Briefly explain why actions by the material purchasing manager can cause unfavourable labour efficiency variances for the production manager.
> What factors would force an organisation such as an airline to review its strategic direction?
> Define strategy and differentiate between corporate-level strategy and business-unit level strategy.
> Explain how managers decide which products in a sales mix to emphasise.
> List two qualitative factors that often need to be considered when making a decision about whether to outsource a product or service.
> Grover Nursery is a large nursery in Sydney that has always raised the bedding plants it sells. The managers recently decided to buy bedding plants from a wholesale nursery in another state. (a) List several quantitative factors that might encourage the
> In your own words, distinguish between quantitative and qualitative information.
> Helium Industries manufactures glitter balloons used as party accessories. The balloons are bagged in packages of 100 and sold for $20 per pack. The company incurs fixed manufacturing overhead of $25 000 per year and the fixed overhead is applied based o
> Describe several methods that can be used to relax constrained resources.
> Refer to the general decision rule for special orders. (a) Would this same general decision rule apply to a decision to sell afternoon theatre tickets at a discounted price? Explain. (b) Identify two other business pricing situations that are similar t
> An organisation is currently operating at capacity. Should it accept a request for a special order based on variable cost plus 40%? Explain.
> Business publications frequently provide subscriptions to students at a substantial discount. Why do you suppose such offers are made?
> The allocation of a joint cost among joint products is essentially an arbitrary process. If this statement is true, then why allocate?
> A decision about processing a product further should not be influenced by joint cost allocation, but should be based on incremental costs and qualitative factors. Explain.
> Give an example of joint products in a service industry and describe the main products and by-products.
> List two qualitative factors that often need to be considered when making a decision about whether to accept a special order.
> List at least three different types of non-routine operating decisions and give an example of each one for a retail clothing factory outlet.
> What kind of constraints would arise in an accounting entity during tax season? How could any constraints be relaxed?
> Black Industries has a static budget based on production and sales of 24 000 units. Sales revenue is expected to be $96 000, variable costs $36 000 and fixed costs $32 000. Actual production and sales were 30 000 units with a profit of $50 000. Required
> Explain how variable costing income statements can be reconciled to absorption costing income statements.
> When making a non-routine operating decision, are all future costs relevant? Explain.
> What makes organisations such as local governments and universities suitable for ABC use?
> Should ABC be used in service industries? Why?
> Is an ABC system appropriate for every industry and every type or organisation? Explain your answer.
> Does increasing the number of cost pools always increase the accuracy of allocations under an ABC system? Explain your answer.
> Does it matter if the ABC-generated cost data is somewhat subjective?
> The results from allocations using ABC are usually different from the results using conventional cost systems. Explain why these differences arise.
> Describe the six ABC cost hierarchies.
> Mannon Company’s accountant exclaimed, 'Our cost accounting system allocates overhead based on direct labour hours, but our overhead costs appear to be more related to set-up activities than to the use of direct labour. It seems as though our costing sys
> Using examples distinguish between value-added and non-value-added activities.
> Paper Bright Industries uses flexible budgeting to assess budgeted expectations against actual performance. Last month Paper Bright produced 12 000 units and incurred direct materials cost of $150 000. Its static budget for the year has a direct material
> Outline the benefits of time-driven ABC.
> Explain the difference between activity-based costing and activity-based management.
> Is ABC appropriate for an organisation that sells a wide range of customised products manufactured using flexible manufacturing systems? Why?
> Suppose that you are part of a student consulting team working for your university. You need to analyse accounting department activities and set up cost pools for these activities. Explain how you would identify the activities and pools.
> List several costs and several benefits of implementing an ABC system.
> Does measurement error increase or decrease when ABC systems are implemented? Explain your answer.
> What use might management make of ABC-cost data output in universities, local governments and other such organisations?
> Explain how conventional and ABC cost systems differ.
> Suppose that utilities are considered a fixed cost for a retail clothing outlet. Why might we expect a variance to occur for the cost of utilities?
