Questions and Answers of Cost And Management Accounting An Introduction

Required:(a) Explain the following terms:(i) normal process loss;(ii) joint product;(iii) by-product;and state the appropriate costing treatments for normal process loss and for by-products.(10
Process costing and a decision on further processing Luiz Ltd operates several manufacturing processes in which stocks of work in progress are never held. In process K, joint products (P1 and P2) are
Explain the role of the accountant in the international environment. LO1
Discuss the varying levels of involvement that firms can take in interna¬ tional trade. LO2
Explain the ways accountants can manage foreign currency risk. LO3
Explain why multinational firms choose to decentralize. LO4
Explain how environmental factors can affect performance evaluation in the multinational firm. LO5
Discuss the role of transfer pricing in the multinational firm. LO6
Discuss efhical issues that affect firms operating in the international environment. LO7
How do international issues affect the role of the accountant? LO7
What is a foreign trade zone, and what advantages does it offer U.S. companies? LO7
Define outsourcing, and discuss why companies may outsource various functions. LO7
What are joint ventures, and why do companies en¬ gage in them? LO7
What are maquiladoras? Why have so many U.S. firms joined forces with maquiladoras? LO7
What is an exchange rate for currency? What is the difference between a spot rate and future rate? LO7
Define currency appreciation. What impact does cur¬ rency appreciation have on a company's ability to import goods? LO7
What impact does currency appreciation have on a company's ability to export its goods? LO7
Mexico is considering devaluing the peso versus the dollar. You are the controller for a company consid¬ ering production in Mexico through the maquiladora program. How does this news affect the
What is transaction risk? Economic risk? Translation risk? LO7
What is hedging? If a company imports raw mate¬ rials, payable in full in 90 days in the foreign cur¬ rency, why might the company want to hedge? LO7
The performance of the subsidiary manager is equiv¬ alent to the performance of a subsidiary. Do you agree? Explain. LO7
What environmental factors may affect divisional performance in a multinational firm? LO7
Define the term budget. How are budgets used in planning? LO5
Define control. How are budgets used to control? LO5
Discuss some of the reasons for budgeting. LO5
What is the master budget? An operating budget? A financial budget? LO5
Explain the role of a sales forecast in budgeting. What is the difference between a sales forecast and a sales budget? LO5
All budgets depend on the sales budget. Is this true? Explain. LO5
How do the master budgets differ among manufac- turing, merchandising, and service organizations? LO5
Why is goal congruence important? LO5
Discuss the roles of monetary and nonmonetary in¬ centives. Do you believe that nonmonetary incen¬ tives are needed? Why? LO5
What is participative budgeting? Discuss some of its advantages. LO5
A budget too easily achieved will lead to diminished performance. Do you agree? Explain. LO5
What is the role of top management in participative budgeting? LO5
Explain why a manager has an incentive to build slack into the budget. LO5
Discuss the differences between static and flexible budgets. Why are flexible budgets superior to static budgets for performance reporting? LO5
Why is it important for a manager to receive fre¬ quent feedback on his or her performance? LO5
Explain how a manager can milk the firm to improve budgetary performance. LO5
Identify performance measures other than budgets that can be used to discourage myopic behavior. Dis¬ cuss how you would use these measures. LO5
How important are the behavioral aspects of a bud¬ getary control system? Explain. LO5
Explain the difference between incremental budget¬ ing and zero-base budgeting. LO5
Advocates of zero-base budgeting maintain that padding the budget is easier imder an incremental system than under a zero-base system. Explain why padding is less likely for a zero-base budgeting
Distinguish between an integrated and interlocking accounting system. (p. 122)
Explain the purpose of control accounts. (9. 122)
List the accounting entries for the purchase of issues of direct and indirect materials.(pp. 122-126)
List the accounting entries for the payment and the allocation of gross wages.(pp. 126-127)
List the accounting entries for the payment and the allocation of overheads.(pp. 128-129)
Explain the major features of contract costing. (op. 132-135)
Define progress payments, architect’s certificates, retention money, cost of work certified and notional profit. (9p. 133-137)
Describe the four guidelines that should be used to determine the amount of profit that should be taken for a contract during a specific period. (pp. 136-137)
Acompany operates an integrated cost and financial accounting system. The accounting entries for the return of unused direct materials from production would be:(a) DR Work in progress account; CR
In an integrated bookkeeping system, when the actual production overheads exceed the absorbed production overheads, the accounting entries to close off the production overhead account at the end of
A company uses a blanket overhead absorption rate of $5 per direct labour hour.Actual overhead expenditure in a period was as budgeted.The under/over absorbed overhead account for the period has the
