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introduction to managerial accounting

Questions and Answers of Introduction To Managerial Accounting

Prepare a table similar to Exhibit 13–3, which focuses on residual income. Use a 10 percent rate to compute the imputed interest charge. The table should show the residual income on the investment
The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.Sales revenue
Refer to Exhibit 13–3. Assume that you are a consultant who has been hired by Suncoast Food Centers.Required: Write a memorandum to the company president explaining why the ROI based on net book
Select one of the following companies (or any company of your choosing) and use the Internet to explore the company’s most recent annual report.American Airlines www.aa.com Deere and Company
Refer to the data for Exercise 13–24. Assume that the company’s minimum desired rate of return on invested capital is 11 percent.Required: Compute Dakota Division’s residual income for the year.
Refer to the preceding exercise.Required: Demonstrate two ways Dakota Division’s manager could improve the division’s ROI to 25 percent.
The following data pertain to Dakota Division’s most recent year of operations.Income
13–23. Explain the role of import duties, or tariffs, in affecting the transfer-pricing policies of multinational companies.
13–22. Why might income-tax laws affect the transfer-pricing policies of multinational companies?
13–21. Explain the significance of excess capacity in the transferring division when transfer prices are set using the general transfer-pricing rule.
13–20. Describe four methods by which transfer prices may be set.
13–19. Identify and explain the managerial accountant’s primary objective in choosing a transfer-pricing policy.
13–18. Discuss the importance of nonfinancial information in measuring investment-center performance.
13–17. List three nonfinancial measures that could be used to evaluate a division of an insurance company.
13–16. How does inflation affect investment-center performance measures?
13–15. Describe an alternative to using ROI or residual income to measure investment-center performance.
13–14. How do organizations use pay for performance to motivate managers?
13–13. Explain why it is important in performance evaluation to distinguish between investment centers and their managers.
13–12. Why do some companies use gross book value instead of net book value to measure a division’s invested capital?
13–11. Distinguish between the following measures of invested capital, and briefly explain when each should be used:(a) total assets, (b) total productive assets, and (c) total assets less current
13–10. Define the term economic value added. How does it differ from residual income?
13–9. Why is there typically a rise in ROI or residual income across time in a division? What undesirable behavioral implications could this phenomenon have?
13–8. What is the chief disadvantage of ROI as an investmentcenter performance measure? How does the residualincome measure eliminate this disadvantage?
13–7. Create an example showing how residual income is calculated. What information is used in computing residual income that is not used in computing ROI?
13–6. Explain how the manager of the Automobile Division of an insurance company could improve her division’s ROI.
13–5. Write the formula for ROI, showing sales margin and capital turnover as its components.
13–4. Define and give three examples of an investment center.
13–3. Describe the managerial approach known as management by objectives or MBO.
13–2. Define goal congruence, and explain why it is important to an organization’s success.
13–1. What is the managerial accountant’s primary objective in designing a responsibility-accounting system?
Stellar Systems Company’s Microprocessor Division sells a computer module to the company’s Guidance Assembly Division, which assembles completed guidance systems. The Microprocessor Division has
Stellar Systems Company manufactures guidance systems for rockets used to launch commercial satellites.The company’s Software Division reported the following results for 20x7.Income
13-8 Understand the behavioral issues of incentives, goal congruence, and internal controls.
13-7 Explain how to base a transfer price on market prices, costs, or negotiations.
13-6 Use the general economic rule to set an optimal transfer price.
13-5 Explain how to measure a division’s income and invested capital.
13-4 Describe some advantages and disadvantages of both ROI and residual income as divisional performance measures.
13-3 Explain how a manager can improve ROI by increasing either the sales margin or capital turnover.
13-2 Compute an investment center’s return on investment (ROI), residual income (RI), and economic value added (EVA).
13-1 Explain the role of managerial accounting in achieving goal congruence.
Montreal Scholastic Supply Company uses a standard-costing system. The firm estimates that it will operate its manufacturing facilities at 800,000 machine hours for the year. The estimate for total
Chillco Corporation produces containers of frozen food. During April, Chillco produced 1,450 cases of food and incurred the following actual costs.Variable overhead
Maxwell Company uses a standard cost accounting system and applies production overhead to products on the basis of machine hours. The following information is available for the year just
Fall City Hospital has an outpatient clinic. Jeffrey Harper, the hospital’s chief administrator, is very concerned about cost control and has asked that performance reports be prepared that compare
Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 72,000 fans evenly over the next quarter at the following costs: direct material, $1,440,000; direct labor,
Countrytime Studios is a recording studio in Nashville. The studio budgets and applies overhead costs on the basis of production time. Countrytime’s controller anticipates 10,000 hours of
Gibralter Insurance Company uses a flexible overhead budget for its application-processing department.The firm offers five types of policies, with the following standard hours allowed for clerical
