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business
horngrens cost accounting a managerial emphasis
Questions and Answers of
Horngrens Cost Accounting A Managerial Emphasis
=+2 Prepare figures for SO similar to Figures 9-4 and 9-5. Comment on the results.
=+As Jill Millbank, SO’s new management accountant, notes that office overhead is more than 10% of total costs, she spends a couple of weeks analysing the consumption of office overhead resources
=+9-17 KK Customer profitability, service company OBJECTIVE 8 Spot On (SO) repairs printers and photocopiers for five multisite companies in a tristate area. SO’s costs consist of the cost of
=+3 Omega Electronics’s management decides to allocate all organisation-sustaining costs to distribution channels: $51 million to the wholesale channel and $14 million to the retail channel. As a
=+2 Prepare a customer-cost hierarchy report using the format in Figure 9-3.
=+9-16 KK Customer profitability, customer-cost hierarchy OBJECTIVE 8 Omega Electronics has only two retail and two wholesale customers. Information relating to each customer for 2014 follows(in
=+2 Sam O’Brien ponders whether to accept the 3000-unit special order. He is afraid of the precedent that might be set by cutting the price. He says: ‘The price is below our full cost of $96 per
=+Puma Ltd, an instruments company, has a problem with its preferred supplier of XT-107. This supplier has had a three-week labour strike. Puma approaches Wainwright Electronics sales representative,
=+9-15 KK Relevant-cost approach to short-run pricing decisions OBJECTIVE 5 Wainwright Electronics Ltd is a business with eight product lines. Income data for one of the products (XT-107) for June
=+3 What other factors should the CEO consider before accepting or rejecting the special order?
=+2 Comment on the CEO’s ‘below manufacturing costs’ reasoning for rejecting the special order.
=+◗ variable marketing costs (sales commissions) of 5% of revenues◗ fixed monthly costs of $65000.During October 2014, Ann Daniels, a Dill Company salesperson, asked the CEO for permission to
=+9-14 K Relevant-cost approach to pricing decisions, special order OBJECTIVE 5 The following financial data apply to the DVD production plant of Dill Company for October 2014:Budgeted manufacturing
=+9-13 How does a knowledge of a customer-cost hierarchy assist in analysing customer profitability?
=+9-12 ‘A customer-profitability profile highlights those customers who should be dropped to improve profitability.’ Do you agree?Explain your answer.
=+9-11 What information does the whale curve provide?
=+9-10 Why is customer-profitability analysis a vitally important topic to managers?
=+9-9 Define predatory pricing, dumping and price fixing.
=+9-8 Give two examples in which the difference in the costs of two products or services is much smaller than the difference in their prices.
=+9-7 Describe three alternative cost-plus pricing methods.
=+9-6 What is cost-plus pricing?
=+9-5 Describe two alternative approaches to long-run pricing decisions.
=+9-4 How is activity-based costing useful for pricing decisions?
=+9-3 Give two examples of pricing decisions with a short-run focus.
=+9-2 ‘Relevant costs for pricing decisions are full costs of the product.’ Do you agree? Explain your answer.
=+9-1 What are the three major influences on pricing decisions?
=+2 Are any customers unprofitable? What is causing this? What should Ring Delights do with respect to these customers?
=+4 Number of customer returns. Customers may return jewellery up to 30 days after the pick-up of the jewellery to have something refitted or repaired at no charge. The cost-driver rate is $30 per
=+3 Rush orders. Some customers want their jewellery quickly. The cost-driver rate is $100 per rush order.
=+2 Customer fittings. Before the jewellery is completed, the customer may come in to make sure it looks right and fits properly. Cost-driver rate is $25 per hour.
=+1 Customer orders. The salespeople, designers and jewellery makers spend time with the customer.The cost-driver rate is $40 per hour spent with a customer.
=+Ring Delights is a new company that manufactures custom jewellery. Ring Delights currently has six customers referenced by customer number: 1, 2, 3, 4, 5 and 6. Besides the costs of making the
=+How does a company distinguish between profitable and unprofitable customers?
=+Why do customer-level costs differ across customers?
=+How is the activity-based costing hierarchy applied to customer costing?
=+Why do a company’s revenues differ across customers purchasing the same product?
=+How do Australian laws affect pricing?
=+How do short-run pricing decisions differ from long-run pricing decisions?
=+How are prices determined for a segmented market?
=+How do companies determine target price and target cost?
=+10 Analyse customer profitability
=+9 Explain differences in customer-level costs across customers
=+8 Apply the activity-based cost hierarchy to customer costing
=+7 Explain differences in a company’s revenues across customers purchasing the same product
=+6 Explain the impact of Australian law on pricing
=+5 Set prices for the long run and/or the short run.
=+4 Set prices using cost-plus pricing
=+3 Set prices in a segmented market
=+2 Set prices of outputs using market prices with or without target costing
=+1 State and explain the three major influences on pricing decisions
=+How do you implement a job-costing system?
=+How do you calculate and use predetermined indirect cost rates to be used for normal costing?
=+How do you prepare the journal entries to account for the flow of costs in a job-costing system?
