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management and cost accounting
Questions and Answers of
Management And Cost Accounting
What are the possible causes of (a) material price and (b)material usage variances? (pp. 444-446)
~~ Explain why it is preferable for the material price variance to be computed at the point of purchase rather than the point of issue. (p. 445)
What are the possible causes of (a) wage rate and (b)labour efficiency variances? (pp. 448-449)
Explain how variable overhead efficiency and expenditure variances are computed. What are the possible causes of each of these variances? (pp. 449-450)
Why are sales variances based on contribution margins rather than sales revenues? (pp.451—452)
Distinguish between a standard absorption and a standard variable costing system. (p. 455)
What additional variance arises with a standard absorption costing system? Why? (pp. 455-458)
How do sales variances differ between a standard absorption and marginal costing system? (p. 459)
Explain what is meant by a volume variance. Does the volume variance provide any meaningful information for cost control? (pp. 455-456)
Describe how standard costs are established using engineering studies. (pp. 437-439)
Basic. Q plc uses standard costing. The details for April were as follows:Budgeted output 15000 Units Budgeted labour hours 60000 Hours Budgeted labour cost £540000 Actual output 14650 Units 61500
Basic. 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) £38500 favourable (ii) £41000
Intermediate: Calculation of actual quantities working backwards from variances. The following profit reconciliation statement summarizes the performance of one of SEWs products for March.The budget
Intermediate: Interpretation of variances and calculation of materials, labour and sales variances.Sticky Wicket (SW) manufactures cricket bats using high quality wood and skilled labour using mainly
Under what circumstances will a (a) material mix and (b)material yield variances arise? (pp. 476-480)
Distinguish between a sales margin mix and sales margin quantity variance. (pp. 480-482)
Describe the approaches for determining when a variance should be investigated. (pp. 483-485)
Explain why actual performance might differ from standard performance. (p. 484)
When should a standard cost variance be investigated?(pp. 483-484)
What is a statistical control chart? How can it be applied to determining when a variance should be investigated?(pp. 484-485). :
Howcan standard costing be used when ABC has been implemented? (pp. 485-487)
Why is standard costing more suitable for controlling the cost of unit-level activities? (p. 485)
What are planning variances? Why are they separately identified? (pp. 482-483)
Advanced. FG, an ink manufacturer, produces black ink by mixing three chemicals.The standard material costs per litre of black ink are as follows:Actual data for April were as follows:Output of black
Advanced. The following data are available for Products A, Band C:Required:(i) Calculate the total sales mix contribution variance.(3 marks)(ii) Calculate the total sales quantity contribution
Advanced. DB manufactures and sells e-readers. The standard labour cost per unit of the product is $7. Each unit takes half-an-hour to produce at a labour rate of $14 per hour. The budgeted
Advanced. The following data relate to both questions (a) and (b).A company has budgeted to produce and sell 15000 units per annum of a singlé product. The budgeted market size for this product is
Intermediate: Accounting entries for a standard costing system. Bronte Ltd manufactures a single product, a laminated kitchen unit with a standard cost of £110 made up as follows:The standard
Advanced: Reconciliation with sales mix, quantity operational and planning variances. DE is a distributor of three models of tablet PCs (Premium, Deluxe and Superfast) to retailers.The details of the
Advanced: Material mix and yield variances and ABC variance analysis. Choc Co is a company which manufactures and sells three types of biscuit in packets. One of them is called‘Ooze’ and contains
Advanced: Labour planning and operational variances and interpretation of variances. Truffle Co. makes high-quality, hand-made chocolate truffles which it sells to a local retailer. All chocolates
Distinguish between divisionalized and non-divisionalized organizational structure. (p. 498)
Distinguish between profit centres and investment centres. (pp. 498-499)
What are the advantages and disadvantages of divisionalization? (p. 499)
What are the pre-requisites for successful divisionalization? (p. 499)
Why might it be appropriate to distinguish between the managerial and economic performance of a division?(pp. 499-500)
Describe three alternative profit measures that can be used to measure divisional performance. Which measures are preferable for (a) measuring divisional managerial performance and (b) measuring
Why is it common practice not to distinguish between managerial and economic performance? (p. 502)
Why is it common practice to allocate central costs to measure divisional managerial performance? (p. 502)
Distinguish between return on investment, residual income and economic value added. (pp. 502-505)
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? (pp. 502-504)
Explain how economic value added is calculated. (p. 505-508)
Describe the effect of performance measurement on capital investment decisions. (pp. 510-512)
Explain the approaches that can be used to reduce the dysfunctional consequences of short-term financial measures. (pp. 512-514)
Intermediate. 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
Intermediate. Division L has reported a net profit after tax of £8.6m for the year ended 30 April 2015. Included in the costs used to calculate this profit are the following items:e interest payable
Intermediate: Return on investment and residual income. Southe Plc has two divisions, A and B, whose respective performances are under review.Division A is currently earning a profit of £35000 and
Advanced: Calculation of ROI and RI and conflict between NPV and performance measurement. The Biscuits division (Division B) and the Cakes division (Division C) are two divisions of a large,
Distinguish between intermediate products and final products. (p. 526)
Explain the four purposes for which transfer pricing can be used. (pp. 526-527)
Explain why a single transfer pricing method cannot serve all four purposes. (pp. 526-527)
‘If an external, perfectly competitive market exists for an intermediate product what should be the transfer price?Why? (pp. 527-529)
Define the term ‘net marginal revenue’. (p. 530)
‘If there is no external market for the intermediate product what is the optimal transfer price? Why? (p. 531)
Why are full cost and cost plus a mark-up transfer prices unlikely to result in the optimum output? (pp. 532-533)
Whyare marginal cost transfer prices not widely used in practice? (p. 532)
Why are transfer prices based on full cost widely used in practice? (pp. 532-533)
Discuss the advantages and disadvantages of negotiated transfer prices. (p. 533)
What are the circumstances that favour the use of negotiated transfer prices? (p. 533)
Describe the two proposals that have been recommended for resolving transfer pricing conflicts. (pp. 535-537)
What are the special considerations that must be taken into account with international transfer pricing? (pp. 539-540)
When there is an imperfect market for the intermediate product what is the optimal transfer price? (p. 543)
Intermediate. X plc, a manufacturing company, has two divisions: Division A and Division B. Division A produces one type of product, ProdX, which it transfers to Division B and also sells externally.
