Question: George Jackson operates a small machine shop.

> 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 $100 000 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

> Jazzy Cases manufactures several different styles of jewellery cases. Management estimates that during the first quarter of this year the company will operate at about 80 per cent of normal capacity. Two special orders have been received, and management

> Vernom Ltd produces and sells to wholesalers a highly successful line of summer lotion and insect repellents. Vernom has decided to diversify to stabilise sales throughout the year. A natural area for the entity to consider is the production of winter lo

> Rightway Printers, a book printing shop, is operating at 95 per cent capacity. The entity has been offered a special order for book printing at $8.50 per book; the order requires 10 per cent of capacity. No other use for the remaining 5 per cent idle cap

> Doe Ltd grows, processes, cans and sells three main pineapple products: sliced pineapple, crushed pineapple, and pineapple juice. The outside skin, which is removed in the cutting department and processed as animal feed, is treated as a by-product. Doe L

> Roses to Go is a flower farm that specialises in fragrant roses for florist shops. Required (a) List five joint costs that are likely to be incurred by Roses to Go in raising roses. (b) The roses are sold by the dozen, with no difference in price for an

> Famous Desk Company manufactures desks for office use. The variable cost of 100 units in beginning inventory is $80 each. The absorption cost is $146.67 each. Following is information about this period’s manufacturing. Required (a) Es

> Elder Services is a not-for-profit entity that has three departments in three separate locations, in addition to the headquarters. The entity provides services for elderly clients who are still living at home. One department provides meals, one departmen

> With reference to Keener Doors in comprehensive example 2, provide answers to each of the following questions with regard to the use of ABC information for activity-based management. (a) Why did the managers ask for additional analysis of marketing and w

> Shearwater Council owns and operates an animal shelter that performs three services: housing and finding homes for stray and unwanted animals, providing health care and neutering services for the animals, and pet training services. One facility is dedica

> Data Processors performs credit card services for banks. The company uses an ABC system. The following information applies to the past year: Required (a) Are the activities listed likely to be the only possible set of activities for the ABC system? Why

> Water Feature Company manufactures kits for fish ponds. The managers recently set up an ABC system to identify and reduce non-value-added activities. The ABC system includes the following cost pools, cost drivers, and estimated costs for manufacturing ac

> Kim Mills produces three different types of fabric using two departments. In department 1, machines weave the cloth. In department 2, the cloth is dyed a variety of colours. Information for the combined use of resources in both departments for the three

> Vines Ltd produces custom machine parts on a job order basis. The company has two direct product cost categories: direct materials and direct labour. In the past, indirect manufacturing costs were allocated to products using a single indirect cost pool,

> In ABC systems, activities are often separated into a hierarchy of categories. Required (a) In your own words, explain what is meant by a cost hierarchy in ABC. (b) Explain why uncertainty is possible in classifying costs within the cost hierarchy. (c)

> Following is a list of steps that must be performed in setting up an ABC system: * Identify and sum the costs into activity-based cost pools. * Choose a cost driver for each activity. * For each ABC cost pool, allocate overhead costs to the product or se

> Auditors must plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatements, which may be caused by either error or fraud. Errors are unintentional misstatements caused by factors such

> In their 2014 annual report, airlineVirgin Australia commented on the strategic direction of the company. After completing the Game Change Program, the Group has commenced Virgin Vision 2017, a strategy to maximise the Group’s potential by extracting val

> Jennifer has just been promoted to manager of the piston division of Car Parts Co. The division, which manufactures pistons for hydraulic drives, uses a standard cost system and calculates the standard cost of a completed piston as $85, as follows: The

> The Software Development Company produces computer programs on DVDs for home computers. This business is highly automated, causing fixed costs to be very high, but variable costs are minimal. The entity is organised along three product lines: games, busi

> Data Processors Ltd performs credit card services for banks. The entity uses an ABC system. Following is information for the past year: Required (a) Using standard values for costs and activity, calculate an ABC allocation rate for each activity. (b)

> Sunglass Guys produces two types of wraparound sunglasses on one assembly line. The monthly fixed overhead is estimated at $235 707, and the variable overhead is estimated at $8.15 per Regular Wrap and $12.32 per Deluxe Wrap. The company set

> Raging Sage Coffee is a franchise that sells cups of coffee from a cart in shopping centres. A computerised standard costing system is provided as a part of the franchise package. A portion of the standard cost data follows. In its first month of opera

> Fasteners Company has several divisions, and just built a new plant with a capacity of 20 000 units of a new product. A standard costing system has been introduced to aid in evaluating managers’ performance and for establish

> Consider the following information for Morgan’s Cheese and Butter Division. Additional information: Required (a) Calculate the market size and market share variances. (b) Comment on the meaning of your calculations (for example, how

> Benerux Industries has been in business for 30 years. The entity’s major product is a control unit for elevators. The entity has a reputation for manufacturing products of exceptionally high quality, resulting in higher prices for its units than competit

> Variance analysis reflects information about actual performance relative to a standard. Variance analysis reports provide managers with information about the performance of employees, from direct labour to supervisors and managers. Grades provide similar

> Cardinal Products hired a new marketing manager early this year. After an informal consumer survey, the marketing manager decided to lower the firm’s selling price by 10 per cent and increase television advertising. The operating result

> An entity uses variable costing for internal reports. It must convert the variable costing results to absorption costing results for external reports. How can this conversion be accomplished?

