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management accounting

Questions and Answers of Management Accounting

The Victoria Hospital is located in a holiday resort that attracts visitors to such an extent that the population of the area is trebled for the summer months of June, July and August. From past
The Viking Smelting Company established a division, called the reclamation division, two years ago, to extract silver from jewellers' waste materials. The waste materials are processed in a furnace,
Outline the main features of a responsibility accounting system. (6 marks)
(a) Budgetary controls have been likened to a system of thermostatic control. priate? (i) In what respects is the analogy inappro- (10 marks) (ii) What are the matters raised in (a) (i) above that
One common approach to organisational control theory is to look at the model of a cybernetic system. This is often illustrated by a diagram of a thermostat mechanism. You are required: (a) to explain
(a) In the context of budgeting, provide defini- tions for four of the following terms:aspiration level; budgetary slack; feedback; zero-base budgeting; responsibility accounting. (8 marks) (b)
You are required, within the context of budgetary control, to: (a) explain the specific roles of planning, motiva- tion and evaluation; (7 marks) (b) describe how these roles may conflict with each
(a) Explain the ways in which the attitudes and behaviour of managers in a company are liable to pose more threat to the success of its budgetary control system than are minor technical inadequacies
What are the behavioural aspects which should be bome in mind by those who are designing and operating standard costing and budgetary control systems? (20 marks)
In his study of 'The Impact of Budgets on People', published in 1952, C. Argyris reported inter alia the following comment by a financial controller on the practice of participation in the setting of
You are required to: (i) discuss the factors that are likely to cause managers to submit budget estimates of sales and costs that do not represent their best estimates or expectations of what will
The typical budgetary control system in practice does not encourage goal congruence, contains budgetary slack, ignores the aspiration levels of participants and attempts to control operations by
Flexible budgets and the motivational role of budgets Club Atlantic is an all-weather holiday complex providing holidays throughout the year. The fee charged to guests is fully inclusive of
Criticism and redrafting of a performance report (a) The following report has been prepared, relat- ing to one product for March. This has been sent to the appropriate product manager as part of PDC
Preparation of flexible budgets Data Rivermede Ltd makes a single product called the Fasta. Last year, Steven Jones, the managing direc- tor of Rivermede Ltd, attended a course on budget- ary
Responsibility centre performance reports Data Jim Smith has recently been appointed as the Head Teacher of Mayfield School in Midshire. The age of the pupils ranges from 11 years to 18 years. For
BS Limited manufactures one standard product and operates a system of variance accounting using a fixed budget. As assistant management accountant, you are responsible for preparing the monthly
The following data relate to actual output, costs and variances for the four-weekly accounting period number 4 of a company that makes only one product. Opening and closing work in progress figures
Preparation of project statements for different demand levels and calculations of expected profit Seeprint Limited is negotiating an initial one year contract with an important customer for the
CVP analysis and uncertainty (a) The accountant of Laburnum Ltd is preparing documents for a forthcoming meeting of the budget committee. Currently, variable cost is 40% of selling price and total
Pricing decision and the calculation of expected profit and margin of safety E Ltd manufactures a hedge-trimming device which has been sold at 16 per unit for a number of years. The selling price is
Output decision based on expected values A ticket agent has an arrangement with a concert hall that holds pop concerts on 60 nights a year whereby he receives discounts as follows per
Pricing decision based on competitor's response In the market for one of its products, MD and its two major competitors (CN and KL) together account for 95% of total sales. The quality of MD's
Expected value, maximin and regret criterion Stow Health Centre specialises in the provision of sports/exercise and medical/dietary advice to clients. The service is provided on a residential basis
A company is preparing its capital budget for the year. A question has arisen as to whether or not to replace a machine with a new and more efficient machine. An analysis of the situation reveals the
The following data is supplied relating to two investment projects, only one of which may be selected:Required: (a) Calculate for each project: (i) average annual rate of return on average capital
A machine with a purchase price of 14000 is estimated to eliminate manual operations costing 4000 per year. The machine will last five years and have no residual value at the end of its life. You are
Payback, accounting rate of return and NPV calculations plus a discussion of qualitative factors The following information relates to three possible capital expenditure projects. Because of capital
