Questions and Answers of Management Cost Accounting

Discuss the value of a cost of quality report.
Identify and discuss the four kinds of quality costs that are included in a cost of quality report. Give examples of costs that fall within each category.
What are the distinguishing features of activity-based management?
Describe the stages involved with target costing. Describe how costs are reduced so that the target cost can be achieved.
Explain the essential features of life cycle costing.
What are committed (locked-in) costs?
How does cost management differ from traditional management accounting control systems?
The new manufacturing environment is characterized by more flexibility, a readiness to meet customers’ requirements, smaller batches, continuous improvements and an emphasis on quality.In such
(a) The absence of the profit measure in not-for-profit (NFP) organizations causes problems for the measurement of their efficiency and effectiveness.(i) Why the absence of the profit measure should
The owners of the Eatwell Restaurant have diversified business interests and operate in a wide range of commercial areas. Since buying the restaurant in 2013 they have carefully recorded the data
Provide examples of performance measures within each of the four perspectives of the balanced scorecard.
Describe three principal categories within the learning and growth perspective.
Describe the three principal internal business processes that can be included within the internal business perspective.
Discuss the benefits and limitations of the balanced scorecard.
Explain what is meant by cause-and-effect relationships within the balanced scorecard.
Explain the differences between lag measures and lead measures.
What is the purpose of a balanced scorecard?
How do different competitive strategies influence the choice of performance measures?
Describe the various generic strategies that an organization can adopt to achieve organizational competitive advantage?
Mobe Co manufactures electronic mobility scooters. The company is split into two divisions: the scooter division (Division S) and the motor division (Division M).Division M supplies electronic motors
When there is an imperfect market for the intermediate product what is the optimal transfer price?
What are the special considerations that must be taken into account with international transfer pricing?
Describe the two proposals that have been recommended for resolving transfer pricing conflicts.
What are the circumstances that favour the use of negotiated transfer prices?
Discuss the advantages and disadvantages of negotiated transfer prices.
Why are transfer prices based on full cost widely used in practice?
Why are marginal cost transfer prices not widely used in practice?
Why are full cost and cost plus a mark-up transfer prices unlikely to result in the optimum output?
If there is no external market for the intermediate product what is the optimal transfer price? Why?
Define the term ‘net marginal revenue’.
Explain why a single transfer pricing method cannot serve all four purposes.
Explain why a single transfer pricing method cannot serve all four purposes.
Explain the four purposes for which transfer pricing can be used.
Distinguish between intermediate products and final products.
Within a large group, divisional managers are paid a bonus that can represent a large proportion of their annual earnings. The bonus is paid when the budgeted divisional profit for the financial year
The Health and Fitness Group (HFG), which is privately owned, operates three centres in the country of Mayland. Each centre offers dietary plans and fitness programmes to clients under the
LOL Co. is a chain of shops selling cards and gifts throughout its country. It has been listed on the stock exchange for ten years and enjoys a fairly high profile in the retail sector of the
The Biscuits division (Division B) and the Cakes division (Division C) are two divisions of a large, manufacturing company. While both divisions operate in almost identical markets, each division
A division is considering investing in capital equipment costing $2.7m. The useful economic life of the equipment is expected to be 50 years, with no resale value at the end of the period. The
Division L has reported a net profit after tax of £8.6m for the year ended 30 April 2018. Included in the costs used to calculate this profit are the following items:● Interest payable of
A company has reported annual operating profits for the year of £89.2m after charging £9.6m for the full development costs of a new product that is expected to last for the current year and two
Explain the approaches that can be used to reduce the dysfunctional consequences of short-term financial measures.
Describe the effect of performance measurement on capital investment decisions.
Explain how economic value added is calculated.
How does the use of return on investment as a performance measure lead to bad decisions? How do residual income and economic value added overcome this problem?
Why is it common practice to allocate central costs to measure divisional managerial performance?
Why is it common practice not to distinguish between managerial and economic performance?
Describe three alternative profit measures that can be used to measure divisional performance. Which measures are preferable for (a) Measuring divisional managerial performance(b) Measuring
Why might it be appropriate to distinguish between the managerial and economic performance of a division?
What are the pre-requisites for successful divisionalization?
What are the advantages and disadvantages of divisionalization?
Distinguish between divisionalized and non-divisionalized organizational structure.
