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managerial accounting
Questions and Answers of
Managerial Accounting
The following articles provide some insight into the current and emerging trends and considerations in supply chain management. Select one of the articles from the list below.“Mitigating Supply
Companies should never sell any product lines with revenues below the variable costs. Do you agree? Explain.
Liles Company sells a product for $110 per unit. In 2022, it reported sales of $770,000 and a contribution margin of $308,000. The gross profit percentage was 50%. Variable costs consist of
Give five special decisions discussed in the chapter.
Review each of the following independent scenarios.Scenario 1: A salesperson was able to secure a special order that would increase his commission for this period. He is concerned that production
Administrative costs should typically be ignored for special decisions since they will not be avoidable and, therefore, do not represent relevant costs. Do you agree? Explain.
Find an article that discusses the role of data analytics in supply chain management. Write a one-page summary of the article. Make sure to cite your sources.
In deciding how to price special orders, the cost of goods sold during the period should be considered. Do you agree? Explain.
The production costs up to the inspection point are irrelevant to scrap or rework decisions for defective units. Do you agree? Explain.
Fixed costs are always sunk costs and are thus irrelevant. Do you agree? Explain.
Past information, although always irrelevant for special decisions, may be very useful. Future information is not reliable because future amounts are only estimates; it is also probably not very
Gross profit is synonymous with contribution margin. Do you agree? Explain.
Discuss why topics such as supply chain and theory of constraints are important when considering relevant costing decisions.
Why do companies conduct post-audit reviews of their relevant costing decisions?
Describe why data analytics is relevant to supply chain management. Recall that supply chain management is the process of designing, implementing, controlling, and monitoring all activities along the
The Humble Company determined that feet of lumber was the appropriate measure of activity for the cutting department. A sample of actual cost data for 2022 was selected as follows:a. Draw the sample
PNH Company produces plastic specialty toys. In 2022, the company produced and sold 80,000 toys. Each toy was sold at $8 and has the following production costs:Selling and administrative costs for
For each of the following statements, indicate whether the statement is true or false.a. The high–low method is superior to regression analysis because the high–low method consistently uses the
Confused Company is considering changing its legal fee representation. Information on the current and proposed annual costs is as follows:● Current structure: $7,000 fixed retainer fee and $120 per
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000
On March 1, Winston Company had 25,000 units of beginning inventory in work in process, which were 60% complete with the following costs:During March, 60,000 units were started. There were 15,000
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.●
Awesome Clothes has two departments. Other facts are as follows:● In the first department, material is introduced at the beginning of the process.● In the second department, material is
Sturdy Paper, which uses a process costing system, had the following production data during September:● 10,000 units were in the beginning inventory.● 80,000 units were started in production.●
Examine these graphs for Kristen Company and answer the following questions.Assume that if activity increased beyond 40 units, a new relevant range would apply (for example, if fixed costs are
Discuss the differences between fixed costs, variable costs, and mixed costs.
Identify the cost behavior in the graph. Dollars 400 350 300 250 200 150 100 50 0 0 10 Total Mixed Costs ? 20 ? Activity (Units) 30 40 ?
Assume the following information is known for Simple Watches Company:● The average sales price per unit is $37.● Total costs at the lowest observed activity of 150 units are $3,822 and at the
Hi-Tech Company sells small labeling machines for $60 each. Expected units, sales, and total costs in the next four quarters are as follows:a. What are fixed costs? Assume that the linear
Which information is found in the contribution margin statement that is not found in the traditional (functional) income statement?
All Weather Company makes umbrellas and outerwear items for rainy and snowy days. It had the following cost structure for the past year:a. What is the product cost per unit and gross margin per unit
From the visual fit, do you believe that there is a strong relationship between activity and costs and that all observations are a good representation? Costs Y Activity X
Style Company sells luggage sets for $200 each. its variable costs include $80 of manufacturing costs and $10 for selling costs. In 2022, the company sold 2,000 luggage sets. Its fixed costs depend
For retailers and service companies, product costs are variable and period costs are fixed. As such, retailers and service companies do not need to break down costs into variable and fixed costs. Do
The Outer Border Company determined that its packaging costs were a function of the weight of the packages. For budgeting purposes, the company wishes to identify the fixed costs and the variable
Simple Company compensates its salespeople based on a percentage of sales volume (items sold). Some of the salespeople have sold to customers with bad credit. The new chief operating officer has
Direct materials and direct labor will always be completely variable. Do you agree? If you do not agree, explain why not.
