Questions and Answers of Management Accounting

The South African company DT Constructers has been carrying out work on a number of building contracts including contract X over the six-month period ended 30 June 2017. The following information is
The Sendai Co. Ltd of Japan has budgeted costs in its various departments as follows for the coming year:Machining and Assembly are operating departments; the other departments all act in a service
Carrot Stix manufactures fishing rods. The company uses a job-order costing system with a plantwide predetermined overhead rate based on direct labour-hours. On 9 November 2017, the company's finance
Judy Anderson, the new controller of Vault Inc., has just returned from a seminar on the choice of the activity level in the predetermined overhead rate. Even though the subject did not sound
What are interdepartmental service costs? How are such costs allocated to other departments under the step method?
How are service department costs allocated to other departments under the direct method?
Refer to the data for Clonex Labs in E5-2.RequiredCompute the equivalent units of production for October assuming that the company uses the FIFO method of accounting for units and costsData from
What similarities exist between job-order and process costing?
Finlay Fisheries processes salmon for various distributors. Two departments are involved – Department 1 and Department 2. Data relating to kilos of salmon processed in Department 1 during July are
Refer to the data for Finlay Fisheries in E5-4.Data from E5-4Finlay Fisheries processes salmon for various distributors. Two departments are involved – Department 1 and Department 2. Data relating
Pureform manufactures a product that passes through two departments. Data for a recent month for the first department follow:The beginning work in progress inventory was 80% complete as to materials
Hielta Oy, a Finnish company, processes wood pulp for various manufacturers of paper products. Data relating to tons of pulp processed during June are provided below:Required1. Compute the tons of
Refer to the data for Hielta Oy in E5-6.Data from E5-6Hielta Oy, a Finnish company, processes wood pulp for various manufacturers of paper products. Data relating to tons of pulp processed during
Refer to the data for Pureform in E5-8.Data from E5-8Pureform manufactures a product that passes through two departments. Data for a recent month for the first department follow:The beginning work in
Helox Ltd manufactures a product that passes through two production processes. A quantity schedule for a recent month for the first process follows:Costs in the beginning work in progress inventory
Sunspot Beverages Ltd of Fiji makes blended tropical fruit drinks in two stages. Fruit juices are extracted from fresh fruits and then blended in the Blending Department. The blended juices are then
Refer to the data for Helox Ltd in E5-10. Assume that the company uses the FIFO cost method.Data from E5-10Helox Ltd manufactures a product that passes through two production processes. A quantity
Builder Products Ltd manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for
Refer to the data for the Blending Department of Sunspot Beverages Ltd in P5-15. Assume that the company uses the FIFO method to compute unit costs rather than the weighted-average
Refer to the data for Provost Industries in the preceding case. Assume that the company uses the FIFO methodto account for units and costs.Required1. Prepare a production report for the Finishing
The most recent statement of profit or loss for Whitney Company appears below. All variable expenses in the company vary in terms of unit sold, except for sales commissions, which are based on
Simon has recently discovered that his local town has a history which includes tales of murder, mystery andsightings of ghosts. He plans to start a small business running ‘ghost tour evenings’.
Home Trends sells kitchenware, wooden flooring and cane furniture at a single store location in trendy Kinvara, Co. Galway, mainly to customers living in apartments, townhouses and holiday homes.
Refer to the data in E6-1 for Ida Sidha Karya Company. A statement of operating profit or loss prepared under the absorption costing method by the company’s accountant appears below (all currency
A group of new business graduates is about to embark on a new business adventure. They want to sell personalized embroidery T-shirts online. Manuel was an accounting student and obviously he was left
A company with three regional offices of different sizes needs to compare the managers’ performance. The managers will be evaluated based on return on investment (ROI). The following results were
Hollings Company sells office furniture. As part of its service, it delivers furniture to customers. The costs associated with the acquisition and annual operation of a delivery van are given
Durban Metal Products Ltd of South Africa makes speciality metal parts used in applications ranging from the cutting edges of bulldozer blades to replacement parts for Land Rovers. The company uses
Updraft Systems Inc. makes paragliders for sale through speciality sporting goods stores. The company has a standard paraglider model, but also makes custom-designed paragliders. Management has
This chapter emphasizes the use of activity-based costing in internal decisions. However, a modified form of activity-based costing can also be used to develop product costs for external financial
Stan's Cookhouse is a popular restaurant located in the centre of Birmingham. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern
The management of Vegetarian Meals Ltd, who make three main product lines of ready-made vegetarian meals in batches for the restaurant trade, are reviewing the cost accounting policy in relation to
Mercer Asbestos Removal Company is in the business of removing potentially toxic asbestos insulation and related products from buildings. There has been a long-simmering dispute between the company's
Aerotraiteur SA is a French company that provides passenger and crew meals to airlines operating out of the two international airports of Paris – Orly and Charles de Gaulle (CDG). The operations at
Classic Windows is a small company that builds speciality wooden windows for local builders. For years the company has relied on a simple costing system based on direct labour-hours (DLHs) for
Remix Ltd is a medium-sized manufacturing company selling two distinct products, the ARMIX and the ORMIX. The products use similar materials but the processes to make them are different. The company
Waukee Railroad is considering the purchase of a powerful, high-speed wheel grinder to replace a standard wheel grinder that is now in use. Selected information on the two machines is given
JLB Ltd is a small, private company which makes a range of household furniture. The company prides itself on sourcing local, ethical raw materials and supporting projects in the local community.
