Contemporary Accounting A Strategic Approach For Users 10th Edition Phil Hancock, Peter Robinson, Mike Bazley - Solutions

Projected sales for each of the first three months of operations for AKP Ltd are as follows:$March 480 000 April 590 000 May 505 000 The company expects to sell 10 per cent of its merchandise for cash. Of sales on account, 60 per cent are expected to be collected in the month of the sale, 30 per
Some companies, such as Volvo, purportedly no longer prepare budgets. What are the main advantages and disadvantages of using a budget? Do you believe that Volvo has no plans?
Discuss the interrelationships between the sales budget and the production budget in a manufacturing organisation.
Why should all senior personnel participate in formulating and submitting budget estimates?
Explain how budgets mean different things to different people within an organisation, giving reasons.
Discuss the stages and parties typically involved in the budget process.
Activity-based costing (ABC) is a system of costing where the costs are allocated to a cost object based on an activity measure. Therefore, this is the major influence on the costs incurred by various cost objects.
If a firm has a significant error in how overheads are allocated to cost objects, such as a product, it may find that it has set prices that are either too high or too low. In the case of the former, the firm is not able to compete with rivals and could be expected to lose market share.
As suggested, we could choose a university as being an organisation that we are all familiar with. A support activity might be the reader services of a library. The cost of reader services would primarily relate to the cost of library staff and other related expenditures (e.g. information
There are two main reasons why estimates are used in determining absorption rates.First, some overhead costs are only known months after they have been incurred. For example, as water consumption charges may be billed to customers biannually, a firm would have to wait six months before they could
Absorption costing means that it has been determined that the costs of a product include all variable and fixed manufacturing costs.
Product costs are those costs that can be allocated to a product. Consistent with the treatment of inventory for general purpose reporting purposes, product costs are all the costs that are reasonable and have, by necessity, been incurred to get a product to a condition and location ready for sale.
A direct cost is one that is readily traceable and identifiable with a product. Indirect costs, also known as overhead costs, cannot be as easily and conveniently identified with a particular product.
a variable b fixed c fixed
A linear fixed cost remains constant for all levels of activity. A stepped fixed cost is constant for certain levels of activity but increases once a certain level of activity is exceeded (e.g. annual supervisory salaries would be fixed for a specified level of supervision (e.g. 10 subordinates
As it is assumed that variable costs are the same per unit of activity, the total variable costs will move in direct proportion to changes in activity levels (i.e. in a linear fashion). In reality, variable costs do not strictly behave in this manner. For example, a firm may receive quantity
The relevant range of activity refers to the levels of activity within which the firm can confidently establish the relationship between the independent and dependent variables and identify how total fixed costs and per unit variable costs will behave with changes in activities. This information is
What factors should a manager of a medium-sized multiproduct manufacturing firm consider before deciding to implement a ‘traditional’ ABC product costing model?In what way might time-driven activity-based costing(TDABC) be a suitable alternative to the traditional ABC model?
‘ABC is only really useful for costing manufactured products. Thus, ABC is of no use to service-providing organisations.’ Critically evaluate this statement using an example of a service-providing industry (e.g. health care, higher education, banking or retailing) to support your view.
In a manufacturing setting where multiple products are produced in varying output volumes and levels of production complexity, how difficult is it to categorise cost behaviour as being fixed or variable on the basis of a volume-based measure such as DLH or MH? What value is obtained from
TVBC methods have been criticised on the grounds that they provide misleading information when fixed manufacturing overheads account for a significant proportion of product cost. Explain how ABC might yield more meaningful product cost information.
Define and briefly explain what is meant by each of the following terms:i activity ii cost pool iii cost driver.
Discuss how the use of variable costing may ignore the impact of fixed costs.
If a manager is paid a bonus based on the profit they have earned, what might be the problems, in the short run, of using absorption costing?
What are period costs?
Give examples of expenditure in a manufacturing firm that would be classified as direct costs and indirect costs.
What are some of the problems with using past activity and cost data to predict future cost behaviour?
In using the high-low method of analysis to identify the cost components of fixed and variable, two variables are used: activity and costs. Which variable is considered to be the independent variable and which is the dependent variable? How would this influence what is identified as being the high
Identify and discuss what two assumptions are made when estimating how a cost will behave.
