Questions and Answers of Management And Cost Accounting

Olympiakos SA provides outsourcing services and advice to both government and corporate clients.For costing purposes, Olympiakos classifies its departments into two support
Euro-Medi Plc manufactures a wide range of medical instruments. Two testing instruments (101 and 201) are produced at its highly automated Limerick plant. Data for December 2022 are as
Koala Ltd has only two divisions: A and B. The following data apply to Division A.Required 1 Prepare a segment report for Division A that differentiates between the performance of the manager and the
Laser Tecnologia Srl develops, assembles and sells two product lines:Product Line A is sold exclusively to the Italian Department of Defence under a cost-plus reimbursement contract. Product Line B
What is a joint cost?
Terms a Split-off point b Joint cost c Separable cost d By-product e Joint product f Product Definitions 1 Product with low sales value compared with the sales value of the main or joint
Miljø-Såpe AS produces two joint products, cooking oil and soap oil, from a single vegetable oil refining process. In July 2022, the joint costs of this process were NOK 24 000 000. Separable
Galinha-Esquina SA grows and processes chickens. Each chicken is disassembled into five main parts. Information pertaining to production in July 2022 is as follows:Joint costs of production in July
Claude Deux-Bussy is the owner and operator of Boissons Barbe-Bleue Sarl, a bulk soft-drink producer. A single production process yields two bulk soft drinks, Pelléas (the main product) and
Flori-Dante Srl grows, processes, packages and sells three joint apple products:(a) sliced apples that are used in frozen pies,(b) apple sauce, and(c) apple juice. The apple peel, processed as animal
Flori-Dante classifies animal feed as a by-product. The by-product is inventoried at its selling price when produced; the net realisable value of the product is used to reduce the joint production
Langholmen-Sverige AB crushes and refines mineral ore into three products in a joint-cost operation. Costs and production for 2022 were as follows:better off by selling Vätervik that way or
Alternative methods of joint-cost allocation, product-mix decisions (40 minutes)Schmidsendl GmbH buys crude vegetable oil. Refining this oil results in four products at the splitoff point: A, B, C
Nor-Pharma AS manufactures three joint products from a joint process: Altox, Lorex and Hycol.Data regarding these products for the fiscal year ended 31 May 2022 are as follows:The joint production
‘The main trouble with variable costing is that it ignores the increasing importance of fixed costs in modern manufacturing.’ Do you agree? Why?
Forza San Marino Srl installed standard costs and a flexible budget on 1 January 2022. The president had been pondering how fixed manufacturing overhead should be allocated to products.Machine-hours
Starzmann GmbH assembles and sells motor vehicles. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to April and May of 2022 are:The selling
Svenborg AS manufactures and sells wide-screen television sets. It uses an actual-costing system, in which unit costs are calculated on a monthly basis. Data relating to January, February and March
Ericsson AB manufactures and sells a single product. The following data cover the two latest years of operations:Required1 Prepare two income statements for 2023, one under variable costing and one
Bières Ronsard SA recently purchased a brewing plant from a bankrupt company. The brewery is in Montpazier, France. It was constructed only two years ago. The plant has budgeted fixed manufacturing
In 2022, the Montpazier brewery of Bières Ronsard showed these results:The sales division of Bières Ronsard purchased 2 400 000 barrels in 2022 at the €68 perbarrel rate.All manufacturing
It is the end of 2023. Ginnungagap Oy began operations in January 2022. The company is so named because it has no variable costs. All its costs are fixed; they do not vary with output.Ginnungagap is
Audumla Oy began operations in 2022 and differs from Ginnungagap in only one respect: it has both variable and fixed manufacturing costs. Its variable manufacturing costs are €7 per tonne, and its
Koninklijke BolsWessanen NV has fixed costs of €300 000 and a variable-cost percentage of 80%.The company earns net profit of €84 000 in 2022. The income tax rate is 40%.Required Calculate (1)
Bomuldstaft AS is considering two new colours for their umbrella products – emerald green and shocking pink. Either can be produced using present facilities. Each product requires an increase in
GF is a company that manufactures clothes for the fashion industry. The fashion industry is fast moving and consumer demand can change quickly due to the emergence of new trends.GF manufactures three
Bellingwolde BV operates car rental agencies at over 20 airports. Customers can choose from one of three contracts for car rentals of one day or less: Contract 1: 50 for the day. Contract 2: 30 for
Lorenzo-Netto, Srl, operates a brushless car wash. Incoming cars are put on an automatic, continuously moving conveyor belt. Cars are washed as the conveyor belt carries the car from the start
Assume the same information for Genève Défense Systèmes as in Exercise9.17 except that Genève Défense Systèmes uses a 90% incremental unit-time learning curve as a basis for forecasting direct
Pauline Raphaël, executive assistant to the principal of Ecole Supérieure des Mines de St Etienne, is concerned about the overhead costs at her university. Cost pressures are severe, so controlling
Required 1 Given your findings in Exercise9.19, should Raphaël use multiple regression analysis to better understand the cost drivers of overhead costs? Explain your answer.2 Raphaël decides that
‘A component part should be purchased whenever the purchase price is less than its total unit manufacturing cost.’ Do you agree? Why?