Targit Ltd manufacture a range of garden furniture. One of their products is a garden lounge chair, which Targit sells to customers for £40, generating £22 of contribution for Targit. There are
KMC Airlines was established 40 years ago and currently operates a small fleet of planes that fly to various cities across Europe from their base in the East Midlands. Whilst they are not a market
Bill has just returned from a duck hunting trip. He has brought home eight ducks. Bill’s friend, John, disapproves of duck hunting and, to discourage Bill from further hunting, John has presented
Thalassines Kataskeves SA of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly profit statement for
Margit Andersen purchased a used car for £10,000 at the beginning of last year and incurred the following operating costs:The variable operating costs consist of petrol, oil, tyres, maintenance and
Zuvetra Pharmaceuticals Ltd manufactures multivitamin medicines. In the past, Zuvetra has done very little in the way of budgeting. The company has also faced cash crunches in previous years.
Access the website of the Association for Accountancy and Business Affairs (visar.csustan.edu/aaba/home), click on one of the issues and follow the links to newspaper cuttings and other sources.
Time allowed: 10 minutes Listed below are a number of terms that relate to organizations, the work of management and the role of management accounting:Choose the term or terms above that most
For an interesting perspective on the changing role of the management accountant see Burns and Baldvinsdottir (2007). The Chartered Institute of Management Accountants also has several publications
Upton University is a large private university located in the Midlands. The university is headed by a vicechancellor who has five pro-vice chancellors reporting to him. These pro-vice chancellors are
Suppose all garages routinely followed the practice of attempting to sell customers unnecessary parts and services by recommending unnecessary or expensive repairs.Required1. How would this unethical
Ethical standards are very important in business, but they are not always followed. If you have ever held a job - even a summer job - describe the ethical climate in the organization where you
Iberdrola S.A. is a large international utilities company. The company's business environment has changed rapidly in recent years as a result of the various phases of privatization, deregulation, and
What are the major differences between financial and management accounting?
Briefly describe the impact of new technology, globalization and deregulation on the practice ofmanagement accounting.
Suggest three ways in which management accounting in services may differ from its practice in manufacturing industry.
Suggest three reasons why value-seeking companies should care about the environment.
For an interesting perspective on the historical development of cost and management accounting, refer to Johnson (1987), Johnson and Kaplan (1987). For a more recent reference see also Kannaiah
Describe how the statement of profit or loss of a manufacturing company differs from the statement of profit or loss of a merchandising company.
Below are a number of costs that are incurred in a variety of organizations:1. X-ray film used in the radiology lab at Queens Medical Centre in Nottingham2. The costs of advertising a Madonna rock
Of what value is the schedule of cost of goods manufactured? How does it tie into the statement of profit or loss?
The following cost and inventory data are taken from the accounting records of Mason Company for the year just completed:Required1. Prepare a schedule of cost of goods manufactured in good form.2.
Is it possible for costs such as salaries or depreciation to end up as assets on the statement of financial position? Explain.