Explain why it is important to determine product or service cost.
A typical strategy map, which has the learning and growth perspective at the base and the financial perspective at the top, traces cause and effect relationships bottom up. Employee skill sets and competencies, attitudes towards customers and behaviours are targeted in the learning and growth
Examples of financial measures are total income/revenue, return on assets, return on shareholders’ equity and cost per unit. Financial measures are easier to calculate than non-financial measures and are more well-known. Financial measures provide standards for comparison across entities.
Relevant financial measures widen in scope as managerial responsibility expands from a cost centre to a profit centre and then from a profit centre to an investment centre. For a cost centre manager (e.g. a production manager), the financial measures would be cost-related and comprise such things
A cost centre is a business unit (which could be a function, an activity or even an item of equipment) whose costs are readily attributed to it. A cost centre is appropriate when a manager only has control over costs and not revenues.A profit centre is a business unit that is accountable for both
While it is true that qualitative factors are, by definition, not measurable in quantitative terms, where they pose a significant opportunity and/or threat to a firm’s chosen business strategy, they must be taken into account. For example, if an organisation fails to promptly deal with acts of
The senior executive team of Aussie Fries attended a presentation made by Robert Kaplan on the nature and use of the BSC. After the presentation, the senior executives decided that they should develop a BSC for Aussie Fries. As a first attempt they decide that they will use the four balanced
One of Kaplan’s recommendations for improving management accounting was the increased use of non-financial performance indicators to control organisational performance. Explain and discuss the advantages and disadvantages of using non-financial performance indicators in controlling organisational
The list below contains a variety of performance measures that could be used in a balanced scorecard. Classify each measure as financial, customer, internal business process or learning and growth:a market share b net profit c defect rate d number of employees attending training programs e lead
The following KPIs are calculated on a monthly basis for the loans department in a credit union. Classify each KPI as strategic or operating; driver or outcome:a dollars spent on advertising b time taken for loan approval c dollar value of loans approved d number of loan applications received via
Explain the differences between strategic, operating, driver and outcome KPIs. Give examples of each of the four types for a financial institution (see Table 13.2).
Icey Delights manufactures a range of ice cream novelty bars for domestic consumption. Icey Delights’ market share has rapidly expanded over the past five years to the extent that the sales demand for the company’s products has outgrown the capacity of its 20 year-old manufacturing facility in
You are a director of a credit union and you have been appointed to the remuneration subcommittee. One of your first tasks is to consider a bonus for the general manager. You believe that a bonus should be paid based on performance. The credit union has 10000 members and total assets of $50
Four different responsibility centres in Hancock Ltd are: (i) Human Resources, (ii) Repairs and Maintenance, (iii) Dairy Products and (iv) Frozen Goods. The Dairy Products and Frozen Goods responsibility centres manufacture packaged consumer food products that are sold into the Australian grocery
You are the Director of Nursing Services for the Bentleigh Private Hospital Group.a Identify and explain what type of responsibility centre will best describe the financial nature of your managerial accountability?b Which of the following items are likely to be controlled by you?i Average daily bed
Visit the Woolworths Limited website (www.woolworths.com.au) and download the company’s most recent annual report (or see Appendix 1). Locate within the Directors’ Statutory Report the report of the Remuneration Committee which provides comprehensive disclosures about the remuneration paid to
Why might a company provide senior management with a remuneration package that offers them an atrisk component of total compensation linked to their achievement of pre-defined performance targets? In what way might the financial performance targets upon which all bonus compensation is determined
Table 13.2 provides a basic BSC for a financial institution. For each of the four perspectives, provide two financial and/or non-financial performance measures in addition to those provided in the chapter.
Explain the four generic perspectives of a BSC. Why might a not-for-profit or government funded service provider choose to replace the financial and customer perspective with one that reflects the interests of those parties for whom it produces outcomes (e.g. clients, donors, taxpayers and the
Explain why the financial indicators traditionally used to measure investment centre performance should not be the only metrics used to evaluate the centre’s management.
What are key performance indicators (KPIs) and how do they shape the level and form of data reported to managers for decision-making purposes.