Define opportunity cost.
Ennerdale Ltd has been asked to quote a price for a one-off contract. The company’s management accountant has asked for your advice on the relevant costs for the contract. The following information
Why should managers worry about product over- or undercosting?
Starkuchen GmbH has been in the food-processing business for three years. For its first two years(2021 and 2022), its sole product was raisin cake. All cakes were manufactured and packaged in 1 kg
Wolfgang Iser, the accountant of Starkuchen, wants to further examine the relative profitability of raisin cake and layered carrot cake. He questions the accuracy of the activity-based normal costing
CJD Ltd manufactures plastic components for the car industry. The following budgeted infomation is available for three of their key plastic components: W X Y per unit per unit per unit Selling
Baden-Möbel GmbH manufactures a variety of prestige boardroom chairs. Its job-costing system was designed using an activity-based approach. There are two direct-cost categories (direct materials and
1 Discuss the conditions under which the introduction of ABC is likely to be most effective, paying particular attention to:2 Explain why ABC might lead to a more accurate assessment of management
Alexon SL is an electronics business with eight product lines. Profit data for one of the products(XT-107) for the month just ended (June 2022) are as follows:Xuclà Mecàniques Fluvià SA, an
Pagnol-Carrelages SNC is a small distributor of marble tiles. Pagnol-Carrelages identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and reports the
Hospedeiras de Portugal Lda, a large labour contractor, supplies contract labour to building construction companies. For 2022, Hospedeiras has budgeted to supply 80 000 hours of contract labour. Its
Overloon BV is a repair-service company specialising in the rapid repair of photocopying machines. Each of its 10 clients pays a fixed monthly service fee (based on the type of photocopying machines
Spring Distribution has decided to analyse the profitability of another five customers. It buys bottled water at €0.50 per bottle and sells to wholesale customers at a list price of €0.60 per
Euro-Jouets SNC sells neon-coated ‘Feu-Follet’ cars to several local toy stores. It has the capacity to make 250 000 of these units per year, but during the year ending 31 December 2022, it made
Aalesund Fotballklubb is a Norwegian football team with a long tradition of winning. However, the last three years have been traumatic. The team has not won a major championship, and attendance at
The manager of the Robin Hood Company is considering two investment projects that are mutually exclusive. The after-tax required rate of return of this company is 10%, and the anticipated cash flows
The board of directors of a company is considering two mutually exclusive projects. Both projects necessitate buying new machinery, and both projects are expected to have a life of five years.Project
ST operates in a highly competitive market and is considering introducing a new product to expand its current range. The new product will require the purchase of a specialised machine costing £825
Embutidos Vallina SA has two direct-cost categories: direct materials and direct manufacturing labour. Its single indirect-cost category (manufacturing overhead) is allocated on the basis of
Lux-Ernster expects 2022 sales of 100 000 units of serving trays. Lux-Ernster’s opening stock for 2022 is 7000 trays; target closing stock, 11 000 trays.RequiredCalculate the number of trays
Europa-Dyonisos SA produces wine. The company expects to produce 1.5 million two-litre bottles of Chablis in 2022. Europa-Dyonisos purchases empty glass bottles from an outside supplier. Its target
Jacek Zielinski, the budget manager at Jelenia-Silesia, a manufacturer of child furniture and carriages, is working on the 2022 annual budget. In discussions with Sylwester Czereszewski, the sales
Castelo Branco Lda is a manufacturer of video-conferencing products. Regular units are manufactured to meet marketing projections, and specialised units are made after an order is
On 1 December 2022, Tire-Lire, SNC, is attempting to project cash receipts and disbursements to 31 January 2023. On this latter date, a note will be payable in the amount of €100 000. This amount