Discussion of alternative investment appraisal techniques and the calculation of payback and NPV for two mutually exclusive projects (a) Explain why Net Present Value is considered technically
Calculation of payback, NPV and ARR for mutually exclusive projects Your company is considering investing in its own transport fleet. The present position is that carriage is contracted to an outside
NPV and payback calculations You are employed as the assistant accountant in your company and you are currently working on an appraisal of a project to purchase a new machine. The machine will cost
Present value of purchasing or renting machinery The Portsmere Hospital operates its own laundry. Last year the laundry processed 120 000 kilograms of washing and this year the total is forecast to
Comparison of NPV and IRR and relationship between profits and NPV Khan Ltd is an importer of novelty products. The directors are considering whether to introduce a new product, expected to have a
Evaluation of mutually exclusive projects using alternative appraisal methods Stadler is an ambitious young executive who has recently been appointed to the position of financial director of Paradis
Computation of NPV and tax payable Sound Equipment Ltd was formed five years ago to manufacture parts for hi-fi equipment. Most of its customers were individuals wanting to assemble their own
NPV calculation and taxation Data Tilsley Ltd manufactures motor vehicle com- ponents. It is considering introducing a new product. Helen Foster, the production director, has already prepared the
R Limited manufactures three products A, B and C. You are required: (a) Using the information given below, to prepare budgets for the month of January for (i) sales in quantity and value, including
understand how traditional cost systems, using only unit- level drivers, distort product and customer costs LO1
describe why factories producing a more varied and complex mix of products have higher costs than factories producing only a narrow range of products LO1
design an activity-based cost system by linking resource costs to the activities performed and then to cost objects, such as products and customers LO1
appreciate the role for choosing appropriate activity cost drivers when tracing activity costs to products and customers LO1
use the information from a well-designed activity-based cost system to improve operations and make better decisions about products and customers LO1
understand the importance of measuring the practical capacity of resources and the cost of unused capacity LO1
assign marketing, distribution, and selling expenses to customers LO1
analyze customer profitability LO1
appreciate the role for activity-based cost systems for service companies LO1
discuss the barriers for implementing activity-based cost systems and how these might be overcome LO1
What is the difference between production de¬ partments and service departments? (LO 1)
What are the two stages of cost allocations in conventional product costing systems? (LO 1)
Why are conventional two-stage cost allocation systems likely to systematically distort product costs? (LO 1, 2)5.4 What are two factors that contribute to cost dis¬ tortions resulting from the use
What fundamental assumption implicit in conventional two-stage cost allocation systems is rejected in activity-based costing systems? (LO 1, 2)
What do the terms activity cost driver and ac¬ tivity cost driver rates mean? (LO 3)
What major steps must be performed to deter¬ mine the activity cost driver rates? (LO 3, 4)
What are some special considerations in the design of cost accounting systems for service organizations? (LO 9)
When would you prefer to use the number of setups instead of the number of setup hours as the cost driver measure for the setup activity? (LO 4)
How do activity-based costing systems avoid distortions in tracing batch-related costs to products? (LO 3, 4)
Why do conventional product costing systems often exclude selling and distribution costs? (LO 1, 7)
What recent changes have made it more impor¬ tant to have nonmanufacturing costs assigned to products, product lines, or market segments? (LO 5, 7, 8)
Why are conventional product costing systems more likely to distort product costs in highly automated plants? How do activity-based cost¬ ing systems deal with such a situation? (LO 2)Activity-Based
"Conventional product costing systems are likely to overcost high-volume products." Do you agree with this statement? Explain. (LO 1, 2, 3)
How are cost drivers selected in activity-based costing systems? (LO 4)
In activity-based costing, what are the trade-offs made in choosing among transaction, duration, and intensity activity cost drivers? (LO 4)
Why is practical capacity recommended in cal¬ culating activity cost driver rates? (LO 6)
"Activity-based costing systems yield more ac¬ curate product costs than conventional systems because they use more cost drivers to assign support costs to products." Do you agree with this
Activity cost drivers Identify a cost driver for each of the following activities:(a) Machine maintenance(b) Machine setup(c) Utilities(d) Quality control(e) Material ordering(f) Production
Revising an activity-based costing system Refer to the Cooper Pen example de¬scribed in the chapter. Suppose that some unrecorded resource expenses were just discovered at Cooper Pen. Inspection
