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cost and management accounting an introduction

Questions and Answers of Cost And Management Accounting An Introduction

Distinguish between a direct and an indirect cost. (pp. 27-28)
Describe how a given direct cost item can be both a direct and an indirect cost. (p. 29)
Provide examples of each of the following: (a) direct labour, (b) indirect labour,(c) direct materials, (d) indirect materials and (e) indirect expenses. (op. 27-28)
Explain the meaning of the terms: (a) prime cost, (b) overheads and (c) cost allocations. (p. 28)
Distinguish between product costs and period costs. (op. 30-31)
Provide examples of decisions that require knowledge of how costs and revenues vary with different levels of activity. (0. 33)
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. 36-37)
Explain the meaning of the term ‘sunk cost’. (op. 37-38)
Distinguish between incremental and marginal costs. (pp. 38-40)
What is an opportunity cost? Give some examples. (op. 39-40)
Explain responsibility accounting. (po. 41)
Classify each of the following as being usually fixed (F), variable (V), semi-fixed(SF) or semi-variable (SV):(a) direct labour;(b) depreciation of machinery;(c) factory rental;(d) supplies and other
Which of the following costs are likely to be controllable by the head of the production department?(a) price paid for materials;(b) charge for floor space;(c) raw materials used;(d) electricity used
The audit fee paid by a manufacturing company would be classified by that company as:(a) aproduction overhead cost;(b) aselling and distribution cost;(c) aresearch and development cost;(d) an
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
Which of the following costs is a variable cost? (a) supervisors' salaries; (b) research and development; (c) rent; (d) materials used in production. (1 mark) CIMA Management Accounting Fundamentals
The following data relate to two output levels of a department:The variable overhead rate per hour is £3.50. The amount of fixed overheads is:(a) £5250;(b) £59500;(c) £187000;(d) £246500.
Prime cost is: (a) all costs incurred in manufacturing a product; (b) the total of direct costs; (c) the material cost of a product; (d) the cost of operating a department.
A direct cost is a cost which: (a) is incurred as a direct consequence of a decision; (b) can be economically identified with the item being costed; (c) cannot be economically identified with the
Fixed costs are conventionally deemed to be: (a) constant per unit of output; (b) constant in total when production volume changes; (1 mark) CIMA Stage 1 (1 mark) CIMA Stage 2(c) outside the control
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 costs. Your
Describe three different methods of cost classification and explain the utility of each method.
(a) Describe the role of the cost accountant in a manufacturing organization. (b) Explain whether you agree with each of the following statements: (i) 'All direct costs are variable.' (ii) 'Variable
Opportunity cost and sunk cost are among the concepts of cost commonly discussed. You are required: (i) to define these terms precisely; (4 marks) (ii) to suggest for each of them situations in which
Distinguish between, and provide an illustration of: (i) 'avoidable' and 'unavoidable' costs; (ii) 'cost centres' and 'cost units'. (8 marks) ACCA Foundation
Amanufacturing 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 as being
Cost behaviour(a) From the above data you are required:(i) to prepare a schedule to be presented to management showing for the mileages of 5000, 10000, 15000 and 30000 miles per
Sunk and opportunity costs for decision-making Mrs Johnston has taken out a lease on a shop for a down payment of £5000.Additionally, the rent under the lease amounts to £5000 per annum. If the
Discuss basic economic pricing concepts. LO1
Calculate a markup on cost and determine a cost-plus price. LO2
Explain the advantages of target costing in determining price. LO3
Explain how price may vary over the product life cycle. LO4
Calculate the sales price variance and price volume variance and explain how they are used in controlling revenue. LO5
Discuss the impact of the legal system and ethics on pricing. LO6
What is the demand curve? How does it relate to the firm's pricing decision? LO3
Define price elasticity of demand. Give an example of a product with relatively elastic demand and an example of a product with relatively inelastic de¬ mand. (Give examples not given in the text.)
What are the features of a perfectly competitive mar¬ ket? Give two examples of competitive markets. How could a firm in such a market move to a less competitive market? LO3
Many times, small startup firms are advised to find "market niches." (A market niche is a narrow seg¬ ment of customers with unique needs which are cur¬ rently not being served by existing
Define monopoly. Why are most existing monopolies subject to government regulation? (Hint: What would happen if there were no legal regulation?) LO3
How do you calculate the markup on cost of goods sold? Is the markup pure profit? Explain. LO3
How does target costing differ from traditional cost¬ ing? How does a target cost relate to price? LO3
Define penetration pricing. Explain where it would occur in the product life cycle. LO3
Define price skimming. Where would it occur in the product life cycle? LO3
In the declining stage of the product life cycle, so lit¬ tle is demanded that the price a firm charges has to decline significantly. Do you agree or disagree with this remark? LO3
What is predatory pricing? If two gas stations on op¬ posite corners have a gas war, is that predatory pric¬ ing? Why or why not? LO3
Why do gas stations in the middle of town typically charge a little less for gasoline than do gas stations located on interstate highway turnoffs? LO3
