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horngrens cost accounting a managerial emphasis

Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

=+4 Use the production budget to:
=+a find the budgeted number of set-ups, set-up hours and the allocation rate for set-up costs
=+b find the budgeted total machine-hours and the allocation rate for processing costs.
=+5 Prepare the direct materials usage budget and the direct materials purchases budget.
=+6 Use the direct materials usage budget to find the budgeted allocation rate for materials-handling costs.
=+7 Prepare the direct manufacturing labour cost budget.
=+8 Prepare the manufacturing overhead cost budget for materials handling, set-up and processing.
=+9 Prepare the budgeted unit cost of ending finished goods inventory and ending inventories budget.
=+10 Prepare cost of goods sold budget.
=+11 Prepare the non-manufacturing overhead costs budget for marketing and distribution.
=+12 Prepare a budgeted income statement (ignore income taxes).
=+13 Compare the budgeted unit cost of a chair to its budgeted selling price. Why might Dinettes Ltd continue to sell the chairs for only $80?
=+10-40 KK Budgeting and ethics OBJECTIVES 3, 6 Delmar Ltd manufactures a variety of products in a variety of departments, and evaluates departments and departmental managers by comparing actual cost
=+414 Chapter 10: Master budget and responsibility accounting M10_HORN3377_02_LT_C10.indd 414 2/09/13 3:46 PM Top management of Delmar Ltd has decided to implement budget standards that will
=+2 Why do you suppose Miller picked these particular standards?
=+3 What steps can Delmar Ltd’s top management take to make sure Wayne Miller’s standards really meet the goals of the firm?
=+10-41 KKK Human aspects of budgeting in a service firm OBJECTIVE 6 Jas Milatic owns three upscale hair salons: Hair Suite I, II and III. Each of the salons has a manager and 10 stylists who rent
=+Jas Milatic knows that utility costs are rising. Jas wants to increase revenues to cover at least some part of rising utility costs, so Jas tells each of the managers to find a way to increase
=+The manager of Hair Suite III sits down with the stylists and discusses the issue. After considering shortening the appointment and break times, or lengthening the hours of operation, one of the
=+1 Which manager’s style do you think is most effective? Why?
=+2 How do you think the stylists will react to the managers of salons I and II? What can they do to indicate their displeasure, assuming they are displeased?
=+3 In Hair Suite III, if the stylists did not want to share their stations with another party, how else could they find a way to increase revenues?
=+4 Refer again to the action that the manager of Hair Suite I has chosen. How does this relate to the concept of stretch targets?
=+10-42 KKK Comprehensive budgeting problem: activity-based costing, operating and financial budgets (Appendix 10-1)Yummy-Pop makes really big lollipops in two sizes, large and giant. Yummy-Pop sells
=+Direct manufacturing labour $8 per direct manufacturing labour-hour Input quantities per unit of output Large Giant Direct materials Sugar 0.25 kg 0.5 kg Sticks 1 1 Direct manufacturing
=+d direct manufacturing labour cost budget
=+e manufacturing overhead cost budgets for processing and set-up activities f budgeted unit cost of ending finished goods inventory and ending inventories budget
=+2 Yummy-Pop’s balance sheet for 30 November follows. Use it and the following information to prepare a cash budget for YummyPop for December:
=+◗ Eighty per cent of sales are on account, of which half are collected in the month of the sale, 49% are collected the following month and 1% are never collected and written off as bad debts.
=+◗ All purchases of materials are on account. Yummy-Pop pays for 70% of purchases in the month of purchase and 30% in the following month.416 Chapter 10: Master budget and responsibility
=+◗ All other costs are paid in the month incurred.
=+◗ Yummy-Pop is making monthly interest payments of 1% (12% per year) on a $20000 long-term loan.
=+◗ Yummy-Pop plans to pay the $500 of taxes owed as of 30 November in the month of December. Income tax expense for December is zero.
