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business
managerial accounting decision making

Questions and Answers of Managerial Accounting Decision Making

Compute the target cost for a new product or service.
Distinguish between the terms cost and expense.
How can it be said that all expenses are costs, but not all costs are expenses?
Why does management need to know anything about cost behavior?
Assume that, in October, management plans for an electricity expense of $400 in November. The actual expense in November turns out to be $550. How can the expense be controlled when it already has
Why should management be concerned with separating a mixed cost into its fixed and variable elements?
Define the following cost behavior patterns:a. Variable cost.b. Fixed cost.c. Step-variable cost.d. Mixed cost.
An individual was heard to say, "I don't know why they call it step-variable; it looks more like step- fixed to me." Comment.
If fixed costs do not change, how can they be controlled?
"The term discretionary cost implies that the cost can be incurred or sot incurred, based on the judgment of management: therefore, a discretionary cost is an optional cost." Comment on the validity
Name the three methods that can be used to separate a mixed cost into its fixed and variable elements.
How can a scatter chart be used?
What is the primary disadvantage in using a scatter chart to separate a mixed cost into its fixed and variable elements?
What is the primary disadvantage in using the high-low points method to separate a mixed cost into its fixed and variable elements?
Which is the best method for separating a mixed cost into its fixed and variable elements? Why?
The scatter charts for Deluxe Delivery Service (Exhibits 2-6 and 2-7) show that number of miles is the more appropriate activity to use as the cost driver. Why might you have expected this to be true?
Cost Behavior Identification. Select the statement below that correctly describes the following grap Total Cost Activitya. The graph represents a fixed cost.b. An increase in activity reduces total
Understanding Fixed Costs. Consider the following information: Number of Units Produced Fixed Cost 0-25,000 $35,000 25,001-50,000 65,000 50,001-75,000 85,000 75,001-100,000 95,000a. If 60,000 units
Cost Behavior Identification. Identify the cost behavior patterns illustrated by the following graphs: LEE B
Distinguishing Fixed Costs. Identify the following fixed costs as either committed or discretionary:a. Salary of the vice-president for manufacturing.b. TV commercials for a new product.c.
Scatter Chart Selection. Which of the following scatter charts is the appropriate one to use in determining the base assumed to cause the variable element of the mixed cost?22 High-Low Points Method.
High-Low Points Method. Refer to Exercise 2-22. Assume that the solution was $5,000 p and $4 per hour. The company expects next year's activity to be 120,000 hours.a. Determine next year's expected
High-Low Points Method. Sam's Supermarket considers electricity a mixed cost. By using a scatter chart, Sam has determined that there is a relationship between electricity expense and the number of
High-Low Points Method. Refer to Exercise 2-24. Assume that the solution was $800 per month and $6 per hour. Sam expects to be open a total of 5.000 hours in the upcoming year.a. Determine next
High-Low Points Method. Last year, total operating expenses for Batsnip, Inc., were $440,000 in February, when sales were $600,000, the lowest for the year, and $1 million in December, when sales
High-Low Points Method. Burney's. Inc.. has analyzed its repair and maintenance costs for its machinery for the past year. Data for each quarter is as follows: Total Tolal Quarter Hours Cost 1st
Least Squares Method (Appendix). Refer to Exercise 2-27. Use the least squares method to determine the variable rate and the fixed cost per quarter for the firm's repair and maintenance costs. (Round
High-Low Points Method. E-Z Rider Mower Company has been analyzing its past experience with one of its mixed costs. Results for the past two years are as follows: 20x4, by Quarter Total Number of
Based on the data for 20x4 and 20x5, use the high-low points method to determine the expected fixed cost per quarter and the variable rate per unit produced for 20x6.b. If the company expects to
Least Squares Method (Appendix). Refer to Problem 2-29. Required: Use the least squares method to determine the expected fixed cost per quarter and the variable rate per unit produced. (Round the
Scatter Chart Selection and High-Low Points Method. Big Burst Balloon Company frequently must hire temporary secretarial help and also pay overtime wages to its full-time secretaries. Management
Least Squares Method (Appendix). Refer to Problem 2-31. Required: Use the least squares method to determine the fixed and variable elements of total secretarial expense. Use only the more appropriate
Least Squares Method (Appendix). Refer to Exhibit 2-5.a. Using the number of deliveries as the activity, use the least squares method to determine the fixed and variable elements of total repairs and
Scatter Chart Selection and High-Low Points Method. Merciful Arms Hospital installed a new body scanner last year. In trying to estimate the expected cost of operating and maintaining the scanner in
The controller feels confident that the cost of operating the scanner is a mixed cost. Required:a. Prepare two scatter charts to determine which activity-number of patients or number of hours used-is
High-Low Points Method. Last year's operating expenses for Sizzlin Sales Company are shown below: Salaries. Sales commissions Repairs and maintenance Power Supplies $100,000 50,000 61,800 36,000
Least Squares Method (Appendix). Refer to Problem 2-36. Required:a. Use the least squares method to determine fixed and variable elements of repairs and maintenance expense and supplies expense.
