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business
management accounting

Questions and Answers of Management Accounting

Relevant costs and cost behaviour (a) Distinguish between 'opportunity cost' and 'out of pocket cost' giving a numerical example of each using your own figures to support your answer. (6 marks) (b)
Tweed Ltd is a company engaged solely in the manufacture of jumpers, which are bought mainly for sporting activities. Present sales are direct to retailers, but in recent years there has been a
(a) A break-even chart is shown below for Windhurst Ltd.You are required: (i) to identify the components of the break-even chart labelled p, q, r, s, t, u, v, w, x and y; (5 marks) (ii) to suggest
A company manufactures and sells two products, X and Y. Forecast data for a year are:Annual fixed costs are estimated at 273 000. What is the break-even point in sales revenue with the current sales
H Limited manufactures and sells two products, J and K. Annual sales are expected to be in the ratio of J:1, K:3. Total annual sales are planned to be 420 000. Product J has a contribution to sales
Z plc currently sells products Aye, Bee and Cee in equal quantities and at the same selling price per unit. The contribution to sales ratio for product Aye is 40%; for product Bee it is 50% and the
E plc operates a marginal costing system. For the forthcoming year, variable costs are budgeted to be 60% of sales value and fixed costs are budgeted to be 10% of sales value. If E plc increases its
A Limited has fixed costs of 60 000 per annum. It manufactures a single product which it sells for 20 per unit. Its contribution to sales ratio is 40%. A Limited's breakeven point in units is: A 1200
The following data relate to the overhead expendi- ture of a contract cleaners at two activity levels:What is the estimate of the overheads if 16200 square metres are to be cleaned? A 88095 B 89674 C
Z plc makes a single product which it sells for 16 per unit. Fixed costs are 76 800 per month and the product has a contribution to sales ratio of 40%. In a period when actual sales were 224000, Z
The graphs shown below show cost-volume-profit relationships as they are typically represented in (i) management accounting and (ii) economic theory. In each graph TR = total revenue, TC= total cost,
'A break-even chart must be interpreted in the light of the limitations of its underlying assump- tions... (From Cost Accounting: A Managerial Emphasis, by C.T. Horngren.) Required: (a) Discuss the
Break-even, contribution and profit- volume graph (a) From the following information you are required to construct: (i) a break-even chart, showing the break- even point and the margin of safety;
Break-even chart with increases in fixed costs (a) Identify and discuss briefly five assumptions underlying cost-volume-profit analysis. (10 marks) (b) A local authority, whose area includes a holi-
Non-graphical CVP analysis and calculation of margin of safety Z Ltd manufactures and sells three products with the following selling prices and variable costs:The company is considering expenditure
Non-graphical CVP analysis and the acceptance of a special order Video Technology Plc was established in 1987 to assemble video cassette recorders (VCRs). There is now increased competition in its
Changes in sales mix XYZ Ltd produces two products and the following budget applies for 2001:You are required to calculate the break-even points for each product and the company as a whole and
Calculation of break-even points based on different sales mix assumptions and a product - abandonment decision M Ltd manufactures three products which have the following revenue and costs ( per
Decision-making and non-graphical CVP analysis Fosterjohn Press Ltd is considering launching a new monthly magazine at a selling price of 1 per copy. Sales of the magazine are expected to be 500 000
Decision-making and non-graphical CVP analysis Fosterjohn Press Ltd is considering launching a new monthly magazine at a selling price of 1 per copy. Sales of the magazine are expected to be 500 000
There are five competitive motels in a resort area with the following number of rooms and current occupancy rates:a. Calculate the current average occupancy of the five motels.b. Calculate the
Six competitive motor hotels have the following number of rooms and current occupancy rates.a. Calculate the current average occupancy of the six motor hotels.b. Calculate the composite rate of
A financial feasibility study is being carried out for a proposed new 120-seat restaurant. It will be open for both lunch and dinner from Monday through Saturday and for dinner only on Sunday. For
A new 50-room budget motel is being planned. Total cost will be$1,450,000, of which land will be $150,000, building $900,000, furniture and equipment $300,000, and the balance for pre-opening
Given the facts in P13.4, assume the building will be depreciated at 6%double declining balance, and that furniture and equipment will be depreciated at 25% double declining balance. Prepare
Given the facts in Problems 13.4 and 13.5 and the following additional information, prepare the pro forma income statements for each of the first five years:Rooms operating costs average 60% of total