=+◗ Forty per cent of processing and set-up costs, and 30% of marketing and general administration costs, are depreciation.Yummy-Pop Balance sheet as of 30 November Assets Cash $587 Accounts
=+3 Prepare a budgeted income statement for December and a budgeted balance sheet for Yummy-Pop as of 31 December.
=+5 How is the behaviour of the salespeople affecting the profit of Orion Ltd? Is their behaviour ethical? What could Orion Ltd do to change the behaviour of the salespeople?
=+4 Recalculate the customer-level operating income if salespeople had not broken up actual orders into multiple smaller orders.Don’t forget also to adjust sales commissions.
=+3 Recalculate the customer-level operating profit using the number of written orders but at their actual $14 cost per order instead of$30 (except for SRU, whose actual cost is $30 per order). How
=+2 Using the above information, calculate the expected customer-level operating profit for the six customers of Orion Ltd. Assume that written orders cost $30 each, and calculate expected order
=+Because salespeople are paid $25 per order, they break up large orders into multiple smaller orders. This practice reduces the actual order-taking cost by $16 per smaller order (from $30 per order
=+9-29 KK Customer profitability and ethics OBJECTIVE 10 Orion Ltd manufactures a product called the ‘star’, which it sells to merchandising firms such as International House of Stars (IHoS),
=+3 Comment on the results of the preceding reports. What recommendations would you give Janice?
=+2 Prepare a customer-profitability analysis for the five customers, using the format in Figure 9-4.
=+*Janice has determined that 25% of her overhead costs relate directly to her architectural business, 40% relate directly to her window treatment business and the remainder is general in nature.370
=+9-28 KK Customer-cost hierarchy, customer profitability OBJECTIVES 8, 10 Janice Nelson operates Interiors by Jay, an interior design consulting and window treatment fabrication business. Her
=+3 Evaluate whether or not Scott Duncan’s suggestion to Andy Parker to use lower cost numbers is ethical. Would it be ethical for Andy to change his analysis so that a lower cost can be
=+2 Calculate the incremental costs of the ball-bearings order. Why do you think Solidity Ltd uses full costs of the order rather than incremental costs in its bidding decisions?
=+9-27 KK Ethics and pricing OBJECTIVE 4 Solidity Ltd is preparing to submit a bid for an order for ball-bearings. Scott Duncan, management accountant of the Bearings Division of Solidity Ltd, has
=+3 How might Heron Air price the seats so as to benefit from market segmentation? That is, what plan could the airline formulate so that business travellers and pleasure travellers each pay the
=+2 Explain the key factor(s) for your answer in requirement 1.
=+9-26 KK Airline pricing, market segmentation OBJECTIVE 3 Heron Air is about to introduce a daily return flight from Perth to Sydney and is determining how it should price its return tickets.The
=+3 What will the billing rate for HTT and ACT be based on in the activity-based costing structure? State the rates in terms of testing hours. Referring to both requirements 1 and 2, which rates make
=+2 Find the three activity-based rates for operating costs.
=+1 Find the single rate for operating costs based on test-hours and the hourly billing rate for HTT and ACT.
=+Bob Granger budgets 106000 total test-hours for the coming period. This is also the cost driver for labour and supervision.The budgeted quantity of cost driver for set-up and facility costs is 800
=+Bob Granger, Mercury’s management accountant, believes that there is enough variation in the test procedures and cost structure to establish separate costing rates and billing rates at a 45%
=+9-25 KK Cost-plus and market-based pricing (CMA, adapted) OBJECTIVES 2, 4 Mercury Laboratories evaluates the reaction of materials to extreme increases in temperature. Much of the company’s early
=+3 Comment on your answers to requirements 1 and 2. Why are they the same or different?
