Explain how safety stock is used to deal with demand uncertainty.
> Describe the difference between the variable overhead efficiency variance and the labor efficiency variance.
> The variable overhead efficiency variance has nothing to do with efficient use of variable overhead. Do you agree or disagree? Why?
> Explain why the variable overhead spending variance is not a pure price variance.
> What is the purpose of an after-the-fact flexible budget?
> What is the purpose of a before-the-fact flexible budget?
> Explain why mixed costs must be broken down into their fixed and variable components before a flexible budget can be developed.
> Why are flexible budgets superior to static budgets for performance reporting?
> During the most recent year, Osterman Company had the following data: Units in beginning inventory ……….………………………………… — Units produced ..……………………………………………………. 10,000 Units sold ($47 per unit) ………………………………………… 9,300 Variable costs per unit: Direct mat
> What is the difference between an activity flexible budget and a traditional-based flexible budget?
> Explain how an activity-based budget is prepared.
> Which do you think is more important for control of fixed overhead costs: the spending variance or the volume variance? Explain.
> Does the volume variance convey any meaningful information to managers?
> Discuss the differences between static and flexible budgets.
> 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.
> What is the purpose of a standard cost sheet?
> Discuss the differences among actual costing, normal costing, and standard costing.
> How does standard costing improve the control function?
> Explain why standard costing systems are adopted.
> During the most recent year, Osterman Company had the following data: Units in beginning inventory ……….………………………………… — Units produced ..……………………………………………………. 10,000 Units sold ($47 per unit) ………………………………………… 9,300 Variable costs per unit: Direct mat
> What are ideal standards? Currently attainable standards? Of the two, which is usually adopted? Why?
> Why is historical experience often a poor basis for establishing standards?
> Describe the relationship that unit standards have with flexible budgeting.
> What is kaizen costing? On which part of the value chain does kaizen costing focus?
> Suggest some possible causes of an unfavorable labor efficiency variance.
> The labor rate variance is never controllable. Do you agree or disagree? Why?
> The materials usage variance is always the responsibility of the production supervisor. Do you agree or disagree? Why?
> Explain why the materials price variance is often computed at the point of purchase rather than at the point of issuance.
> What are control limits, and how are they set?
> When should a standard cost variance be investigated?
> In assigning costs to goods transferred out, how do the weighted average and FIFO methods differ?
> Discuss the difference between budgets and standard costs.
> Why is it important for a manager to receive frequent feedback on his or her performance?
> Why is goal congruence important?
> What is a master budget? An operating budget? A financial budget?
> Discuss some reasons for budgeting.
> Define control. How are budgets used to control?
> Explain how a manager can milk the firm to improve budgetary performance.
> Explain why a manager has an incentive to build slack into the budget.
> A budget too easily achieved will lead to diminished performance. Do you agree? Explain.
> Define the term budget. How are budgets used in planning?
> During the most recent year, Judson Company had the following data associated with the product it makes: Units in beginning inventory ………………………….. 300 Units produced …………………………………………. 15,000 Units sold ($300 per unit) …………………………. 12,700 Variable costs p
> Explain why, in the traditional view of inventory, carrying costs increase as ordering costs decrease.
> What are the reasons for carrying inventory?
> What are stockout costs?
> What are ordering costs? Carrying costs? Give examples of each.
> What is the difference between contribution margin and segment margin?
> What is a segment?
> If a company produces 10,000 units and sells 8,000 units during a period, which method of computing operating income (absorption costing or variable costing) will result in the higher operating income? Why?
> What approach does JIT take to minimize total inventory costs?
> What is the economic order quantity?
> Under the weighted average method, how are prior period costs and output treated? How are they treated under the FIFO method?
> What is the difference between the unit cost of a product under absorption costing and variable costing?
> Describe the value of activity-based customer costing.
> Explain how costs are assigned to activities.
> What is an activity dictionary?
> What is activity-based product costing?
> What is an overhead consumption ratio?
> What is meant by ‘‘product diversity’’?
> What are nonunit-level overhead activities? Nonunit-based cost drivers? Give some examples.
> Describe the two-stage process for departmental overhead rates.
> What is cycle time? Velocity?
> What is a production report? What purpose does this report serve?
> What are nonvalue-added activities? Nonvalue-added costs? Give an example of each.
> What is driver analysis? What role does it play in process-value analysis?
