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business
management accounting

Questions and Answers of Management Accounting

What is the purpose of a standard cost sheet? lop5
The budget variance for variable production costs is broken down into quantity and price variances. Explain why the quantity variance is more useful for control purposes than the price variance. lop5
When should a standard cost variance be investi- gated? lop5
What are control limits and how are they set? lop5
Explain why the materials price variance is often computed at the point of purchase rather than at the point of issuance. lop5
The materials usage variance is always the re- sponsibility of the production supervisor. Do you agree or disagree? Why? lop5
The labor rate variance is never controllable. Do you agree or disagree? Why? lop5
Suggest some possible causes of an unfavorable labor efficiency variance. lop5
Explain why the variable overhead spending vari- ance is not a pure price variance. lop5
The variable overhead efficiency variance has nothing to do with efficient use of variable over- head. Do you agree or disagree? Why? lop5
Explain why the fixed overhead spending vari- ance is usually very small. lop5
What is the cause of an unfavorable volume vari- ance? Does the volume variance convey any mean- ingful information to managers? lop5
Which do you think is more important for control of fixed overhead costs: the spending variance or the volume variance? Explain. lop5
Associated Media Graphics (AMG) is a rapidly expanding company involved in Werke the mass reproduction of instructional materials. Ralph Boston, owner and manager of AMG, has made a concerted effort
During the year, Marsing Company produced 45,000 mechanical components for a tractor manufacturer. Marsing’s materials and labor standards are:Direct materials (3 components @ 8.00) $24.00 Direct
Jugo Company produces fruit juices, sold in gallons. Recently, the company adopted the following standards for one gallon of its apple juice: lop5 Direct materials (128 oz @ $0.025) $3.20 Direct
Young, Inc., has gathered the following data on last year’s operations: lop5 Units produced: 28,000 Direct labor: 20,000 hours at $9 Actual fixed overhead: $280,000 oe aoActual variable overhead:
Cordero Corporation produces high-quality leather purses. The company uses a standard cost system and has set the following standards for materials and labor: lop5 Leather (6 strips @ $8) $48 Direct
Escrevem Products produces instructional aids. Among the company’s products are“white boards,” which use colored markers instead of chalk. They are particularly popular for conference rooms in
Tules Company is planning to produce 2,400,000 power drills for the coming year.Each drill requires one-half standard hour of labor for completion. The company uses direct labor hours to assign
Underwood Company uses the following rule to determine whether materials usage variances ought to be investigated: A materials usage variance will be investigated anytime the amount exceeds the
Tavera Company uses a standard cost system. The direct labor standard indicates that four direct labor hours should be used for every unit produced. Tavera pro- duces one product. The normal
At the beginning of 2001, Ammondar Company had the following standard cost sheet for one of its chemical products: lop5 Direct materials (10 lb @ 3.20) $32.00 Direct labor (4 hr @ $9.00) 36.00 Fixed
Refer to the data in Exercise 9-10. Prepare journal entries for the following:The purchase of raw materials The issuance of raw materials to production (Work in Process)The addition of labor to Work
Jackie Iverson was furious. She was about ready to fire Tom Rich, her purchasing agent. Just a month ago, she had given him a salary increase and a bonus for his performance. She had been especially
Basura Company produces plastic garbage cans. The following standards for producing one unit have been established:Direct materials (5 lb @ $0.90) $ 4.50 Direct labor (1.5 hr @ $7.00) 10.50 Standard
Refer to Exercise 9-13. Prepare journal entries for the following:1. The purchase of raw materials 2. The issuance of raw materials 3. The addition of labor to Work in Process 4. Closing of variances
Layner Company uses a standard costing system. During the past quarter, the following variances were computed:Variable overhead efficiency variance $ 8,000 U Labor efficiency variance 20,000 U Labor
Kascara Company manufactures plastic football helmets. The following standards have been established for the helmet’s variable inputs:Standard Quantity Standard Price (Rate) Standard Cost Direct
The Lubbock plant of Morril’s Small Motor Division produces a major subassembly for a 6.0 horsepower motor for lawn mowers. The plant uses a standard costing system for production costing and
Lorale Company, a producer of recreational vehicles, recently decided to begin producing a major subassembly for jet skis. The subassembly would be used by Lorale’s jet ski plants and also would be
Koolkare Company manufactures two types of ice makers, small and regular. The standard quantities of labor and materials per unit for 2001 are:Small Regular Direct materials (oz) Om2: 0.20 Direct
