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horngrens cost accounting a managerial emphasis

Questions and Answers of Horngrens Cost Accounting A Managerial Emphasis

Simplified cost accounting by valuing all inventories at standard.LO.1
Structured data for planning and special studies.LO.1
Other benefits including:a. The planning required to set up standards.b. Enhanced coordination and cooperation by and within all areas.c. Pursuit of both total and individual goals.LO.1
Accountants use estimates of what manufacturing overhead costs should be rather than estimates what they will be.LO.1
For fixed overhead rates, accountants use of a level of activity different from the expected volume of activity as discussed in an earlier chapter.LO.1
What is the primary difference between a predetermined cost and a standard cost?LO.1
Of what value is the difference between what costs are and what cost should be?LO.1
Is it possible that an exemplary system of cost control may be effected through the use of physical standards rather than dollar standards? Explain.LO.1
Comment on the following: "Without clear statements of responsibility and the granting of authority necessary to fulfill responsibility, efforts designed to control costs will ultimately result in
Comment on the following: "The setting of standards is basically an engineering function.Accountants enter into the setting of standards via the testing of standards and the conversion of physical
Define, distinguish, and discuss the merits and demerits of the following:a. Attainable standards.b. Perfection standards.LO.1
How is make-up pay built into cost standards covering piecework?LO.1
Would there be much incentive in an incentive system which has the level where incentive earnings start equal to a perfection standard? An attainable standard?LO.1
Define and distinguish between:a. Variable manufacturing overhead.b. Fixed manufacturing overhead.c. Direct manufacturing overhead.d. Indirect manufacturing overhead.LO.1
Discuss the following: "The fixed cost vs. variable cost distinction is an oversimplification of the economic facts of life. Students and even practitioners of accounting are often misled by this
What is the relevant range and how does it relate to the fixity and variability of various costs?LO.1
Why is it reasonable to consider the use of two or more overhead rates based on the distinction between fixed and variable costs? How might one state a general limitation concerning the number of
Define and distinguish between:a. Normal volumeb. Expected activityc. Physical capacityd. Average capacitye. Expected capacityf. Practical capacity g. Normal capacity LO.1
Substantiate the following: "If variable costs vary directly with volume of activity, the level of activity used to establish the variable manufacturing overhead rate will not affect the rate."LO.1
Substantiate the following: "Only where costs do not vary directly with the volume of output will the level of activity used to establish the manufacturing overhead rate be of consequence."LO.1
How do the concepts of physical life and useful life affect the utility of expected activity, average activity, and physical capacity for purposes of developing manufacturing overhead rates?LO.1
Can perfection standards be used as the sole basis of effecting cost control or should they be used in conjunction with attainable standards? Should perfection standards normally be expressed as
How is the allowance for shrinkage of materials reflected in standard costs? The allowance for spoilage?LO.1
How frequently should changes in standards be considered? What are the advantages and disadvantages of changes?LO.1
How to compute variances for prices paid and quantities used.LO.1
How managers use variances to identify out of control expenses.LO.1
How managers can use target costing to spot problems before a product enters production.LO.1
How to collect data about competitors to perform cost benchmarking analyses.LO.1
The basic accounting entries under standard cost systems.LO.1
The disposition or treatment of variances in financial statements.LO.1
Describe a five-step sequence in the decision process
Distinguish relevant costs and revenues from irrele¬vant costs and revenues in any decision situation
Understand the difference between quantitative factors and qualitative factors in decisions
Identify two potential problems in relevant-cost analysis
Describe the opportunity cost concept; explain why it is used in decision making
Describe the key concept in choosing which among multiple products to produce when there are capacity constraints
Discuss the key issue managers must consider when adding or dropping customers and segments
Explain why the book value of equipment is irrele¬vant in equipment replacement decisions
Explain how conflicts can arise between the decision model used by a manager and the performance model used to evaluate the manager
Define relevant cost. Why are historical costs irrelevant?
Describe two ways in which unit-cost data can mislead a decision maker.
Defin& opportunity cost.
“A customer, branch, or business segment that show's negative operating income should be shut down.” Do you agree? Explain briefly.
“Cost written off as amortization is always irrelevant.” Do you agree? Why?
