Questions and Answers of Horngrens Cost Accounting

29. (Cost classifications) Indicate whether each item listed below is a variable (V), fixed (F), or mixed (M) cost and whether it is a product or service (PT) cost or a period (PD) cost. If some
28. (Terminology) Match the following lettered terms on the left with the appropriate numbered description on the right.a. Budgeted cost 1. An expense or lossb. Direct cost 2. A cost that remains
27. Using the Internet, find an article about costs. List and define as many different types of costs from the article as you can.
26. (Appendix) Why would regression analysis provide a more accurate cost formula for a mixed cost than the high-low method?
25. (Appendix) Why are departmental overhead rates more useful for managerial decision making than plantwide rates? Separate variable and fixed rates rather than total rates?
24. Why is the amount of cost of goods manufactured different from the amount of cost of goods sold? Could there be a situation in which these amounts are equal? If so, explain.
23. Why can it be said that the cost of goods manufactured schedule shows the flow of production costs in a manufacturing company?
22. What factors can cause overhead to be underapplied or overapplied? Are all of these factors controllable by management? Why or why not?
21. If overhead was materially underapplied for a year, how would it be treated at year-end? Why is this treatment appropriate?
20. What recordkeeping options are available to account for overhead costs in a normal cost system? Which would be easiest? Which would provide the best information and why?
19. When a normal cost system is used, how are costs removed from a single Manufacturing Overhead account and charged to Work in Process Inventory?
18. Discuss the reasons a company would use a predetermined overhead rate rather than apply actual overhead to products or services.
17. Compare and contrast a normal cost system and an actual cost system. Relative to an actual cost system, what are the advantages associated with the use of a normal cost system? What are the
16. Is allocation of manufacturing overhead to products necessary for external reporting purposes? Internal purposes? Provide explanations for your answers.
15. What inventory accounts are shown on the balance sheet of a manufacturer and what information is contained in each of these accounts?
14. What is the process of conversion and why does this process create a need for cost accounting?
13. Why are some material and labor costs that should, in theory, be considered direct costs instead accounted for as indirect costs?
12. How is the concept of a direct cost related to that of a cost object?
11. Are all product costs unexpired costs and all period costs expired costs? Explain.
10. What is a period cost? What types of costs are included in period costs for retailers, manufacturers, and service companies?
9. What is a product cost? What types of costs are included in product costs for retailers, manufacturers, and service companies?
8. Relative to a set of data observations, what is an outlier? Why is it inappropriate to use outliers to determine the cost formula for a mixed cost?
7. The high-low method of analyzing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not?
6. How do predictors and cost drivers differ? Why is such a distinction important?
5. What is the difference between a variable and a mixed cost, given that each changes in total with changes in activity levels?
4. Would it be true that fixed costs will never change in an organization? Explain the rationale for your answer.
3. Why is a cost referred to as variable if it remains constant per unit for all volume levels within the relevant range?
2. How does a company determine its relevant range of activity? Of what use to managers is the concept of a relevant range of activity?
1. Distinguish among the cost accounting uses of historical costs, replacement costs, and budgeted costs.
BagsSoStrong Company had the following account balances as of August 1, 2001:Raw Materials (direct and indirect) Inventory $ 9,300 Work in Process Inventory 14,000 Finished Goods Inventory 18,000
8 How is cost of goods manufactured calculated?
7 What causes underapplied or overapplied overhead and how is it treated at the end of a period?
6 Why and how are overhead costs allocated to products and services?
5 What product cost categories exist and what items compose those categories?
4 How are the high-low method and least squares regression analysis (Appendix) used in analyzing mixed costs?
3 What assumptions do accountants make about cost behavior and why are these assumptions necessary?
2 How does the conversion process occur in manufacturing and service companies?
1 How are costs classified and why are such classifications useful?
50. The motivational elements of a cost management system are integral to the success of cost management goals. It is understood that the stronger the individual incentive to manage costs correctly,
49. [John] Strazzanti is president of Com-Corp Industries, a $13 million, 100-employee metal-stamping shop he incorporated in Cleveland in 1980. He’d started out as a machine operator with a
48. A joke making the rounds in Philadelphia-area doctors’ lounges goes like this:Leonard Abramson, chief executive officer of U.S. Healthcare Inc., the big health-maintenance company, dies and
47. (Cost management and product life cycle) Ford Motor Co. reported a 58 percent drop in its fourth-quarter profits as a result of the heavy costs of launching new vehicles. And officials predicted
46. (Cost management and profitability) The following excerpt deals with Nordstrom’s cost-cutting efforts.Nordstrom’s Inc., a retailing-industry laggard in profits, has been undergoing an effort
45. (Cost management: short-term vs. long-term) Flatland Metals Co. produces steel products for a variety of customers. One division of the company is Residential Products Division, created in the
44. (Cost management and customer service) The following excerpt illustrates how one company experienced negative fallout due to cost-cutting measures.In Digital Equipment Corp.’s 1994
43. (Alternative cost management strategies) Robert L. Wehling, Procter & Gamble’s senior vice president for advertising and market research, would like to wean Americans off coupons.His relentless
42. (Information and cost management) Consider the following excerpt about customer communication.Companies worldwide lose millions of dollars each year because they fail to communicate with
41. (Cost management and strategy change) The following excerpt illustrates a strategy change by Corel, the software company.Corel’s problems originated four years ago when the company purchased
40. (Organizational culture) Write a paper describing the organizational culture at a job you have held or at the college or university that you attend. Be sure to include a discussion of the value
39. (Cost management and organizational objectives) In a team of three, prepare an oral presentation discussing how accounting information can (a) help and(b) hinder an organization’s progress
38. (Organizational strategy) Use Internet resources to find a company (regardless of where they are domiciled) whose managers have chosen to (a) avoid competition through differentiation, (b) avoid
37. (Cost management and organizational culture) Use Internet resources to compare and contrast the organizational cultures and operating performance of any two firms in the same industry. Following
36. (Organizational form) As a team of three, or as individuals, write a paper that compares and contrasts the corporate, general partnership, limited partnership, LLP, and LLC forms of business. At
35. (Cost management system benefits) Consider the following excerpt regarding advertising agencies:The latest study on advertising agency performance from the Incorporated Society of British
34. (Cost management and strategy) Assume that you are a financial analyst and you have just been handed a 2000 financial report of Firm X, a large, global pharmaceutical firm. The company competes
33. (Appendix) What was CAM-I and why was it organized?