> Explain why variances for direct material and direct labour are separated into price and efficiency variances.
> Franklin Industries’ CEO was talking with the CFO about the appropriate standard to use for the new product being launched in the coming year. The CEO argued that standards based on ideal performance would enable profits to be maximised through improved
> Discuss the ‘bookkeeping’ role of standard costing and its performance role.
> How might the production volume variance encourage excess production?
> Discuss why the variable overhead spending variance does not just focus on price.
> Explain how accountants and managers decide which cost variances to monitor.
> Why is the efficiency variance more useful for control purposes than the price variance?
> Identify four revenue drivers.
> Recently the Victorian Government introduced a solar rebate of $2500 for eligible home owners. How might such an initiative impact on the budget variances for a business that installs solar panels given the rebate was announced halfway through the financ
> What is the cause of an unfavourable volume variance?
> A favourable variance is always good news and an unfavourable variance is always bad news. Discuss.
> The following price and operating cost information applies to Happy Bikers Motorcycle Company. No beginning balance in finished goods is evident because the beginning inventory account on the balance sheet is zero. Average manufacturing is 10Â&nb
> Why are direct materials price variances usually recorded at the time of purchase?
> Suppose the direct materials price variance is large and favourable, and the direct materials efficiency variance is large and unfavourable. What questions would you be likely to ask when investigating these variances further?
> Discuss factors that affect accountants’ decisions to investigate the reasons for variances.
> Identify the common variances that are needed to reconcile the accounting records at the end of the period for a manufacturing entity. How are these variances treated at the end of the period if the total variance is immaterial? How are they treated if t
> Fly-a-Kite Company manufactures a variety of kite kits. You have been asked by the production manager to prepare a simple but meaningful variance report for product costs so that she can identify areas in need of improved cost control. List all of the va
> Explain why the variance accounts need to be closed at the end of the period.
> Discuss the three variances that help explain the sales volume variance.
> List several ways that variances can be used to improve future operations.
> Explain how accountants and managers decide which cost variances to monitor.
> Discuss the different types of budget variances that can be calculated.
> Wild Bird Feeders produces deluxe bird feeders for distribution to catalogue companies and wild bird stores. The company uses an absorption costing system for internal reporting purposes but is considering using variable costing. Data regarding Wild Bird
> Which item has the same value for both the static budget and the flexible budget?
> Explain the difference between a static budget and a flexible budget.
> Discuss the behavioural issues that need to be considered when establishing a standard cost.
> Discuss the different methods that an organisation can use to determine standard costs.
> Explain the difference between an ideal standard and a currently attainable standard.
> Distinguish between a price variance and an efficiency variance.
> Suppose that utilities are considered a fixed cost for a retail clothing outlet. Why might we expect a variance to occur for the cost of utilities?
> Which type of entities would be suited to the use of a standard cost system?
> Software Galore sells gaming software that is downloaded to the customer’s device on purchase. The owner, Fred, was talking with a friend who sang the praises of flexible budgeting in his manufacturing business. Fred was wondering whether a flexible budg
> Variance analysis is only useful for organisations using a standard costing system. Discuss.
> Asian Iron began last year with no inventories. During the year, 10 500 units were produced, of which 9400 were sold. Data concerning last year’s operations appear here: Variable manufacturing costs reflect the variable co
> Should management be excited if all variances for the period are favourable?
> Should management be upset if all variances for the period are unfavourable?
> Why might the role of the accountant be referred to as one of a ‘detective’ in relation to variance analysis?
> Explain what a favourable variance and an unfavourable variance mean in relation to revenue and costs.
> How can the use of absorption costing lead managers to make dysfunctional decisions for the entity?
