Questions and Answers of Management And Cost Accounting 11th

B Ltd manufactures a range of products which are sold to a limited number of wholesale outlets. Four of these products are manufactured in a particular department on common equipment. No other
We have all experienced it – a large sporting event in a major city and prices go through the roof. Take for example the World Cup held in 2010 in South Africa. A report in The Guardian (London) in
Cloud computing is a term used to describe the delivery of information systems without the presence of physical hardware or the purchase of software in some instances. What this means for an average
Apple Inc. is well known for developing innovative products like the iPhone, iPad and iPod. Such devices are manufactured with complex electronic components and incur substantial design and
What is meant by cost-plus pricing?
A manufacturer of electrical appliances is continually reviewing its product range and enhancing its existing products by developing new models to satisfy the demands of its customers. The company
Dr Peter Turney, founder, president and chief executive officer of Cost Technology Inc. (a Portland, Oregon based consultancy firm) poses an interesting question on his blog: what is the return on
Cost assignment is a major problem for healthcare providers as, typically, healthcare providers experience a high level of indirect and support costs – blood tests, diagnostics and out-patient
In 2008, the Department of Communities and Local Government in the UK published a report which addressed how local authorities need to gain a deeper understanding of the costs of the services they
Provide examples of how ABC can be used in service organizations.
Comparison of traditional product costing with ABC. Having attended a CIMA course on activity-based costing (ABC) you decide to experiment by applying the principles of ABC to the four products
W is a manufacturing company that produces three products: X, Y and Z. Each uses the same resources, but in different quantities as shown in the table of budgeted data for 2010 below:W’s budgeted
XY provides accountancy services and has three different categories of client:limited companies, self employed individuals, and employed individuals requiring taxation advice. XY currently charges
A healthcare company specialises in hip, knee and shoulder replacement operations, known as surgical procedures. As well as providing these surgical procedures the company offers pre operation and
Define the term ‘operating leverage’ and explain how the degree of operating leverage can influence future profits.
A company has established a budgeted sales revenue for the forthcoming period of £500 000 with an associated contribution of £275 000. Fixed production costs are £137 500 and fixed selling costs
The following information is required for sub-questions (a) and (b).W Ltd makes leather purses. It has drawn up the following budget for its next financial period:Selling price per unit $$11.60$
Z plc provides a single service to its customers. An analysis of its budget for the year ending 31 December shows that in period 4, when the budgeted activity was 5220 service units with a sales
XYZ Ltd produces two products and the following budget applies for 20 × 2:You are required to calculate the break-even points for each product and the company as a whole and comment on your
(a) ‘The analysis of total cost into its behavioural elements is essential for effective cost and management accounting.’Required:Comment on the statement above, illustrating your answer with
Most developed economies have well developed road and highway networks. From time to time new highways are built to relieve congested cities, but by and large most developed countries are not
Shelf space limits the quantity and variety of products offered by a retail operation. The visibility of a particular stock-keeping unit (SKU) and probability of a stock-out are related to the space
Following public expenditure cuts and other austerity measures in the United Kingdom in 2010, the City of London police commissioner has made soundings about privatizing some sections of the police
Ireland’s largest bank, Bank of Ireland, outlined plans in April 2010 to dispose of its pensions and life assurance operations, as well as its asset management business and other small operations.
WTD Ltd produces a single product. The management currently uses marginal costing but is considering using absorption costing in the future.The budgeted fixed production overheads for the period are
In a period, opening stocks were 12 600 units and closing stocks 14 100 units. The profit based on marginal costing was £50 400 and profit using absorption costing was £60 150. The fixed overhead
There is an old saying ‘there’s money in scrap’.The increasing price of metals like copper, gold and aluminium has brought good business to scrap metal merchants. Nowadays, this saying applies
In February 2010, Reed Elsevier Plc, the London-based publisher of Variety magazine and owner of the Lexis-Nexis database, forecast a lower profit margin for 2010 after 2009 sales were little changed
Auto manufacturers are keen to report their production and sales figures. This may be to assess market share or the data may be considered a key performance indicator given the high fixed costs an
Operating leverage can tell investors a lot about a company’s risk profile, and although high operating leverage can often benefit companies, firms with high operating leverage are also vulnerable
J Ltd uses standard absorption costing and absorbs production overheads on the basis of standard machine hours.The following budgeted and actual information applied in its last accounting period:At
Bookdon Public Limited Company manufactures three products in two production departments, a machine shop and a fitting section; it also has two service departments, a canteen and a machine
(a) Describe the distinguishing characteristics of production systems where:(i) job costing techniques would be used, and (ii) process costing techniques would be used.(b) Job costing produces more
(a) ‘While the ascertainment of product costs could be said to be one of the objectives of cost accounting, where joint products are produced and joint costs incurred, the total cost computed for
(a) A company uses a process costing system in which the following terms arise:conversion costswork-in-processequivalent unitsnormal lossabnormal loss.Required:Provide a definition of each of these
South Africa is one of the top gold producers in the world, holding about 40 per cent of global reserves. According to Statistics South Africa, a government statistics agency, the value of gold sales
Define joint costs, split-off point and further processing costs.