Activity-based costs Friendly Bank is developing an activity-based cost system for its teller department. A task force has identified five different activities: (1) process deposits, (2) process
Activity-based costs VG Company has identified the following cost pools and cost drivers: COST POOLS Machine setup Materials handling Electric power ACTIVITY COSTS $360,000 100,000 40,000 COST
Activity cost driver rates Creathon Company's plant in Columbus, Ohio, manu¬ factures two products: BR12 and BR15. Product BR15 has a more complex de¬ sign and requires more setup time than
Carl's Cornerspot, a popular university eatery in a competitive market, has seat¬ing and staff capacity to serve about 600 lunch customers every day. For the past two months, demand has fallen from
Customer profitability A credit card company has classified its customers into the following types for customer profitability analysis:1. Applies for credit card in response to a low introductory
Refer to the Inkslinger, Inc. situation described in the "In Practice" box on page LO 10 185. What barriers to implementing an activity-based costing system can you identify? How would you respond to
Comparison of two costing systems Normal manufacturing support costs of LO 1,3 Mclnnes Company for September 2000 are as follows:The present cost accounting system allocates support costs to final
Cost distortions Ferreira Company has established the following cost pools for 2000:REQUIRED (a) Determine the unit cost of each job using machine hours to allocate all sup¬ port costs.(b) Determine
Cost distortions Ehsan Electronics Company manufactures two products, X21 and Y37, at its manufacturing plant in Duluth, Minnesota. For many years the company has used a simple plant-wide
Product profitability analysis Kidspack, Inc., has recently expanded its line of LO 1, 3, 4, 5 backpacks to include high-quality, lightweight hiker backpacks. This new model uses more expensive
Activity cost drivers The Simply French Restaurant has identified the following activities performed by its staff:Set tables Seat customers Take orders Cook food Serve orders Take dessert orders
Cost driver rates with practical capacity Kohlman Company manufactures two products: K33 and K77. Estimated unit cost and production data follow:REQUIRED (a) Estimate the manufacturing cost per unit
Customer profitability analysis Kronecker Company, a growing mail-order LO 3, 5, 7, 8, 9 clothing and accessory company, is concerned about its growing marketing, dis¬ tribution, selling, and
Activity cost driver rates The customer billing department at U.S. West Tele¬communication, Inc. currently employs 25 billing clerks on annual contract. Each clerk works 160 hours per month. The
Activity-based costing in a health care organization In computing the cost of patient stays, Riverside General Hospital assesses physician costs and medication costs directly to each patient.
Product cost distortions The Manhattan Company manufactures two models of LO 1, 3, 4, 5 compact disc players: a deluxe model and a regular model. The company has manufactured the regular model for
Activity-based costing (Adapted from CMA, June 1992) Alaire Corporation manufactures several different types of printed-circuit boards; however, two of the boards account for the majority of the
Activity-based costing for services, outsourcing Smithers, Inc. manufactures 10 and sells a wide variety of consumer products. The products are viewed as suffi¬ciently profitable, but recently, some
Comparison of two costing systems The Redwood City plant of Crimson Components Company makes two types of rotators, R361 and R572, for auto¬ mobile engines. The old cost accounting system at the
Activity-based costing The Fishburn plant of Hibeem Electronics Corporation LO 1, 3, 4, 5 makes two types of wafers, W101 and W202, for electronic instruments. The old cost accounting system at the
Activity-based costing Sandra Slaughter, senior vice president for sales for Showman Shoes, Inc., noticed that the company had substantially increased its market share for the high-quality boomer
Product profitability analysis Petersen Pneumatic Company makes three products. Its manufacturing plant in Petersburg has three production depart¬ ments and three service departments.The
Product profitability analysis Pharaoh Phawcetts, Inc. manufactures two mod- LO 1, 3, 4, 5, els of faucets: a regular and a deluxe model. The deluxe model, introduced just 10 two years ago, has been
Cost distortions Sweditrak Corporation manufactures two models of its exer- LO 1, 3, 4 cise equipment: regular (REG) and deluxe (DLX). Its plant has two production departments, fabrication (FAB) and
Identifying activity costs Linda Collins is manager in charge of cost analysis and LO 3, 4, 5 planning at Montex Company. Montex makes steel and brass pumps at its four plants located in Minnesota,
Part proliferation: role for activity-based costing Discuss case 1-27.
Role for activity-based cost systems in implementing strategy Discuss case 1-28.
Financial versus management accounting: role for activity-based cost sys¬ tems in privatization ofgovernment services Discuss case 1 -29.
explain why sunk costs are not relevant costs LO1
analyze make-or-buy decisions LO1
demonstrate the influence of qualitative factors in making decisions LO1
compare the different types of facilities layouts LO1
explain the theory of constraints LO1
demonstrate the value of just-in-time manufacturing systems LO1

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