Given the comments made about creative accounting in general purpose financial reports, is management accounting subject to similar types of practices? Identify and explain three decisions that can be made by an investment centre manager to present an improvement in the short-term performance of
In evaluating the return earned by an investment centre on the assets it controls, managers will also examine the net margin percentage (i.e. net profit before interest and tax divided by net revenue) and the asset turnover ratio(i.e. net revenue divided by average total assets). Explain why
While return on equity (ROE) is a measure of interest to shareholders, the managers of investment centres are more likely to focus on the return on investment (ROI)measure. Explain why an ROI divisional performance metric might be of greater significance to an investment centre manager than ROE.
‘Control, despite its financial accounting interpretation, is never absolute when it comes to holding a manager to account for the performance of their responsibility centre.No individual manager can ever always control things that they are asked to account for.’ Critically evaluate this
Goal congruence is said to be a necessary condition if an organisation is to be successful. What is meant by goal congruence and how does the system of responsibility accounting facilitate such congruence?
Responsibility accounting is a system that identifies decision centres and the managers responsible for those centres (e.g.departments). Costs and revenues are traced to these centres and compared with planned costs and revenues. Therefore, the performance of managers, and their centres, can be
The competitive strategy of the firm requires managers to focus on those factors that are relevant to the successful pursuit of that strategy. If following a cost leadership competitive strategy, managers require information about the costs of products or services supplied. However, managers have
a Stage 1: Setting objectives. Having formulated goals, objectives of the organisation need to be detailed for both the short and long term. Organisations do not have objectives per se; the objectives will reflect the objectives of those people involved in the organisation. These objectives can be
In the information age, many firms produce unprecedented levels of information about their operational performance and how value chain relationships impact on performance. The challenge for managers in an information-rich environment is ensuring they are not overwhelmed by the data they access.
If managers are to make effective day-to-day resource allocation decisions, they require accounting information provided in near-to-real time and high levels of granularity. However, for a key external stakeholder such as a bank, their task is to monitor borrower performance so as to assure
Annual GPFRs contain summarised information – more detail may be required by management. More frequent and up-todate information is needed by managers to take action. The information in annual GPFRs may not be suitable for decision making in relation to planning, control or investment.
Giggling Brothers, wholesalers of fine wines, has been trading profitably for a number of years using a manual accounting system. However, the company has experienced, every six months or so, severe cash-flow problems caused by a number of factors including the excessive purchase of ‘special
You work for a business primarily involved in health care, which runs a number of nursing homes for the elderly and has a head-office staff consisting of you and two owner-directors. Each of the nursing homes has a sister-in-charge who looks after the day-to-day running of the nursing home, but the
Describe why it is important to set strategic goals for a business and comment on the problems of setting those goals.
‘For plans to be effective, management should consider the wider environmental factors that relate to the organisation.’Discuss.
Give illustrations of ways in which the behaviour of individuals can affect the planning and control process.
Discuss how the control models of accountants and engineers might differ. Through this comparison, provide details of any limits on the planning and control process that you can identify.
Discuss the meaning of and difference between strategic and operating decisions.
In each of the situations below, identify what you believe your information needs would be.a If you are the manager of a local branch of a national retailer. All buying is done centrally and prices are fixed. You are in charge of the day-to-day management, and hiring and firing of staff. Your
Noting that Woolworths prepares financial reports with a ‘year’ end that falls on a Sunday closest to 30 June, refer to the extract of the Woolworths Limited financial report in Appendix 1.a Do you think there is more information in the annual GPFR than is required by the average investor?b The
In determining the design of a management accounting system (MAS) and the information to be provided to organisational managers, the cost-benefit test is said to be an influential factor. Briefly explain why costs and benefits need to be taken into account when determining the form and scale of a
The strategic planning process entails four stages:strategic analysis, strategic planning, strategy choice and strategy implementation. Briefly explain what each stage of the strategic planning process entails. Providing a relevant example, explain how accounting information contributes to the
Briefly explain how advances in information and communications technology have influenced the provision of accounting information to a firm’s managers.
Similar types of healthcare services are provided by for-profit (e.g. the Australian Securities Exchange-listed Ramsay Health), not-for-profit (e.g. St John of God Health Care) and public sector organisations (e.g. state government health departments).i How might the sector within which a
How might the competitive strategy of cost leadership or differentiation influence the accounting information provided to a firm’s managers? Would the management accounting information vary according to the operational responsibilities (e.g. product development, process improvement, production,
Explain why some external users are able to access internal company information beyond that published in the annual GPFR.
