Questions and Answers of Cost And Management Accounting An Introduction

Describe the ABC manufacturing cost hierarchy. (ep. 337-338)
Explain the circumstances when ABC is likely to be preferred to traditional costing systems. (op. 338-339)
Provide examples of how ABC can be used in service organizations. (p. 338)
EF manufactures and sells; three products X,Y and Z. The following production overhead costs are budgeted for next year:Budgeted details for each of the products tor next year are as
Calculation of gross profit using ABC MS manufactures three types of skincare product for sale to retailers. MS currently operates a standard absorption costing system. Budgeted information for next
Calculation of ABC product cost and discussion as to whether ABC should be implemented Beckley Hill (BH) is a private hospital carrying out two types of procedures on patients. Each type of procedure
ABC profitability analysis GH produces three models of speedboat for sale to the retail market. GH currently operates a standard absorption costing system. Budgeting information for next year is
ABC profitability analysis A company sells and services photocopying machines. Its sales department sells the machines and consumables, including ink and paper, and its service department provides an
Calculation of traditional and ABC product costs The Gadget Co produces three products, A, B and C, all made from the same material. Until now, it has used traditional absorption costing to allocate
explain how budgeting fits into the overall planning and control framework. LO1
identify and describe the six different purposes of budgeting.LO2
identify and describe the various stages in the budget process.LO3
prepare functional and master budgets.LO4
describe the use of computer-based financial models for budgeting.LO5
describe the criticisms relating to traditional budgeting.LO6
What is the difference between quality of design and quality of conformance? LO3
Why are quality costs the costs of doing things wrong? LO3
What is the difference between the zero-defects phi¬ losophy and the robust quality philosophy? LO3
Describe the Taguchi quality loss function and relate it to robust quality LO3
Identify and discuss the four kinds of quality costs. LO3
Explain why external failure costs can be more dev¬ astating to a firm than internal failure costs. LO3
What is the difference between an AQL standard and a zero-defects standard? LO3
Explain why activity-based management supports a zero-defects standard over an AQL standard. LO3
Many quality experts maintain that quality is free. Do you agree? Why or why not? LO3
What is the purpose of interim quality standards? LO3
Describe the three types of quality performance re¬ porting. How can managers use each report to help evaluate their quality improvement programs? LO3
Discuss the different kinds of incentives that can be used to motivate employees to become involved in quality improvement programs. LO3
Explain why it is important for a manager to assess the relative distribution of quality costs among the four categories. LO3
Discuss the benefits of quality cost reports that sim¬ ply list the quality costs for each category. LO3
Explain why the accounting department should be responsible for producing quality cost reports. LO3
What is ISO 9000? Why do so many companies want this certification? LO3
Explain what is meant by the term ‘cost function’. (po. 263)
Under what circumstances can the engineering method be used to estimate costs? (p. 264)
Describe the high-low method. (pp. 267-268)
What is the major limitation of the high-low method? (p. 268)
Describe how the scattergraph method is used to analyze costs into their fixed and variable elements. (op. 265-266)
Describe the least squares method. Why is this method better than the high-low and scattergraph methods? (op. 268-270)
Describe the steps that should be followed in estimating cost functions. (op. 272-273)
Why is a scattergraph a useful first step in estimating cost functions? (p. 273)
Explain the meaning of ‘coefficient of determination’. (0. 271)
The table below shows the output, total costs and the cost inflation index for a business in two periods. Cost behaviour patterns were the same in both periods.The variable cost per unit at an
The following data relate to a company’s overhead cost.Using the high-low technique, what is the variable cost per unit (to the nearest $0.01) expressed in current year prices?(a) $3.22 (b) $4.13
The following shows the total overhead costs for given levels of a company’s total output.A step up in fixed costs of $500 occurs at an output level of 3500 units.What would be the variable
A company is estimating its costs based on past information. The total costs incurred by the company at different levels of output were as follows:The company uses the high-low method to separate
Regression analysis is being used to find the line of best fit (vy =a+t bx)from five pairs of data. The calculations have produced the following information:Sx = 129 Sy = 890 Sxy = 23091 dx? = 3433
Brisbane Limited has recorded the following sales information for the past six months:The following has also been calculated:> (Advertising expenditure) = £13500 > (Sales revenue) = £192000
company is seeking to establish whether there is a linear relationship between the level of advertising expenditure and the subsequent sales revenue generated.Figures for the last eight months are as
Cost estimation using the linear regression formula The management accountant at Josephine Ltd is trying to predict the quarterly total maintenance cost for a group of similar machines. She has
Define quality, discuss the different approaches to quality, and describe the four types of quality costs. LO1
Prepare a quality cost report and explain the difference between the con¬ ventional view of acceptable quality level and the view espoused by total quality control. LO2
Explain why quality cost information is needed and how it is used. LO2
Describe and prepare three different types of quality performance reports. LO4
Explain what is meant by the term ‘relevant range’. (o. 234)
Define the term ‘contribution margin’. (0. 235)
Defithne teer m ‘profit-volume ratio’ and explain how it can be used for cost-volume—profit analysis. (0. 238)
Describe and distinguish between the three different approaches to presenting cost-volume-profit relationships in graphical format. (op. 240-243)
How can a company with multiple products use cost-volume-profit analysis?(pp. 243-245)
Explain why the break-even point changes when there is a change in sales mix.(pp. 244-245)
Describe the assumptions underlying cost-volume-profit analysis. (op. 245-247)
