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business
management cost accounting

Questions and Answers of Management Cost Accounting

Define and discuss the terms safety stock, economic order quantity, and lead time.
Indicate one way of determining the optimum size of production runs.ONWhAatN a re stockouts, TOS, and B/O?
What risks does a company run when these conditions occur?
Contrast the three EOQ computational methods presented. What are the inherent limitations of each? Why is it important to recognize these weaknesses?
How can the effect of quantity discounts be added to the tabular approach of determining EOQ?
Discuss the impact of backflushing on the cost of inventory accounting.
Why is quality increasingly being considered by management as a key feature for reducing long-term manufacturing costs?
Susan Smith is confused about why the company she works for sets up scrap inventory as an asset. She believes the present system is strictly a waste of time and accounting effort because the value of
According to its production schedule, Jacksonville Company estimates that 12,000 yards of polyester at a cost of $45 per yard will be needed next year. The estimated carrying cost is 30 percent of
Management of James Machine Shop has been quite concerned as to the optimum production run. It produces special die castings for a customer who yearly orders 20,000 Type I castings and 25,000 Type II
Jovan Corporation has developed a new type of industrial detergent. Sales are expected to be 78,000 gallons per year. The manager wishes to keep a safety stock of 2 weeks normal usage based on a
Give two examples frequently encountered in actual business organizations that suggest workers are compensating for each others’ perceived errors.
What impact do automated manufacturing systems have on the concept and applicability of learning curve theory?
Discuss the variety of labor-related costs that an employer can incur for each worker.
a. Discuss the advantages and the disadvantages of group incentive payroll plans.b. As a member of the management team, what factor would you consider most important when evaluating an incentive plan?
What is the impact of JIT and newer management philosophies on incentive plans?
Discuss the relation of a no-layoff policy and workers’ acceptance of robots. What is a preferred approach when introducing automation?
As a manufacturing company’s cost accountant, you recognize the importance of understanding the production process. Periodically, you walk through the plant to reorient yourself to any changes
Why might you advise companies to stagger payrolls throughout the week or month?
What is the basic assumption of the learning curve?
List some managerial applications of learning curves in the planning and controlling of business operations.
Shell, Inc., manufactures complex units for submarines. Fabricating these units requires a high degree of technical skill. However, employees have an opportunity to learn how to produce the units
Management of Roget Company was surprised to learn that employees were complaining about posters that managers recently placed on departmental bulletin boards. The posters show an employee running to
Dobbs Company uses an incentive plan in which employees receive a guaranteed rate of $8 per hour and a premium of 60 percent of the time saved on production in excess of the standard of 80 units per
Pauley, Inc., uses a payroll account to record its weekly payroll. The labor summary for March shows Pauley incurred $15,800 direct labor and $6,100 indirect labor. Vacation and holiday pay is
An employee at the Russell Company is paid $4.60 per hour for a regular week of 40 hours.For the week ending July 19, the employee worked 43 hours on Job No. 502 and earned time and a half for
a. Comment on this statement: “All accounting information is relevant for some purpose.”b. What are relevant costs, and why is the ability to determine relevant costs necessary in decision making?
In what type of business decision making would differential cost be more appropriate to use than full cost? What is an appropriate use of full cost?
Discuss the types of cost analysis that are important in internal decision making.Should you use the same cost for all decisions?
What is the objective in evaluating short-term projects?
Discuss the constraints on decision making and how their impact may alter the course of action taken. What is the relationship between time and planning?
Support your agreement or disagreement with the following statement: “If a plant has excess capacity everywhere, it can produce additional products for essentially raw material costs.”
Explain if differential costs are composed only of variable costs.
Why may differential cost analysis not be appropriate for determining the asset value of the component parts manufactured rather than purchased?
What is the danger in using historical cost when a shift from making to buying is contemplated? What costs should be used instead?
Distinguish between escapable and nonescapable costs.
List four criticisms of using the expected monetary value criterion in decision making.
Decision makers often need a new set of cost data that is not provided by financial accounting:Required:a. Discuss the following terms as they relate to decision making:(1) Relevant cost(2) Sunk cost
Paternal, Inc., owns a manufacturing plant that processes textiles. The variable costs including direct material and direct labor amount to $4 per yard. Fixed costs of operating the present
Siegel Company is considering manufacturing an order of 3,000 units for another company.Without the special order, the company had planned to produce 42,000 units of the product for a total cost of
The variable costs of Gretts Company including direct material and direct labor amount to$15 per hour with each unit requiring two hours of processing. Fixed costs of operating the present facilities
As manager of Dufour, Inc., you receive a report indicating a $20,000 unfavorable labor efficiency variance for the past week’s operations. You estimate the probability of the process being out of
Contrast budget-related behavior in organizations of different size, technology, and structure.
Why is it important that top management become involved in the budgeting process?How can budgets be viewed as a means of coordination and continuous improvement?
Discuss four different approaches to establishing an advertising budget.
Discuss how the design of the budgeting system influences managerial behavior and performance.
List several modifications of government budgeting that would allow more effective managerial control.
How could you use PERT in time budget analysis?
What advantages over zero-base budgeting do proponents of incremental budgeting stress?
Discuss the strengths as well as the weaknesses of participative budgeting.
Contrast budget-constrained style versus profit conscious style of using budgeted and accounting cost information in performance evaluation.
Define the expectancy theory of motivation and how it relates to budgets and cost accounting systems.
You have been asked to forecast the cash receipts from credit sales for the month of May for the Reid Company. The company is engaged in seasonal production, and May credit sales are estimated to be
Dorette Corporation management makes the following data available:The company takes full advantage of the 3 percent discount allowed on purchases paid for by the 10th of the following month. Dorette
What is the behavioral impact of:a. The budgeting process being referred to in a budget orientation meeting as meeting the budget.b. Using concern with cost as a means of evaluating a manager’s