(a) Explain briefly the term ‘joint products’ in the context of process costing.(b) Discuss whether, and if so how, joint process costs should be shared among joint products. (Assume that no
(a) Discuss the problems which joint products and by-products pose the management accountant, especially in his attempts to produce useful product profitability reports.Outline the usual accounting
Explain how the apportionment of those costs incurred up to the separation point of two or more joint products could give information which is unacceptable for (i) stock valuation and (ii)
According to a 2009 survey undertaken by CIMA, variable (or marginal) costing is used by almost 40 per cent of firms. Management accountants from a wide range of sectors, including manufacturing and
Liquefied natural gas (LNG) is natural methane gas which is retained as a liquid by cooling it to minus 160 degrees Celsius. LNG is a particularly useful way to get large quantities of gas from gas
Describe the differences between process costing and job costing.
Provide examples of industries that use process costing.
Why is cost accumulation easier with a process costing system compared with a job costing system?
Why is it necessary to treat ‘previous process cost’ as a separate element of cost in a process costing system?
Describe how the weighted average and FIFO methods differ in assigning costs to units completed and closing work in progress.
A company uses process costing to value its output and all materials are input at the start of the process. The following information relates to the process for one month:How many good units were
A company operates a process costing system using the first-in-first-out (FIFO) system of valuation. No losses occur in the process. The following data relate to last month:Last month the cost per
Explain responsibility accounting.
Which of the following should be classified as indirect labour?(a) machine operators in a factory producing furniture;(b) lawyers in a legal firm;(c) maintenance workers in a power generation
According to a CIMA research report from 2006, many manufacturing companies continue to use traditional management accounting techniques such as absorption costing. The research explored 41 UK
Media reports often mention how businesses have to absorb increasing input costs, which cannot be passed on to their customers or end consumers. While these may be fixed or variable costs, the term
(a) Explain why predetermined overhead absorption rates are preferred to overhead absorption rates calculated from factual information after the end of a financial period.(b) The production overhead
Critically consider the purpose of calculating production overhead absorption rates.
(a) Specify and explain the factors to be considered in determining whether to utilize a single factory-wide recovery rate for all production overheads or a separate rate for each cost centre,
Many large retailers use complex information systems to track individual items of inventory across many locations and even countries. According to Procurement Leaders, Marks and Spencer (a large UK
Since accounting software first became widely available in the 1970s, accounting data used for external financial reporting and internal cost and decisionmaking information has in essence been
At the end of a period, in an integrated cost and financial accounting system, the accounting entries for overhead overabsorbed would be:(a) DR Profit and loss account CR Work in progress control
People Management, the journal of the Chartered Institute of Personnel and Development (CIPD), provides an example of the importance of accounting information to human resources (HR)
In recent years, books have become increasingly available in electronic format. Amazon.com offers e-books on its Kindle e-readers, and Apple Inc. offer e-books through their iBooks App, which covers
As one of the pioneers in the low cost airline market, easyJet bases its business on a number of principles:•Minimize distribution costs by using the internet to take bookings. About 90 per cent of
Many low-cost carriers such as easyJet and Ryanair regularly offer flights to customers at a very low price or even free. They continue to do this even during depressed economic times. Both continue
Governments worldwide spend vast amounts of money on capital projects such as road and rail infrastructure, schools, hospitals, community projects and even defense. While the vast majority of these
Food prices have been rising in the past decade or so. In 2008, many countries around the world saw rioters protest in anger against the rising cost of basic foods stuffs. Poorer countries were
Cornerstone Ltd carries an item of inventory to which the following data apply:fixed cost of ordering per batch ................................ £5expected steady quarterly volume of sales
A jewellery company makes rings (R) and necklaces (N).The resources available to the company have been analysed and two constraints have been identified:Labour time 3R + 2N ≤ 2,400 hoursMachine
The economic order quantity is the order quantity which results in:(a) The lowest cost of ordering inventory;(b) The highest discount from suppliers;(c) The lowest combined total costs of ordering
Cathedral City Services (CCS) is a not-for-profit organization offering two services in a midsized city. The services are “Elder Meals” and “Jobs 4U.” Elder Meals is a meals-on-wheels type
Forest Products, Inc. manufactures three products (FP-10, FP-20, and FP-40) from a single, joint input. None of the products can be sold without further processing. In November, joint product costs