Calgary Paper Company produces paper for photocopiers. The company has developed standard overhead rates based on a monthly capacity of 180,000 direct-labor hours as follows:Standard costs per unit
Refer to the data in Exercise 11–22 for Crystal Glassware Company. Prepare journal entries to• Record the incurrence of actual variable overhead and actual fixed overhead.• Add variable and
Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system.The standard production overhead costs per switch are based on direct-labor hours and are as
Refer to DCdesserts.com’s activity-based flexible budget in Exhibit 11–11. Suppose that the company’s activity in June is described as follows Process hours
You brought your work home one evening, and your nephew spilled his chocolate milk shake on the variance report you were preparing. Fortunately, knowing that overhead was applied based on machine
You recently received the following note from the production supervisor of the company where you serve as controller. “I don’t understand these crazy variable-overhead efficiency variances. My
The controller for Rainbow Children’s Hospital, located in Munich, Germany, estimates that the hospital uses 30 kilowatt-hours of electricity per patient-day, and that the electric rate will be .10
Evening Star, Inc. produces binoculars of two quality levels: field and professional. The field model requires three direct-labor hours, while the professional binoculars require five hours. The firm
The following data are the actual results for Marvelous Marshmallow Company for October.Actual output
Choose a city or state in the United States (or a Canadian city or province), and use the Internet to explore the annual budget for the governmental unit you selected. For example, you could check
Refer to the data in the Exercise 11–22 for Crystal Glassware Company. Draw graphs similar to those in Exhibit 11–7 (variable overhead) and Exhibit 11–9 (fixed overhead) to depict the overhead
Refer to the data in the preceding exercise. Use diagrams similar to those in Exhibits 11–6 and 11–8 to compute the variable-overhead spending and efficiency variances, and the fixed-overhead
Crystal Glassware Company has the following standards and flexible-budget data.Standard variable-overhead rate
11–21. Explain how an activity-based flexible budget differs from a conventional flexible budget.
11–20. Give one example of a plausible activity base to use in flexible budgeting for each of the following organizations:an insurance company, an express delivery service, a restaurant, and a
11–19. Draw a graph showing both budgeted and applied variable overhead. Explain why the graph appears as it does.
11–18. Why are fixed-overhead costs sometimes called capacity-producing costs?
11–17. Distinguish between the control purpose and the productcosting purpose of standard costing and flexible budgeting.
11–16. What is the conceptual problem of applying fixed production overhead as a product cost?
11–15. What types of organizations use flexible budgets?
11–14. Draw a graph showing budgeted and applied fixed overhead, and show an unfavorable (or positive) volume variance on the graph.
11–13. Describe a common but misleading interpretation of the fixed-overhead volume variance. Why is this interpretation misleading?
11–12. What is the correct interpretation of the fixed-overhead volume variance?
11–11. What is the fixed-overhead budget variance?
11–10. Distinguish between the interpretations of the directlabor and variable-overhead efficiency variances.
11–9. What is the interpretation of the variable-overhead efficiency variance?
11–8. Jeffries Company’s only variable-overhead cost is electricity.Does an unfavorable variable-overhead spending variance imply that the company paid more than the anticipated rate per
11–7. What is the interpretation of the variable-overhead spending variance?
11–6. How have advances in manufacturing technology affected overhead application?
11–5. Show, using T-accounts, how production overhead is added to Work-in-Process Inventory when standard costing is used.
11–4. Distinguish between a columnar and a formula flexible budget.
11–3. Why are flexible overhead budgets based on activity measures, such as hours of process time, machine time, or direct-labor hours?
11–2. Explain the advantage of using a flexible budget.
In November, DCdesserts.com produced 3,000 multilayer fancy cakes, used 9,100 hours of process time, and incurred the following production-overhead costs.Variable overhead
11-9 Compute and interpret the sales-price and sales-volume variances (appendix B).
11-8 Prepare journal entries to record production overhead under standard costing(appendix A).
11-7 Explain how an activity-based flexible budget differs from a conventional flexible budget.
11-5 Compute and interpret the variable-overhead spending and efficiency variances and the fixed-overhead budget and volume variances.
11-4 Explain the important issues in choosing an activity measure for overhead budgeting and application.
11-3 Explain how overhead is applied to Work-in-Process Inventory under standard costing.
11-2 Prepare a flexible overhead budget, using both a formula and a columnar format.
11-1 Distinguish between static and flexible budgets and explain the advantages of a flexible overhead budget.
8-1 Explain the accounting treatment of fixed manufacturing overhead under absorption and variable costing.
8-2 Prepare an income statement under absorption costing.
8-3 Prepare an income statement under variable costing.
8-4 Reconcile reported income under absorption and variable costing.
8-5 Explain the implications of absorption and variable costing for cost-volume-profit analysis.
8-6 Evaluate absorption and variable costing.
8-7 Prepare a quality-cost report.
8-8 Discuss two contrasting views of the optimal level of product quality.
8-9 Understand the different types of environmental costs, and discuss the management of these costs.
ScholasticPak Company manufactures backpacks used by students. A typical backpack has the following price and variable costsBudgeted fixed overhead in the company’s first year of operations, was
8–1. Briefly explain the difference between absorption costing and variable costing.

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