M plc designs, manufactures and assembles furniture. The furniture is for home use and therefore varies considerably in size, complexity and value. One of the departments in the company is the
Nyborg Supermarkets AS is preparing its activity-based budget for January 2022 for its operating costs (that is, its non-cost of goods purchased for resale costs). Its current concern is with its
Nyborg Supermarkets has a kaizen (continuous improvement) approach to budgeting monthly activity area costs for each month of 2022. February’s budgeted cost driver rate is 0.998 times the budgeted
British Beverages bottles two soft drinks under licence to Cadbury Schweppes at its Manchester plant. Bottling at this plant is a highly repetitive, automated process. Empty bottles are removed from
Abulafia Srl manufactures tyres for the Formula 1 motor racing circuit. For August 2022 Abulafia budgeted to manufacture and sell 3000 tyres at a variable cost of €74 per tyre and a total fixed
Consider the following data collected for Helsingør: Cost incurred: Actual inputs x actual prices Actual inputs standard prices Standard inputs allowed for actual outputs standard prices Direct
Sharmila Khan is manager of TaxExperts.co.uk, a firm that provides assistance in the preparation of individual tax returns via the internet. Because of the highly seasonal nature of her business,
AKEI is an elite desk manufacturer. At the start of May 2022, the following budgeted unit amounts(based on a standard costing system) related to its manufacture of executive desks (made out of
The budgeted prices for direct materials, direct manufacturing labour and direct marketing (distribution)labour per attaché case are €40, €8 and €12, respectively. The chairman is pleased with
Ched Ltd manufactures Cheddar cheese pies. For January 2022, it budgeted to purchase and use 15 000 kg of Cheddar cheese at £0.89 per kg; budgeted output was 60 000 pies. Actual purchase and use for
Norland-Norge AS produces corporate notebooks. Each notebook is designed for an individual customer. The company’s operating budget for September 2022 included these data:The actual results for
Drogheda Chemical Ltd has set-up the following standards per finished output unit for direct materials and direct manufacturing labour.Required1 Calculate the March 2022 price and efficiency
Drogheda Chemical adopts a continuous improvement approach to setting monthly standards’ costs. Assume the direct materials standard quantity input of 10 kg per output unit and the direct
The managing partner of Hoofdorp Music Box Fabricators has become aware of the disadvantages of static budgets. She asks you to prepare a flexible budget for October 2022 for the main style of music
Sam Chase is the Finance Director of Flowers.co.ke, an internet company that enables customers to order home deliveries of flowers by accessing its website. Flowers.co.ke has a network of florists
Sam Chase of Flowers.co.ke receives a brochure from the Hackett Group, a consulting firm specialising in benchmarking. He asks the Hackett Group to provide benchmark data from its recent study of the
Poitou-Chemises SARL manufactures shirts for retail chains. Armand Plessis, the accountant, is becoming increasingly disenchanted with Poitou-Chemises’ six-month-old standard costing system. The
Münzel GmbH helps prospective homeowners of substantial means to find low-cost financing and assists existing homeowners in refinancing their current loans at lower interest rates. Münzel works
Lavertezzo Srl is a manufacturer of designer suits. The cost of each suit is the sum of three variable costs (direct material costs, direct manufacturing labour costs and manufacturing overhead
Lavertezzo allocates fixed manufacturing overhead to each suit using budgeted direct manufacturing labour-hours per suit. Data pertaining to fixed manufacturing overhead costs for June 2022 are
L’Evénement du Dimanche budgets to produce 300 000 copies of its monthly newspaper for August 2022. It is budgeted to run 15 000 000 print pages in August with 50 print pages per newspaper.Actual
PP Ltd operates a standard absorption costing system. The following information has been extracted from the standard cost card for one of its products: Budgeted production Direct material cost:
