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business
horngrens cost accounting a managerial emphasis

Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

=+3 Use the activity-based costing information to allocate the $301080 of ‘other operating costs’ to each of the market segments.Calculate the operating profit for each market segment.
=+4 Comment on the results. What new insights are available with the activity-based costing information?
=+6-48 KKK Choosing cost drivers, activity-based costing, activity-based management OBJECTIVES 7, 8, 9 Boast Sacs (BS) is a designer of high-quality backpacks and purses. Each design is made in small
=+2 Identify the most appropriate cost driver for each cost category. Explain briefly your choice of cost driver.
=+3 Calculate the cost per unit of cost driver for each cost category.
=+4 Calculate the total costs and cost per unit for each product line.
=+5 Explain how you could use the information in requirement 4 to reduce costs.
=+6-49 KKK Activity-based costing, health care OBJECTIVES 7, 8 Haven Health Centre runs two programs: drug addict rehabilitation and aftercare (counselling and support of patients after release from
=+b Using an activity-based costing approach to cost analysis, calculate the cost of each program and the cost per patient-year of the drug program.
=+c What benefits can Haven Health Centre obtain by implementing the ABC system?
=+2 What factors, other than cost, do you think Haven Health Centre should consider in allocating resources to its programs?
=+6-50 KK Unused capacity, activity-based costing, activity-based management OBJECTIVES 7, 8 Advance Netballs is a manufacturer of high-quality basketballs and volleyballs. Set-up costs are driven by
=+2 What is the cost of unused capacity?
=+3 What is the total cost and the cost per unit of resources used to produce: (a) basketballs and (b) volleyballs?
=+4 What factors should Advance Netballs consider if it has the opportunity to manufacture a new line of footballs?
=+6-51 KKK Activity-based job costing, unit-cost comparisons OBJECTIVES 7, 8 Dynamic Ltd has a machining facility specialising in jobs for the aircraft-components market. Dynamic Ltd’s previous
=+2 Calculate the manufacturing cost per unit for each job under the activity-based costing system.Chapter 6: Activity-based costing and activity-based management 259 M06_HORN3377_02_LT_C06.indd 259
=+3 Compare the per-unit cost figures for jobs 410 and 411 calculated in requirements 1 and 2. Why do the simple and the activitybased costing systems differ in the manufacturing cost per unit for
=+4 How might Dynamic Ltd use information from its ABC system to manage its business better?
=+6-52 KKK Activity-based costing, implementation, ethics (CMA, adapted) OBJECTIVES 3, 5, 7, 8 Eagle Electronics, a division of Bundle Ltd, manufactures two LCD screen television models: the Topaz,
=+After completing her analysis, Susan shows the results to Roger White, Eagle Electronics’ division managing director. Roger does not like what he sees. ‘If you show headquarters this analysis,
=+2 Explain briefly why these numbers differ from the profitability of the Jade and Topaz models calculated using Eagle Electronics’existing simple costing system.
=+3 Comment on Roger White’s concerns about the accuracy and limitations of ABC.
=+4 How might Eagle Electronics find the ABC information helpful in managing its business?
=+5 What should Susan Church do in response to Roger White’s comments?
=+6-53 KKK Activity-based costing, activity-based management, merchandising OBJECTIVES 7, 8 Books’N’More is a large city bookstore that sells books and music CDs, and has a café. It operates at
=+2 Identify an improved method for allocating costs to the three product lines. Explain. Use the method for allocating S, G & A costs that you propose to prepare new product line and total company
=+3 Write a memo to Books’N’More’s management describing the state of its accounting system, any improvements that you would recommend and how the information may be useful for product line
=+V1 Distinguish between market-based and cost-based pricing
=+2 Set output prices using the target-costing approach
=+3 Distinguish between value- and non-value-added activities
=+4 Apply the concepts of cost incurrence and locked-in costs
=+5 Apply life-cycle budgeting and costing when making pricing decisions
=+6 Describe and apply various capacity concepts
=+7 Select the appropriate capacity concept under differing circumstances
=+8 Describe how attempts to recover the costs of capacity (fixed costs) may lead to increases in price(s)and reduction in demand
=+Should a company use market-based or cost-based pricing?
=+How do companies determine target costs?
=+How do management and workers distinguish between value- and non-value-added activities?
=+Why is it important to distinguish cost incurrence from locked-in cost?
=+What are life-cycle budgeting and life-cycle costing, and when should companies use these techniques?
=+What are the various capacity concepts a company can apply to calculate the budgeted fixed manufacturing cost rate?
=+What are the major factors managers consider in choosing the capacity level to calculate the budgeted fixed manufacturing cost rate?
=+Should a company with high fixed costs and unused capacity raise selling prices to try to recoup its costs fully?
=+Reconsider the Auscompt example (pp. 265–273). Auscompt’s marketing manager realises that a further reduction in price is necessary to sell 200000 units of Hellovalue II. To maintain a target
=+2 Re-engineer ordering and receiving to reduce ordering and receiving costs per order.
=+3 Reduce testing time and the labour and power required per hour of testing.
=+4 Develop new rework procedures to reduce rework costs per hour.No changes are proposed in direct manufacturing labour cost per unit and in total machining costs.The following table summarises the
=+7-1 What is the difference between market-based and cost-based pricing?
=+7-2 What is a target cost per unit?
=+7-3 Describe value engineering and its role in target costing.
=+7-4 Give two examples of a value-added cost and two examples of a non-value-added cost.
=+7-5 ‘It is not important for a company to distinguish between cost incurrence and locked-in costs.’ Do you agree? Explain your answer.
