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management accounting

Questions and Answers of Management Accounting

Define normal costing.
State three examples of service industries that use the job costing approach.
“As data processing becomes more economical, more costs than just direct material and direct labour will be classified as direct costs wherever feasible. ?Give three examples of such costs.
Fill in the unknowns in physical units. Case Flow of Production Work-in-process, beginning inventory 1,500 4,000 Started Completed and transferred Work-in-process, ending inventory 6,500 ? 8,000
Consider the following data for 2011:
One department of Guelph Instruments Company manufactures basic handheld calculators. Several materials are added at various stages of the process. The outer front shell and the carrying case, which
A department of Gatineau Textiles produces cotton fabric. All direct materials are introduced at the start of the process. Conversion costs are incurred uniformly throughout the process.In April,
Process costing systems are used in all business sectors. For each example listed, indicate whether the company is in the manufacturing or service sector.1. Beverage bottling at Coca-Cola2. Delivery
“In operation costing or activity costing, average conversion costs are applied to products in a manner similar to the application of factory overhead in a job-cost system.” Do you agree? Explain.
Give three examples of industries that probably use operation costing.
Explain what happens in a backflush costing system when the amount of actual conversion cost in a period exceeds the amount applied to the products completed that period.
“Backflush costing systems only work for companies using a just-in-time production system.” Do you agree? Explain.
“FIFO process costing is helpful for planning and control even if it is not used for product costing.” Do you agree? Explain.
“Ordinarily, the differences in unit costs under FIFO and weighted-average methods are insignificant.” Do you agree? Explain.
“The total conversion costs are divided by the equivalent units for the work done to date.” Does this quotation describe the weighted-average method or does it describe FIFO?
Why is “work done in the current period only” a key measurement of equivalent units?
“The beginning inventory is regarded as if it were a batch of goods separate and distinct from the goods started and completed by a process during the current period.” What method of process
“Equivalent units are the work done to date.” What method of process costing is being described?
Suppose a university has 10,000 full-time students and 5,000 half-time students. Using the concept of equivalent units, compute the number of “full-time equivalent” students.
Identify the major distinction between the first two and the final three steps of the five major steps in accounting for process costs.
What is the central product-costing problem in process costing?
Give three examples of non-profit organizations where process-costing systems are probably used.
Give three examples of industries where process-costing systems are probably used.
Audio Components recently installed a backflush costing system. One department makes 10 cm speakers with a standard cost as follows:Materials ...................................$ 9.60Conversion costs
The Rainbow Paint Company uses a process-costing system. Materials are added at the beginning of a particular process, and conversion costs are incurred uniformly. Work-in-process at the beginning of
Hassan Company produces digital watches in large quantities. The manufacturing costs of the assembly department wereFor simplicity, assume that this is a two-department company, assembly and
Digital Controls makes electronic thermostats for homes and offices. The Regina Division makes one product, Autotherm, which has a standard cost of $36, consisting of $20 of materials and $16 of
The Magnatto Company manufactures electric drills. Material is introduced at the beginning of the process in the assembly department. Conversion costs are applied uniformly throughout the process. As
produces cellular phones in large quantities. For simplicity, assume that the company has two departments, assembly and testing. The manufacturing costs in the assembly department during February
Wayne Andrews, the president and major shareholder of Walnut Furniture Limited (Walnut), was reviewing the 2012 and 2013 comparative income statements (Exhibit 6A-1) and was wondering why, despite
The Matterhorn Instruments Co. in Geneva, Switzerland, has the following 2012 budget for its two departments in Swiss francs (CHF):In the past, the company has used a single plantwide overhead
Brampton Co. uses normal absorption costing. Factory overhead is applied to production at a budgeted rate based on direct labour cost. At the end of the period, there are two unfinished jobs.
