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managerial accounting
Questions and Answers of
Managerial Accounting
The IMA Management Accounting Competency Framework identifies six domains and core competencies management accountants must possess in order to perform their jobs effectively in today’s world of
The income statement reports assets and liabilities as of a point in time. Do you agree with this statement? Discuss.
Morgan’s financial statement had the following balances at year end:a. What was the amount of the current assets?b. What was the amount of the current liabilities?c. What was the quick ratio?d.
Whitney has working capital of $1,600. Cash is $600, merchandise inventory $1,700, and current liabilities are $1,500. The only other current account is accounts receivable.a. What is the amount of
Mariah Company is currently preparing an income statement budget for 2023. Mariah, the owner of Mariah Company, requests assistance with analyzing results of operations in 2022.a. In 2022, Mariah
A cash flow statement is very valuable in assessing a company’s debt paying ability. Do you agree? Discuss.
What would be the effect of each of the following transactions on each of the following ratios? An example is provided for you.Example: Collect $10,000 on outstanding accounts receivable.The current
A high current ratio is not always desirable. Do you agree? Discuss.
Are the following ratios useful in assessing the liquidity position of a company: return on stockholders’ equity, current ratio, inventory turnover? Discuss.
Match each of the following decisions to the phase of the IPO model the decision relates to.1. What type of system should be used to analyze captured data?2. How frequently is the information
Distinguish among the three most common comparative financial statement techniques.
Select the letter of the description that best fits each ratio or analysis. Choose from:a. Reports all amounts as percentages of a base amount
Contemporary Tableware manufactures dishes and cutlery. The production supervisor has noted that the direct labor efficiency variance has decreased over the last three quarters as follows:
Suvaranat shows the following budgeted and actual data for the current fiscal year:a. Was the company effective in reaching its goals? Support your position with numbers.b. Was the company efficient
For each of the following items, select the term that best fits the description:a. Price varianceb. Efficiency variancec. Flexible budgetd. Profit centere. Balanced scorecardf. Management by
In the input-process-output model for standard costing, the inputs are the standard costs. What information is used to establish the standard price for direct materials and direct labor?
What information is used to establish the standard quantity of materials and labor to be used in production for the current period?
Sparkle Clean uses a standard cost system to apply factory overhead costs to units of toothpaste produced. The following facts are known:● Both variable and fixed factory overhead costs are applied
Identify each statement as True or False.a. In the performance report, the flexible budget costs for the units produced are compared to the actual costs to produce those units.b. The term “flexible
In a responsibility accounting system, who is assigned responsibility for explaining the price and the quantity variances for direct materials and direct labor?
The Trendsetter Company produces fashionable clothing. It had the following standard costs for the month of May 2022:● Direct materials per unit: 5 yards at $6.00 per yard● Direct labor per unit:
Identify each statement as True or False.a. Having a bonus based on the direct materials purchase price variance can motivate purchasing department personnel to buy inferior goods.b. A master budget
The Clement Co. uses a flexible budget and standard costs; it applies overhead on the basis of standard labor hours. The following information is known for Clement Co.a. Calculate the direct
Because actual costs have already happened (sunk costs), there is no point in analyzing variances. Do you agree? If you do not agree, explain why not.
Give all of the journal entries for direct materials, direct labor, and variable overhead for Problem 5.Data from Problem 5The Clement Co. uses a flexible budget and standard costs; it applies
Plastic Imitations produced 1,000 units during November. Normal activity for the company is 1,200 units per month. The budgeted fixed overhead was $4,800 and the actual fixed overhead for November
All unfavorable variances should be investigated, and all favorable variances should not be investigated because the costs will always outweigh the benefits. Do you agree? If you do not agree,
Tasteful Art uses standard costs and flexible budgets for control and product costing. Two hours of work is required per finished unit. The fixed overhead rate per hour is $1.20. During March, the
The Farr Quality Bathroom Tile Company has developed the following standards for one of its products:The company produced 1,200 units and sold all of the units at the budgeted sales price of $85.
The organization’s long-term practical capacity should be used to create the flexible budget for the period. Do you agree? If you do not agree, explain why not.
The performance report for Smart Pens included the following variances for direct materials: price variance, $10,200 favorable; flexible budget (total) variance, $7,200 favorable. The materials
The Mazdiak Company has converted to an activity-based costing (ABC) system, as discussed in Chapter 4. Accordingly, the company prepares a flexible budget based on the four activity costs for
The price variance for fixed overhead represents the savings or extra cost if production personnel are efficient. Do you agree? If you do not agree, explain why not.