Given the facts in Problems 13.4, 13.5, and 13.6, calculate the net annual cash flow figures for each of the 5 years. What would be your evaluation of the financial feasibility of this proposed
Discuss the role of mission statements with reference to financial goals.LO1
Discuss the general concept of financial management and list the types of financial and other goals that a company might have.LO1
Discuss the pros and cons of profit wealth maximization as a financial goal.LO1
Define MBO, explain how it is used to measure performance, and define the term goal congruence.LO1
Discuss social goals.LO1
Discuss the role of strategies and tactics in developing an action plan to achieve financial goals.LO1
List the four levels in the decision-making process.LO1
Explain the ways in which information is obtained in an organization, list the main criteria for information to be useful in the decision-making process, and state how an information system should be
Define management by exception.LO1
Explain your understanding of a mission statement and state four purposes that it can serve.LO1
Briefly describe your understanding of the meaning of financial management.LO1
Explain how you think a small restaurant operation can practice good financial management.LO1
What is your understanding of the term satisficing?LO1
In what way might a policy to pay no dividends affect a hotel corporation’s market price of shares? If the policy were to pay out all net income in dividends, how might this affect the company’s
Explain why wealth maximization, as indicated by market price of shares, may not be achieved by profit maximization.LO1
Would the objective of no net income for a certain period (e.g., three years)be consistent with the goal of wealth maximization? Explain.LO1
What is a secondary goal? Give an example that might be appropriate for the housekeeping department of a hotel.LO1
Define MBO and explain how it is used in an organization. What is goal congruence, and how does it fit in with MBO?LO1
Explain why a resort hotel that is the only one in the area would or would not be likely to practice social responsibility. Do you think such a resort hotel might act differently if it were only one
Discuss the need for an action plan to achieve goals and differentiate between strategies and tactics.LO1
What are the four steps in the decision-making process?LO1
Discuss how you think an information system should be judged for quality.LO1
What are the main criteria for information so it is useful in the decisionmaking process?LO1
Define management by exception and give an example of a circumstance where it might be used.LO1
Briefly discuss two ways in which the effectiveness of a management information system can be determined.LO1
Some hospitality enterprise entrepreneurs, even with limited education, have successfully operated their businesses for many years. They have probably never heard of management by objectives (MBO).
The following paragraph appeared in a chain motel’s monthly in-house newsletter announcing the creation of a trophy that will be awarded to the motel with the most outstanding performance each
Following are performance objectives for three different organizations:a. A restaurant’s manager: “To establish a position in the market by providing top-quality menu items created from the
You are the manager of the maintenance department of a hotel. You are paid a basic salary, plus a bonus. The bonus consists of another $1,000 each time your expenses are under budget, plus 2% of the
A small resort hotel that caters primarily to the family trade set as an objective an increase of 5% in its rooms occupancy over the next 12 months. Its strategy for achieving this was to convert
The concierge’s department of a large hotel normally has a head concierge and nine concierges on duty during the day shift for the peak tourist months. During the past peak month, there have been
In late January 0008, George Ray, president of Restoration Resort Ltd., is concerned about how he could finance the more than $200,000 he esc14 timates he needs to convert, improve, and expand the
A restaurant has 100 seats with an average turnover of 2.5, with an average check of $14.75. The restaurant is open 260 days a year. What is the estimated sales revenue for the year?LO1
A motel operation has 80 rooms, an occupancy rate of 62%, and an average room rate of $74.00. The owner wants you to give an estimate of sales revenue for the month of April. What is the estimated
A motel had budgeted an occupancy of 8,000 rooms with a selling price of$82 per room and a variable housekeeping cost of $4.40 per room. Actual data indicated that a total of 8,480 rooms were sold at
Using the same information in E9.3, answer the following about the sales revenue:a. What is the budget variance? Is it favorable or unfavorable?b. What is the price variance? Is it favorable or
Assume you had a guest count for the first 3 months of the year. In January, the count was 1,670; in February the count was 1,880; and in March the count was 2,882. What was the moving average guest