Intermediate. Division A transfers 100000 units of a component to Division B each year:The market price of the component is £25.Division A’s variable cost is £15 per unit.Division A's fixed costs
Advanced: Interdivisional profit statements and optimal transfer prices. Bath Co. is a company specialising in the manufacture and sale of baths. Each bath consists of a main unit plus a set of bath
Advanced: Interdivisional profit statements and impact of an investment on interdivisional transfers and profits. The DE Company has two divisions. The following statement shows the performance of
Identify and describe the different users of accounting information. (pp. 5-6)
Describe the differences between management accounting and financial accounting. (pp. 6-7)
Explain each of the elements of the decision-making, planning and control process. (pp. 7-9)
Describe what is meant by management by exception.(p. 9)
Explain how the business environment that businesses face has changed over the past decades and discuss how this has had an impact on management accounting. (pp. 9-13)
Describe each of the key success factors that companies should concentrate on to achieve customer satisfaction. (pp. 13-14)
Explain why firms are beginning to concentrate on social responsibility and corporate ethics. (p. 15)
Describe the different functions of management accounting. (pp. 16-18)
Describe enterprise resource planning systems and their impact on management accountants.(p. 12)
Explain why management accounting practices tend not to differ across countries. (p. 16)
Define the meaning of the term ‘cost object’ and provide three examples of cost objects. (pp. 25-26)
Distinguish between a direct and indirect cost. (pp. 26-27)
Describe how a given direct cost item can be both a direct and indirect cost. (p. 28)
Provide examples of each of the following: (a)direct labour, (b) indirect labour, (c) direct materials,(d) indirect materials and (e) indirect expenses. (p. 27)
Explain the meaning of the terms: (a) prime cost,(b) overheads and (c) cost allocations. (pp. 25-28)
Distinguish between product costs and period costs.(pp. 29-31)
Provide examples of decisions that require knowledge of how costs and revenues vary with different levels of activity. (p. 31)
Explain the meaning of each of the following terms:(a) variable costs, (b) fixed costs, (c) semi-fixed costs and (d) semi-variable costs. Provide examples of costs for each of the four categories.
Distinguish between relevant (avoidable) and irrelevant(unavoidable) costs and provide examples of each type of cost. (pp. 34-35)
Explain the meaning of the term ‘sunk cost’. (p. 35)
Distinguish between incremental and marginal costs.(pp. 36-37)
What is an opportunity cost? Give some examples. (35-36)
Explain responsibility accounting. (p. 38)
Basic. Classify each of the following as being usually fixed (F), variable (V), semi-fixed (SF) or semi-variable (SV):(i) direct labour;(ii) depreciation of machinery;(iii) factory rental;(iv)
Basic. The audit fee paid by a manufacturing company would be classified by that company as:(a) A production overhead cost(b) A selling and distribution cost(c) A research and development cost(d) An
Basic. Which ONE of the following costs would NOT be classified as a production overhead cost in a food processing company?(a) The cost of renting the factory building(b) The salary of the factory
Basic. Which one of the following would be classified as indirect labour?(a) assembly workers on a car production line;(b) bricklayers in a house building company;(e) machinists in a factory
Basic. Fixed costs are conventionally deemed to be:(a) constant per unit of output;(b) constant in total when production volume changes;(c) outside the control of management;(d) those unaffected by
Intermediate. A manufacturing company has four types of cost (identified as T1, T2, T3 and T4). The total cost for each type at two different production levels is:Which cost types would be classified
Intermediate. Prepare a report for the managing director of your company explaining how costs may be classified by their behaviour, with particular reference to the effects both on total and on unit
Intermediate. Cost classifications used in costing include:(i) period costs;(ii) product costs;(iii) variable costs;(iv) opportunity costs.Required:Explain each of these classifications, with
Intermediate.(a) Describe the role of the cost accountant in a manufacturing organization. (8 marks)(b)Explain whether you agree with each of the following statements:(i) ‘All direct costs are
Intermediate. ‘Costs may be classified in a variety of ways according to their nature and the information needs of management.’ Explain and discuss this statement, illustrating with examples of
Intermediate. It is commonly suggested that a management accounting system should be capable of supplying different measures of cost for different purposes. You are required to set out the main types
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