1. A company has an inventory of 1,000 assorted parts for a line ofmachines that has been dis¬continued. The inventory cost is $88,000. The parts can be either (a) remachined at total additional
Multiple choice. (CPA) Choose the best answer.1. The Woody Company manufactures slippers and sells them at $11 a pair. Variable manufac¬turing costs are $4.95 a pair, and allocated fixed
Special order, activity-based costing. (CMA, adapted) The Award Plus Company manufac¬tures medals for winners of athletic events and other contests. Its manufacturing plant has the _capacity to
Make versus buy, activity-based costing. The Svenson Corporation manufactures cellular rhodems. It manufactures its own cellular modem circuit boards (CA1CB), an important part//ofthe cellular modem.
WTich bases to close, relevant-cost analysis, opportunity costs. The Department of National Defence has the difficult decision of deciding which military bases to close down. Alilitary and political
Inventory decision, opportunity cost. Lawnox, a manufacturer of lawn mowers, predicts that 240,000 spark plugs will have to be purchased during the next year. The manufacturer estimates that 20,000
Relevant costs, contribution margin, product emphasis. The Beach Comber is a takeout food store at a popular beach resort, fiusan $exton, owner of the Beach Comber, is deciding how much shelf space
Selection of most profitable product. Body-Builders, Inc., produces two basic types of weightlifting equipment, Model 9 and Model 14. Pertinent data are as follows:Per Unit Model 9 Model 14 Sales
Closing and opening stores, fianchez Corporation runs two convenience stores in Regina and $askatoon. Operating income for each store in 2007 follows:Regina Store Saskatoon Store Revenues $1,177,000
Customer profitability, choosing customers. Broadway Printers operates a printing press.''' with a monthly capacity of 2,000 machine-hours. Broadway has two main customers, Taylor Corporation and
Relevance of equipment costs. The Auto Wash Company has just today paid for and installed a special machine for polishing cars at one of its several outlets. It is the first day of the com¬pany’s
Equipment upgrade versus replacement. (A. Spero, adapted) The Pacifica Corporation makes steel table lamps. It is considering either upgrading its existing production line or replac¬ing it. The
Multiple choice, comprehensive problem on relevant costs. The following are the Class Company’s unit costs of manufacturing and marketing a high-style pen at a level of 20,000 per month:CHAPTER 11
Make or buy (continuation of 11-29). Assume that, as in requirement 7 of Problem 11-29, a proposal is received from an outside supplier who will make and ship high- decision making and style pens
Special-order decision. The Modern Packing Corporation (MPC) specializes in the manu¬facture of one-litre plastic botdes. The plastic moulding machines are capable of producing, 100 bottles per
Product mix, relevant costs. (N. Melumad, adapted) Pendleton Engineering makes cutting tools for metal working operations. It makes two types oftools, R3, a regular cutting tool, and HP6, a
Discontinuing a product line, selling more product. The Northern Furniture Division of Grossman Corporation makes and sells tables and beds. The following revenue and cost information from the
Opportunity cost. (H. Schaefer) The Wolverine Corporation is working at full production capacity producing 10,000 units of a unique product, Rosebo. Manufacturing costs per tinit for Rosebo are as
Discontinuing a product line, selling more product, activity-based costing. Home Furnishings makes bookshelves, tables, and beds. The following sales and cost information is available about the
Considering three alternatives. (CMA) The Auer Company had just completed an order for a special machine from the Jay Company when the Jay Company declared bankruptcy, defaulted on the order, and
Contribution approach, relevant costs. Air Pacific owns a single jet aircraft and operates between Vancouver and the Hawaiian Islands. Flights leave Vancouver on Mondays and Thursdays and depart from
Make or buy, unknown level of volume. (A. Atkinson) Oxford Engineering manufactures small engines. The engines are sold to manufacturers who install them in such products as lawn mowers. The company
Make or buy, activity-based costing, opportunity costs. (N. Melumad and S. Reichelstein, adapted) The Ace Bicycle Company produces bicycles. This year’s expected production is 10,000 units.
Relevant cost of materials. The Hernandez Corporation is bidding on a new construction contract, here called Contract No. 1. If the bid is accepted, work will begin in a few days, on January 1, 2007.