=+What are the variations from normal costing?
=+How can under- or overallocated manufacturing overhead costs be dealt with at the end of the fiscal period?
=+What are equivalent units and what role do they play in the process-costing sequence?
=+What is the weighted-average method of process costing?
=+How are transferred-in costs dealt with when using the weighted-average method?
=+5-1 How does a job-costing system differ from a process-costing system?
=+5-3 Describe three major source documents used in job-costing systems.
=+5-4 Give two reasons why most organisations use an annual period rather than a weekly or monthly period to calculate budgeted indirect cost rates.
=+5-5 Distinguish between actual costing and normal costing.
=+5-6 Identify the seven steps in job costing and describe two ways in which a house construction company may use job-cost information.
=+5-7 Describe three alternative ways to dispose of under- or overallocated overhead costs. What factors will influence which approach is most appropriate?
=+5-8 When might a company use budgeted costs rather than actual costs to calculate direct labour rates?
=+5-9 Give three examples of industries that use process-costing systems.
=+5-10 Explain equivalent units. Why are equivalent-unit calculations necessary in process costing?
=+5-11 Name the five steps in process costing when equivalent units are calculated.
=+5-12 Describe the distinctive characteristic of weighted-average calculations in assigning costs to units completed and to units in ending work in process.
=+5-13 (Appendix 5-1) Describe the distinctive characteristic of FIFO calculations in assigning costs to units completed and to units in ending work in process.
=+5-14 (Appendix 5-1) Identify a major advantage of the FIFO method for purposes of planning and control.
=+5-15 K Job costing, process costing OBJECTIVE 1 In each of the following situations, determine whether job costing or process costing would be more appropriate:a an accounting firm b an oil
=+e a textbook publisher
=+f a pharmaceutical company g an advertising agency
=+h a clothing manufacturing plant i a flour mill
=+j a paint manufacturer k a medical care facility l a landscaping company
=+m a cola-drink-concentrate producer n a movie studio
=+o a law firm p a commercial aircraft manufacturer
=+q a management consulting firm r a breakfast cereal company
=+s a catering service
=+t a paper mill
=+u a car repair shop
=+5-16 KK Actual costing, normal costing, accounting for manufacturing overhead OBJECTIVES 3, 4 Maverick Products uses a job-costing system with two direct cost categories (direct materials and
=+2 During March, the job-cost record for job 626 contained the following information:Direct materials used $40 000 Direct manufacturing labour costs $30 000 Calculate the cost of job 626 using: (a)
=+5-17 KK Job costing, normal and actual costing OBJECTIVES 3, 4 Stegline Construction builds units in retirement complexes in remote communities. It uses a job-costing system with two direct cost
=+At the end of 2014, Stegline is comparing the costs of several jobs that were started and completed in 2014:Sunrise model Sunset model Construction period Feb–June 2014 May–Oct 2014 Direct
=+2 What are the job costs of the Sunrise model and the Sunset model using: (a) normal costing and (b) actual costing?
=+3 Why might Stegline Construction prefer normal costing over actual costing?
=+5-18 K Budgeted manufacturing overhead rate, allocated manufacturing overhead OBJECTIVE 4 Waheed Ltd uses normal costing. It allocates manufacturing overhead costs using a budgeted rate per
=+2 Calculate the manufacturing overhead allocated during 2014.
=+3 Calculate the amount of under- or overallocated manufacturing overhead. Show the journal entry to close the manufacturing overhead accounts and write off the under- or overallocated overhead to
=+5-19 KKK Job costing, accounting for manufacturing overhead, budgeted rates OBJECTIVES 4, 5 Lynn Ltd uses a job-costing system at its Melbourne plant. The plant has a Machining Department and an
=+2 During February, the job-cost record for job 494 contained the following:Machining Department Assembly Department Direct materials used $45 000 $70 000 Direct manufacturing labour costs $14 000
=+Calculate the total manufacturing overhead costs allocated to job 494.
=+3 At the end of 2015, the actual manufacturing overhead costs were $2100000 in Machining and $3700000 in Assembly.Assume that 55000 actual machine-hours were used in the Machining Department and
=+5-20 KKK Job costing, accounting firm OBJECTIVE 6 Poole and Partners is an accounting firm specialising in auditing. Budgeted revenues for 2014 were 13000000. The main costs incurred by Poole and
=+2 The mark-up rate for pricing jobs is intended to produce operating profit equal to 35% of revenues. Calculate the mark-up rate as a percentage of direct labour costs.
=+3 Poole and Partners is preparing a tender to complete an audit for Peter & Sons. How much will Poole and Partners bid for the job if it is to earn its target operating profit of 35% of revenues?
=+5-21 KK Service industry, time period used to calculate indirect cost rates OBJECTIVE 4 LazerLine Pty Ltd produces annual reports and marketing materials for large companies. There are three
=+Direct materials $900 000 $620 000 $595 000 $605 000 $2 720 000 Direct labour costs $400 000 $280 000 $250 000 $270 000 $1 200 000 Variable overhead costs as a percentage of direct labour cost 90%
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