How can a company with multiple products compute its breakeven point?
> The Deli-Sub Shop owns and operates six stores in and around Minneapolis. You are given the following corporate budget data for next year: Revenues…………………..$11,000,000 Fixed costs…………………$ 3,000,000 Variable costs…………….$ 7,500,000 Variable costs change b
> Describe the business functions in the value chain.
> Sunset Travel Agency specializes in flights between Toronto and Jamaica. It books passengers on Hamilton Air. Sunset’s fixed costs are $23,500 per month. Hamilton Air charges passengers $1,500 per round-trip ticket. Calculate the number of tickets Sunset
> Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2017. Variable cost per unit is $60, and total fixed costs are $1,640,000. Required: 1. Calculate (a) contribution margin and (b) operating income. 2. Garrett’s current manufact
> Kindmart is an international retail store. Kindmart’s managers are considering implementing a new business-to-business (B2B) information system for processing merchandise orders. The current system costs Kindmart $2,000,000 per month and $55 per order. K
> Juicy Beauty manufactures and sells a face cream to small specialty stores in the greater Los Angeles area. It presents the monthly operating income statement shown here to George Lopez, a potential investor in the business. Help Mr. Lopez understand Jui
> Consolidated Motors specializes in producing one specialty vehicle. It is called Surfer and is styled to easily fit multiple surfboards in its back area and top-mounted storage racks. Consolidated has the following manufacturing costs: Plant management
> Bridget Ashton is getting ready to open a small restaurant. She is on a tight budget and must choose between the following long-distance phone plans: Plan A: Pay 10 cents per minute of long-distance calling. Plan B: Pay a fixed monthly fee of $15 for up
> Each of the following cost items pertains to one of these companies: Best Buy (a merchandising-sector company), KitchenAid (a manufacturing-sector company), and HughesNet (a service-sector company): a. Cost of phones and computers available for sale in B
> Gayle’s Glassworks makes glass flanges for scientific use. Materials cost $1 per flange, and the glass blowers are paid a wage rate of $28 per hour. A glass blower blows 10 flanges per hour. Fixed manufacturing costs for flanges are $28,000 per period. P
> National Training recently started a business providing training events for corporations. In order to better understand the profitability of the business, the owners asked you for an analysis of costs—what costs are fixed, what costs are variable, and so
> The representative cost drivers in the right column of this table are randomized so they do not match the list of functions in the left column. Function………………………………………..Representative Cost Driver 1. Accounts payable………………………..A. Number of invoices sent
> How can a management accountant help formulate strategy?
> Torrance Technology Company (TTC) is developing a new touch-screen smartphone to compete in the cellular phone industry. The company will sell the phones at wholesale prices to cell phone companies, which will in turn sell them in retail stores to the fi
> Gummy Land Candies manufactures jaw-breaker candies in a fully automated process. The machine that produces candies was purchased recently and can make 5,000 per month. The machine costs $6,500 and is depreciated using straight-line depreciation over 10
> Hannah Gilpin is the controller of Blakemore Auto Glass, a division of Eastern Glass and Window. Blakemore replaces and installs windshields. Her division has been under pressure to improve its divisional operating income. Currently, divisions of Eastern
> Maria Mendez is division controller and James Dalton is division manager of the Hestor Shoe Company. Mendez has line responsibility to Dalton, but she also has staff responsibility to the company controller. Dalton is under severe pressure to achieve the
> The Cooper Furniture Company of Potomac, Maryland, assembles two types of chairs (Recliners and Rockers). Separate assembly lines are used for each type of chair. Required: Classify each cost item (A–I) as follows: a. Direct or indirect (D or I) cost fo
> Band Box Entertainment (BBE) operates a large store in Atlanta, Georgia. The store has both a movie (DVD) section and a music (CD) section. BBE reports revenues for the movie section separately from the music section. Required: Classify each cost item (
> Market Focus is a marketing research firm that organizes focus groups for consumer-product companies. Each focus group has eight individuals who are paid $60 per session to provide comments on new products. These focus groups meet in hotels and are led b
> California Tires manufactures two types of tires that it sells as wholesale products to various specialty retail auto supply stores. Each tire requires a three-step process. The first step is mixing. The mixing department combines some of the necessary d
> Minnesota Office Products (MOP) produces three different paper products at its Vaasa lumber plant: Supreme, Deluxe, and Regular. Each product has its own dedicated production line at the plant. It currently uses the following three-part classification fo
> What is the relationship between management by exception and variance analysis?
> The sales forecast is the cornerstone for budgeting.” Why?
> Describe four decisions for which ABC information is useful.
> What is the advantage of using computerized source documents to prepare job-cost records?
> List four reasons for using standard costs.
> Why might managers find a flexible-budget analysis more informative than a static-budget analysis?
> Distinguish between a favorable variance and an unfavorable variance.
> What are two possible sources of information a company might use to compute the budgeted amount in variance analysis?
> The following information was extracted from the accounting records of Roosevelt Manufacturing Company: Direct materials purchased 80,000 Direct materials used 76,000 Direct manufacturing labor costs 10,000 Indirect manufacturing labor costs
> Management accounting should not fit the straitjacket of financial accounting.” Explain and give an example.