32. What is gap analysis, and what role does it play in the implementation of a cost management system?
31. Why do companies measure their performance from a variety of perspectives(e.g., shareholder, customer) rather than a single perspective?
30. Provide three examples from your academic career of the truthfulness of the statement “you get what you measure.”
29. “A firm cannot be successful unless short-term profits are achieved.” Is this statement true or false? Why?
28. Which is most important in the design of a cost management system: motivational elements, informational elements, or reporting elements? Discuss the rationale for your answer.
27. What are feeder systems and why are they important in the design of a cost management system?
26. Why is the supply chain, or value chain, becoming an increased focus of cost management systems?
25. Give three examples of industries in which time-to-market is critical. Give three examples of industries in which time-to-market is almost irrelevant. Discuss the reasons for importance or lack
24. Why can “dollar sales per employee” be viewed as a measure of organizational productivity? What actions can managers take to increase productivity?
23. What do you believe the core competencies of your college or university to be? Why did you choose these?
22. In the present highly competitive environment, why has cost management risen to such a high level of concern while price management has declined in importance?
21. How does the life-cycle stage of a product influence the nature of information that is required to successfully manage costs of that product?
20. Why would a cost management system, within a company pursuing confrontational competition, be required to provide information about competitors?
19. Compare the description in the chapter of AT&T prior to divestiture with the former Soviet Union prior to perestroika. How has the culture of each of these entities changed over time? How would
18. Discuss ways in which organizational culture could be used as a control mechanism.
17. List five types of cost management information that would be most useful to an organizational subunit that was engaged in a (a) build, (b) harvest, or (c)hold mission.
16. Would you prefer to work as an employee in an organization that had centralized or decentralized control? Discuss the reasons for your answer.
15. Describe characteristics of organizations in which centralized control would be effective and those in which decentralized control would be effective.
14. What information could be generated from a cost management system that would help an organization manage its core competencies?
13. How does the choice of organizational form influence the design of a firm’s cost management system?
12. Why is it not possible for a cost management system to simply be “pulled off the shelf”?
11. Is cost reduction the primary purpose of a cost management system? Discuss the rationale for your answer.
10. How can an integrated cost management system help managers understand and evaluate the effectiveness and efficiency of business processes?
9. List some examples of costs that a cost management system might treat differently for internal and external purposes. Why would these treatments be appropriate?
8. Why would management be willing to accept somewhat inaccurate costs from the cost management system? What sacrifices would be necessary to obtain more accurate costs?
7. Why does an effective cost management system necessarily have both a shortterm and long-term focus?
6. Why would an organization have multiple control systems in place?
5. What is a control system? What purpose does a control system serve in an organization?
4. Why is an effective management information system a key element of an effective management control system?
3. How can a company evaluate whether it is effectively managing its costs?
2. Why are so many companies presently redesigning their cost accounting systems?
1. Why must a company spend money to make money? What do you predict would occur to a company’s revenues if that company achieved its objective of incurring annual operating costs of $0?
73. Accounting has a long history of being an ethical profession. In recent years, however, some companies have asked their accountants to help “manage earnings.”a. What does it mean to “manage
72. Intellectual capital is extremely important to the longevity of an organization.There are, however, “intellectual capital pirates” who make their livings from stealing.a. Assume that you have
71. Mission statements are supposed to indicate what an organization does and why it exists. Some of them, however, are simply empty words, with little or no substance and with few people using them
70. “Few trends could so thoroughly undermine the very foundation of our free society,” writes Milton Friedman in Capitalism and Freedom, “as the acceptance by corporate officials of a social
69. As chief legal officer in a well-respected company making lifesaving drugs, Alistair had been asked by his board of directors to look into rumors of price-fixing in the firm’s European offices.
68. The Foreign Corrupt Practices Act (FCPA) prohibits U.S. firms from giving bribes in foreign countries, although giving bribes is customary in some countries and non-U.S. companies operating in
67. You are a senior manager at a large domestic firm. All senior managers and the board of directors are scheduled for a meeting next week to discuss the opportunities for e-business. The CEO has
66. Many individuals do not shop on-line because of the risk of theft of passwords, credit card numbers, and so forth. Do you believe that this risk is a significant one? Discuss the rationale for
65. (Value chain) Strategic alliances are important parts of the value chain. In many organizations, suppliers are beginning to provide more and more input into customer activities.a. In the United
64. (Competition) You recently received a very large inheritance and have decided to buy an existing business or open a new business. Given your interests, you have narrowed your choices to the
63. (Organizational culture) The United States provides an ethnically, racially, and culturally diverse workplace. It has been argued that this plurality may be a competitive handicap for U.S.
62. (Organizational constraints) Four common organizational constraints involve monetary capital, intellectual capital, technology, and organizational structure.Additionally, the environment in which

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