Donald Aeronautics Co. uses a budgeted overhead rate in applying overhead to individual job orders on a machine-hour basis for Department A and on a direct-labour-hour basis for Department B. At the
You are asked to bring the following incomplete accounts of a printing plant acquired in a merger up to date through January 31, 2011. Also consider the data that appear following the
The managing partner of Brenda McCoy Accounting is considering the desirability of tracing more costs to jobs than just direct labour. In this way, the firm will be better able to justify billings to
Job-order costing is usually identified with manufacturing companies. However, service industries and non-profit organizations also use the method. Suppose a social service agency has a cost
The Scott Furniture Company has two departments. Data for 2010 opening balances for inventory include the following:Direct materials (30 types)
The following summarized data are available on three job-cost records of Weeks Company, a manufacturer of packaging equipment:The company’s fiscal year-end is May 31. Factory overhead is applied as
The Jasper Avenue Clinic computes costs of treating each patient. It allocates costs to departments and then applies departmental overhead costs to individual patients using a different budgeted
MacLachlan Manufacturing Company had overapplied overhead of $20,000 in 2010. Before adjusting for overapplied or underapplied overhead, the ending inventories for direct materials, WIP, and finished
Consider the following data for Oxford Printing Company (in thousands):Inventories, December 31, 2011Direct materials ...............................£ 18Work-in-process
Gloria Cosmetics uses a normal cost system and has the following balances at the end of its first year’s operations:Work-in-process inventory ....................$200,000Finished-goods inventory
A Paris manufacturer uses a job-order system. At the end of 2010 the following balances existed (in millions of euros):Cost of goods sold ........................?50Finished goods
Assume the following at the end of 2010 (in thousands):Cost of goods sold ..........................................$300Direct materials inventory .................................70Work-in-process
Wosepka Welding Company applied factory overhead at a rate of $8.50 per direct-labour-hour. Selected data for 2010 operations are as follows (in thousands):Compute for both cases:1. Factory overhead
Consider the following summarized data regarding 2010:Omit explanations for journal entries.1. Prepare a summary journal entry for the actual overhead incurred for 2010.2. Prepare summary journal
Link Engineering Consultants is a firm of professional civil engineers. It mostly does surveying jobs for the heavy construction industry throughout Western Canada. The firm obtains its jobs by
“ABC and JIT are alternative techniques for achieving competitiveness.” Do you agree?
Name four factors crucial to the success of just-in-time production systems.
Why do managers want to distinguish between value-added activities and non-value-added activities?
Why do organizations adopt activity-based costing systems?
Refer to the Pacific Power illustration. Which resource costs depicted in Exhibit 5-7 could have variable cost behaviour?Exhibit 5.7 Current Costing Based on One Overall Rate Total Indirect Cost:
Name four steps in the design and implementation of an activity-based costing system.
Refer to Exhibit 5-6. Suppose the appliance maker has two plants—the Salem plant and the Youngstown plant. The Youngstown plant produces only three appliances that are very similar in material and
“Activity-based costing is useful for product costing but not for planning and control.” Do you agree? Explain.
Give four examples of activities and related cost drivers that can be used in an ABC system to allocate costs to products, services, or customers.
Why is it especially difficult to allocate joint costs and byproduct costs?
How does the term cost application differ from cost allocation?
“The step-down method allocates more costs to the producing departments than does the direct method.” Do you agree? Explain.
How could national advertising costs be allocated to territories?
“A commonly misused basis for allocation is dollar sales.” Explain.
“We used a lump-sum allocation method for fixed costs a few years ago, but we gave it up because managers always predicted usage below what they actually used.” Is this a common problem? How
Why should budgeted-cost rates, rather than actual-cost rates, be used for assigning the variable costs of service departments?
What are the three types of allocations?
What are the three purposes of cost allocation?
Give five terms that are sometimes used as substitutes for the term allocate.
Red Deer Milling buys oats at $0.60 per kilogram and produces CRM Oat Flour, CRM Oat Flakes, and CRM Oat Bran. The process of separating the oats into oat flour and oat bran costs $0.30 per kilogram.
Brandon Cleaning provides cleaning services for a variety of clients. The company has two producing departments, Residential and Commercial, and two service departments, Personnel and Administrative.
