Questions and Answers of Management Accounting

Quality engineering, quality training, statistical process control, and supplier certification are what kinds of quality costs?
Waste, rework, and net cost of scrap are examples of what kinds of quality costs?
What is meant by the phrase cost of nonconformance in relation to quality?
Midwest Office Products* John Malone, general manager of Midwest Office Products (MOP), was concerned about the financial results for calendar year 2003. Despite a sales increase from the
What does a pricing waterfall chart depict?
Sippican Corporation (A)*The decline in our profits has become intolerable. The severe price cutting in pumps has dropped our pre-tax margin to less than 2%, far below our historical 15% margins.
Ken’s Cornerspot, a popular university eatery in a competitive market, has seating and staff capacity to serve about 600 lunch customers every day. For the past two months, demand has fallen from
Kappa Company runs two shifts each day. Workers on average have four weeks off per year and after training and breaks, average 34 hours per week. What is Kappa’s practical capacity number of labor
What does the term conversion costs mean?
What are indirect cost pools?
How is overhead cost estimated for individual jobs?
How are indirect cost rates determined?
What are predetermined indirect cost rates commonly called in practice?
Provide several examples of cost objects.
What does the term breakeven point mean?
What are the three components of a linear program?
“When production capacity is constrained, determine what products to make by ranking them in order of their contribution per unit.” Do you agree with this statement? Explain.
What is an opportunity cost that is relevant in a make-or-buy decision?
Are avoidable costs relevant? Explain.
What is an opportunity cost?
What are sunk costs? Explain whether they are relevant costs.
What does the term breakeven point mean?
Mercury, Inc., produces cell phones at its plant in Texas. In recent years, the company’s market share has been eroded by stiff competition from overseas. Price and product quality are the two key
Refer to the data for Lavage Rapide in Exercises 10–8 and 10–10.Data from in Exercise 10-8For example, electricity costs are $1,200 per month plus $0.15 per car washed. The company expects to
What is cost-plus pricing?
The questions in this exercise are based on one of the fastest growing food retailers in the United States—Whole Foods Market, Inc. To answer the questions, you will need to download Whole Foods
A number of terms are listed below:Required:Choose the term or terms from the above list that most appropriately completes each of the following statements:1. A(n) _________________ is a game plan
Six terms that relate to organizations, the work of management, and the role of managerial accounting are listed below:Decentralization ControllerLine
What are unit-level, batch-level, product-level, customer-level, and organization-sustaining activities?
Distinguish between (a) a variable cost, (b) a fixed cost, and (c) a mixed cost.
What is a plantwide overhead rate? Why are multiple overhead rates, rather than a plantwide overhead rate, used in some companies?
What is a plantwide overhead rate? Why are multiple overhead rates, rather than a plantwide overhead rate, used in some companies?
1. The $14.5 million is made up of the following cost categories:Direct contract costs .......................................................................$ 6,200,000Government ships and
Raynard’s Jewellery had the following data (in thousands) for a given period. Assume there are no inventories. Fill in the blanks.Sales
Lynda Carson is the recently appointed general manager of Crichton General Assurance Corporation (CGAC). She has been appointed to help the company regain profitability after several years of
Homestead Foods Limited is a large processor and distributor of packaged foods. Its product lines include soups, vegetables, potatoes, fruits, pasta, TV dinners, juices, and bread. In addition, it
Harold Mover has been the president of Newprod Ltd. for a little over six months. He was brought in by the board of directors to reverse the trend of falling profits. He had told the board that it
Form groups of three to six students. Obtain the 2007 Acute Care Hospital Report (pdf) from the Ontario Hospital Association (OHA) website (www.oha.com). This Hospital Report has many pages of tables
One of three major strategic initiatives of General Electric Company in 1998 was Six Sigma quality. The following comments were made by John Welch, former CEO of GE in the 1998 Annual
Zenon Medical Instruments Company (ZMIC) recently revised its performance evaluation system. The company identified four major goals and several objectives required to meet each goal. Ruth Sanchez,
As you are about to depart on a business trip, your accountant hands you the following information about your Thailand division. 1. Master budget for the fiscal year just ended on June 30, 2010 2.