High-Low Points and Least Squares Methods (Appendix). The controller at Telbur Company has analyzed data that relate to material handling costs and tons of material handled for the last six months.
Cost Behavior Identification. The controller for Krispy Cereal Company has been analyzing the cost behavior of several of the company's costs, as described below.a. The company puts a toy that costs
What is the difference between inventory for a merchandising firm and inventory for a manufacturing firm?
What is the difference between cost of goods sold for a merchandising firm and cost of goods sold for a manufacturing firm?
What is cost accounting?4.What is the difference between direct materials and indirect materials?
Give an example of each. What is the difference between direct labor and indirect labor?
Give an example of each. What is factory overhead?
Give an example. How can indirect materials be both a raw materials cost and a factory overhead cost?
In what way is activity-based costing superior to the traditional manner of accounting for manufacturing costs?
"Since delivery trucks are used to deliver the product, depreciation on delivery trucks is a product cost." Comment on the validity of this statement.
The vice president of sales and the vice president of manufacturing are arguing about whether their salaries are product costs or period costs. How would you settle the argument?
Since fixed factory overhead does not vary, what is the justification for applying it at a predetermined rate, which makes the fixed cost appear to vary?
Assume that a company's normal activity is 30,000 direct labor hours per year. If expected variable factory overhead is $60,000 and expected fixed factory overhead is $100,000, determine the factory
If the debits to fixed factory overhead total $42,500 and the credits total $43,200, what does the difference represent?
What is the entry to dispose of an overapplied amount of variable factory overhead?
What does it mean to say that fixed factory overhead has been overapplied by $500?
If a balance of $12.000 in cost of goods sold is to be adjusted for a $200 underapplication of variable factory overhead, what is the amount of cost of goods sold after the adjustment? Explain.
Can cost of goods manufactured and cost of goods sold ever be the same? Explain
Product Costs; Period Costs. Indicate which of the following costs are product costs and which are period costs:a. Rent on an office building.b. Wages of a plant guard.c. Freight costs of shipping
Raw Materials Journal Entries (Actual Cost System). Ace Manufacturing Company purchased raw materials on account for $40,000 on March 1, 20x2. On March 2, direct materials costing $15,000 were placed
Direct Labor and Indirect Labor Journal Entries (Actual Cost System). For the week ending July 26, 20x0, Buildrite Construction Company incurred direct labor costs of $20.000 and indirect labor costs
Factory Overhead Journal Entries (Actual Cost System). The Rally Company incurred the following factory overhead costs during October, 20x1: Indirect materials Indirect labor Depreciation on
Direct Materials and Direct Labor Journal Entry. Potter Corporation used direct materials costing $25,000 and incurred direct labor costs of $45,000 in its manufacturing process for the week ending
Materials, Labor, and Overhead Journal Entries (Actual Cost System). A company incurred the following costs in its manufacturing process for the month ending June 30, 20x1: Disect materials Indirect
Completion and Sale of Product Journal Entries. The Dawson Rubber Band Company complete production on rubber bands costing $65,000 during August, 20x2. During August, it sold rubbe bands on account
Completion and Sale of Product Journal Entries. Happy Tot Toy Company began business o January 1, 20x3. During the year, it incurred production costs of $700,000 and completed manufacture of toys
Completion and Sale of Product Journal Entries. The Miker Manufacturing Company had a balance of $140,000 in work-in-process inventory and a balance of $275,000 in finished goods inventory as of
Overhead Rate Calculation. Normal activity for the Whiz-Bank Firecracker Company is 80,000 direct labor hours. Management predicts that variable factory overhead next year will total $120,000 and
Overhead Rate Calculation. Determine the variable and fixed factory overhead rates under the conditions of parts (a), (b), and (c) below. Assume that the total variable factory overhead for the year
Overhead Rate Calculation and Journal Entry. In 20x4, the Wilshire Woolen Company used 200,000 direct labor hours and incurred variable factory overbead of $120,000. The company used this information
Overhead Journal Entries: Adjusting Cost of Goods Sold. The following information applied to Braker Corporation for the month ended June 30 20x1. Overhead Rate Overhead per DLH) Variable Fixed $1.10
Overhead Journal Entries: Adjusting Cost of Goods Sold. For the year ending December 31, 20x6, Risor Corporation incurred variable factory overhead totaling $93,000 and fixed factory overhead
Adjusting Cost of Goods Sold; Allocating Underapplied or Overapplied Overhead. In 20x3. Ding Dong Bell Company incurred fixed factory overhead totaling $200,000. However, it applied only $150,000.
