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introduction to managerial accounting

Questions and Answers of Introduction To Managerial Accounting

III–1. Define and give examples of inventory ordering, holding, and shortage costs.
II–6. What is an annuity?
II–5. “If the interest rate is 10 percent, a present value of $100 and a future value of$161.10 at the end of five years are economically equivalent.” Explain.
II–4. “The greater the discount rate, the greater the present value of a future cash flow.” True or false? Explain your answer.
II–3. Define the term present value.
II–2. Explain in words the following futurevalue formula: Fn = P(1 + r)n.
II–1. What is meant by the term compound interest?
II-1 Explain the importance of the time value of money in capital-budgeting decisions
Read Problem 9–43. Instead of answering the requirements listed in the problem, discuss the implications of SOX sections 302 and 404 regarding John Winslow’s contemplated actions.
Read Exercise 13–32. Instead of answering the requirements listed in the exercise, discuss the implications of SOX sections 302 and 404 for the company’s internal control issues
As a group, stage an in-class debate about the future of the Sarbanes-Oxley Act. At least three positions can be staked out: leave SOX as is, repeal SOX, and modify SOX.
I–6. Why did some managers complain about the requirements imposed by SOX sections 302 and 404?
I–5. What does SOX section 404 require of management?
I–4. What does SOX section 302 require of management?
I–3. What is the PCAOB? Describe its mission.
I–2. Explain the nature and importance of internal controls over financial reporting.
I–1. Briefly describe the overall intent of the Sarbanes-Oxley Act of 2002.
Valdosta Chemical Company manufactures two industrial chemical products in a joint process. In May, 10,000 gallons of input costing $60,000 were processed at a cost of $150,000. The joint process
Refer to the data for Riverside Clinic given in Exhibits 17–2 and 17–5.Required: Use the reciprocal-services method in combination with the dual-allocation approach to allocate Riverside’s
Refer to the data given in Problem 17–26 for Celestial Artistry Company.Required:1. Use the reciprocal-services method to allocate service department costs. Calculate the overhead rates per
Lafayette Company manufactures two products out of a joint process: Compod and Ultrasene. The joint costs incurred are $250,000 for a standard production run that generates 120,000 gallons of Compod
Snake River Sawmill manufactures two lumber products from a joint milling process. The two products developed are mine support braces (MSB) and unseasoned commercial building lumber (CBL). A standard
Refer to the data given in Exercise 17–17 for Tuscaloosa National Bank.Required: Use the reciprocal-services method to allocate the budgeted costs of the HR and Computing departments to the Deposit
Refer to the data given in Exercise 17–20. Breakfasttime Cereal Company has an opportunity to process its Crummies further into a mulch for ornamental shrubs. The additional processing operation
Visit the website of one of the following organizations, or a different organization of your choosing.Allstate www.allstate.com Gallo Winery www.gallo.com Mayo Clinic www.mayoclinic.org Starwood
Refer to the data given in the preceding exercise.Required: Use the step-down method to allocate the budgeted costs of the HR and Computing departments to the Deposit and Loan departments. Tuscaloosa
Refer to the data given in the preceding exercise.Required:1. Use the step-down method to allocate Hudson Community College’s service department costs to the Liberal Arts and Sciences
17-14. For what purpose should the managerial accountant be careful to not use joint cost allocations?
17-13. Are joint cost allocations useful? If they are, for what purpose?
17-12. Define the term net realizable value, and explain how this concept can be used to allocate joint costs.
17-11. Describe the relative-sales-value method of joint cost allocation.
17-10. Briefly explain how to use the physical-units method of joint cost allocation.
17-9. Define the following terms: joint production process, joint costs, joint products, split-off point, separable costs, and by-product.
17-8. Explain the difference between two-stage allocation with departmental overhead rates and activity-based costing. Which approach generally results in more accurate product costs?
17-7. Should actual or budgeted service department costs be allocated? Why?
17-6. What potential behavioral problem can result when dual cost allocation is used?
17-5. Why does dual cost allocation improve the resulting allocation of service department costs?
17-4. How does the managerial accountant determine the department sequence in the step-down method? How are ties handled?
17-3. Explain briefly the main differences between the direct, step-down, and reciprocal-services methods of service department cost allocation.
17-2. Define the term reciprocal services.
17–1. Distinguish between a service department and a production department. Give an example of the counterpart of a manufacturer’s “production” department in a bank.
17-6 Allocate service department costs using the reciprocal-services method (appendix).
17-5 Describe the purposes for which joint cost allocation is useful and those for which it is not.
17-4 Allocate joint costs among joint products using each of the following techniques:physical-units method, relative-sales-value method, and net-realizable-value method.
17-3 Explain the difference between two-stage cost allocation with departmental overhead rates and activity-based costing (ABC).
17-2 Use the dual approach to service department cost allocation.
17-1 Allocate service department costs using the direct method and the step-down method.
14-1 Describe seven steps in the decision-making process and the managerial accountant’s role in that process.
Kitchen Magician, Inc. has assembled the following data pertaining to its two most popular products.Past experience has shown that the fixed manufacturing overhead component included in the cost per
