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introduction to managerial accounting

Questions and Answers of Introduction To Managerial Accounting

10–11. Explain why the quantity purchased (PQ) is used in computing the direct-material purchase price variance, but the actual quantity consumed (AQ) is used in computing the direct-material price
10–12. What is the interpretation of the direct-labor rate variance?What are some possible causes?
10–13. What manager is generally in the best position to influence the direct-labor rate variance?
10–14. What is the interpretation of the direct-labor efficiency variance?
10–15. What manager is generally in the best position to influence the direct-labor efficiency variance?
10–16. Refer to Review Question 10–11. Why does an analogous question not arise in the context of the direct-labor variances?
10–17. Describe five factors that managers often consider when determining the significance of a variance.
10–18. Discuss several ways in which standard-costing systems should be adapted in today’s manufacturing environment.
10–19. Describe how standard costs are used for product costing.
10–20. List six advantages of a standard-costing system.
10–21. List seven criticisms of standard costing in an advanced manufacturing environment.
Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the
Refer to the data in the preceding exercise. Use diagrams similar to those in Exhibits 10-2, 10–3, and 10–4 to determine the direct-material and direct-labor variances. Indicate whether each
Choose one of the following manufacturers (or any manufacturer of your choosing), and use the Internet to gather information about any new products the company has recently introduced or plans to
During June, Danby Company’s material purchases amounted to 6,000 pounds at a price of $7.30 per pound. Actual costs incurred in the production of 2,000 units were as follows:Direct labor: $116,745
Refer to the data in the preceding exercise. Draw diagrams depicting the direct-material and direct-labor variances similar to the diagrams in Exhibits 10–2, 10–3, and 10–4.
Part of your company’s accounting database was destroyed when Godzilla attacked the city. You have been able to gather the following data from your files. Reconstruct the remaining information
Refer to the data in Exercise 10–22, regarding Saskatewan Can Company. Prepare journal entries to:1. Record the purchase of direct material on account.2. Add direct-material and direct-labor cost
Refer to your answer for Exercise 10–31. Set up T-accounts, and post the journal entries to the general ledger.
New Jersey Valve Company manufactured 7,800 units during January of a control valve used by milk processors in its Camden plant. Records indicated the following:Direct labor
South Atlantic Chemical Company manufactures industrial chemicals in Rio de Janeiro, Brazil. The company plans to introduce a new chemical solution and needs to develop a standard product cost. The
Sal Amato operates a residential landscaping business in an affluent suburb of St. Louis. In an effort to provide quality service, he has concentrated solely on the design and installation of upscale
The following data pertain to Colgate-Palmolive’s liquid filling line during the first 10 months of a particular year. The standard ratio of direct-labor hours to machine hours is 4:1. The standard
Orion Corporation has established the following standards for the prime costs of one unit of its chief product, dartboards.During June, Orion purchased 160,000 pounds of direct material at a total
The director of cost management for Portland Instrument Corporation compares each month’s actual results with a monthly plan. The standard direct-labor rates for the year just ended and the
Quincy Farms produces items made from local farm products that are distributed to supermarkets. For many years, Quincy’s products have had strong regional sales on the basis of brand recognition:
Rocky Mountain Camping Equipment, Inc. has established the following direct-material standards for its two productsDuring March, the company purchased 2,100 yards of tent fabric for its standard
6-1 Explain the relationships between cost estimation, cost behavior, and cost prediction.
6-2 Define and describe the behavior of the following types of costs: variable, stepvariable, fixed, step-fixed, semivariable (or mixed), and curvilinear.
6-3 Explain the importance of the relevant range in using a cost behavior pattern for cost prediction.
6-4 Define and give examples of engineered costs, committed costs, and discretionary costs.
6-5 Describe and use the following cost estimation methods: account classification, visual fit, high-low, and least-squares regression.
6-6 Describe the multiple regression, engineering, and learning-curve approaches to cost estimation.
6-7 Describe some problems often encountered in collecting data for cost estimation.
6-8 Perform and interpret a least-squares regression analysis with a single independent variable (appendix).