Lynwood Company produces surge protectors. To help control costs, Lynwood employs a standard costing system and uses a flexible budget to predict overhead costs at various levels of activity. For the
Demismell Company produces a well-known cologne. The standard manufacturing cost of the cologne is described by the following standard cost sheet:Direct materials:Liquids (4.2 oz @ $0.25) $1.05
Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of the year, the following plans for production and costs were revealed:Pairs of shoes to be produced and sold
The management of Golding Company has determined that the cost to investigate a variance produced by its standard cost system ranges from $2,000 to $3,000. If a problem is discovered, the average
Briggs Company had recently acquired Metalica, Inc., a small manufacturing firm located in the Midwest. Unfortunately, Metalica had very poor internal controls, and a master disk with some
Mark Wright, Inc. (MWD) is a specialty frozen-food processor located in the midwestern states. Since its founding in 1982, MWI has enjoyed a loyal clientele that is willing to pay premium prices for
Crunchy Chips was established in 1938 by Paul Golding and his wife, Nancy (Nancy sold her piano to help raise capital to start the business). Paul assumed responsibility for buying potatoes and
Pat James, the purchasing agent for a local plant of the Oakden Electronics Division, was considering the possible purchase of a component from a new supplier. The component's purchase price, $0.90,
Standard costing concepts have been applied in the health-care industry. For exam- ple, diagnostic related groups (DRGs) are used for prospective payments for medicare patients. Select a search
Describe the difference between support departments and producing departments. lop8
Calculate single charging rates for a support department. lop8
Allocate support-department costs to producing departments using the direct, sequential, and reciprocal methods. lop8
Calculate departmental overhead rates. lop8
Why do you think that the copying department charges amount to $0.12 per page?List the types of costs incurred for photocopying and divide them into fixed and variable categories. lop8
Jan mentioned the security and convenience of in-house photocopying. How do you think the firm might weigh these factors in deciding whether or not the cost of inhouse copying is “worth it”? lop8
Since the firm as a whole has decided to have an in-house copying department, why are copying costs charged to the individual departments? What purpose does the practice of developing support
Describe the two-stage allocation process for as- signing support department costs to products in a functional manufacturing environment. lop8
Explain how allocating support department costs can be helpful in pricing decisions. lop8
Why must support department costs be assigned to products for purposes of inventory valuation? lop8
Explain how allocation of support department costs is useful for planning and control. lop8
Explain how allocating support department costs will encourage support departments to operate more efficiently. lop8
Why is it important to identify and use causal fac- tors to allocate support department costs? lop8
Identify some possible causal factors for the fol- lowing support departments:a. Cafeteriab. Custodial servicesc. Laundryd. Receiving, shipping, and storagee. Maintenancef. Personnel g. Accounting
Explain why it is better to allocate budgeted sup- port department costs rather than actual support department costs. lop8
Explain the difference between the direct method and the sequential method. lop8
The reciprocal method of allocation is more accu- rate than either the direct or sequential methods. Do you agree? Explain. lop8
Classify each of the following departments in a factory as a producing department lop8 or a support department:Power Maintenance Finishing Landscaping Payroll Cooking Blending General factory
For the following support departments, identify one or more causal factors that might be useful for support-department cost allocation purposes.Supervision Data processing Quality control Purchasing
Mondo Music Company recently established a centralized purchasing department to handle purchasing for its four retail stores. The costs of the purchasing department include fixed costs of $42,000 per
Morton Auto Sales has three producing departments: new car sales, used car sales, and service. The service department provides service to both outside customers and to the new and used car
Actual materials and direct labor hours incurred by the service department during the year are:Materials Actual DLH New Car Department § 2,100 1,300 Used Car Department 7,890 4,700 Service
Patton Company charges all of its departments and manufacturing cells for the use of engineering services. Budgeted engineering costs for the year are $160,000, and budgeted engineering hours are
Terrell Company manufactures a product in a factory that has two producing departments, cutting and polishing, and two support departments, maintenance and human resources. The activity driver for