Bellis Company produces pottery items. Bellis sells each item for an average sales price of $10. The company has a choice of two production methods: hand-crafting and painting versus machine
Fun in the Sun sells beach chairs. The following facts are known for 2022:● Each chair sells for $15.● Variable costs are $80,000 for 10,000 chairs.● Current production and sales are 16,000
Match the following terms to the definitions below:Terms:i. Variable costii. Fixed costiii. Independent variableiv. Dependent variablev. Scatter diagramvi. High–low methodvii. Regression
Contribution margin is the same as gross profit. Do you agree? If you do not agree, explain why not.
Hayes Consulting Company builds database and point-of-sale systems for golf courses and country clubs. Mr. Hayes is trying to determine total revenues for the coming year and feels he can estimate
As R2 approaches +1, we are given a higher level of assurance that the independent variable accounts for most of the variability in the dependent variable. Do you agree? Explain.
An experienced company uses account analysis to separate its costs. For each of the following costs, indicate the category in which it would likely be classified:i. Variableii. Fixediii.
The wages of salespeople who are paid strictly on commission will always be variable, and the wages of those who are paid only a salary will be considered fixed. Do you agree? If you do not agree,
FQR’s Gadgets manufactures and sells a single product. A partially completed schedule of the company’s total and per-unit costs over a relevant range of 60,000 to 100,000 units produced and sold
Stuart Advertising Company decided to analyze its travel and entertainment expenses based on the number of customers it serviced each month. The regression analysis for the prior 12 months gave the
“Committed costs” is a term used to refer to fixed costs, whereas “discretionary costs” refers to variable costs. Do you agree? If you do not agree, explain why the statement is false.
Clean Company reported the following information on its current-year contribution margin income statement:a. The marketing department suggests that a new advertising campaign costing $15,000 can
Why is the organization of costs by behavior (variable versus fixed) useful for budgeting profits at different volume levels?
Following are two income statements: internal (contribution margin income statement, with costs classified by behavior) and external (a traditional income statement, with GAAP-based costs classified
Party Planner is considering two options, as follows:● Pay a variety entertainer (a comedian who is also a musician) a fixed amount of $10,000 and $100 per job● Pay the entertainer $600 per joba.
Why might there be a difference in operating income in a contribution margin income statement compared to a traditional income statement?
Understanding cost behavior is important. Select the graph for Williams Company that matches each description given. The vertical (or y) axes represent total dollars and the horizontal (or x) axes
For each of the following fixed costs, indicate if the costs are committed costs or discretionary costs:i. Committed costsii. Discretionary costsFixed costs:a. Company picnic costsb. Salary of
WKC Company reported the following overhead charges for the first 3 months:a. Which of the costs are fixed? Explain why.b. Which of the costs are variable? Explain why.c. Which of the costs are
BBC manufactures whiteboards. In March 2022, the variable production costs per unit were $15 and the average fixed production costs per unit (based on 5,000 whiteboards produced and sold) were $25.
Match the terms with their descriptionsa. Transferred-in costsb. Conversion costsc. Normal spoilaged. Process costinge. Equivalent unitsf. FIFO methodg. Weighted average methodh. Abnormal spoilage(1)
Light Plastics uses a process costing system. The following is known for September:● The company transferred out 66,000 units.● The beginning work in process was 10,000
Under process costing, a unit cost is determined for each product and then used to price the product at a margin above cost. Do you agree? If you disagree, explain why.
When is process costing used?
Great Paint Company uses a process costing system. The following applies to materials for June:● Materials are added halfway through the process.● The company started
Under process costing, since all units are the same, there is no distinction in the cost accumulation between direct materials costs and conversion costs. Do you agree? If you disagree, explain why.
Shiny Metals had a cost per equivalent unit of $6.00 for direct materials. Materials are added at the beginning of the first process. There were 20,000 units in work in process at the beginning of
Describe the cost flow for a process costing system.