Optimal production mix. (CMA adapted, Chapter Appendix) Della Simpson, Inc., sells two popular brands of cookies, Della’s Delight and Cathy’s Chocolate Chip. Both cookies go through the Mixing
Optimal sales mix for a retailer, sensitivity analysis. (Chapter Appendix) Always Open, Inc., operates a chain of food stores open 24 hours a day. Each store has a standard 48,000 square metres
Make versus buy, ethics. (CMA, adapted) Lynn Hardt, a management accountant with the Paibec Corporation, is evaluating whether a component, MTR-85, should continue to be manufactured by Paibec or
Ethics and relevant costs. The Pastel Company must reach a make/buy decision with respect to a high-volume, easily made metal tool, RG1. Sean Gray, the cost analyst, estimates the following costs and
Optimal product mix. (CMA, adapted) OmniSport’s Plastics Department is currently man¬ufacturing 5,000 pairs of skates annually, making full use of its machine capacity. Presented below are the
Relevant costs, opportunity costs. Larry Miller, the general manager of Basil Software, scheduled a meeting on June 2, 2007, with Nicole Nguyen, sales manager, Andy Ayim, accountant, and Ellen
Distinguish between a static budget and a flexible budget
Develop flexible budgets and compute flexiblebudget and sales-volume variances
Explain why standard costs are often used in variance analysis
Compute the price and efficiency variances for direct cost categories
Understand how managers use variance analyses
Perform variance analysis in activity-based costing systems
Describe benchmarking and how it can be used by managers in cost management
WTiat are two possible sources of information a company might use to compute the budgeted amount in variance analysis?
“Benchmarking against other companies enables a company to identify the lowest-cost producer, which should become the performance measure for the next year.” Do you agree?EXERCISES
Flexible budget. Brabham Enterprises manufactures tires for the Formula I motor racing circuit. For August 2007, Brabham budgeted to manufacture and sell 3,000 tires at a variable cost of $88 per
Flexible budget. The budgeted prices for direct materials, direct manufacturing labour, and direct marketing (distribution) labour per attache case are $48, $9.60, and $14.40 respectively. The
Flexible budget. The Virtual Candy Company sells sweets in bulk over the Internet. Virtual Candy’s budgeted operating income for the year ended December 31, 2007, was $3,780,000.As a result of
Price and efficiency variances. Peterson Foods manufactures pumpkin scones. For January 2007, it budgeted to purchase and use 15,000 kilograms ofpumpkin at $1.07 a kilogram; budgeted output was
Materials and manufacturing-labour variances. Consider the following data collected for Great Homes, Inc.:Costs incurred: Actual inputs X actual prices Actual inputs X standard prices Standard inputs
Price and efficiency variances. CellOne, a cellular phone service reseller, contracts with major cellular operators for airtime in bulk and then resells service to retail customers.CellOne budgeted
Comprehensive variance analysis. Pacific Furniture is an elite desk manufacturer. At the start ofMay 2007, the following budgeted unit amounts (based on a standard costing system)related to its
Flexible budgets, variance analysis. You have been hired as a consultant by Mary Flanagan, the president of a small manufacturing company that makes automobile parts.Flanagan is an excellent
Flexible-budget preparation and analysis. Bank Management Printers, Inc., produces luxury chequebooks with three cheques and stubs per page. Each chequebook is designed for an individual customer and
Flexible budget, working backward. The Specialty Balls Company designs and manufac¬tures ball bearings for extreme performance machinery. The following table is a partially com¬pleted variance
Activity-based costing, flexible-budget variances for finance function activities. Josh Sanchez is the chief financial officer of Bouquets.com, an Internet company that enables cus¬tomers to order
Finance function activities, benchmarking (continuation of 7-26).Josh Sanchez, CFO of Bouquets.com, engages The Hackett Group, a consulting firm specializing in benchmarking.He asks Flackett to
Flexible budget, direct materials and direct manufacturing labour variances. Tuscany Statuary manufactures bust statues of famous historical figures. All statues are the same size.Each unit requires
Price and efficiency variances, journal entries. Chemical, Inc., has set up the following standards per finished output unit for direct materials and direct manufacturing labour:Direct materials: 10
Continuous improvement (continuation of 7-29). Chemical, Inc., adopts a continuous improvement approach to setting monthly standards costs. Assume the direct materials stan¬dard quantity input of
Materials and manufacturing labour variances, standard costs. Consider the following selected data regarding the manufacture of a line of upholstered chairs:Standards per Chair Direct materials 2
Journal entries and T-accounts (continuation of 7-31). Prepare journal entries and post them to T-accounts for all transactions in Exercise 7-31, including requirement 2. Summarize in three sentences

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