Refer to Exercise 7-6. Under the sequential method, the human resource department costs are allocated first.Required:1. Calculate the allocation ratios to be used under the sequential method for the
Refer to Exercise 7-6.Required:1. Calculate the allocation ratios to be used under the reciprocal method for the human resources and maintenance departments. Carry your calculations out to four
Yolanda Bakery, Inc. has two producing departments, mixing and baking. At the beginning of the year, the following budgeted information was provided:Mixing Baking Machine hours 2,000 5,000 Direct
Gordon Company manufactures a product in two producing departments: P1 and P2. Three support departments support the production departments: SA, SB, and SC. Budgeted data on the five departments
Refer to the data in Exercise 7-10. The company has decided to use the sequential method of allocation instead of the direct method. , Required:1. Allocate the overhead costs to the producing
Mandelbrot Company produces fractals in two producing departments (generating and coloring) and two support departments (human resources and power). The following budgeted data pertain to these four
Refer to the data in Exercise 7-12. The company has decided to simplify its method of allocating service costs by switching to the direct method.Required:1. Allocate the costs of the support
Refer to the data in Exercise 7-12.Required:1. Allocate the costs of the support departments using the sequential method. 2. Using direct labor hours, compute departmental overhead rates (to the
Trinity Medical Clinic has two support departments and two revenue-producing departments. The controller for the clinic has decided to use the reciprocal method to allocate the costs of the support
Morris Machine Works has two support departments—power and general factory—and two producing departments—grinding and assembly. Budgeted data for each follows:General Power Factory Grinding
Refer to the data in Exercise 7-16.Required:1. Allocate the costs of the support departments using the sequential method.2. Calculate departmental overhead rates, using machine hours for grinding and
MedServices, Inc., is divided into two operating departments: the laboratory and tissue pathology. The company allocates delivery and accounting costs to each operating department. Delivery costs
Lahoma Uniform Company manufactures a variety of uniforms for the armed services. Lahoma has two producing departments, cutting and sewing. Usually, the uniforms are ordered in batches of 100.Two
Refer to the data in Problem 7-19.Required:1. Prepare bids for Lahoma Uniform Company using each of the following alloca- tion methods:a. Sequential method, allocating Maintenance first, then
Lilly Candies has three producing departments—mixing, cooking, and packaging, and five support departments. The following is the basic information on all departments (bases represent practical
Watterman Company has two producing departments (machining and assembly)and two support departments (power and maintenance). The budgeted costs and normal usage are as follows for the coming
Golden Oaks is a chain of assisted-living apartments for retired people who cannot live completely alone, yet do not need 24-hour nursing services. The chain has grown from one apartment complex in
Alden Peterson, marketing manager for Retlief Company, had been puzzled by the outcome of two recent bids. The company’s policy was to bid 150 percent of the full manufacturing cost. One job
Browse through the Web sites of one or more major financial services companies, such as the following:Then, identify as many producing departments as possible. Are any support departments listed? Why
Define budgeting and discuss its role in planning, control, and decision making. lp6
Define and prepare the master budget, identify its major components, and explain the interrelationships of its various components. lp6
Describe flexible budgeting and identify the features that a budgetary system should have to encourage managers to engage in goal-congruent behavior. lp6
Describe activity-based budgeting. lp6
Why did Dr. Jones fire his bookkeeper? Were his financial problems her fault? Why or why not? lp6
How would a formal budgeting system help Dr. Jones get out of his financial difficulties? lp6
Many small businesses do not budget, reasoning that they are small enough to mentally keep track of all revenues and expenditures. Comment on this idea. lp6
Do you budget? Explain why or why not. lp6
Define the term budget. How are budgets used in? lp6
Define control. How are budgets used to control? lp6
Explain how both small and large organizations can benefit from budgeting? lp6
Discuss some of the reasons for budgeting. lp6
What is a master budget? an operating budget? a financial budget? lp6
Explain the role of a sales forecast in budgeting. What is the difference between a sales forecast and a sales budget? lp6
All budgets depend on the sales budget. Is this true? Explain. lp6
How do the master budgets differ among manu- facturing, merchandising, and service organiza- tions? lp6

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