Erie Hardware, Inc. operates a chain of four retail stores. Data on the company’s maintenance costs for its store buildings and furnishings are as follows:Using the high-low method, estimate and
The Keystone Sentinel is a weekly newspaper sold throughout Pennsylvania. The following costs were incurred by its publisher during a week when circulation was 100,000 newspapers: total variable
6–1. Describe the importance of cost behavior patterns in planning, control, and decision making.
6–3. Suggest an appropriate activity base (or cost driver)for each of the following organizations: (a) hotel, (b)hospital, (c) computer manufacturer, (d) computer sales store, (e) computer repair
6–4. Draw a simple graph of each of the following types of cost behavior patterns: (a) variable, (b) step-variable,(c) fixed, (d) step-fixed, (e) semivariable, and (f)curvilinear.
6–6. Explain why a manufacturer’s cost of supervising production might be a step-fixed cost.
6–8. Using graphs, show how a semivariable (or mixed) cost behavior pattern can be used to approximate (a) a stepvariable cost and (b) a curvilinear cost.
6–9. Indicate which of the following descriptions is most likely to describe each cost listed below. Description Engineered cost Costs Annual cost of maintaining an highway Committed cost Cost of
6–11. What is meant by a learning curve? Explain its role in cost estimation.
6–13. What is an outlier? List some possible causes of outliers. How should outliers be handled in cost estimation?
6–14. Explain the cost estimation problem caused by allocated and discretionary costs.
6–15. Describe the visual-fit method of cost estimation.What are the main strengths and weaknesses of this method?
6–16. What is the chief drawback of the high-low method of cost estimation? What problem could an outlier cause if the high-low method were used?
6–17. Explain the meaning of the term least squares in the least-squares regression method of cost estimation.
6–18. Use an equation to express a least-squares regression line. Interpret each term in the equation.
6–19. Distinguish between simple regression and multiple regression.
6–20. List several possible cost drivers that could be used by a cruise line such as Carnival.
6–21. Briefly describe two methods that can be used to evaluate a particular least-squares regression line.
The behavior of the annual maintenance and repair cost in the Bus Transportation Department of the Summerset Public School District is shown by the solid line in the following graph. The dashed line
Visit the website of one of the following companies, or a different company of your choosing.Required: Read about the company’s products and operations. Then list five costs that the company would
Rio Bus Tours has incurred the following bus maintenance costs during the recent tourist season. (The real is Brazil’s national monetary unit. On the day this exercise was written, the real was
The State Department of Taxation processes and audits income-tax returns for state residents. The state tax commissioner has recently begun a program of work measurement to help in estimating the
Recent monthly costs of providing on-board flight service incurred by Great Plains Airlines are shown in the following table.Required:1. Build a spreadsheet: Construct an Excel spreadsheet and use
Gator Beach Marts, a chain of convenience grocery stores in the Fort Lauderdale area, has store hours that fluctuate from month to month as the tourist trade in the community varies. The utility
For each of the cost items described below, choose the graph (see below) that best represents it.1. The salary costs of the shift supervisors at a truck depot. Each shift is eight hours. The depot
The following selected data were taken from the accounting records of Metcalf Manufacturing. The company uses direct-labor hours as its cost driver for overhead costs.March’s costs consisted of
Antioch Extraction, which mines ore in Montana, uses a calendar year for both financial-reporting and tax purposes. The following selected costs were incurred in December, the low point of activity,
(Note: Instructors who wish to cover all three cost-estimation methods with the same data set may assign this problem in conjunction with the next one.) Martha’s Vineyard Marine Supply is a
Refer to the original data in the preceding problem for Martha’s Vineyard Marine Supply.Required:1. Build a spreadsheet: Construct an Excel spreadsheet and use the Excel commands to perform a
Shortly after being hired as an analyst with Global American Airlines, Kim Williams was asked to prepare a report that focused on passenger ticketing cost. The airline writes most of its own tickets
The controller of Chittenango Chain Company believes that the identification of the variable and fixed components of the firm’s costs will enable the firm to make better planning and control
Dana Rand owns a catering company that prepares banquets and parties for both individual and business functions throughout the year. Rand’s business is seasonal, with a heavy schedule during the
Rand recently attended a meeting of the local chamber of commerce and heard a business consultant discuss regression analysis and its business applications. After the meeting, Rand decided to do a
Earth and Artistry, Inc. provides commercial landscaping services. Sasha Cairns, the firm’s owner, wants to develop cost estimates that she can use to prepare bids on jobs. After analyzing the
(Note: Instructors who wish to cover all three cost-estimation methods with the same data set may assign this case in conjunction with the following case.)“I don’t understand this cost report at
7-1 Compute a break-even point using the contribution-margin approach and the equation approach.