=+2 The marketing manager supplies the following information on demand levels at different prices:Price per hour Demand (hours)$16 124 000 17 104 000 18 84 000 19 74 000 20 61 000 Immediate Solutions
=+9-24 KK Cost-plus and market-based pricing OBJECTIVES 2, 3 Immediate Solutions, a large labour contractor, supplies contract labour to building construction companies. For 2015, Immediate Solutions
=+3 If Greg’s objective is to maximise profits, which option would he recommend to Ashley? What would be the ethical course of action?368 Chapter 9: Pricing decisions and customer-profitability
=+2 If the two options were equally effective for the three years that Ashley intends to live in the home, which option would she choose?
=+staff, support materials and shared equipment and tools, and to earn a profit.Spearhead technician Greg Garrison is called to the home of Ashley Briggs on a particularly hot summer day to
=+9-23 K Cost plus, time and materials, ethics OBJECTIVE 2 Spearhead Ltd sells and services plumbing, heating and air conditioning systems.Spearhead’s cost accounting system tracks two cost
=+4 If Boscoe Ltd spends an extra $200000 on marketing but uses the same mark-up percentage on the full cost per unit as in requirement 2, calculate the new selling price.
=+3 The sales manager thinks that Boscoe Ltd can sell 10000 more units at the $40.60 price if it spends $200000 on marketing by putting advertisements in trade magazines. Boscoe Ltd will not need to
=+2 What is the mark-up percentage on the full cost per unit of DN25?
=+Direct materials: $14.98 per unit Direct manufacturing labour: $15 per direct manufacturing labour-hour Engineering: $14 per engineer-hour (based on capacity of 25000 engineering-hours)Testing: $12
=+9-22 KK Target pricing, target cost and value engineering OBJECTIVES 2, 4 Boscoe Ltd manufactures component parts. One product, DN25, has annual sales of 50000 units. Boscoe Ltd sells DN25 for
=+3 Perfection’s closest competitor has just increased its price per case of chocolate bars to $15, although it sells 36 chocolate bars per case. Perfection is considering increasing its selling
=+2 What is the selling price Perfection needs to charge to earn the target operating profit? Calculate the mark-up percentage on full cost.
=+9-21 KK Cost-plus, target return on investment pricing OBJECTIVES 2, 4 Perfection makes chocolate bars for vending machines and sells them to vendors in cases of 30 bars. Although Perfection makes
=+2 Discuss the results of your customer-profitability analysis. Does Cartwright Ltd have unprofitable customers? Is there anything Cartwright Ltd should do differently with its five customers?
=+The full cost of manufacturing a unit of 9-CW9-14 is $80. In addition, Cartwright Ltd incurs customer-level costs. Customer-level cost-driver rates are:Order taking $390 per order Product handling
=+9-20 KK Customer profitability in a manufacturing company OBJECTIVE 8 Cartwright Ltd makes a component they call 9-CW9-14. This component is manufactured only when ordered by a customer, so
=+3 What factors should Crystal Distribution consider in deciding whether to drop one or more of the five customers?
=+2 What insights are gained by reporting both the list selling price and the actual selling price for each customer?
=+9-19 KK Customer profitability, distribution OBJECTIVE 10 Crystal Distribution has decided to analyse the profitability of five new customers (see pp. 355–358). It buys bottled water at $12 per
=+2 Geoff ranks the individual customers in the single-store distribution market on the basis of monthly operating profit. The cumulative operating profit of the top 20% of customers is $55680. Ross
=+5 Shelf-stocking $16 per stocking-hour Geoff Strong, the management accountant of Ross Ltd, wants to use this ABC system to examine individual customer profitability within each distribution
=+2 Line-item ordering $3 per line item 3 Store deliveries $50 per store delivery 4 Carton deliveries $1 per carton
=+9-18 K Customer profitability, distribution OBJECTIVE 10 Ross Ltd is a distributor of pharmaceutical products. Its ABC system has five activities:Activity area Cost-driver rate in 2014 1 Order
=+3 What options should SO consider, with regard to individual customers, in light of the new data and analysis of office overhead?
=+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?

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