is as follows: Work-in-process Finished goods inventory Cost of goods sold Total $30,000 45.000 75.000 $150.000a. Prepare the journal entry as of December 31, 20x3, to adjust cost of goods sold for
Allocating Underapplied Overhead. In 20x6, A.L.. Kate Company incurred fixed factory overhead totaling $240,000. However, it applied only $180.000. The account balances and the amount of fixed
Adjusting Cost of Goods Sold. The balances of selected ledger accounts for the Laden Company as of December 31, 20x2. are as follows: Vanable factory overhead Fixed factory overhead Cost of goods
Journal Entries (Actual Cost System). Transactions for Berrington Corporation for October, 20x1 are shown below: Oct 1 2 15 15 15 16 17 20 31 31 31 31 31 31 31 31 31 Purchased on account raw
Overhead Rate Calculation: Adjusting Cost of Goods Sold. The Mason Machine Company applies variable factory overhead on the basis of machine hours and fixed factory overhead on the basis of direct
Incomplete Ledger Accounts. Below are incomplete ledger accounts for a manufacturing company. Not all of the company's accounts are shown. The company uses a combined factory overhead sate and
Schedule of Cost of Goods Manufactured. Manufacturing information for 20x3 for the E-Z. Rest Mattress Company is provided below! On January 1, 20x3, raw materials inventory included direct materials
Schedule of Cost of Goods Manufactured. The beginning and ending inventory balances for Brite- Lite Company for 20x8 are shown below. January! December 31
Raw materials inventory Work-in-process inventory. Finished goods inventory $24,000 $32,000 36.000 40,000 25.000 45.000 Raw materials included $6,000 of indirect materials in beginning inventory and
Determining Sales from Given Data. Cathy's Calculator Company requires ten numbered buttons for every hand calculator produced. During June, 20x0, 350,000 buttons were purchased. Information
Determining Amounts from Given Data. The following information relates to the Wilson Watch Company for the year ended June 30, 20x4: Raw materials inventory tall direct materials) Work-in-process
Schedule of Cost of Goods Manufactured. The Wanda Walker Company manufactures a single product. Information for the month caded June 30, 20x1, follows: Sales Production Direct materials inventary
Determining Amounts after Fire Loss. Combust Oil Company had a fire on February 28, 20x2, two months into its fiscal year. The company's work-in-process inventory was completely destroyed. You have
How is contribution margin determined?
How does it differ from gross margin? What is variable costing?
Is cost of goods sold a variable cost?
Explain. Refer to Exhibit 4-6. Calculate the variable cost ratio and the contribution margin ratio.
"A firm with a positive contribution margin always will show a profit. A firm with a negative contribution margin always will show a loss." Do you agree with these statements? Explain.
"Regardless of changes in production, inventory always will be valued higher under absorption costing than under variable costing." Do you agree with this statement? Explain.
Since variable costing is considered a product-costing technique, how is it applicable to merchandising firms?
Since fixed cost per unit decreases with increased production, should a manufacturing firm produce as much as possible in order to lower the cost per unit as low as possible and therefore increase
Since fixed cost is a cost of doing business, why does it appear to be ignored when variable costing concepts are applied in decision-making situations?
What are the primary arguments in favor of absorption costing? What are the primary arguments in favor of variable costing?
What is meant by just-in-time inventory? Why has it become popular in recent years?
(Appendix). Assume that a firm uses the LIFO method of inventory valuation. Tell whether net income under absorption costing will be greater than, less than, or equal to net income under variable
(Appendix). Refer to question 4-12. Explain the reason for the differences under parts (a), (b), and (c).
"In order to show a continually increasing net income, a firm should use absorption costing and always produce more than it sells." Discuss the validity of this statement.15, Not In Absorption and
Net Income under Absorption and Variable Costing. Krinkle Kookie Company completed production on 50,000 cases of cookies, with a variable cost of $250,000, during March, 20x1. In addition, the
Inventory Balances under Variable Costing. For internal purposes, Harlow Manufacturing Company uses variable costing. As of January 31, 20x2, work-in-process inventory had a balance of $80,000, and
Contribution Approach Income Statement. Vinson's Deep-Discount Store presented the following information for the year ended December 31, 20x2. Sales... Inventory January 1, 20x2 $850,000 60,000

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