Refer to the data in Exercise 14-37. Data in Exercise 14-37.Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in
Veach Division has total assets (net of accumulated depreciation) of $462,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $42,000. Expected divisional
Lola Metals has two decentralized divisions, Stamping and Finishing. Finishing always has purchased certain units from Stamping at $36 per unit. Stamping plans to raise the price to $48 per unit, the
Grand Amusements, Inc. (GAI) has two operating divisions, Parks and Foods. The two divisions have a marketing agreement to provide incentives to customers. Parks Division offers vouchers good for
Durham Parts (DP) makes a variety of products. It is organized in two divisions, Eastern and Western. The managers for each division are paid, in part, based on the financial performance of their
Luce Original Baking Supplies (LOBS) sells equipment to homes and small businesses for baking. There are two distribution channels. Customers can shop and purchase at a retail outlet located near the
Rowe Tool and Die (RTD) produces metal fittings as a supplier to various manufacturing firms in the area. The following is the forecasted income statement for the next quarter, which is the typical
Couzen’s Company’s cost structure is dominated by variable costs with a contribution margin ratio of .25 and fixed costs of $450,000. Every dollar of sales contributes 25 cents toward fixed costs
Miami Training Support (MTS) produces materials for companies to use for training new hires as well as advanced training for employees who have been promoted to new positions. Most of the material
Nardin Outfitters has the capacity to produce 12,000 of its special arctic tents per year. The company is currently producing and selling 5,000 tents per year at a selling price of $900 per tent. The
What is a special order? What costs should be considered for a special order?
Parkview Fish Tacos sells tacos for $4.50 each. The cost of each taco follows: One of Parkview’s regular customers asked the company to fill a special order of tacos at a selling price of
What are predatory pricing, dumping, and price discrimination? What role would a cost accountant play in determining whether dumping or price discrimination has occurred?
Coram Audio makes wireless headphones. Each pair of headphones comes with a travel case. Since its founding, Coram has manufactured its own travel cases. Recently, Holmur Travel Gear (HTG), a local
Brandon Technology makes two models of a specialized sensor for the aerospace industry. The difference in the two models relates to the required accuracy of the sensor. The Standard model is
Florida Kitchens produces high-end cooking ranges. The costs to manufacture and market the ranges at the company’s volume of 3,000 units per quarter are shown in the following table: The
Nagle Devices produces medical instruments, primarily for hospital and medical office use. A new design for its best-selling hospital thermometer has the marketing team considering possibly entering
Platt Instruments produces and sells medical devices for both home and professional use. One line of products that has been consistently profitable for Platt is its range of sphygmomanometers (blood
Mcquade Equipment is considering a new product for the road construction industry. The analyst has collected some information about the product design, summarized as follows:The marketing group at
Lakeside Accessories manufactures computer backpacks, messenger bags, and other items for carrying electronics, documents, and so on. In developing a new bag for the newest release of laptops, the
Greenview Dairies produces a line of organic yogurts for sale at supermarkets and specialty markets in the Southeast. Economic conditions and changing tastes have resulted in slowing demand growth.
Sparta Fashions owns four clothing stores, where it sells a wide range of women’s fashions, from casual attire to formal wear. In addition, it rents formal wear and gowns for special occasions. At
Talbot Industries manufactures two models of wireless headset: TI-12 and TI-28. Each model requires time on a single machine. The machine has a monthly capacity of 540 hours. Total market demand for
Ontario Audio makes a popular satellite radio receiver for over-the-road trucks and other professional uses. The two major parts of the radio are the electronics (receiver, speaker, and so on) and
Senator Pet Foods makes a variety of canned and dried food for pets. The Center Street Manufacturing Campus is the site of the original Senator plant and is used solely for the production of its
Pierson Products manufactures furniture, primarily for institutional use, such as for furniture rental companies, college dorm rooms, and budget hotel and motel chains. The company’s Verne Valley
Ferdinand Construction (FC) manages the design and construction of hospitals. Ferdinand has developed several formulas that it uses to quote jobs. These include costs of basic construction but
Collingwood Contractors (CC) designs and builds new model homes for individual customers. CC has developed a reputation in the market for relatively upscale, unique designs with highend finishings.
Consider the Business Application item “Data Analytics for Managing Operations and Forecasting Revenue.” How would using analytic techniques, including regression analysis, be similar for
You are in the middle of performing a cost study and are using statistical regression analysis to make some cost estimates. As you proceed, you realize that there could be errors in the accounting

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