=+7-6 What is cost-plus pricing?
=+7-7 What is life-cycle budgeting?
=+7-8 What are three benefits of using a product life-cycle reporting format?
=+7-9 Which denominator-level capacity concepts emphasise the output a plant can supply? Which denominator-level capacity concepts emphasise the output customers demand for products produced by a
=+7-10 ‘The way to get the best use of production capacity is to operate at theoretical capacity.’ Do you agree? Explain your answer.
=+7-11 Describe the downward demand spiral and its implications for pricing decisions.
=+7-12 ‘The normal capacity concept eliminates entirely the effect of fluctuating production levels on unit costs.’ Do you agree?Explain your answer.
=+7-13 What is the ATO’s requirement for tax reporting regarding the choice of a denominator-level capacity concept?
=+7-14 Why is it important to distinguish between value-added and non-value-added costs?
=+7-15 K Short-run pricing, capacity constraints OBJECTIVE 6 Organix Dairy, maker of specialty cheeses, produces a soft cheese from the milk of dairy cows raised on a special corn-based diet. One
=+2 Now suppose that the special milk is in short supply. Every kilogram of Supreme Gourmet hard cheese that Organix Dairy produces will reduce the quantity of Organix soft cheese that it can make
=+7-16 KK Value-added, non-value-added costs OBJECTIVE 3 Coggs Ltd repairs and services machine tools. A summary of its costs (by activity) for 2014 is as follows:a Materials and labour for servicing
=+2 For any cost classified in the grey area, assume 65% is value added and 35% is non-value added. How much of the total of all seven costs is value added and how much is non-value added?
=+3 Coggs Ltd is considering the following changes: (a) introducing quality-improvement programs, whose net effect will be to reduce rework and expedite costs by 75% and materials and labour costs
=+Calculate the effect of programs (a), (b) and (c) on
=+value-added costs, non-value-added costs and total costs. Comment briefly.
=+7-17 KK Target operating profit, value-added costs, service company OBJECTIVE 3 Stratum prepares architectural drawings to conform to local structural-safety codes. Its income statement for 2014
=+2 Suppose Stratum could eliminate all errors so that it did not need to spend any time making corrections and, as a result, could proportionately reduce professional labour costs. Calculate
=+3 Now suppose Stratum could take on as much business as it could complete, but it could not add more professional staff. Assume Stratum could eliminate all errors so that it does not need to spend
=+7-18 KK Target prices, target costs, activity-based costing OBJECTIVES 1, 2 Adonis Pty Ltd is a small distributor of marble tiles. Adonis identifies its three major activities and cost pools as
=+2 For 2015, retailers are demanding a 5% discount off the 2014 price. Adonis’s suppliers are only willing to give a 4% discount.Adonis expects to sell the same quantity of marble tiles in 2015 as
=+3 Suppose further that Adonis decides to make changes in its ordering and receiving and storing practices. By placing long-run orders with its key suppliers, Adonis expects to reduce the number of
=+7-19 K Target costs, effect of product design changes on product costs OBJECTIVE 2 Medical Instruments Ltd uses a manufacturing costing system with one direct cost category (direct materials) and
=+2 Calculate the manufacturing cost per unit of HJ6 in 2015.
=+3 Did Medical Instruments Ltd achieve the target manufacturing cost per unit for HJ6 in 2015? Explain.
=+4 Explain how Medical Instruments Ltd reduced the manufacturing cost per unit of HJ6 in 2015.
=+7-20 K Cost-plus target return on investment pricing OBJECTIVE 2 Henri Dubois is the managing partner of a business that has just finished building a 60-room motel. Dubois anticipates that he will
=+2 Dubois’s market research indicates that if the price of a room-night determined in requirement 1 is reduced by 10%, the expected number of room-nights Dubois could rent would increase by 10%.
=+7-21 KK Cost-plus, target pricing, working backwards (S. Sridhar, adapted) OBJECTIVE 1 Drummond Ltd manufactures and sells SPRY1, a specialty raft used for white-water rafting. In 2014, it reported
=+7-22 K Life-cycle product costing OBJECTIVE 5 Insync Ltd manufactures game systems. Insync Ltd has decided to create and market a new system with wireless controls and excellent video graphics.
=+2 The managers at Insync Ltd are thinking of two alternative pricing strategies:a Sell the Boast at $110 each from the outset. At this price they expect to sell 1500000 units over its life cycle.b
=+3 What other factors should Insync Ltd consider in choosing its pricing strategy?
=+7-23 K Capacity management, capacity concepts OBJECTIVE 7 Match each of the following items with one or more of the capacity concepts by putting the appropriate letter(s) by each item:a theoretical
=+4 Measures the denominator level in terms of demand for the output of the plant
=+5 Takes into account seasonal, cyclical and trend factors
=+6 Should be used for performance evaluation
=+7 Represents an ideal benchmark
=+8 Highlights the cost of capacity acquired but not used
=+9 Should be used for long-run pricing purposes
=+10 Hides the cost of capacity acquired but not used
=+11 If used as the denominator-level concept, would avoid the restatement of unit costs when expected demand levels change
=+7-24 KK Application of capacity concepts OBJECTIVE 7 Motion Ltd is a manufacturer of the very popular G36 motorcycles. The management at Motion Ltd has recently adopted absorption costing and is
=+b Practical capacity—theoretical capacity adjusted for unavoidable interruptions, breakdowns and so on: 3 × 4 × 320 = 3840.
=+c Normal capacity utilisation—estimated at 3240 units.
=+d Master-budget capacity utilisation—the strengthening share market and the growing popularity of motorcycles have prompted the Marketing Department to issue an estimate for 2014 of 3600
=+2 What are the benefits to Motion Ltd of using either theoretical capacity or practical capacity?
=+3 Under a cost-based pricing system, what are the negative aspects of a master-budget capacity concept? What are the positive aspects?

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