refined, producing liquefied gas, oil and grease. The cost of crude oil refined in the past year was £105,000 and the refining department incurred processing costs of £45,000. The output and sales for the three products during that year were as follows:The
A product is manufactured in a continuous process carried on successively in two departments, Assembly and Finishing. In the production process, materials are added to the product in each department without increasing the number of units produced.For July Year 2 the production records contain the
Chemicals Ltd owns a supply of North Sea gas liquids, and is developing its downstream activities. It is producing two main products, propane and butane, and there is a by-product, arcone. There are four manufacturing processes involved where the gas passes through Modules 1, 2, 3 and 4.Production
British Sugar, part of Associated British Foods, provides sugar for the top brand names in sugar confectionery, chocolate confectionery, soft drinks and preserves, etc. The company has six factories in the UK, with each one split between a ‘beet end’ and a ‘sugar end’.Typically, a factory
Flavor-charged water is integral to the SWISS WATER® Process, which starts with top quality green beans and works as follows.First, the beans are cleaned and soaked in water partially saturated with coffee flavor solids, in preparation for caffeine extraction.Next, the beans are immersed in the
Seaweeds are used in many maritime countries as a source of food, for industrial applications and as a fertiliser. The major utilisation of these plants as food is in Asia, where seaweed cultivation has become a major industry . . .Industrial utilisation is at present largely confined to extraction
Flying Brands is a company which delivers goods to customers.The business began some years ago by flying flowers from the Channel Islands to the UK mainland.The Group has continued to drive profits forward with profit before tax up by 24%, and profit before tax and before all exceptional items up
Royal Dutch/Shell Group discusses here its profit margins in the Chemical unit.. . . earnings in 2003 were $185 million lower.Sales volumes, including traded products, increased by 19% from a year ago benefiting from capacity additions and volumes from new units. However, there was a decline in
Delta Air Lines is an airline carrier based in Atlanta, USA. Delta’s hopes of survival rest on a series of initiatives: a new pilot contract; the simplification of its fares; and ‘Operation Clockwork’, an attempt to reduce the costs of running a ‘hub and spoke’ operation to get close to
You are employed as the accountant for Cars Ltd, a local garage which has a bodyshop. The bodyshop manager, Mr George, has contacted you saying that one of the company’s present customers has offered the company a one-year contract for additional work. The customer requires a discount of 10% to
From April 2005 the Office of Gas and Electricity Markets (Ofgem) in the UK has put in place its British Electricity Trading and Transmission Arrangements (BETTA). The following article was written during the consultation period leading up to the implementation of BETTA.It is an immutable physical
This extract discusses the costs that are relevant to an organisation that is already benefiting from relatively low labour costs.In a vast sprawl of inter-linked factory buildings in southern China, 25,000 people are toiling to turn out tiny electric motors that are used in a variety of consumer
The National Farmers’ Union (NFU) has a long-standing concern about obtaining a fair price for dairy farmers who sell milk to the major supermarket chains and similar outlets.NFU Scotland is continuing its campaign for higher milk prices by writing to all the major supermarkets, processors and
What is a relevant cost? Give an example.
What is a relevant revenue? Give an example.
What is a sunk cost? Give an example.
What is incremental analysis.
What is the method used in analysing relevant and non-relevant costs.
What are the limitations of the decision-relevant approach.
Show that a sales margin of 10% is equal to 11% on sales.
When may mark-up percentages be applied in pricing.
Explain marginal cost pricing.
What is the ‘three-way analysis’ method of decision making under risk and uncertainty.
What is an objective probability.
What is a subjective probability.
What is the rule for joint probabilities ‘both . . . and’.
What is a sensitivity factor.
A hardware store is considering purchasing the shop next door to expand capacity. The shop next door will cost £140,000 to buy. The cost of the existing shop was £80,000 but it would now sell for £120,000. Fittings in the existing shop will be sold for £5,000 and a new refit for both shops
An outdoor pursuits centre is planning for the year ahead. There is a possibility that the government will give additional funds to the education budget under an ‘active and healthy’ policy.There is also a possibility that this money will be diverted for other use and as a result the local
A souvenir shop makes the following forecast for one year’s sales and costs.Required Prepare tables showing the sensitivity of the profit forecast to each of the following:(a) a 1% change in sales and variable costs, (b) a 1% change only in the materials cost of souvenirs purchased, (c) a 1%
The directors of Hightown United Football Club Ltd are preparing for a meeting with their bank manager to discuss the availability of funds to be used to buy new players.The following information is available:1 The Hightown United stadium is divided into three separate spectator areas:2 Other
Cleancloths Ltd has two production lines. One line produces Supersnake, an absorbent double strength cloth which soaks up spillage of industrial liquids. Supersnake cannot be sold for domestic use. The other production line manufacture rolls of absorbent cloth for domestic use.The directors
John Armitt, chief executive of Network Rail, the ‘not for dividend’ successor to Railtrack as owner of the UK rail infrastructure, does not expect an ongoing review of the industry’s performance payment system to produce any significant changes.‘The first half of 2004/5 marked the start of
This extract from the annual report of Punch Taverns refers to ‘return on investment’ (ROI) as an alternative description of the accounting rate of return.A further £48.7m was invested in the acquisition of 80 individual pubs during the year, together with investment of £46.2m on existing
ntl Incorporated has appointed Jacques Kerrest as its Chief Financial Officer. As CFO, Jacques is responsible for all of ntl’s financial activities including cash and credit management, capital budgeting, financial planning and analysis, corporate finance, tax, financial reporting, SEC and
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