XYZ operates an integrated accounting system. The material control account at 31 March shows the following information:The $125 000 credit entry represents the value of the transfer to the (a) cost
In an interlocking accounting system, the profit shown in the financial accounts was £79252 but the cost accounts showed £74 294 profit. The following stock valuations were the only differences
The following data have been taken from the books of CB plc, which uses a nonintegrated accounting system:The effect of these stock valuation differences on the profit reported by the financial and
The profit shown in the financial accounts was £158500 but the cost accounts showed a different figure. The following stock valuations were used:What was the profit in the cost accounts?(a) £163179
A construction company has the following data concerning one of its contracts:The profit (to the nearest £1000) to be attributed to the contract is:(a) £250000 (b) £277000 (c) £300000 (a)
The following statements relate to long-term contracts:(i) Levels of completion of the contract can be estimated using either costs to date or work certified to date.(ii) Any anticipated losses
The following could relate to contract costing:(i) Work is for a period of long duration.(ii) Progress payments are amounts paid for the contract throughout the course of the contract.(iii)
Interlocking accounts CD Ltd, a company engaged in the manufacture of specialist marine engines, operates a historic job cost accounting system that is not integrated with the financial accounts. At
Integrated accounts In the absence of the accountant you have been asked to prepare a month’s cost accounts for a company which operates a batch Costing system fully integrated with the financial
Reconciliation of cost and financial accounts K Limited operates separate cost accounting and financial accounting systems.The following manufacturing and trading statement has been prepared from the
Contract costing HR Construction plc makes up its accounts to 31 March each year. The following details have been extracted in relation to two of its contracts:Depreciation is charged on plant using
Explain how unit standards are set and why standard cost systems are adopted. LO1
Explain the purpose of a standard cost sheet. LO2
Describe the basic concepts underlying variance analysis and explain when variances should be investigated. LO3
Compute and journalize the materials and labor variances and explain how they are used for control. LO4
Compute overhead variances three different ways and explain overhead accounting. ^ LO5
Calculate mix and yield variances for materials and labor. LO6
Discuss the difference between budgets and stan¬ dard costs. LO6
Describe the relationship that unit standards have with flexible budgeting. LO6
What is the quantity decision? The pricing decision? LO6
Why is historical experience often a poor basis for establishing standards? LO6
Should standards be set by engineering studies? Why or why not? LO6
What are ideal standards? Currently attainable stan¬ dards? Of the two, which is usually adopted? Why? LO6
How does standard costing improve the control function? LO6
Discuss the differences between actual costing, nor¬ mal costing, and standard costing. LO6
What is the purpose of a standard cost sheet? LO6
Explain why the materials price variance is often computed at the point of purchase rather than at the point of issuance. LO6
The materials usage variance is always the respon¬ sibility of the production supervisor. Do you agree or disagree? Why? LO6
The labor rate variance is never controllable. Do you agree or disagree? Why? LO6
Suggest some possible causes of an unfavorable labor efficiency variance. LO6
Explain why the variable overhead spending vari¬ ance is not a pure price variance. LO6
The variable overhead efficiency variance has noth¬ ing to do with efficient use of variable overhead. Do you agree or disagree? Why? LO6
Explain why the fixed overhead spending variance is usually very small. LO6
When should a standard cost variance be in¬ vestigated? LO6
What are control limits and how are they set? LO6
Which do you think is more important for control of fixed overhead costs: the spending variance or the volume variance? Explain. LO6
Explain why standard cost systems are adopted. LO6
Explain how the two-variance, three-variance, and four-variance overhead analyses are related. LO6
Explain what mix and yield variances are. LO6
Describe the differences between process costing and job costing. (op. 151-152)
Provide examples of industries that use process costing. (p. 157)
Why is cost accumulation easier with a process costing system compared with a job costing system? (p. 152)
Distinguish between normal and abnormal losses and explain how their accounting treatment differs. (0p. 154-155)
What are equivalent units? Why are they needed with a process costing system?(p. 160) ;
Why is it necessary to treat ‘previous process cost’ as a separate element of cost in a process costing system? (op. 162-163)
How is the equivalent unit cost calculation affected when materials are added at the beginning or at a later stage of the process rather than uniformly throughout the process? (p. 163)
Describe how the weighted average and FIFO methods differ in assigning costs to units completed and closing work in progress. (op. 166-168)

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