What useful management information is available from the accounting records from which annual reports are prepared?
What is likely to be the major impact of organisational size on the information needs of managers?
One of the major improvements that bankers wish to see in respect of financial information is more timely information. Explain what this means and why it is so important to bankers. How might this not be the case for the managers of a firm that wants to borrow from a bank?
Debits and credits are rules concerning the recording of transactions into asset, liability, income, revenue, expense and equity accounts.
The trial balance of the Hourglass Organisation does not balance. On examining the records, you discover the following information:a The purchase of supplies using $500 cash was incorrectly recorded as a purchase on credit.b The debits and credits of accounts payable totalled $10 000 and $14 000
The following trial balance and extended trial balance has been prepared. Record the adjustments on the table provided and journalise the adjusting entries.
Prepare general journal entries for the following independent transactions.a Issued 25 000 $1 ordinary shares paid to 80 cents for cash.b Issued 200 $2 ordinary shares to a solicitor in exchange for legal advice.c Profit for the year was $123 000. Directors paid the 5 per cent dividend on 100 000
Prepare general journal entries for the following independent transactions. You can also prepare a worksheet for the same data. Note: Some of the terms that are used appear as margin definitions throughout this book or you will need to look them up in an accounting dictionary.a Issued 5000 fully
Prepare general journal entries to record the following transactions:a A building worth $100 000 is acquired and financed by paying $20 000 in cash and negotiating a mortgage for the remaining $80 000.b Depreciation on factory machines is estimated to be $2000.c A total of 100 shares in Ravan
Prepare the trial balance at the end of the period, after recording the following opening balances and transactions in the appropriate accounts:Debit Credit$ $Cash at bank 4000 Accounts payable 5600 Mortgage 10000 Capital 20000 Accounts receivable 9600 Inventory 13200 Delivery vehicles 2400
Philjen balances its books on 31 December each year. As the accountant, you are required to make adjustments to balances in the business’s accounts. Journalise, in general journal form, the following items. Each adjustment is independent of the others.a The next electricity account is due on 31
Record the following transactions using a worksheet, and then post each transaction into T accounts. Prepare a trial balance.
Refer to Problem 13 in Chapter 6 of this textbook. Record the transactions as debits and credits, and show them in the form of T accounts. Prepare a trial balance.
Refer to Problem 14 in Chapter 6 of this textbook. Prepare a trial balance from your worksheet.
Record the following transactions, using a worksheet, and then translate each transaction into debits and credits and show them in the form of T accounts.
Prepare a balance sheet from the following information:$Bank overdraft 10000 Land and buildings 120000 Accounts receivable 13450 Accounts payable 29600 Inventory 63230 Short-term loan payable 15000 Vehicles 27300 Equipment 7600 Taxation 10000 General reserve 27000 Dividends payable 13500 50000 $1
At the end June the following trial balance was prepared:Debit Credit$ $Cash 49680 Accounts receivable 33700 Inventory 27840 Land and buildings 188000 Accounts payable 22000 Loan 28000 Capital 80000 Sales 275420 Cost of goods sold 45000 Advertising expense 16000 Electricity account 7700 Rent
Amber Ltd had the following transactions during June:– 3 Paid electricity bill, $480– 5 Purchased inventory on credit, $2500– 7 Sold goods on credit, $12 000– 9 Prepaid insurance for June to October, $6000– 12 Paid salary expense, $2500– 15 Paid account payable from June 5– 22
Identify the affected accounts from the following list of transactions and the effect of the transactions on the accounts as illustrated in the first transaction.
Why are final adjustments not required in the cash basis of accounting?
Explain the differences between a trial balance prepared under a traditional approach and one prepared from a worksheet.
Explain why it is important to prepare journal entries instead of simply posting transactions directly to the ledger accounts.
Explain the role of journals and ledger accounts.
The amount of working capital and the change in working capital are just two indicators of the strength of the current position. A comparison of the current ratio and the quick ratio, along with the amount of working capital, gives a better analysis of the current position. Such a comparison

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Contemporary Accounting A Strategic Approach For Users 10th Edition Phil Hancock, Peter Robinson, Mike Bazley - Solutions

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