What is price discrimination? Is it legal? LO3
What variances do managers use in trying to under¬ stand the difference between actual and planned revenue? LO3
Many colleges and universities have raised tuition over the past few years. What are some of the ex¬ planations used to justify tuition increases? Relate these to community standards of fairness. LO3
Explain the accounting treatment for holiday pay, overtime payments and employment costs. (op. 54-55)
Describe the materials recording procedure. (pp. 55-57)
Explain the purpose of a stores ledger account. (p. 56)
Describe the first in, first out (FIFO), last in, first out (LIFO) and average cost methods of stores pricing. (op. 58-62)
Explain the accounting treatment of stores losses and materials handling costs.(pp. 62-64)
What are holding costs? Provide some examples. (op. 64-65)
What are ordering costs? Provide some examples. (p. 65)
What are the assumptions underlying the economic order quantity? (p. 68)
Define lead time. (p. 69)
Explain what is meant by the re-order point. (p. 69)
Describe the ABC classification method. What purposes does it serve? (pp. 70-72)
What are the main features of the just-in-time approach? (op. 72-73)
Amachine operator is paid $10.20 per hour and has a normal working week of 35 hours. Overtime is paid at the basic rate plus 50 per cent. If in week 7, the machine operator worked 42 hours, the
An advertising agency uses a job costing system to calculate the cost of client contracts. Contract A42 is one of several contracts undertaken in the last accounting period. Costs associated with the
The effect of using the last in, first out (LIFO) method of stock valuation rather than first, in, first out (FIFO) method in a period of rising prices is: (a) to report lower profits and a lower
An organization's records for last month show the following in respect of one stores item:Last month’s opening stock was valued at a total of £2900 and the receipts during the month were purchased
The following data relate to material J for last month:Using the LIFO valuation method, what was the value of the closing stock for last month?(a) £3300 (c) £3700 (b) £3500 (d) £3900 (2
ELtd’s stock purchases during a recent week were as follows:There was no stock at the beginning of the week. 420 units were issued to production during the week. The company updates its stock
A domestic appliance retailer with multiple outlets stocks a popular toaster known as the Autocrisp 2000, for which the following information is available:(i) Based on the data above, at what level
A manufacturing company uses 25000 components at an even rate during a year. Each order placed with the supplier of the components is for 2000 components, which is the economic order quantity. The
Data relating to one particular stores item are as follows: Average daily issues 70 units Maximum daily issues 90 units Minimum daily issues 50 units Lead time for the replenishment of stock 11 to 17
FP is a retailer of office products. For one particular model of calculator there is an annual demand of 26000 units. Demand is predictable and spread evenly throughout the year. Supplies are
PR is a retailer of bicycles. The most popular children's bicycle has an annual demand of 30000 units. Demand is predictable and spread evenly throughout the year. The bicycles are purchased by PR
Calculate annual stockholding costs and impact of quantity discounts. BB manufactures a range of electronic products. The supplier of component Y has informed BB that it will offer a quantity
EOQ and the impact of quantity discounts Point Ltd uses the economic order quantity (EOQ) model to establish the re- order quantity for raw material Y. The company holds no buffer stock. Information
Impact of JIT on inventory costs (10 marks) ACCA Financial Information for Management CDE has recently won a contract to supply a component to a major car manufacturer that is about to launch a new
Explain why firms measure profit. LO1
Calculate measures of profit using absorption and variable costing. LO2
Calculate the contribution margin, sales volume, sales mix, market share, and market size variances. LO3
Determine the profitability of segments. LO4
Describe the impact of the short run and the long run on measuring profit. LO5
Discuss the product life cycle in relation to profitability analysis. LO6
Describe the impact of profits on behavior. LO7
Discuss some of the limitations of profit measurement. LO8
Why do firms measure profit? LO8
Why do regulated firms care about the level of profit? LO8
Why would a company avoid earning the highest possible profit in the short run? LO8
What is a segment, and why would a company want to measure profits of segments? LO8
How does absorption costing differ from variable costing? When will absorption costing operating in¬ come exceed variable costing operating income? LO8
Is ABC appropriate for external financial reporting? Explain your reasoning. LO8
What are some advantages and disadvantages of using net income as a measure of profitability? LO8
Describe the product life cycle. LO8
How do unit-level costs behave in relation to the product life cycle? Batch-level costs? Product-level costs? Facility-level costs? LO8
Why do some firms measure customer profitabihty? In what situation(s) would a firm not want to mea¬ sure customer profitability? LO8
What are the three major implications of prospect theory for profitability analysis? LO8
What is the "big bath," and why would firms want to take one? LO8
Carol Jackson is the public relations coordinator for Selmore, Inc., a nationwide chain of retail drug stores. During the past month, Selmore has experi¬ enced the following: the construction of two
There is no point in measuring profit, since numbers cannot tell the whole story. Discuss this statement. Do you agree or disagree with it and why? LO8

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