Mondragon SA assembles its CardioX product at its Toledo plant. Manufacturing overhead (both variable and fixed) is allocated to each CardioX unit using budgeted assembly-time hours. Budgeted
Danskmat AS operates a home meal delivery service. It has agreements with 20 restaurants to pick up and deliver meals to customers who phone or fax in orders. Danskmat is currently examining its
Nolton-Ragnvald AS uses a standard costing system. It allocates manufacturing overhead (both variable and fixed) to products on the basis of standard direct manufacturing labour-hours (DLH). Nolton
Madetoja Oy’s job-costing system has two direct-cost categories: direct materials and direct manufacturing labour. Manufacturing overhead (both variable and fixed) is allocated to products on the
Paix-Trolls SARL produces a petrol additive, Elysium, which increases engine efficiency and reduces petrol consumption. The actual and budgeted quantities (in litres) of materials required to produce
Les Cliniques du Parc reports the following information for July 2022 regarding its nursing staff consisting of nurses, nursing assistants and orderlies.Required1 Calculate the total direct nursing
The Antwerp Lions play in the Flemish Football League. The Lions play in the Antwerp Stadium (owned and managed by the City of Antwerp), which has a capacity of 30 000 seats (10 000 lower- tier seats
Deadeye Ltd operates a standard costing system in which all stocks are valued at standard cost.The standard direct material cost of one unit of product MS is £36, made up of 4.8 kg of material H at
X Ltd uses an automated manufacturing process to produce an industrial chemical, Product P. X Ltd operates a standard marginal costing system. The standard cost data for Product P is as follows:In
Granoline SA manufactures cereal products such as multi-grain porridge and breakfastcereals.It makes multi-grain porridge by blending barley, wheat and rye. Budgeted costs to produce 100 000 kg of
Markku Antero Oy produces perfume. To make this perfume, Markku Antero uses three different types of fluid. Tartarus, Erebus and Uranus are used in standard proportions of 4/10, 3/10 and 3/10 , and
Tropica AB processes tropical fruit into fruit salad mix, which it sells to a food-service company.Tropica has in its budget the following standards for the direct materials inputs to produce 80 kg
Calypso SA manufactures and sells fertilisers. Calypso uses the following standard direct materials costs to produce 1 tonne of fertiliser:Note that 1.2 tonnes of input quantities are required to
O’Connell & Associates, a firm of architects, has three levels of professional staff: principals(managers), who manage all aspects of the architectural job; senior architects, who are
Rusti-Verres SNC sells two brands of wine glasses – Choc and Chic. Rusti-Verres provides the following information for sales in the month of June 2022:All variances are to be calculated in
The Safe Soap Co. makes environmentally-friendly soap using three basic ingredients. The standard cost card for one batch of soap for the month of September was as follows:The budget for production
Refer to Exercise 18.13. Assume that Division A can sell the 1000 units to other customers at €155 per unit with variable marketing costs of €5 per unit.RequiredDetermine whether Gustavsson will
The Leipzig Division of Bohemia Industries makes two component parts, X23 and Y99. It supplies X23 to the Hanover Division to be used in the manufacture of car engines and supplies Y99 to the Bremen
Ilmajoki-Lumber Oy has a Raw Lumber Division and Finished Lumber Division. The variable costs are:Assume that there is no waste incurred in processing raw lumber into finished lumber. Raw lumber can
Escuelas SA has two divisions. The Mining Division makes toldine, which is then transferred to the Metals Division. The toldine is further processed by the Metals Division and is sold to customers at
Liberaki SA has two divisions, A and B, which manufacture bicycles. Division A produces the bicycle frame, and Division B assembles the bicycle components onto the frame. There is a market for both
P Ltd has two divisions, Q and R that operate as profit centres. Division Q has recently been set up to provide a component (Comp1) which division R uses to produce its product (ProdX). Prior to

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