Questions and Answers of Cost And Management Accounting An Introduction

describe the six different purposes of budgets;Appendix
describe the various stages in the budget process;Appendix
prepare functional and master budgets.Appendix
describe the three different types of controls used in organizations;Appendix
describe a cybernetic control system;Appendix
distinguish between feedback and feed-forward controls;Appendix
define the four different types of responsibility centres;Appendix
explain the different elements of management accounting control systems;Appendix
describe the controllability principle and the methods of implementing it;Appendix
describe the different types of financial performance targets and the effects of their level of difficulty on motivation and performance;Appendix
describe the influence of participation in the budgeting process;Appendix
explain why a performance measurement system should also emphasize non-financial measures;Appendix
Define the term ‘budget’. How are budgets used in planning? (op. 351-354)
Distinguish between budgeting and long-range planning. How are they related?(ep. 354-355)
Describe the different purposes of budgeting. (op. 355-356)
Explain what is meant by the term ‘management by exception’. (p. 357)
Describe how the different roles of budgets can conflict with each other.(p. 358)
Distinguish between continuous and rolling budgets. (0. 359)
Describe the different stages in the budgeting process. (pp. 360-363)
All budgets depend on the sales budget. Do you agree? Explain. (p. 366)
What is a master budget? (p. 377)
The following estimates have been prepared for a retailer’s next budget period:The gross profit margin on sales is budgeted at 55 per cent.(a) The cash which the retailer expects to receive from
A company manufactures two products P1 and P2 in a factory divided into two cost centres, X and Y. The following budgeted data are available:Budgeting output is 8000 units of each product. Fixed
A company manufactures and sells one product which requires 8kg of raw material in its manufacture. The budgeted data relating to the next period are as follows:What is the budgeted raw material
A company produces two products, A1 and A2 that are sold to retailers. The budgeted sales volumes for the next quarter are as follows:The inventory of finished goods is budgeted to increase by 1000
CHisa building supplies company that sells products to trade and private customers.Budget data for each of the six months to March are given below:80 per cent of the value of credit sales is received
You have recently been appointed as an assistant management accountant in a large company, PC Co. When you meet the production manager, you overhear him speaking to one of his staff,
The budgeted balance sheet data of Kwan Tong Umbago Ltd is as follows:The estimates for the next four-month period are as follows:The company intends to sell each unit for £219 and has estimated
Budget preparation and comments on sales forecasting methods You have recently been appointed as the management accountant to Alderley Ltd, a small company manufacturing two products, the Elgar and
X plc manufactures specialist insulating products that are used in both residential and commercial buildings. One of the products, Product W, is made using two different raw materials and two types
Explain what productive efficiency means and describe the difference between technical and input tradeoff efficiency. LO1
Explain what partial productivity measurement is and describe its advan¬ tages and disadvantages. LO2
Explain what total productivity measurement is and describe its advantages. LO3
Describe the role of productivity measurement in assessing activity improvement. LO4
Define total productive efficiency. LO4
Explain the difference between technical and input tradeoff efficiency. LO4
What is productivity measurement? LO4
Explain the difference between partial and total mea¬ sures of productivity. LO4
What is an operational productivity measure? A fi¬ nancial measure? LO4
Discuss the advantages and disadvantages of partial measures of productivity. LO4
What is the purpose of a base period? LO4
What is profile measurement and analysis? What are the limitations of this approach? LO4
What is profit-linked productivity measurement and analysis? LO4
Explain why profit-linked productivity measurement is important. LO4
What is the price-recovery component? LO4
What is activity productivity analysis, and what are its limitations? LO4
What is process productivity analysis? LO4
Can productivity improvements be achieved without improving quality? Explain. LO4
Why is it important for managers to be concerned with both productivity and quality? LO4
Discuss the role accounting has in productivity measurement. LO4
What are the differences between quality and pro¬ ductivity? The similarities? LO4
Distinguish between relevant and irrelevant costs and revenues. LO1
Explain the importance of qualitative factors. LO2
Distinguish between the relevant and irrelevant costs and revenues for the five decision-making problems described. LO3
Describe the key concept that should be applied for presenting information for product mix decisions when capacity constraints apply. LO4
Explain why the book value of equipment is irrelevant when making equipment replacement decisions. LO5
Describe the opportunity cost concept. LO6
What is a relevant cost? (p. 284)
