Questions and Answers of Financial And Management Accounting

What are the main items in a statement of the cost of production of an item of output?(Section 18.1)
How may a system of materials-control procedures ensure accurate accounting information for job-costing purposes? (Section 18.2.1)
Which source documents should be used to create the accounting record for direct materials costs? (Section 18.2.1)
What is meant by the term ‘FIFO’, when used in deciding on the cost price of goods issued to production? (Section 18.2.2)
What are the problems of accounting for wastage and scrap? (Section 18.2.3)
Is direct labour cost a fixed cost or a variable cost? Explain your answer. (Section 18.3)
Give three examples of production overheads in (Section 18.4)(a) a manufacturing business; and(b) a service business.
For each of your answers to the previous question, say whether the cost is a fixed cost or a variable cost. (Section 18.4)
What are the important features of any successful scheme of allocating, apportioning and absorbing indirect costs to products? (Section 18.4.2)
For each of the following overhead costs, suggest one method of apportioning cost to cost centres: (Section 18.4.2)(a) employees’ holiday pay;(b) agency fee for nurse at first-aid centre;(c)
Explain how each of the following service department costs could be apportioned over production centres: (Section 18.4.2)(a) Cleaning of machines in a food-processing business.(b) Vehicle maintenance
State the principles to be applied in absorbing costs into products. (Section 18.4.3)
Using your answer to question A18.12, compare the relative merits of calculating overhead costs per unit of products using each of the following methods: (Section 18.4.3)(a) Cost per direct labour
What are the benefits and what are the possible problems of using overhead cost rates estimated in advance of the actual costs being recorded? (Section 18.4.5)
How does under-recovery of production overhead arise? (Section 18.4.6)
Give three possible causes of an adverse direct labour efficiency variance.(Section 22.6)
Give three possible causes of a favourable direct labour rate variance. (Section 22.6)
How are direct labour rate and efficiency variances calculated? (Section 22.6)
Give three possible causes of a favourable direct materials usage variance.(Section 22.5)
Give three possible causes of an adverse direct materials price variance. (Section 22.5)
How are direct materials price and usage variances calculated? (Section 22.5)
How are standard costs used in the control process? (Section 22.4)
How are standard costs related to levels of output? (Section 22.3)
Why are standard costs useful? (Section 22.2)
What is a standard cost? (Section 22.1)
Understand the broader views that exist regarding variance analysis.
Discuss the usefulness of variance analysis.
Use flexible budgeting to calculate variances in a case study.
Explain the application of flexible budgets in variance analysis.
Explain how variances may be investigated.
Combine calculation of all variances in a case study.
Define and calculate fixed overhead expenditure variance.
Define and calculate variable overhead cost variance and its components.
Define and calculate direct labour cost variance and its components.
Define and calculate direct materials cost variance and its components.
Explain how the control process uses standard costs and variances.
Describe the problems of choosing the level of output for standards.
Explain the purpose of using standard costs.
Define the terms ‘standard cost’ and ‘variance’.
Would the same standard cost apply across all the levels of degree study?
Do you agree with the method used to calculate the standard cost of attendance?
[S] The sales budget for the BeeSee Company for the first six months of the year is:£January 12,000 February 13,000 March 14,000 April 13,500 May 12,600 June 11,100 There are no debtors at the start
Explain the nature and purpose of zero-base budgeting (ZBB). (Section 21.6.2)
Explain the nature and purpose of planning, programming budgeting systems (PPBS).(Section 21.6.2)
What are the limitations of line item budgets? (Section 21.6.1)
How may these behavioural problems be avoided or minimised? (Section 21.5.1)
What are the behavioural aspects of budgeting which may give rise to problems?(Section 21.5.1)
How does budgeting help the management function of communication and coordination? (Section 21.4.3)
How does budgeting help the management function of control? (Section 21.4.2)
How does budgeting help the management function of planning? (Section 21.4.1)
What is the sequence of the budgetary process? (Section 21.3.3)
What is the role of the accounting department? (Section 21.3.2)
What is the role of the budget committee? (Section 21.3.1)
Define the term ‘budget’. (Section 21.2.3)
Explain the purpose of setting a strategy. (Section 21.2.2)
Explain the purpose of long-range planning. (Section 21.2.1)
Prepare budgets for periods shorter than 12 months.
Prepare the separate budgets that lead to a master budget.
Explain how budgets are used in public service organisations.
Explain the benefits of budgeting.
Describe the administration of the budgetary process.
Explain the purpose and nature of a budgetary system.
How does the recommendation help with a basic description of how to continue monitoring the budget plan?
How does the recommendation help with a basic description of the preparation of a budget?
Explain the situations where marginal cost pricing may be appropriate. (Section 20.8.5)
What are the limitations of full cost pricing? (Section 20.8.4)
Explain the situations where full cost pricing may be appropriate. (Section 20.8.2)
Explain how economic factors usually dictate prices of goods and services.(Section 20.8.1)
Explain how cost–volume–profit analysis may help in:(a) decisions on special orders; (Section 20.6.1)(b) abandonment decisions; (Section 20.6.2)(c) situations of limiting factors; and (Section
Give three examples of applications of cost–volume–profit analysis. (Section 20.6)
State the limitations of break-even analysis. (Section 20.5)
What happens to the break-even point when fixed overheads increase? (Section 20.4.6)
What happens to the break-even point when the variable cost per unit falls?(Section 20.4.5)
What happens to the break-even point when the sales price per unit falls? (Section 20.4.4)
Sketch, and explain the main features of, a profit–volume chart. (Section 20.3.3)
Sketch, and explain the main features of, a break-even chart. (Section 20.3.2)
Explain the formula method for determining the break-even point. (Section 20.3.1)
Explain the algebraic method for determining the break-even point. (Section 20.3.1)
Contrast the economist’s view of costs and revenues with that taken in management accounting. (Section 20.2)
Define ‘variable cost’ and ‘fixed cost’. (Section 20.1)
Explain how pricing decisions may be related to cost considerations.
Show how calculation of contribution can be applied in short-term decision making.
Explain applications of cost–volume–profit analysis.
Explain the limitations of break-even analysis.
Use break-even analysis to explore the effect of changing unit selling price, unit variable cost or fixed cost.
Define and calculate contribution and break-even point, and prepare a break-even chart and a profit–volume chart.
Explain how the accountant’s view of cost behaviour differs from that of the economist.
What is the strategy for reviewing marketing activities?
What factors caused a decline in the division’s contribution to fixed overheads and profit?
Set out the arguments in favour of marginal costing. (Section 19.4.8)
Set out the arguments in favour of absorption costing. (Section 19.4.7)
Explain why absorption costing and marginal costing may lead to different measures of profit in a period. (Sections 19.4.3 and 19.4.4)
Define marginal costing. (Section 19.4)
Define absorption costing. (Section 19.4)
How does the accounting equation represent the sale of goods? (Section 19.3.7)
How does the accounting equation represent the transfer of work in progress to finished goods? (Section 19.3.6)
How does the accounting equation represent the transfer of production overhead costs to work in progress? (Section 19.3.5)
How does the accounting equation represent the transfer of labour costs to work in progress? (Section 19.3.4)
How does the accounting equation represent the issue of indirect materials to production? (Section 19.3.3)
How does the accounting equation represent the conversion of raw materials into work in progress? (Section 19.3.2)

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