Jupiter Corporation manufactures skateboards. Several weeks ago, the firm received a special-order inquiry from Venus, Inc. Venus desires to market a skateboard similar to one of Jupiter’s and has
Johnson and Gomez, Inc. is a small firm involved in the production and sale of electronic business products.The company is well known for its attention to quality and innovation.During the past 15
Tipton One-Stop Decorating sells paint and paint supplies, carpet, and wallpaper at a single-store location in suburban Des Moines. Although the company has been very profitable over the years,
Casting Technology Resources (CTR) has purchased 10,000 pumps annually from Kobec, Inc. Because the price keeps increasing and reached $68.00 per unit last year, CTR’s management has asked for an
The Midwest Division of the Paibec Corporation manufactures subassemblies that are used in the corporation’s final products. Lynn Hardt of Midwest’s Profit Planning Department has been assigned
Connecticut Chemical Company is a diversified chemical processing company. The firm manufactures swimming pool chemicals, chemicals for metal processing, specialized chemical compounds, and
Manhattan Fashions, Inc., a high-fashion dress manufacturer, is planning to market a new cocktail dress for the coming season. Manhattan Fashions supplies retailers in the east and mid-Atlantic
Upstate Mechanical, Inc. has been producing two bearings, components T79 and B81, for use in production.Data regarding these two components follow.Upstate Mechanical’s annual requirement for these
Chenango Industries uses 10 units of part JR63 each month in the production of radar equipment. The cost of manufacturing one unit of JR63 is the following:Material handling represents the direct
Miami Industries received an order for a piece of special machinery from Jay Company. Just as Miami completed the machine, Jay Company declared bankruptcy, defaulted on the order, and forfeited the
Ozark Industries manufactures and sells three products, which are manufactured in a factory with four departments. Both labor and machine time are applied to the products as they pass through each
In addition to fine chocolate, International Chocolate Company also produces chocolate-covered pretzels in its Savannah plant. This product is sold in five-pound metal canisters, which also are
Bo Vonderweidt, the production manager for Sportway Corporation, had requested to have lunch with the company president. Vonderweidt wanted to put forward his suggestion to add a new product line. As
15-1 List and describe the four major influences on pricing decisions.
15-2 Explain and use the economic, profit-maximizing pricing model.
15-3 Set prices using cost-plus pricing formulas.
15-4 Discuss the issues involved in the strategic pricing of new products.
15-5 List and discuss the key principles of target costing.
15-6 Explain the role of activity-based costing in setting a target cost.
15-7 Explain how product-cost distortion can undermine a firm’s pricing strategy.
15-8 Explain the process of value engineering and its role in target costing.
15-9 Determine prices using the time and material pricing approach.
15-10 Set prices in special-order or competitive-bidding situations by analyzing the relevant costs.
15-11 Describe the legal restrictions on setting prices.
Kitchenware Corporation manufactures high-quality copper pots and pans. Greta Cooke, one of the company’s price analysts, is involved in setting a price for the company’s new Starter Set. This
15–1. Comment on the following remark made by a bank president: “The prices of our banking services are determined by the financial-services market. Costs are irrelevant.”
15–2. “All this marginal revenue and marginal cost stuff is just theory. Prices are determined by production costs.” Evaluate this assertion.
15–3. List and briefly describe four major influences on pricing decisions.
15–4. Explain what is meant by the following statement: “In considering the reactions of competitors, it is crucial to define your product.”
15–5. Explain the following assertion: “Price setting generally requires a balance between market forces and cost considerations.”
15–6. Briefly explain the concept of economic, profitmaximizing pricing. It may be helpful to use graphs in your explanation.
15–7. Define the following terms: total revenue, marginal revenue, demand curve, price elasticity, and cross-elasticity.
15–8. Briefly define total cost and marginal cost.
15–9. Describe three limitations of the economic, profitmaximizing model of pricing.
15–10. Determining the best approach to pricing requires a cost-benefit trade-off. Explain.
15–11. Write the general formula for cost-plus pricing, and briefly explain its use.
15–12. List the four common cost bases used in cost-plus pricing. How can they all result in the same price?
15–13. List four reasons often cited for the widespread use of absorption cost as the cost base in cost-plus pricing formulas.
15–14. What is the primary disadvantage of basing the costplus pricing formula on absorption cost?
15–15. List three advantages of pricing based on variable cost.
15–16. Explain the behavioral problem that can result when cost-plus prices are based on variable cost.
15–17. Briefly explain the concept of return-on-investment pricing.
15–18. Explain the phrase price-led costing.
15–19. Why is a focus on the customer such a key principle of target costing?
15–20. Explain the role of value engineering in target costing.
15–21. Could tear-down methods be used effectively for target pricing in a service-industry company, such as a hotel or an airline? Explain.
15–22. Briefly describe the time-and-material pricing approach.
15–23. Explain the importance of the excess-capacity issue in setting a competitive bid price.
15–24. The decision to accept or reject a special order and the selection of a price for a special order are very similar decisions. Explain.
15–25. Describe the following approaches to pricing new products: skimming pricing, penetration pricing, and target costing.
15–26. Explain what is meant by unlawful price discrimination and predatory pricing.

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