Management by objectives (MBO) is a participative process involving all management levels. This process measures and evaluates both segment and individual performance. MBO is a strategy of planning
The six divisions of Beale, Inc., are in different regions of the United States, and all but one are situated a great distance from corporate headquarters. The Western Division is the exception;its
a. Contrast standard costing, target costing, and kaizen costing.b. How does value engineering play a role in these systems?
Discuss the similarities in and differences between budgets and standard costs.
a. Discuss why you agree or disagree that a primary focus on direct labor standards and variances leads to long production runs.b. Discuss whether long production runs are profitable.
Why is it incorrect in a labor efficiency variance to compare actual hours and budgeted hours?
Why is it imperative that a standard cost system have the support of top management before initiation of the system?
a. What factors should a company consider in deciding how tight standards should be?b. Why is the worker representative important to the success of time and motion studies?
Would you advise recognizing material quantity variances at the time the materials are charged to production? Why or why not?
Which departments should be held responsible for ana. Unfavorable material usage variance?b. Unfavorable material price variance?
When can the total standard quantity allowed be determined? How is it determined?
Why are yardsticks for performance measurement needed? What limitations are inherent in any approach in which actual current costs are compared with historical cost data?
The introduction of zero defect programs questions the traditional approach of including rework costs and waste in standards.Required:Write a memo to the vice president of production addressing these
The standard rate is $24 per direct labor-hour for Ace Company. In the current month, actual hours were 12,800 at an actual price of $23.50 per hour. For the output achieved, the standard direct
Jeanne, Inc.’s records show the following data relating to direct materials cost for November:There is no work in process either at the beginning or the end of the month.Required:a. Calculate the
Ian, Inc., is a personal computer manufacturing company. It uses a standard cost system to record its production cost and the system allows for a small level of product defects. However, in its
Osbert Company is a canned cat food manufacturer. The basic meat ingredients are fish, pork and beef, and all of these ingredients are supplied by an outside vendor. The production Writing floor of
How can the reporting of variances cause further breakdowns in the working relationship of employees and supervisors? Suggest a better approach for reporting variances.
Indicate which of the following data are known before operations begin or after operations end and how each is determined or computed.a. Actual hours.b. Standard variable overhead rate.c. Standard
Discuss the three different capacity levels that companies use in overhead variance analysis. Indicate the point in the operating cycle at which information used to determine these capacity levels
What similarities are there between factory overhead application rates in an actual cost system and those in standard factory overhead rates? Discuss the difference between applying factory overhead
What capacity level is normally chosen as a basis for establishing standard factory overhead rates? In what terms is the capacity level chosen as the basis for standard overhead most often expressed?
Why is a volume variance comparing budgeted hours with standard hours a better indication of the use of capacity than a volume variance comparing budgeted hours with actual hours?
What is the danger involved if a company automatically loosens a standard every time an unfavorable variance occurs? How often do you think standards should be reviewed for possible revisions? Why is
a. Discuss two reasons that could cause factory overhead to be overapplied.b. How should an accountant dispose of an overapplied factory overhead balance if it is material?
Why is it necessary that managers using a standard cost system know the total standard factory overhead rate when operations begin? Why are the standard factory overhead rates used to cost inventory
.Discuss some environmental conditions that have an effect on the standard cost system.
Before operations begin, management has analyzed the market and determined that 500 batches of their secret mixture TREX are budgeted to be produced. Time and motion studies show that 25 standard
McSparrin Company is a manufacturer of costume jewelry and employs a standard cost system.The ingredients for the fake stones are combined in the Mixing Department. From there, the mixture is sent in
Midtown Hospital administrators know that the seriousness of patients’ illnesses determines the skill and amount of nursing services the hospital requires. For example, their study of activities
Name six cost drivers typically used in ABC systems.
List benefits expected from ABC systems.
Explain how traditional cost systems frequently overcost high-volume products and undercost low-volume specialty products.
Do you think simple cost systems with limited cost pools provide enough information for companies to compete internationally? Provide support for your answer.
Why do ABC advocates argue that allocating overhead across all products hinders cost reduction and pricing strategies because management receives the wrong signals?
Discuss the two assumptions underlying ABC. Do these differ from the assumptions of a traditional costing system?
Suppose another manager suggests that the company engineer assist you, the cost accountant, in preparing a questionnaire that surveys what workers really do and for what product lines. Indicate
a. What is the theoretical justification for applied rates for material acquisition and warehousing costs?b. Why aren’t material acquisition and warehousing costs commonly applied in practice?
Assume a company uses benchmarking to find the best way to manufacture its products. After identifying these best world-class practices, it copies them and incorporates them into its own process.
The controller of your company is comfortable using a traditional cost system that is familiar.The argument presented for not detailing cost pools more is that there is always a trade-off in dividing
Write a memo to the Cheng Company president supporting your request for top managers to examine company policies to determine if they place constraints on operations that the managers can eliminate
Holt, Inc., recently introduced a new motor designed for refrigerators. Because this was a new product design, engineers had to make 100 engineering changes, but only 300 changes for its other more
KLIZ, Inc. is a highly automated delivery service. Its operations are divided into three product lines: heavy-weight loads; light-weight loads; and highly perishable, rapid deliveries.The following
taSpecial wrapping paper for lighter loads.Invoice forms for each delivery.Salaries of three divisional managers.Dry ice for floral deliveries.Property taxes.Maintenance of administrative
A sample from the value chart of the activities conducted by Bramwell, Inc., workers reveals the following tasks performed:ile DES on~An operator is manually counting parts because the counter on her

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