The Tsang Manufacturing Company has two producing departments, machining and assembly. Mr. Tsang recently automated the machining department. The installation of a computer-aided manufacturing (CAM)
Quebec Metals buys raw ore on the open market and processes it into two final products, A and B. The ore costs $10 per kilogram, and the process separating it into A and B has a cost of $4 per
Wheelick Controls Company has two producing departments, Mechanical Instruments and Electronic Instruments. In addition, there are two service departments, Building Services and Materials Receiving
Kiku Yamamoto is the controller of Watanabe Inc., an electronic controls company located in Osaka. She recently attended a seminar on activity-based costing (ABC) in Tokyo. Watanabe’s traditional
The following data (in thousands) summarize the factory operations of the Smothers Manufacturing Company for the year 2011, its first year in business:a. Direct materials purchased for cash
The Eastclock Corporation (EC) manufactures timing devices that are used in industrial settings. Recently, profits have fallen, and management is seeking your advice as an outside consultant on
Independent Outside Underwriters Co. (IOU) established a Systems Department two years ago to implement and operate its own data processing systems. IOU believed that its own system would be more
Maritime Desserts Inc. (MDI) produces a variety of premium cheesecakes and sells them in individual packages directly to retail customers and in packages of 10 cakes to restaurants in New Brunswick,
Company is an automotive component supplier. O’Sullivan has been approached by Honda Canada’s Alliston, Ontario, plant to consider expanding its production of part 24Z2 to a total annual quantity
Hipercor is a grocery company with stores throughout Spain. Suppose the company is planning an expansion of its store in central Madrid. A preliminary analysis has shown the Packaged Food department
Refer to the chapter’s Pacific Power Company (PPC) ABC illustration.1. One of the activity centres is Account Inquiry. Based on Exhibits 5-7 through 5-9, estimate the variable and fixed costs
Winnipeg Wholesale Distributors uses an activity-based costing system to determine the cost of handling its products. One important activity is the receiving of shipments in the warehouse. Three
The Glasgow Electronics Company produces three types of circuit boards: L, M, and N. The cost accounting system used by Glasgow until 2012 applied all costs except direct materials to the products
General Textiles Company has prepared departmental overhead budgets for normal activity levels before reapportionment's as follows:Building and grounds ..............................................$
Reliable Machining Products (RMP) is an automotive component supplier. RMP has been approached by Chrysler with a proposal to significantly increase production of Part T151A to a total annual
Lower Mainland Railroad (LMR) has a commuter operation that services passengers along a route between Vancouver and Mission. Problems of cost allocation were highlighted in a news story about LMR’s
Jade Soon, the administrator of Saint Jude Hospital, is interested in obtaining more accurate cost allocations on the basis of cause and effect. The $210,000 of laundry costs had been allocated on
A chemical company has a batch process that takes 1,000 litres of a raw material and transforms it into 80 kilograms of X1 and 400 kilograms of X2. Although the joint costs of their production are
The Western Canadian Railroad allocates all central corporate overhead costs to its divisions. Some costs, such as specified internal auditing and legal costs, are identified on the basis of time
1. Allocate the costs of the service departments using the step-down method.2. Using the results of number 1, compute the cost per direct-labourhour in the Mechanical Instruments department and the
Many provinces have a hospital regulatory board that must approve the acquisition of specified medical equipment before hospitals can qualify for cost-based reimbursement related to that equipment.
The Vigil Trucking Company has one service department and two regional operating departments. The budgeted cost behaviour pattern of the service department is $750,000 monthly in fixed costs plus
The vehicle pool of a major city provides cars for the use of various city departments. Currently, the vehicle pool has 50 cars. A recent study showed that it costs $2,400 in annual fixed costs per
Zhao Manufacturing Company has two departments, machining and finishing. For a given period, the following costs were incurred by the company as a whole: direct materials, $200,000; direct labour,
A motorcycle manufacturer was concerned with declining market share because of foreign competition. To become more efficient, the company was considering changing to a just-in-time (JIT) production
Vernon Company buys apples from local orchards and presses them to produce apple juice. The pulp that remains after pressing is sold to farmers as livestock food. This livestock food is accounted for
The Calgary branch of Southern Alberta Savings Bank (SASB) is a retail branch in a rapidly growing residential area. It services individuals and local businesses. To support its services, the branch
The Deutsche Toy Company makes a variety of alpine dolls at its operation in Munich. Its manufacturing process is highly automated. A recently installed ABC system has four activity centres:Two dolls
Robinson Chemical Company’s production process for two of its solvents can be diagrammed as follows:The cost of the joint input, including processing costs before the split-off point, is $300,000.
Butler Home Products has two producing departments, Machining and Assembly, and two service departments, Personnel and Custodial. The company’s budget for April 2012 isButler allocates personnel
Johnny’s Markets has three grocery stores in the metropolitan Toronto area. Central costs are allocated using sales as the cost-allocation base. The following are budgeted and actual sales during
The City of Nanaimo signed a lease for a photocopy machine at $2,500 per month and $0.02 per copy. Operating costs for toner, paper, operator salary, and so on are all variable at $0.03 per copy.

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