Why is it important to recognize qualitative factors when presenting information for decision-making? Provide examples of qualitative factors. (p. 285)
What underlying principle should be followed in determining relevant costs for decision-making? (p. 285)
Explain what is meant by special pricing decisions. (pp. 285-286)
Describe the important factors that must be taken into account when making special pricing decisions. (op. 287-288)
Define limiting factors. (p. 297)
How should a company determine its optimal product mix when a limiting factor exists? (0p. 291-293)
Why is the written down value and depreciation of an asset being considered for replacement irrelevant when making replacement decisions? (op. 293-294)
Explain the importance of opportunity costs for decision-making. (0. 288)
Explain the circumstances when the original purchase price of materials are irrelevant for decision-making. (p. 307)
Why does the relevant cost of labour differ depending upon the circumstances?(p. 301)
All of acompany’s skilled labour, which is paid £8 per hour, is fully employed manufacturing a product to which the following data refer:The company is evaluating a contract which requires 90
A company requires 600kg of raw material Z for a contract it is evaluating. It has 400kg of material Z in stock which were purchased last month. Since then the purchase price of material Z has risen
Equipment owned by a company has a net book value of £1800 and has been idle for some months. It could not be used on a six months contract which is being considered.If not used on this contract,
A company is considering the costs for a special order. The order would require 1250kg of material D. This material is readily available and regularly used by the company. There are 265kg of material
X plc intends to use relevant costs as the basis of the selling price for a special order: the printing of a brochure. The brochure requires a particular type of paper that is not regularly used by X
A company which manufactures four components (A, B, C and D), using the same skilled labour, aims to maximize its profits. The following information is available:As it has insufficient skilled labour
A company has the following production planned for the next four weeks. The figures reflect the full capacity level of operations. Planned output is equal to the maximum demand per product.The direct
A company has three shops (R, S and T) to which the following budgeted information relates:Sixty per cent of the total fixed costs are general company overheads. These are apportioned to the shops on
The following information relates to questions (i) and (ii):In the following price, revenue and cost functions, which have been established by an organization for one of its products, Q represents
Relevant cost for minimum price for a contract The Telephone Co. (T Co) is a company specializing in the provision of telephone systems for commercial clients. There are two parts to the business:—
Limiting factor and make or buy decision Merry! Ltd manufactures four components (E, F, G and H) which are incorporated into different products made by the company. All the components are
Acceptance of a special order The production manager of your organization has approached you for some costing advice on project X, a one-off order from overseas that he intends to tender for. The
Decision on which of two mutually exclusive contracts to accept A company in the civil engineering industry with headquarters located 22 miles from London undertakes contracts anywhere in the United
Deletion of a product Blackarm Ltd makes three products and is reviewing the profitability of its product line. You are given the following budgeted data about the firm for the coming year.The
Calculation of the optimum selling price using calculus Ella Ltd recently started to manufacture and sell product DG. The variable cost of product DG is £4 per unit and the total weekly fixed costs
Describe the dangers involved in focusing excessively on a short-run decisionmaking time horizon. (pp. 287-288)
Explain why a cost accumulation system is required for generating relevant cost information for decision-making. LO1
Describe the differences between activity-based and traditional costing systems. LO2
Explain why traditional costing systems can provide misleading information for decision-making. LO3
Compute product costs using an ABC system. LO4
Identify and explain each of the four stages involved in designing ABC systems. LO5
Describe the ABC cost hierarchy. LO6
Explain why a cost accumulation system is required for generating relevant cost
What are the fundamental differences between a traditional and an ABC system? (p. 323)
Define activities and cost drivers. (p. 323)
Distinguish between volume-based and non-volume-based cost drivers.(pp. 324-325)
Describe the circumstances when traditional costing systems are likely to report distorted costs. (0p. 325-326)
Explain how low volume products can be undercosted and high volume products overcosted when traditional costing systems are used. (pp. 324-326)
What is meant by ‘product diversity’ and why is it important for product costing?(p. 325)
Describe each of the four stages involved in designing ABC systems. (pp. 335-337)
Distinguish between resource cost drivers and activity cost drivers. (p. 336)
Distinguish between transaction and duration cost drivers. (0. 337)

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