Unless otherwise indicated, each of the following questions is independent. In all cases, show computations to support your answer.1. A merchandising company has two departments, A and B. A recent
Murl Plastics Ltd purchased a new machine one year ago at a cost of £60,000. Although the machine operates well, the managing director (MD) wondered if the company should replace it with a new
The company Jugueton sells two electric ride-on cars. They buy all the components from different suppliers and they assemble by hand the products. The ride-on cars are tested before being packaged
Cleanit Corporation produces a variety of cleaning compounds and solutions for both industrial and household use. While most of its products are processed independently, a few are related, such as
GianAuto Corporation manufactures cars, vans and trucks. Among the various GianAuto plants around the United States is the Denver Cover Plant. Coverings made primarily of vinyl and upholstery fabric
Harplast produces over 120 varieties of plastic products, from pacifiers and milk bottles to toilet seats and plastic boxes for industrial storage. Harplast's CEO needs to make a decision in the face
The Puxi Company manufactures consumer food products based on soya beans. For convenience purposes the three products can be referred to as Alpha (A), Beta (B) and Cappa (C). The production process
Xico Ltd is a medium-sized sugar cane company in Mexico. The company divides the sugar cane into two parts: the top of sugar cane and the stalk. The stalk is used to obtain juice and bagasse. The
SofTowel produces luxury towels for the hospitality industry. At the beginning of each year, the CEO together with marketing, production and financial managers discuss the operating business plan of
Proxemiks Solutions Ltd is a manufacturing company that has started operations in the current year. The company manufactures Product R, Product S and Product T. The company is in the process of
CrossMan Corporation, a rapidly expanding crossbow distributor to retail outlets, is in the process of formulating plans for next year. Joan Caldwell, director of marketing, has completed her sales
Refer to the data in E12-3. Assume that instead of producing 4,000 units during the month, the company produced only 3,000 units, using 14,750 kilos of material in the production process. (The rest
The repair shop of Quality Motor Company uses standards to control the labour time and labour cost in the shop. The standard labour cost for a motor tune-up is given below:The record showing the time
An examination of the cost records of the Chittenden Furniture Company reveals that the materials price variance is favourable but that the materials quantity variance is unfavourable by a
I-Fonics Ltd is a mobile phone manufacturing company that manufactures smart phones and feature phones. The management team of I-Fonics Ltd discovered that the company has excessive inventories of
Scarlet Ltd is a mobile phone manufacturing company. The static budget for the month ended 31 January is given below:The actual data for January is given below:Required1. Prepare a flexible budget
The standard cost card for the single product manufactured by Cutter Ltd is given below:Manufacturing overhead is applied to production on the basis of direct labour-hours. During the year, the
In what way is the flexible budget involved in product costing?
The cheque-clearing office of Columbia National Bank is responsible for processing all cheques that come to the bank for payment. Managers at the bank believe that variable overhead costs are
Dime Motorcycles Ltd is a company that manufactures cruiser bikes. The flexible budget of Dime Motorcycles for January is given below:Standard time required to manufacture a bike is 20 machine-hours.
Flandro Company uses a standard cost system and sets predetermined overhead rates on the basis of direct labour-hours. The following data are taken from the company’s budget for the current
How might the volume variance be measured, other than in pounds?
The cost formulas for variable overhead costs in a machining operation are as follows:During August, the machining operation was scheduled to work 11,250 machine-hours and to produce 4,500 units of
Lane Company manufactures a single product that requires a great deal of hand labour. Overhead cost is applied on the basis of direct labour-hours. The company’s condensed flexible budget for
When planning operations for the year, Southbrook Company chose a denominator activity of 40,000 direct labour-hours. According to the company’s flexible budget, the following manufacturing
Harper Company assembles all of its products in the Assembly Department. Budgeted costs for the operation of this department for the year have been set as follows:Since the assembly work is done
Gant Products Ltd has recently introduced budgeting as an integral part of its corporate planning process. The company’s first effort at constructing a flexible budget for manufacturing overhead is
The Little Theatre is a non-profit organization devoted to staging theatre productions of plays for children in Manchester. The theatre has a very small full-time professional administrative staff.
Froden Ltd manufactures acoustic guitars. Froden has hired you as an accountant. Before leaving the company, the previous accountant had prepared a performance report for April. The performance
High Mechanics Inc. manufactures automobile tyres. The company manufactures winter tyres and highperformance tyres. The CFO of the company analysed the production and cost report for the month of
Paladium Ltd has manufactured and patented a unique addressable fire alarm. There is an increasing demand for this fire alarm in the market. The supervisor has decided to prepare a flexible budget to
Each of the cases below is independent. You may assume that each company uses a standard cost system and that each company’s flexible budget for manufacturing overhead is based on standard
Complete the following cases (ignore income taxes).1. Preston Company requires a minimum return of 14% on all investments. The company can purchase a new machine at a cost of £84,900. The new
Boyne University offers an extensive continuing education programme in many cities throughout the country. For the convenience of its faculty and administrative staff and to save costs, the
Blue Ltd, which manufactures garments, has recently formed a new department, Department J, which manufactures denim jackets. The top management of the company is unsure of the accuracy of the
Flaming Foliage Sky Tours is a small sightseeing tour company in Plettenberg that specialises in aerial tours of the Garden Route area. Until recently, the company had not had an accounting
High Graphics Solutions is a software solution company. The company’s existing data management software cannot accommodate the details of its clients and suppliers. The company is planning to
Frontier Company is investigating the purchase of a piece of automated equipment, but after considering the savings in labour costs the machine has a negative net present value. If no other cost
Honest John’s Used Cars plc has always hired students from the local university to wash the cars on the lot. Honest John is considering the purchase of an automatic car wash that would be used in

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