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In respect of each of the following statements explain the meaning of the terms used and comment on the likely significance of the statement in
In respect of each of the following statements explain the meaning of the terms used and comment on the likely significance of the statement in the context given.(50 words for each)
- The current ratio of our Company has changed from 5:1 last year to 0.9:1 this year. I am told that several creditors and the bank manager keep telephoning and want to speak to me. (Managing Director)
- The Managing Director is considering a new project and wants me to evaluate it. I usually use the pay-back method, but he wants me to use Discounted Cash Flow this time. (Works Manager)
- Because we have modernized the production process, we have a lot of fixed costs and thus our margin of safety is small. (Chief Accountant)
- Balanced Scorecard is a new approach to measure firms performance. It places more weight on the non-financial dimension (Management Accountant)
- Past costs are indeed relevant in most instances because they provide the point of departure for the entire decision process. and recovering sunk costs is a major objective when replacing equipment. (Cost Accountant)
- Target costing is an approach to better copes with cutthroat competition and is a method of costing that sets a target price by adding a desired profit margin to actual cost. (Production Manager)
- ABB is a new approach to allocate resources to activities as compared to the incremental budgeting approach which focus too much on the line-item cost. (Management Accountant)
- Corporate failure models are only as good as the accounting ratios used in the model. (Financial Controller)
- Machine hours are the most appropriate basis to use to charge indirect cost (overheads) to jobs in the modern manufacturing environment where people are less important. (Cost Controller)
- Provided that the special-order price is large enough to cover the cost of production, the sale should be made. (Management Accountant)
- Relevant costing principles refer to recovering all costs whether incurred or not while tendering for competitive bids (Procurement Manager)
- Because we are a big manufacturing company, we have a lot of fixed costs and thus our margin of safety is small. (Chief Accountant)
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