Baffin Manufacturing Company was concerned about a growing number of defective units being produced. At one time the company had the percentage of defective units down to fewer than 50 per 1,000, but
Sketch the two graphs as they appear below and add a curve to both representing total cost. Compare the total quality management approach to the traditional theory of quality. Which theory do you
The Paul Company stresses competition among the heads of its various divisions, and it rewards stellar performance with year-end bonuses that vary between 5 and 10 percent of division net operating
Manufacturing Company produces precision parts. LaCrosse uses a standard cost system, calculating variances for each department and reporting them to the department managers. Managers are supposed to
Red River Manufacturing Division makes a variety of home furnishings. In 2010 the company installed a system to report on quality costs. At the end of 2012 the division general manager wanted an
George McBee owns a small chain of specialty toy stores in Edmonton and Calgary. The company’s organization chart follows: The following data about 2010 operations were also available. 1.
Digital Processors Ltd. monitors its cycle time closely in order to prevent schedule delays and excessive costs. The standard cycle time for the manufacture of printed circuit boards for one of its
Tom’s Maytag Laundry had the following results in 2011 and 2013. The laundry used the same facilities in 2013 as in 2011. During the past three years, however, the company put more effort into
In early 2011, United Communications, a U.S.–based international telephone communications company, purchased the controlling interest in Bucharest Telecom Ltd. (BTL) in Romania. A key productivity
A major objective of Six Sigma quality-control programs is to better meet customers needs. One place where companies have applied Six Sigma is to order delivery times. They have directed efforts at
Suppose Saskatoon Honda had the following data for the year’s operations. The president of the dealership has long regarded the markup on material and labour for the parts and service activity
Cindy’s BBQ is a restaurant in Thunder Bay. Cindy expanded to a second location in Sudbury three years ago. Recently, Cindy decided to retire from active management of the individual restaurants
Interiors Inc., a privately held enterprise, has a subcontract to produce overhead storage bins for a Bombardier airplane. Although GL was a low bidder, Bombardier was reluctant to award the business
You are manager of a department store in Kyoto. Sales are subject to month-tomonth variations, depending on the individual sales-clerk’s efforts. A new salary-plus-bonus plan has been in effect for
In 1975, New York City barely avoided bankruptcy. By the 1990s it had one of the most sophisticated budgeting and reporting systems of any municipality, and its budgetary problems had nearly
How does a manager decide whether the management control system should be changed?
How should self-interest be considered when designing incentives?
Discuss the difficulties of comparing productivity over time.
Identify three measures of labour productivity, one using all physical measures, one using all financial measures, and one that mixes physical and financial measures.
"Non-financial measures of performance can be controlled just like financial measures." Do you agree? Explain.
Discuss how quality, cycle time, and productivity are related.
Why are companies increasing their quality control emphasis on the prevention of defects?
"Always try to distinguish between the performance of a segment and its manager." Why?
Give four examples of segments.
"The contribution margin is the best measure of short-run performance." Do you agree? Explain
What is a balanced scorecard and why are more and more companies using one?
How do profit centres and investment centres differ?
Name five kinds of responsibility centres.
"There are corporate objectives other than profit." Name four.
"Goals are useless without performance measures." Do you agree? Explain.
What is the purpose of a management control system?