You manage a small motel that has 45 rooms, with an average room rate of $58 on a 76% occupancy rate. Fixed costs are $480,000 and the VC per room sold is $8.00. What do you anticipate your annual
An 80-seat coffee shop is open for all three meals every day of the year.Calculate sales revenue for the coming year. Seat turnover and average check figures are as follows:LO1 Turnover Average Check
Calculate the room sales revenue for a 50-room motel for the first 3 months of the year. Assume February is not in a leap year and has 28 days. The following information is given:LO1 Room Rate
A 70-room motel’s average room rate is $125. Its average occupancy is 74%. Fixed costs are $1,056,000 a year and variable costs are $212,704 a year. Calculate the motel’s operating income for the
A restaurant has budgeted sales revenue of $912,000 for the next year.Variable costs are 72% of sales revenue and fixed cost is $102,000. Answer the following questions:a. What are the total variable
A motel has 40 units. During the month of June, its average room rate is expected to be $80, and its room occupancy 74%. In July, the owner is planning to raise room rates by 10%, and occupancy is
As the manager of the 60-room motel, you have the responsibility of preparing next year’s budget from the following information:■ Annual occupancy: 74%■ Average room rate: $84■ Variable costs
A dining room has 66 seats. It is open only for lunch and dinner 6 days a week (closed Sundays). This particular August has four Sundays. Round your calculations to the nearest dollar. Management has
A hotel coffee shop has 120 seats and is open 7 days a week for all threemeal periods. During the month of January, it anticipates the following seat turnovers and average food checks:Calculate the
The manager of Buff’s Buffet is preparing next year’s budget. She wants to prepare a flexible budget for three different annual sales revenue levels using a contribution margin income statement.
A resort hotel has a dining room that has no business from street trade;it is dependent solely on the occupancy of its rooms for its sales revenue.It has 150 rooms. During the month of June it
A 120-seat family restaurant is open Mondays to Saturdays only for lunch and dinner. On Sundays and holidays, totaling 60 days annually, the restaurant is open for dinner only. During the coming
A restaurant’s average monthly income statement is as follows:The owner is considering two possible alternatives for the coming year:■ Alternative 1: By improving purchasing and reducing
a. Budgeted liquor sales revenue at a banquet were 1,500 drinks at $5.00 each. Actual sales were 1,550 drinks at $4.80 each. Determine the price and sales volume variances.b. Banquet food sales
An 80-room motel forecasts its average room rate to be $68.00 for next year at 75% occupancy. The rooms department has a fixed wage cost of $186,000.Variable wage cost for housekeeping is $9.00 an
You have been asked to help prepare the operating budget for a proposed new 100-room motel, with a 65-seat coffee shop, 75-seat dining room, and 90-seat cocktail lounge. The operating budget for the
You have the following guest-nights and meals-served figures for the past 12 months for the Inland Inn.Use regression analysis to solve the hotel’s equation Y = a + bX.LO1 Guest Nights Meals Served
The manager of the Hospitality Inn has developed regression analysis equations for forecasting the hotel’s dining room sales volume based on the hotel’s anticipated guest-night count. The monthly
Define the purpose of the statement of cash flows.LO1
Identify the three sections of the statement of cash flows and explain the nature of the types of transactions.LO1
Explain the effect that changes in current asset and current liability accounts have on the adjustment of accrual net income or net loss to cashbased net income or net loss.LO1
Explain how depreciation expense, amortization expense, and gains or losses on the disposal of noncurrent assets apply in increasing or decreasing the adjustment to net income.LO1
Define working capital.LO1
List and briefly explain some of the sources and uses that change working capital.LO1
Prepare a change to working capital accounts and identify the net change to working capital.LO1
Explain why cash does not always increase by an amount equal to net income.LO1
Explain the common uses of major elements in both the statement of cash flows and the various statements used to analyze working capital.LO1
Explain whether the hospitality industry can operate on a relatively low current ratio.LO1
What is the purpose of the SCF?LO1
What are the major operating accounts by category analyzed in the SCF, indirect method?LO1
If a current asset account increases, how is the increase treated in the statement of cash flows?LO1
What is the typical noncash item, by name, that is automatically added back in the operating activities section of the SCF?LO1
The financing section of an SCF analyzes three different items by category.What are they?LO1
What are the primary items by category analyzed in the SCF, investing section?LO1
What is working capital?LO1
Of what use is the statement of source inflows and use outflows of working capital?LO1

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