Use the Internet to access the website of one of these airlines, or a different airline of your choosing.Required: Find the company’s most recent annual report. Does the management discussion in
A contribution income statement for the Nantucket Inn is shown below. (Ignore income taxes.)Required:1. Show the hotel’s cost structure by indicating the percentage of the hotel’s revenue
Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker
Serendipity Sound, Inc. manufactures and sells compact discs. Price and cost data are as follows:In the following requirements, ignore income taxes.Required:1. What is Serendipity Sound’s
Athletico, Inc. manufactures warm-up suits. The company’s projected income for the coming year, based on sales of 160,000 units, is as follows:Required: In completing the following requirements,
The European Division of Worldwide Reference Corporation produces a pocket dictionary containing popular phrases in six European languages. Annual budget data for the coming year follow. Projected
Celestial Products, Inc. has decided to introduce a new product, which can be manufactured by either a computer-assisted manufacturing system or a labor-intensive production system. The manufacturing
Refer to the original data given for Jupiter Game Company in the preceding problem. An activity-based costing study has revealed that Jupiter’s $150,000 of fixed costs include the following
Condensed monthly income data for Thurber Book Stores are presented in the following table for November 20x1. (Ignore income taxes.)Additional Information:• Management estimates that closing the
Ohio Limestone Company produces thin limestone sheets used for cosmetic facing on buildings. The following income statement represents the operating results for the year just ended. The company had
Alpine Thrills Ski Company recently expanded its manufacturing capacity. The firm will now be able to produce up to 15,000 pairs of cross-country skis of either the mountaineering model or the
Colorado Telecom, Inc. manufactures telecommunications equipment. The company has always been production oriented and sells its products through agents. Agents are paid a commission of 15 percent of
Niagra Falls Sporting Goods Company, a wholesale supply company, engages independent sales agents to market the company’s products throughout New York and Ontario. These agents currently receive a
Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.Model no.
7–22. Explain briefly how activity-based costing (ABC)affects cost-volume-profit analysis.
7–20. Two companies have identical fixed expenses, unit variable expenses, and profits. Yet one company has set a much lower price for its product. Explain how this can happen.
7–19. How could cost-volume-profit analysis be used in budgeting?In making a decision about advertising?
7–18. How can a hotel’s management use cost-volume-profit analysis to help in deciding on room rates?
7–16. What does the term sales mix mean? How is a weighted-average unit contribution margin computed?
7–13. What is the difference between a manufacturing company’s gross margin and its total contribution margin?
7–12. Why do many operating managers prefer a contribution income statement instead of a traditional income statement?
7–11. List the most important assumptions of cost-volumeprofit analysis.
7–10. How can a profit-volume graph be used to predict a company’s profit for a particular sales volume?
7–4. What does the term safety margin mean?
7–3. What information is conveyed by a cost-volume-profit graph in addition to a company’s break-even point?
7–2. What is the meaning of the term unit contribution margin?Contribution to what?
Overlook Inn is a small bed-and-breakfast inn located in the Great Smoky Mountains of Tennessee. The charge is $50 per person for one night’s lodging and a full breakfast in the morning. The
7-11 Understand the effect of income taxes on CVP analysis (appendix).
7-10 Be aware of the effects of advanced manufacturing technology on CVP relationships.

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