Indicate whether job order costing or process costing best fits the scenario.a. Flour millb. Breweryc. Tire manufacturerd. Printing shope. Identical units are made continuouslyf. Costs are
Give the steps used to allocate costs in a process costing system.
Flour Everywhere uses a process costing system. The following applies to conversion costs for April:● Conversion costs are added uniformly throughout the process.● The
Flowers uses a weighted average process costing system. The following is known for November:a. What were the total costs to account for and allocate?b. What is the cost of goods completed and
Pencils and Pens uses a weighted average process costing system. The following applies to conversion costs for October:● 27,000 units were completed and transferred out.●
Explain what is meant by the term equivalent unit as used in process costing.
How are unit costs calculated under the weighted average method and under the FIFO method?
How are unit cost calculations different in the first and second production departments of a process costing system?
Cable Products uses a weighted average costing system with two departments: cutting and packaging. The following is known for February:a. What are the equivalent units for transferred-in costs in the
If a company does not have any beginning inventory in work in process, unit costs will be the same under the weighted average and FIFO process costing methods. Do you agree? If you disagree, explain
Questionable is the controller for a company that uses a process costing system. Questionable is concerned with the spoilage costs that have been identified as abnormal and has asked the staff
Discuss the differences in cost allocations when using the weighted average versus the FIFO method.
Companies use process costing systems in an effort to have lower cost of goods sold than if they used job order costing systems. Do you agree? If you disagree, explain why.
How is spoilage accounted for in a process costing system?
Both job order and process costing systems include direct materials, direct labor, and overhead as product costs. Do you agree? If you disagree, explain why.
As goods are finished in a process costing department, the costs are transferred from finished goods to cost of goods sold. Do you agree? If you disagree, explain why.
The two process costing methods are FIFO and weighted average. Weighted average is the most widely used because it is the more accurate approach. Do you agree? If you disagree, explain why.
Kralik’s Krazy Kostumes, LLC, manufactures its own costumes for business professionals and has two main products: the “Accounting Nerd” and the “Master Marketer.” The Accounting Nerd is a
One benefit of ABM is that because it provides information about which customers require a significant amount of service, marketing personnel can determine which customers to charge a high fee or, if
How is process costing different than job costing?
Pretty Lawn Products uses a process costing system. The following is known for July:● The company started 90,000 units and completed 87,000 units.● The beginning work in
VBD has started a home delivery business that buys items at wholesale prices and sells them to customers at retail prices. The owner has identified several key indirect cost activities for its
Morgan Company, which uses a normal job order cost system, has recorded the following information in its ledgers for several jobs during July 2022. Analyze the numbers given as well as the missing
Refer to the information in Problem 6. Record the information in the T-accounts.Data from problem 6The Moez Company uses a normal job order cost system. Other data:• There are three jobs that pass
Wizard Architects has three types of service lines: Basic: Customer accepts the quoted “off the shelf” service with no modifications.Upgrade: Customer is allowed three changes.Specialized:
Sanchez has developed the following product activity cost pool information for this year:Actual information follows for Standard Product A, Standard Product B, and Specialty Products:a. Determine the
Simple Company uses a traditional volume-based costing system with a single overhead cost pool and direct labor hours as the cost driver. Simple estimates total overhead for the year at $76,200 and
Wall, Inc., has identified the following overhead costs and cost drivers:The following are two of the jobs completed during the year:The company’s normal activity is 4,000 direct labor hours.a. If
You have been hired as a consultant to analyze the production job costs for a prestigious financial services company. Your analysis reveals that many tasks that were subcontracted out at cheaper
XYZ Company manufactures two products: Product DDD and Product EEE. Indirect manufacturing costs (overhead) are budgeted at $600,000 annually. The company is concerned about the assignment of the
Below you will find several activity drivers that can be used to assign indirect production costs (overhead) and general, selling, and administrative costs (period costs). For each of the activities,
With respect to indirect costs, explain the difference between a single overall plantwide rate and a departmental rate.
Value-added costs are those that customers are willing to pay for and that are necessary for the organization. Give examples of value-added and non–value-added costs for each of the following:a.
Which steps must an organization take to implement an activity-based costing (ABC) system?
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