The president of North Shore Railroad wants to obtain an overview of the company’s operations, particularly with respect to comparing freight and passenger business. He has heard about
Wells and Severson are manufacturing companies. Comparative data for 2006 and 2012 are Assume that inflation has totalled 15 percent during these six years so that each 2006 dollar is equivalent
Mark Ferguson, the president of Ferguson Foundry Limited (FFL), sat in his office early on June 2, 2010, reviewing the financial statements of FFL for the fiscal year ended May 31, 2010. The results
Durst Industries Inc. (Durst), a multinational company, has its head office in Western Canada. Shares are listed on Canadian stock exchanges and on several foreign exchanges. For the fiscal year
Riverside Mining and Manufacturing is a vertically integrated company that mines, processes, and finishes various non-precious metals and minerals. Riverside has decentralized both on a geographical
The Whole Company is an integrated multidivisional manufacturing firm. Two of its divisions, Rod and Champ, are profit centres and their division managers have full responsibility for production and
EZtronics, a manufacturer of small appliances, has an Engineering Consulting Department (ECD). The department’s major task has been to help the production departments improve their operating
In October 2009 CanWest Global Communications Corp. was declared insolvent and began selling media assets by announcing the sale of Global Television. CanWest also owned many major Canadian
This is an expansion of E14-8. The primary difference between the EVA and residual income measures is the increased focus on cash flow by EVA. EVA companies make several adjustments to both operating
Tom Clay is the chief executive officer of Mayberry Company. Clay has a financial management background and is known throughout the organization as a “no-nonsense” executive. When Clay became
Antonio Company uses the decentralized form of organizational structure and considers each of its divisions as an investment centre. Division L is currently selling 15,000 air filters annually,
Assume that a machine shop acquires $600,000 of fixed assets with a useful life of four years and no residual value. The shop uses straight-line depreciation. The company judges the shop manager
As the CEO of Friendly Hardware Company, you examined the following measures of the performance of three divisions (in thousands of dollars). 1. Calculate for each division the rate of return on
Accountants often express ROI as the product of two components—capital turnover and return on sales. You are considering investing in one of three companies, all in the same industry, and are given
The London Trading Company plans to hire a manager for its division in Kenya. London Trading’s president and vice president/personnel are trying to decide on an appropriate incentive employment
Keyworth Co. is a large, integrated conglomerate with shipping, metals, and mining operations throughout the world. The general manager of the Shipbuilding division plans to submit a proposed capital
A large automobile dealership is installing a responsibility accounting system and three profit centres: parts and service; new vehicles; and used vehicles. The department managers have been told to
Canadian Medical Instruments produces a variety of medical products at its plant in Saskatoon. The company has sales divisions worldwide. One of these sales divisions is located in Uppsala, Sweden.
The Lighting division of St. John’s Office Furniture needs 1,200 units of a leaded-glass lamp shade from the Fabricating division. The company has a policy of negotiated transfer prices. The
A consulting firm, TAC, is decentralized with 25 offices around the country. The headquarters is based in Vancouver. Another operating division is located in Calgary. A printing subsidiary operation,
The Furniture division of Barrie Woodcraft purchases lumber, which it uses to fabricate tables, chairs, and other wood furniture. Most of the lumber is purchased from the Southshore Mill, also a
The Moncton division of Glencoe Corporation, operating at capacity, has been asked by the Antigonish division of Glencoe to supply it with Electrical Fitting No. LX29. Moncton sells this part to its
The Coca-Cola Company uses EVA to evaluate top management performance. In 2008, Coca-Cola had net operating income of $8,446 million, income taxes of $1,632 million, and average noncurrent
Hershey Company manufactures, distributes, and sells many items with the Hershey brand name. It also has many other brands including Almond Joy, Milk Duds, and Twizzlers. Its financial results for
Technology does business in three different business segments: (1) Entertainment, (2) Publishing/Information, and (3) Consumer/ Commercial Finance. Results for a recent year were (in
Cambridge International has production and marketing divisions throughout the world. It produces one particular product in Ireland, where the income tax rate is 12 percent, and transfers it to a
A chair’s variable cost is $50 and its market value as a piece of unfinished furniture is $63 at a transfer point from the Assembly division to the Finishing division. The Finishing division’s
The St. Cloud division of Martinelli Company just purchased an asset for $150,000. The asset has a three-year life. Martinelli’s top management evaluates Freida Schmidt, manager of the St. Cloud

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