The performance report of Custom Jewelry included the following variances for direct labor: price (rate) variance, $4,000 favorable; quantity (efficiency) variance, $14,000 unfavorable. For each
Holtje sells hammocks to many different retail outlets, and has gathered the following information for the period:* U = unfavorable, F = favorable.Additional information:● Planned production was
Standard costs should be based on the assumption of ideal (maximum efficiency) conditions to hold production and purchasing employees accountable. Do you agree? If you do not agree, explain why not.
As part of the management by exception philosophy, Luggage Manufacturing gives bonuses based on positive variances with respect to the following:i. Using less materials than allowed in the flexible
Trendy Corporation manufactures a basic line of ground cover with the following standard unit costs:The following information pertains to the month of December:Standards are based on normal monthly
The sum of the price and quantity variances for variable overhead equals the flexible budget variance for variable overhead. Do you agree? If you do not agree, explain why not.
Crispin Company uses a standard-cost system. The standard direct materials cost per unit is $20, consisting of 4 lb at $5 per lb. The standard direct labor cost per unit is $40, consisting of 2 hours
The balanced scorecard is a performance measurement system that recognizes both financial and nonfinancial measures when evaluating a company’s performance. The balanced scorecard consists of four
The only reason a company would use a standard costing system is for planning and control purposes. Do you agree? If you do not agree, explain why not.
Costs of quality fall into four main categories: prevention, appraisal, internal failure, or external failure.a. Indicate for each of the costs whether it should be classified as a prevention,
Young, Inc., manufactures cardboard boxes. Young has shared the most recent performance report with you as follows:a. What are the master budget revenues?b. What are the master budget variable
Describe the contents of a flexible budget in a standard costing system for a manufacturer.
Morra is the new manager of the parking division of a small college; her division is set up as a profit center. Morra has responsibility for control of the costs and for revenues generated by parking
Describe the information contained in a performance report that a company using a standard costing system would prepare.
Purchasing Company budgeted $100,000 of factory overhead cost to manufacture 5,000 units in 2022. At the end of 2022, management asked production why only 4,000 units were produced and the factory
Variances are insufficient performance metrics since they represent past historical/sunk costs; promote short-term thinking; represent mainly lag indicators; do not shed light on the source of the
If a company spends less on materials than the master budget, management is working efficiently and should not investigate the variances. Do you agree? If you do not agree, explain why not.
Actual weekly payroll costs for direct labor for installations of Easy Applications were $10,500 for 500 hours. The standard was 2 hours per installation. The direct labor standard cost was $18 per
Variances only list the amounts over or under budget; they do not explain the causes of the problems. Do you agree? Explain.
Give three reasons why a direct labor unfavorable variance may occur.
Find an article that discusses the role of the balanced scorecard within organizations. Write a one-page summary of the article. Make sure to cite your sources.
Basing bonuses only on favorable purchasing and production variances could encourage employees in the short run to act in a manner that does not promote goal congruence (is best for the company). Do
How is the concept of “management by exception” used with standard costing?
What is a balanced scorecard report, and how is it useful to management?
If a company spends more money on appropriate prevention and appraisal costs, it should realize lower internal and external failure costs of quality in future periods. Do you agree? Explain.
What are capital projects? Explain the purpose of capital projects.
The Taylor Company is planning to purchase a new machine for $30,000. The payback period is expected to be 5 years. The new machine is expected to provide after tax cash flow from operations of
Cainas/Jozsi Cookies is considering leasing a new kitchen space and purchasing new equipment, or completing an addition on the current kitchen space and refurbishing some of the old equipment. Other
Jenny’s Flower Shop wants to expand its operations and is looking for a larger facility. The company can add to the current building or sell the building and lease a larger facility nearby. Other
Describe the input-process-output model as it applies to capital budgeting.
Limon Company is planning to invest in a machine with a useful life of 5 years and no salvage value. The machine is expected to produce after-tax cash inflows from operations of $20,000 per year.
Use the chart to answer questions 4a–4c:a. Set up the schedule of relevant cash flows. Remember: Relevant items are those that differ between alternatives and occur in the future. Calculate the NPV
Windy Company invested in a 2-year project with an expected internal rate of return of 10%. The machine is expected to produce cash flows from operations of $50,000 in the first year and $45,000 in
Give several capital budgeting decisions for an electric company.