> Informal networks (such as the use of idea brokers) are one way of overcoming a lack of collaboration and innovation. Required Drawing on any of the five strategy and control frameworks outlined in the chapter, explain how organisations could use manage
> Unilever is a large Dutch–British consumer product manufacturer with sites around the world including Australia and New Zealand. Currently, there are 2000 employees in the Australian and New Zealand operations with two factories in New South Wales and tw
> The Nutrition Division of Regal Foods focuses on health-related products. Historically, the Nutrition Division has been an excellent contributor to group performance, with annual growth rates of up to 12 per cent for the period 2006 to 2012, and revenues
> Wildcat Welders manufactures new and repairs old irrigation sprinkler systems in Western Australia. The entity has been plagued with industrial accidents involving its old welding technology. A new (safer) welding robot has been developed that will reduc
> Kelly Black is manager of the customer service division of a retail calculator store, Quik Computers. Kelly would like to buy computer diagnostic equipment that costs $10 000. The equipment will last five years. Kelly estimates that the incremental opera
> Plains Irrigation uses absorption costing for its external reports and variable costing for its internal reports. Data concerning inventories appear here: Required (a) Why is the value of inventory for Plains Irrigation higher when absorption costing i
> Xi Phan, CEO of the Fine Furniture Supply Group, is considering an investment to upgrade his current computer-aided design equipment. The new equipment would cost $110 000, have a five-year useful life, and have a zero terminal value. The new equipment w
> As part of community town planning, an industrial estate was proposed for development on the outskirts of a growing township which was a two-hour commute from the Melbourne CBD. The estate required water and sewerage facilities to be provided. At this st
> Irrigation Supply is negotiating with a major hardware chain to supply heavy-duty sprinkler heads at $18 000 each year for five years. Irrigation Supply would need to retool at a cost of $20 000 to fill this order. Incremental costs associated with the o
> Paradise Resorts, a Hong Kong company that owns and operates holiday resorts, has hired you to analyse its investment opportunities in Australia. The entity's managers have always used the payback method and have asked you to prepare an analysis comparin
> Your brother, Jack, was laid off from his job with a large and famous software company. He would like to sell his shares in the company and use the proceeds to start a restaurant. The stock is currently valued at $500 000. He received a job offer from a
> Energy plays an important role in improving people’s lifestyles. In Australia, our energy consumption is growing and is forecasted to increase by 50 per cent over the next 15 years. The available power resources in Australia (currently 80 per cent coal-f
> The Mavericks are a professional football team with a long tradition of winning. However, over the last three years the team has not won a major championship, and attendance at games has dropped considerably. A large football manufacturer is the team’s m
> The local homeless shelter received a large donation from a wealthy benefactor and asked you to review its decision-making process for the proposed investment choice. The shelter’s financial advisor suggested using the IRR to evaluate three different pro
> Managers often use the real interest rate to help them decide whether to take on a new project. Required (a) What two factors are included in the real interest rate? (b) What economic factors could affect the two aspects you identified in part (a)? List
> Riteway currently produces and sells five different products. Total demand for the products exceeds the firm’s capacity to produce all of them. The constraint on production is the time available on a special machine. Data on the product
> Rock Crusher Ltd produces two grades of sand (A100 and A300) used in the manufacture of industrial abrasives. The results of operations last year were as follows: Fixed manufacturing costs were $100Â 000 and fixed selling and administrative
> Mills and Vines just received a bid from a supplier for 6000 motors per year used in the manufacture of electric lawn mowers. The supplier offered to sell the motors for $88 each. Mills and Vines’ estimated costs of producing the motor
> Gourmet Fast Foods produces and sells many products in each of its 35 different product lines. Occasionally a product or an entire product line is dropped because it ceases to be profitable. The entity does not have a formalised program for reviewing its
> Falco Services processes mortgage loan applications. The cost of home appraisals is included in its service fee, but Falco uses an outside appraisal service. The cost of appraisals has been increasing rapidly over the last several years, reaching $180 pe
> Scott Mills was originally a producer of fabrics, but several years ago intense foreign competition led management to restructure the entity as a vertically integrated cotton garment manufacturer. Scott purchased spinning entity that produce raw yarn and
> George Jackson operates a small machine shop. He manufactures one standard product available from many other similar businesses, and he also manufactures custom-ordered products. His accountant prepared the following annual income statement. The deprec