> Explain how ABC can help a firm identify its true low-cost suppliers.
> What are equivalent units? Why are they needed in a process-costing system?
> How does the adoption of a JIT approach to manufacturing affect process costing?
> Identify some possible causal factors for the following support departments: a. Cafeteria b. Custodial services c. Laundry d. Receiving, shipping, and storage e. Maintenance f. Personnel g. Accounting
> Why is it important to identify and use causal factors to allocate support department costs?
> How would process costing for services differ from process costing for manufactured goods?
> Describe the difference between producing and support departments.
> How is the equivalent unit calculation affected when materials are added at the beginning or end of the process rather than uniformly throughout the process?
> Describe the five steps in accounting for the manufacturing activity of a processing department, and explain how they interrelate.
> If a company decides to increase advertising expense by $25,000, how will that affect the predetermined overhead rate? Eventual cost of goods sold?
> Explain why transferred-in costs are a special type of raw material for the receiving department.
> What is an overhead variance? How is it accounted for typically?
> Carver Company uses a plant wide overhead rate based on direct labor cost. Suppose that during the year, Carver raises its wage rate for direct labor. How would that affect overhead applied? The total cost of jobs?
> What is the role of materials requisition forms in a job-order costing system? Time tickets? Predetermined overhead rates?
> What journal entry would be made as goods are transferred out from one department to another department? From the final department to the warehouse?
> What are the similarities in and differences between the manufacturing cost flows for job order firms and process firms?
> What is over applied overhead? When Cost of Goods Sold is adjusted for over applied overhead, will the cost increase or decrease? Why?
> What is under applied overhead? When Cost of Goods Sold is adjusted for under applied overhead, will the cost increase or decrease? Why?
> Why are actual overhead rates seldom used in practice?
> Why might a company decide to use departmental overhead rates instead of a plant wide overhead rate?
> What is normal costing? How does it differ from actual costing?
> Distinguish between sequential processing and parallel processing.
> Describe the two-stage process associated with plant wide overhead rates.
> Which of the following is typically a process-costing firm? a. Paint manufacturer b. Custom cabinetmaker c. Large regional medical center d. Law office e. Custom framing shop
> The cash budget serves which of the following purposes? a. Documents the need for liberal inventory policies. b. Reveals the amount of depreciation expense. c. Reveals the amount lost due to uncollectible accounts. d. Provides information about the abil
> Select the one budget below that is not an operating budget. a. Cost of goods sold budget b. Cash budget c. Production budget d. Overhead budget e. All of these are operating budgets.
> Which of the following is needed to prepare a budgeted income statement? a. The production budget b. Budgeted selling and administrative expenses c. The budgeted balance sheet d. The capital expenditures budget e. Last year’s income statement
> A company plans to sell 220 units. The selling price per unit is $24. There are 50 units in beginning inventory, and the company would like to have 20 units in ending inventory. How many units should be produced for the coming period? a. 250 b. 200 c. 2
> A company requires 100 pounds of plastic to meet the production needs of a small toy. It currently has 10 pounds of plastic inventory. The desired ending inventory of plastic is 30 pounds. How many pounds of plastic should be budgeted for purchasing duri
> A budget a. is a long-term plan. b. covers at least 2 years. c. is only a control tool. d. is a short-term financial plan. e. is necessary only for large firms.
> Suppose that you and a friend decide to set up a lawn mowing service next summer. Describe the source documents that you would need to account for your activities.
> Which of the following is typically a job-order costing firm? a. Paint manufacturer b. Pharmaceutical manufacturer c. Cleaning products manufacturer d. Cement manufacturer e. Large regional medical center
> Companies may choose to use variable costing because it a. accords with GAAP. b. is most useful for management decision making. c. provides the gross margin. d. is useful for external reporting. e. None of these.
> Garrett Company provided the following information: Common fixed cost totaled $46,000. Garrett allocates common fixed cost to Product 1 and Product 2 on the basis of sales. If Product 2 is dropped, which of the following is true? a. Sales will increas
> A segment could be which of the following? a. Product b. Customer type c. Geographic region d. All of these. e. None of these.
> Suppose that a material has a lead time of four days and that the average usage of the material is 12 units per day. The maximum usage is 15 units per day. What is the safety stock? a. 3 b. 12 c. 9 d. 15 e. 5