> For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1. Analyzing whether to produce a component needed
> For each of the following items, identify which of the management accounting guidelines applies: cost–benefit approach, behavioral and technical considerations, or different costs for different purposes. 1. Analyzing whether to keep the billing function
> Budgets meet the cost–benefit test. They force managers to act differently.” Do you agree? Explain.
> Budgeted performance is a better criterion than past performance for judging managers.” Do you agree? Explain.
> Define master budget.
> Define Kaizen budgeting.
> Westover Motors is a small car dealership. On average, it sells a car for $32,000, which it purchases from the manufacturer for $28,000. Each month, Westover Motors pays $53,700 in rent and utilities and $69,000 for salespeople’s salaries. In addition to
> What is an activity-based approach to designing a costing system?
> Why should managers worry about product overcosting or undercosting?
> Activity-based costing is the wave of the present and the future. All companies should adopt it.” Do you agree? Explain.
> Year 1 financial data for the ABC Company is as follows: Sales $5,000,000 Direct materials 850,000 Direct manufacturing labor 1,700,000 Variable manufacturing overhead 400,000 Fixed manufacturing overhead 750,000 Variable SG&A 150,0
> ABC systems only apply to manufacturing companies.” Do you agree? Explain.
> Fill in the blanks for each of the following independent cases. Variable Operating Costs Fixed Costs Total Costs Income Margin Percentage $1,600 $ 00 Contribution Case Revenues $600 $ 800 a. $2,500 $ 500 $1,200 b. $200 $300 $ 500 C. d. $200 25%
> Describe briefly why Electronic Data Interchange (EDI) is helpful to managers.
> When might a company use budgeted costs rather than actual costs to compute direct-labor rates?
> Describe two ways in which a house-construction company may use job-cost information.
> In CVP analysis, gross margin is a less-useful concept than contribution margin.” Do you agree? Explain briefly.
> What are three common features of cost accounting and cost management?
> Define product cost. Describe three different purposes for computing product costs.
> Where does the management accounting function fit into an organization’s structure?
> Frisco Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant range, which of the following statements is/are correct? I. As the cost driver level increases, total
> What is operating leverage? How is knowing the degree of operating leverage helpful to managers?
> Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management accountant.” Do you agree? Why?
> What three guidelines help management accountants provide the most value to managers?
> How does an increase in the income tax rate affect the breakeven point?
> Describe the five-step decision-making process.
> What is the relevant range? What role does the relevant-range concept play in explaining how costs behave?
> Give examples of two cost objects in companies using job costing.
> Define contribution margin, contribution margin per unit, and contribution margin percentage.
> Name three factors that will affect the classification of a cost as direct or indirect.
> How does a job-costing system differ from a process-costing system?
> Comprehensive Care Nursing Home is required by statute and regulation to maintain a minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with the Nursing Home beds. The salary expense associated with direct servi
> Define cost–volume–profit analysis.
> Define cost object and give three examples.
> List three causes of a favorable direct materials price variance.
> How might a manager gain insight into the causes of a flexible-budget variance for direct materials?
> Describe the steps in developing a flexible budget.
> What is the key difference between a static budget and a flexible budget?
> Benchmarking against other companies enables a company to identify the lowest-cost producer. This amount should become the performance measure for next year.” Do you agree?
> When inputs are substitutable, how can the direct materials efficiency variance be decomposed further to obtain useful information?
> Comment on the following statement made by a plant manager: “Meetings with my plant accountant are frustrating. All he wants to do is pin the blame on someone for the many variances he reports.”
> Why might an analyst examining variances in the production area look beyond that business function for explanations of those variances?
> Which of the following is not a primary function of the management accountant? a. Communicates financial results and position to external parties. b. Uses information to develop and implement business strategy. c. Aids in the decision making to help an o
> How does variance analysis help in continuous improvement?
> Describe three reasons for an unfavorable direct manufacturing labor efficiency variance.
> Outline the steps in preparing an operating budget.
> Define rolling budget. Give an example.
> Production managers and marketing managers are like oil and water. They just don’t mix.” How can a budget assist in reducing conflicts between these two areas?
> Strategy, plans, and budgets are unrelated to one another.” Do you agree? Explain.
> Cash budgets must be prepared before the operating income budget.” Do you agree? Explain.
> What are some additional considerations that arise when budgeting in multinational companies?
> Explain how the choice of the type of responsibility center (cost, revenue, profit, or investment) affects behavior.
> Describe how nonoutput-based cost drivers can be incorporated into budgeting.
> What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?
> How can sensitivity analysis be used to increase the benefits of budgeting?
> What are the four elements of the budgeting cycle?
> Department indirect-cost rates are never activity-cost rates.” Do you agree? Explain.
> What are the key reasons for product cost differences between simple costing systems and ABC systems?
> Why is it important to classify costs into a cost hierarchy?
> Describe four levels of a cost hierarchy.
> What is costing system refinement? Describe three guidelines for refinement.
> The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, “Given a choice, I will always prefer a $50,000 investment in improving things a c
> Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs.” Do you agree? Why?
> What are the main costs and limitations of implementing ABC systems?
> Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets forth these standards?
> Describe four signs that help indicate when ABC systems are likely to provide the most benefits.
> What is broad averaging, and what consequences can it have on costs?
> Distinguish between actual costing and normal costing.
