Questions and Answers of Cost And Management Accounting An Introduction

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)
Under what conditions will the weighted average and FIFO methods give similar results? (0. 168)
Explain the distinguishing features of a batch/operating costing system. (op. 168-169)
R makes one product, which passes through a single process. Details of the process account for period 1 were as follows:There was no work in progress at the beginning or end of the period. Process
A company operates a process in which no losses are incurred. The process account for last month, when there was no opening work in progress, was as follows:The closing work in progress was complete
A company uses process costing to value its output. The following was recorded for the period:Input materials 2000 units at £4.50 per unit Conversion costs £13340 Normal loss 5 per cent of input
KL Processing Limited has identified that an abnormal gain of 160 litres occurred in its refining process last week. Normal losses are expected and have a scrap value of £2.00 per litre. All losses
The following details relate to the main process of W Limited, a chemical manufacturer:Opening work in progress 2000 litres, fully complete as to materials and 40 per cent complete as to conversion
Process B had no opening stock. 13500 units of raw material were transferred in at£4.50 per unit. Additional material at £1.25 per unit was added in process. Labour and overheads were £6.25 per
Information relating to two processes (F and G) was as follows:For each process, was there an abnormal loss or an abnormal gain?(2 marks)ACCA Financial Information for Management process G FC Normal
The following details relate to the main process of Z Limited, a paint manufacturer:Opening work in process 2400 litres _ fully complete as to materials and 30 per cent complete as to conversion
The following information is required for sub-questions (a) to (c).The incomplete process account relating to period 4 for a company which manufactures paper is shown below:Losses are recognized at
A company operates a process costing system using the first in, first out (FIFO)method of valuation. No losses occur in the process. All materials are input at the commencement of the process.
Acompany operates a process costing system using the first in, first out (FIFO) system of valuation. No losses occur in the process. The following data relate to last month:Last month the cost per
Weighted average method with losses CW Ltd makes one product in a single process. The details of the process for period 2 were as follows:a There were 800 units of opening work in progress valued as
Equivalent production with losses (FIFO method)Partlet Ltd makes a product that passes through two manufacturing processes.A normal loss equal to 8 per cent of the raw material input occurs in
Equivalent production with losses (FIFO method)Adam, the management accountant of Mark Limited, has on file the costs per equivalent unit for the company’s process for the last month but the input
Equivalent production and losses in process A concentrated liquid fertilizer is manufactured by passing chemicals through two consecutive processes. Stores record cards for the chemical ingredients
Equivalent production with losses (FIFO method)Yeoman Ltd uses process costing and the FIFO method of valuation. The following information for last month relates to Process G, where all the material
Define responsibility accounting and describe the four types of responsibil¬ ity centers. LO1
Explain why firms choose to decentralize. LO2
Compute and explain return on investment (ROI), residual income (RI), and economic value added (EVA). LO3
Discuss methods of evaluating and rewarding managerial performance. LO4
Explain the role of transfer pricing in a decentralized firm. LO5
Discuss the methods of setting transfer prices. LO6
What is decentralization? Discuss the differences between centralized and decentralized decision making. LO6
Explain why firms choose to decentralize. LO6
Explain how access to local information can improve decision making. LO6
One division had operating profits of $500,000, and a second division had operating profits of $3 million. Which divisional manager did the best job? Explain. LO6
What are margin and turnover? Explain how these concepts can improve the evaluation of an invest¬ ment center. LO6
What are the three benefits of ROl? Explain how each can lead to improved profitability. LO6
What are two disadvantages of ROl? Explain how each can lead to decreased profitability. LO6
What is residual income? Explain how residual in¬ come overcomes one of ROTs disadvantages. LO6
What disadvantage is shared by ROl and residual in¬ come? What can be done to overcome this problem? LO6
What is EVA? How does it differ from ROl and re¬ sidual income? LO6
What problems do owners face in encouraging goal congruence of managers? LO6
What is a stock option? How can it encourage goal congruence? LO6
What is a transfer price? LO6
Explain how transfer prices can impact performance measures, firmwide profits, and the decision to de¬ centralize decision making. LO6
What is the transfer pricing problem? LO6
Explain the opportunity cost approach to transfer pricing. LO6
If the minimum transfer price of the selling division is less than the maximum transfer price of the buy¬ ing division, the intermediate product should be transferred internally. Do you agree? Why?
Discuss the advantages and disadvantages of nego¬ tiated transfer prices. LO6
Why are indirect costs not directly traced to cost objects in the same way as direct costs? (p. 86)
Define cost tracing, cost allocation, allocation base and cost driver. (p. 86)
Distinguish between arbitrary and cause-and-effect allocations. (p. 86)
Explain how cost information differs for profit measurement/inventory valuation requirements compared with decision-making requirements.(pp. 87-88)
Explain why cost systems should differ in terms of their level of sophistication.(pp. 88-89)
Why are separate departmental or cost centre overhead rates preferred to a plant-wide (blanket) overhead rate? (pp. 90-97)
Describe the two-stage overhead allocation procedure. (pp. 91-93)
Why are some overhead costs sometimes not relevant for decision-making purposes? (pp. 99)
Why are budgeted overhead rates preferred to actual overhead rates?(pp. 99-100)
Give two reasons for the under- or over-recovery of overheads at the end of the accounting period. (pp. 100-107)
Acompany uses absorption costing with a predetermined hourly overhead absorption rate. The following situations arose last month:(i) Actual hours worked exceeded planned hours.(ii) Actual overhead
The following data are to be used for sub-questions (i) and (ii) below:Budgeted labour hours ‘ 8500 Budgeted overheads " $148750 Actual labour hours 7928 Actual overheads £146 200(i) Based on the
Acompany uses an overhead absorption rate of $3.50 per machine hour, based on 32 000 budgeted machine hours for the period. During the same period the actual total overhead expenditure amounted to
The management accountant's report shows that fixed production overheads were over-absorbed in the last accounting period. The combination that is certain to lead to this situation is:(2 marks)CIMA

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