(a) The investigation of a variance is a fundamental element in the effective exercise of control through budgetary control and standard costing systems. The systems for identifying the variances may
In recent years, writers have argued that standard costing and variance analysis should not be used for cost control and performance evaluation purposes in today’s manufacturing world. Its use,
From past experience a company operating a standard cost system has accumulated the following information in relation to variances in its monthly management accounts:Percentage of total number of
Frolin Chemicals Ltd produces FDN. The standard ingredients of 1kg of FDN are: 0.65 kg of ingredient F ................................@ ?4.00 per kg0.30 kg of ingredient D
Linsil has produced the following operating statement reconciling budgeted and actual gross profit for the last three months, based on actual sales of 122 000 units of its single product: The
Bedco manufactures bed sheets and pillowcases which it supplies to a major hotel chain. It uses a just-in-time system and holds no inventories.The standard cost for the cotton which is used to make
A company has produced the following performance report for April. The budget shown in the report was based on an original assumption that the total market size for April would be 40 million units.
Choc Co is a company which manufactures and sells three types of biscuit in packets. One of them is called ?Ooze? and contains three types of sweetener: honey, sugar and syrup. The standard materials
Valet Co is a car valeting (cleaning) company. It operates in the country of Strappia, which has been badly affected by the global financial crisis. Petrol and food prices have increased
The following data relate to both questions (a) and (b). A company has budgeted to produce and sell 15 000 units per annum of a single product. The budgeted market size for this product is 75 000
Why is standard costing more suitable for controlling the cost of unit-level activities?
How can standard costing be used when ABC has been implemented?
What is a statistical control chart? How can it be applied to determining when a variance should be investigated?
Explain why actual performance might differ from standard performance.
Describe the approaches for determining when a variance should be investigated.
Distinguish between a sales margin mix and sales margin quantity variance.
Distinguish between a sales margin mix and sales margin quantity variance.
Under what circumstances will a(a) Material mix(b) Material yield variances arise?
A major information source within many businesses is a system of standard costing and variance analysis.Required:(a) Describe briefly four purposes of a system of standard costing.(b) Explain three
Woodeezer Ltd makes quality wooden benches for both indoor and outdoor use. Results have been disappointing in recent years and a new managing director, Peter Beech, was appointed to raise production
Sticky Wicket (SW) manufactures cricket bats using high quality wood and skilled labour using mainly traditional manual techniques. The manufacturing department is a cost centre within the business
The following profit reconciliation statement summarizes the performance of one of SEWs products for March.............................................................(?)Budgeted profit...........
A company uses standard absorption costing. The following information was recorded by the company for October: (a) The sales price variance for October was:(i) ??38 500 favourable(ii) ??41 000
A company’s actual profit for a period was $27 000.The only variances for the period were.......................................................................$Sales price
Q plc uses standard costing. The details for April were as follows:Budgeted output ................................15 000 unitsBudgeted labour hours ......................60 000 hoursBudgeted labour
Explain what is meant by a volume variance. Does the volume variance provide any meaningful information for cost control?
How do sales variances differ between a standard absorption and marginal costing system?
What additional variance arises with a standard absorption costing system? Why?
Distinguish between a standard absorption and a standard variable costing system.
Why are sales variances based on contribution margins rather than sales revenues?
Explain how variable overhead efficiency and expenditure variances are computed. What are the possible causes of each of these variances?
What are the possible causes of (a) Wage rate(b) Labour efficiency variances?
What are the possible causes of (a) Material price(b) Material usage variances?
Describe the different purposes of a standard costing system.
What are standard hours produced? What purpose do they serve?
Describe how standard costs are established using engineering studies.
Explain how a standard costing system operates.
Describe the difference between budgeted and standard costs.
A firm of solicitors is using budgetary control. The senior partner estimated the demand for the year for each of the firm’s four divisions: civil, criminal, corporate and property. A separate
A competent management accounting system should endeavour to enhance the performance of a company. It should, in particular, consider the behavioural consequences of the systemRequired:(a) Explain
‘Responsibility accounting is based on the application of the controllability principle.’Required:(a) Explain the ‘controllability’ principle and why its application is difficult in
A college is preparing its budget for next year. In previous years the director of the college has prepared the college budget without the participation of senior staff and presented it to the
.A transport company is preparing its cost budgets for the coming year. It has been set both social objectives and cost targets by (the government which it must achieve in order to receive a subsidy.
The Rubber Group (TRG) manufactures and sells a number of rubber-based products. Its strategic focus is channeled through profit centres that sell products transferred from production divisions that
Albacore Chess Stores (Albacore) is a chain of 12 shops specializing in selling items associated with the game of chess: boards, pieces, clocks, software and books. Three years ago, the company was
Perkin manufactures electronic components for export worldwide, from factories in Ceeland, for use in smartphones and hand held gaming devices. These two markets are supplied with similar components
Club Atlantic is an all-weather holiday complex providing holidays throughout the year. The fee charged to guests is fully inclusive of accommodation and all meals. However, because the holiday
The standard cost card for a company’s only product is given below:.....................................................................$ per unitSelling price

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