How can sensitivity analysis be used in conjunction with cost—volume-profit analysis? (p. 247)
Four lines representing expected costs and revenue have been drawn on thefollowing break-even chart:Which statement is correct?(a) Line F represents total variable cost.(b) The break-even point
The following information is required for sub-questions (a) and (b)The company expects to sell A units in the next accounting period.(a) The margin of safety is shown on the diagram by:(i) k (ii) m
The diagram shows the profit-volume chart of Z Ltd for its last accounting period.The company made a profit of $w during the period.(a) An increase in the fixed costs per period (assuming the selling
The profit-volume chart for a single product company is as follows:What is the product’s contribution to sales ratio (expressed as a %)?(a) 16%(b) 28%(c) 40%(d) 72%(2 marks)ACCA - Financial
A company’s budget for the next period shows that it would break even at sales revenue of $800 000 and fixed costs of $320 000.The sales revenue needed to achieve a profit of $200 000 in the next
A company wishes to make a profit of £150000. It has fixed costs of £75000 with a C/S ratio of 0.75 and a selling price of £10 per unit.How many units would the company need to sell in order to
A company manufactures a single product which it sells for £15 per unit. The product has a contribution to sales ratio of 40 per cent. The company’s weekly break-even point is sales of
An organization manufactures a single product which has a variable cost of£36 per unit. The organization’s total weekly fixed costs are £81000 and it has a contribution to sales ratio of 40 per
An organization manufactures and sells a single product which has a variable cost of £24 per unit and a contribution to sales ratio of 40 per cent. Total monthly fixed costs are £720000.What is the
Z plc currently sells products Aye, Bee and Cee in equal quantities and at the same selling price per unit. The contribution to sales ratio for product Aye is 40 per cent; for product Bee it is 50
Acompany manufactures a single product. Budget and standard cost details for next year include:Required:(a) Calculate the break-even point in units.(b) Calculate the percentage by which the budgeted
Preparation of break-even and profit-volume graphs ZED plc manufactures one standard product, which sells at £10. You are required to:(a) Prepare from the data given below, a break-even and
Preparation of a contribution graph Z plc operates a single retail outlet selling direct to the public. Profit statements for August and September are as follows:Required:(a) Use the high- and
Preparation of a break-even chart with step fixed costs Toowomba manufacturers various products and uses CVP analysis to establish the minimum level of production to ensure profitability.Fixed costs
Changes in sales mix XYZ Ltd produces two products and the following budget applies:You are required to calculate the break-even points for each product and the company as a whole and comment on your
Non-graphical CVP analysis The summarized profit and loss statement for Exewye plc for the last year is as follows:At a recent board meeting the directors discussed the year’s results, following
Multi-product CVP analysis Cardio Co manufactures three types of fitness equipment: treadmills (T), cross trainers (C) and rowing machines (R). The budgeted sales prices and volumes for the next year
Distinguish between variable costing and absorption costing. (op. 207-208)
How are non-manufacturing fixed costs treated under absorption and variable costing systems? (p. 208)
Describe the circumstances when variable and absorption costing systems will report identical profits. (p. 273)
Under what circumstances will absorption costing report higher profits than variable costing? (p. 213)
Under what circumstances will variable costing report higher profits than absorption costing? (p. 273)
What arguments can be advanced in favour of variable costing? (pp. 214-216)
What arguments can be advanced in favour of absorption costing? (pp. 216-27 7)
Explain how absorption costing can encourage managers to engage in behaviour that is harmful to the organization. (p. 275)
The following budgeted information relates to a manufacturing company for next period:The normal level of activity is 14000 units per period.Using absorption costing the profit for next period has
A company has the following budgeted costs and revenues:In the most recent period, 2000 unit were produced and 1000 units were sold.Actual sales price, variable production cost per unit and total
A company manufactures and sells a single product. In two consecutive months the following levels of production and sales (in units) occurred:The opening inventory for Month 1 was 400 units. Profits
WTD Ltd produces a single product. The management currently uses marginal costing but is considering using absorption costing in the future.The budgeted fixed production overheads for the period are
The following information relates to a manufacturing company for next period:Using the absorption costing the profit for next period has been calculated as £36000.What would the profit for next
Last month a manufacturing company’s profit was $2000, calculated using absorption costing principles. If marginal costing principles had been used, a loss of $3000 would have occurred. The
A company which uses marginal costing has a profit of £37500 for a period.Opening inventory was 100 units and closing inventory was 350 units.The fixed production overhead absorption rate is £4 per
A company uses standard absorption costing to value inventory. Its fixed overhead absorption rate is $12 per labour hour and each unit of production should take four labour hours. In a recent period
The following details have been extracted from KL’s budget:The budgeted fixed production cost per unit was based on a normal Capacity of 11000 units per month.Actual details for the months of
Preparation of variable and absorption costing statements and an explanation of the differences in profits Bittern Ltd manufactures and sells a single product at a unit selling price of £25.In
Compare and contrast traditional responsibility accounting with contempo¬ rary responsibility accounting. LO1
Describe process value analysis and explain its role in the contemporary responsibility accounting model. LO2
Describe activity-based flexible budgeting. LO3
Describe life cycle cost budgeting. LO4
Discuss how control at the operational level in a contemporary environ¬ ment differs from that in a conventional environment. LO5

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