Assume that the amounts in Problem 4 are before taxes and the tax rate is 30%. As a result, the analysis would differ as follows:● The after-tax cash cost savings net only 70% of the amounts.●
What are the main categories of capital projects?
The Amber Company expects a 16% accounting rate of return on an investment that cost $30,000 and has an expected 8-year life and no salvage value.a. What is depreciation expense?b. What are the
Discuss how capital budgeting is linked to an enterprise’s vision, mission statement, and strategic plan.
Expo is considering buying a new truck costing $32,000, which should generate after-tax cost savings of $10,000 for each of the first 3 years and $9,000 in each of the last 3 years. The salvage value
On December 31, 2022, CC is considering launching a new product line and entering a new market.● The new product line would require an infrastructure cost today of $240,000.● The anticipated
Capital budgeting decisions are difficult because of increased uncertainty of risks due to changing technology, security, global pressures, competition, and regulations. Do you agree? Discuss.
Mr. Ambitious is considering purchasing a new machine to be used in his dry-cleaning business. The following cash savings are expected from the $40,000 investment over the next 5 years: years 1 and
Some intangible benefits are difficult to estimate and quantify. Give some intangible benefits of setting up an “online store” in addition to having a physical store location.
At the beginning of 2022, Auner Company is considering whether to continue to make a product or to buy the finished product from a supplier. The following data have been gathered:● Expected sales
Mr. Ambitious is considering the purchase of a new machine to be used in his dry-cleaning business. The following after-tax cash savings are expected from the $40,000 investment over the next 5
The following facts are known about an investment for Amol Company: The payback period is 4 years, the expected after-tax cash flows per year are $8,000, and the life of the project is 6 years.a.
Cool for School Corporation is a manufacturer of smart boards and plans to purchase new equipment for its manufacturing process. After contacting the appropriate vendors, the purchasing department
If management is not committed to funding a project or does not believe that the project is a strategic fit for the organization, the potential for not approving the project is high, even if the
Morales Company is planning to invest in high-tech equipment costing $580,000, which has a useful life of 6 years and a $40,000 salvage value. The investment is expected to produce net cash (after
“The effectiveness of the capital budgeting methodology is questionable because predicting future cash inflows is often difficult and full of uncertainties.” Do you agree with this statement?
Cristina Company is considering investing in a new electronic data interchange (EDI) integrated system. The expected data follow. The cost savings are already after taxes, so taxes can be ignored.a.
Sporty is interested in expanding its operations. A new facility will provide cash savings. Additionally, the company can sublease space and realize cash lease revenues. The current facility was
The following information is known about Premiere Suits, which sells tailored, hand-detailed suits and provides alteration and tailoring services:● The cash balance on November 1, 2022, is
Match the following terms with the descriptions provided below by placing the letter of the term in front of the description:a. Manufacturing overhead budgetb. Budgetary slackc. Budget committeed.
Custom Windows has budgeted annual unit quarterly sales and production data as follows:● Each unit requires 2 pounds of direct materials at a standard cost of $10 per pound.● Payments for
Fancy Runners manufactures and sells table runners for an average price of $18.00. Other facts are as follows:● Materials cost $12 per runner.● The company projects 16,000 runners to be sold in
Distinguish between short-term and long-term objectives. Provide two examples of each for a car manufacturer.
Explain why objectives need to be quantifiable to provide value to management in the budgeting process.
Identify how prescriptive and descriptive analytics can be used in the capital budgeting process.
True or False: For each of the following statements, identify whether the statement is true (T) or false (F).a. The internal rate of return assumes that funds are reinvested at the company’s cost
Find an article that discusses a capital investment decision. Write a one-page summary of the article that includes discussion of the relevant internal and external factors and risks. Make sure to
Companies today face many uncertainties that make predicting future cash flows difficult for major projects. Several such risks are data security breaches (hacking, stealing of data), terrorist
For each of the statements, indicate which capital budgeting accounting method applies. More than one method may be used for a given item.P = PaybackARR = Accounting rate of returnIRR = Internal rate
For each of the following scenarios that involve significant investments in technology, provide examples of one tangible benefit and one intangible benefit.a. Wearable technology such as uniforms,
Describe the major benefits and weaknesses of the payback period and accounting rate of return methods.
MOP factors were described as important considerations for the success of projects. For each of the items described, select the appropriate category. Choose from:M = Management view, including
If the net present value is zero, the project has no value in the present and should be rejected. Do you agree with this statement? Explain why or why not.
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