> Explain the similarities and differences among absorption and variable costing.

> 1. Saving time and money are reasons to take a _______________ rather than a census. 2. If the research process is destructive, taking a _______________ may be the only option in gathering data. 3. A researcher may opt to take a _______________ to el

> 1. The uniform distribution is sometimes referred to as the _____________________ distribution. 2. Suppose a set of data are uniformly distributed from x = 5 to x = 13. The height of the distribution is ____________________. The mean of this distribut

> 33. A binomial distribution problem is to determine the probability that x is greater than 10 when the sample size is 20 and the value of p is .60. Using the normal distribution to work this problem produces a probability of ________. If this problem h

> 11. Suppose a population of values is normally distributed with a mean of 155 and a standard deviation of 12. The z score for x = 170 is ________. 12. Suppose a population of values is normally distributed with a mean of 76 and a standard deviation of

> 21. A population is normally distributed with a mean of 340 and a standard deviation of 55. 10.93% of values in the population are less than ________. 22. In working a binomial distribution problem by using the normal distribution, the interval, _____

> Fill in the Blanks: 21. The long-run average or mean of a Poisson distribution is _______________. 22. The variance of a Poisson distribution is equal to _______________. 23. If Lambda is 2.6 occurrences over an interval of five minutes, the probability

> 11. On any one trial of a binomial experiment, there can be only _______________ possible outcomes. 12. Suppose the probability that a given part is defective is .10. If four such parts are randomly drawn from a large population, the probability that

> 1. Variables that take on values at every point over a given interval are called _______________ _______________ variables. 2. If the set of all possible values of a variable is at most finite or a countably infinite number of possible values, then th

> 11. Whenever the proportions of the strata in the sample are different than the proportions of the strata in the population, _______________ _______________ random sampling occurs. 12. With _______________ random sampling, there is homogeneity within

> 21. The central limit theorem states that if n is large enough, the sample means are ______________ distributed regardless of the shape of the population. 22. According to the central limit theorem, the mean of the sample means for a given size of sam

> An entrepreneur opened a small hardware store in a strip mall. During the first few weeks, business was slow, with the store averaging only one customer every 20 minutes in the morning. Assume that the random arrival of customers is Poisson distributed.

> The average fill volume of a regular can of soft drink is 12 ounces. Suppose the fill volume of these cans ranges from 11.97 to 12.03 ounces and is uniformly distributed. What is the height of this distribution? What is the probability that a randomly se

> A U.S. Bureau of Labor Statistics survey showed that one in five people 16 years of age or older volunteers some of his or her time. If this figure holds for the entire population and if a random sample of 150 people 16 years of age or older is taken, wh

> The U.S. Bureau of Labor Statistics reports that of persons who usually work full-time, the average number of hours worked per week is 43.4. Assume that the number of hours worked per week for those who usually work full-time is normally distributed. Sup

> Find the probabilities for the following exponential distribution problems. a) P(x ≥ 3|λ = 1.3) b) P (x < 2|λ = 2.0) c) P(1 ≤ x ≤ 3|λ = 1.65) d) P(x > 2|λ = .405)

> Work the following binomial distribution problems by using the normal distribution. Check your answers by using Table A.2 to solve for the probabilities. a) P(x = 12|n = 25 and p = .60) b) P(x > 5|n = 15 and p = .50) c) P(x ≤ 3|n = 10 and p = .50) d) P(x

> Assume a normal distribution and find the following probabilities. a) P (x < 21|μ = 25 and σ = 4) b) P(x ≥ 77|μ = 50 and σ = 9) c) P(x > 47|μ = 50 and σ = 6) d) P(13 < x < 29|μ = 23 and σ = 4) e) P(x ≥ 105|μ = 90 and σ = 2.86)

> Data are uniformly distributed between the values of 6 and 14. Determine the value of f(x). What are the mean and standard deviation of this distribution? What is the probability of randomly selecting a value greater than 11? What is the probability of r

> During the dry month of August, one U.S. city has measurable rain on average only two days per month. If the arrival of rainy days is Poisson distributed in this city during the month of August, what is the average number of days that will pass between m

> The Foundation Corporation specializes in constructing the concrete foundations for new houses in the South. The company knows that because of soil types, moisture conditions, variable construction, and other factors, eventually most foundations will nee

> Shown here is a graph of a binomial distribution for n = 6. Study the graph and from the graph, estimate what you think is the mean of this distribution. Approximately what do you think is the value of p and why? 0.45 0.4 0.35 0.3 0.25 0.2 - 0.15 0.1

> The exponential distribution can be used to solve Poisson-type problems in which the intervals are not time. The Air Travel Consumer Report published by the U.S. Department of Transportation reported that in a recent year, Spirit Airlines led the nation