I am going to focus on the customers of my business and leave cost allocation issues to my accountant.” Do you agree with this comment by a division president?
> Lynn Hardt, a management accountant with the Paibec Corporation, is evaluating whether a component, MTR-2000, should continue to be manufactured by Paibec or purchased from Marley Company, an outside supplier. Marley has submitted a bid to manufacture an
> Nost Vineyards is a wine manufacturer. It distributes its products to retailers across Canada. Nost’s objective is to be the number one distributor of its product lines in Canada. Nost competes against a limited number of Canadian companies, but also mus
> Describe just-in-time (JIT) purchasing and its benefits.
> Name five cost categories that are important in managing goods for sale in a retail organization.
> The costs of reworking defective units are always charged to the specific jobs where the defects were originally discovered.” Do you agree? Explain.
> The point of inspection is the key to the allocation of spoilage costs.” Do you agree? Explain.
> In accounting for spoiled goods, we are dealing with cost assignment rather than cost incurrence.” Explain.
> What has been regarded as normal spoilage in the past is not necessarily acceptable as normal spoilage in the present or future.” Explain.
> Transferred-in costs are those incurred in the preceding accounting period.” Do you agree? Explain.
> Sooke Ale recently purchased a brewing plant from a bankrupt company. It was constructed only two years ago. The plant has budgeted fixed manufacturing overhead of $50 million per year ($4.167 million each month) in 2015. Paul Vautin, the controller of t
> Identify the main difference between journal entries in process costing and the ones in job costing.
> State two conditions under which computing equivalent units will make a material difference to reported inventory amounts.
> Give three examples of industries that often use process-costing systems.
> How can the extent of price discounting be tracked on a customer-by-customer basis?
> Are for-profit businesses the only users of revenue allocation? Explain.
> Why is customer profitability analysis a vitally important topic to managers?
> Why might some companies choose not to compute market-size and market-share variances?
> Explain why a favourable sales-quantity variance occurs.
> How might a dispute over the allocation of revenues of a bundled product be resolved?
> Why is the constant gross margin percentage NRV method sometimes called a “joint cost and a profit allocation” method?
> EnRG Inc. produces trail mix packaged for sale in convenience stores across Canada. At the beginning of April 2015, EnRG has no inventory of trail mix. Demand for the next three months is expected to remain constant at 50,000 bags per month. EnRG plans t
> How might a company simplify its use of the estimated NRV method when the final selling prices can vary sizably in an accounting period and management makes frequent changes to the point at which it sells individual products?
> What is one key method to avoid disputes over allocation of support costs with respect to government contracts?
> What is theoretically the most defensible method for allocating service division costs?
> To ensure unbiased cost allocations, fixed indirect costs should be allocated on the basis of estimated long-run use by user division managers.” Do you agree? Why?
> Name three decisions managers face when designing the cost allocation component of an accounting system.
> What are two basic reasons for a management team to select one period cost allocation method over another?
> What are four purposes of cost allocation?
> What is the difference between a stakeholder and a shareholder?
> What is a strategy map?
> What is a customer preference map and why is it useful?
> Halsey Company sells women’s clothing. Halsey’s strategy is to offer a wide selection of clothes and excellent customer service and to charge a premium price. Halsey presents the following data for 2015 and 2016. For s
> Assume variable manufacturing overhead is allocated using machine-hours. Give three possible reasons for a $30,000 favourable variable overhead efficiency variance.
> Describe three alternative cost-plus methods.
> It is not important for a firm to distinguish between cost incurrence and locked-in costs.” Do you agree? Explain.
> Give two examples of pricing decisions with a short-run focus.
> All future costs are relevant.” Do you agree? Explain briefly.
> Define opportunity cost .
> What is the goal of an ordinary least squares (OLS) linear regression?
> All independent variables in a cost function estimated with regression analysis are cost drivers.” Do you agree?
> The difference between practical capacity and master-budget capacity utilization is the best measure of management’s ability to balance the costs of having too much capacity and having too little capacity.” Do you agree? Explain.
> Which denominator-level concepts emphasize what a plant can supply? Which denominator-level concepts emphasize what customers demand for products produced by a plant?
> Explain how four-variance analysis differs from one-, two-, and three-variance analysis.
> Select the graph that matches the numbered manufacturing cost data. Indicate by letter which of the graphs best fits each of the situations or items described. The vertical axes of the graphs represent total dollars of cost, and the horizontal axes repre
> Explain how the analysis of fixed overhead costs differs for (a) planning and control on the one hand and (b) inventory costing for financial reporting on the other.
> The rate variance for variable manufacturing overhead is affected by several factors. Explain.
> The main trouble with variable costing is that it ignores the increasing importance of fixed costs in modern manufacturing.” Do you agree? Why?
> Do companies in either the service sector or the merchandising sector make choices about absorption costing versus variable costing?
> Define relevant cost. Why are historical costs irrelevant?
> Match each of the following numbered items with one or more of the denominator-level capacity concepts by putting the appropriate letter(s) by each item: a. Theoretical capacity b. Practical capacity c. Normal capacity utilization d. Master-budget capaci
> Distinguish job-costing systems using sequential tracking from backflush costing.
> What are the main features in a JIT production system?
> What are some obstacles to companies adopting a supply-chain approach?
> The controller of the Ijiri Company wants you to estimate a cost function from the following two observations in a general ledger account called Maintenance: Required: 1. Estimate the cost function for maintenance. 2. Can the constant in the cost funct
> What is supply-chain analysis and how can it benefit manufacturers and retailers?
> Why might goal-congruence issues arise when an EOQ model is used to guide decisions on how much to order?
> What five assumptions are made when using the simplest version of the economic order quantity (EOQ) decision model?
> In job costing, the costs of normal spoilage that occur while a specific job is being done are charged to the specific job.” Do you agree? Explain.
> Distinguish among spoilage, reworked units, and scrap.
> Why should the accountant distinguish between transferred-in costs and additional direct materials costs for each subsequent department in a process-costing system?
> Standard-cost procedures are particularly applicable to process-costing situations.” Do you agree? Why?
> Describe the distinctive characteristic of FIFO computations in assigning costs to units completed and ending work in process.
> Give an example of three types of different levels of costs in a customer cost hierarchy.
> A customer profitability profile highlights those customers that should be dropped to improve profitability.” Do you agree? Explain.
> Avery, Inc., manufactures two component parts for the television industry: â– Tvez: Annual production and sales of 50,000 units at a selling price of $48.72 per unit. â– Premia: Annual production and sales of 25,000 unit
> Distinguish between a market-size variance and a market-share variance.
> Distinguish between the stand-alone revenue-allocation method and the incremental revenue allocation method.
> Give two limitations of the physical measure method of joint cost allocation.
> Distinguish between the sales value at split off method and the estimated NRV method.
> Why might the number of products in a joint cost setting differ from the number of outputs? Give an example.
> Distinguish between two methods of allocating common costs.
> Specify the strengths and weaknesses among the three methods of allocating the costs of service divisions to production divisions.
> Why might a manager prefer that budgeted rather than actual indirect cost allocation rates be used for costs being allocated to her division from another division?
> Give examples of bases used to allocate corporate cost pools to the operating divisions of an organization
> How do cost–benefit considerations affect choices by a company about the allocation of indirect criteria?
> The Zwatch Company manufactures trendy, high-quality moderately priced watches. As Zwatch’s senior financial analyst, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare Zwatchâ
> What criteria might be used to justify cost allocation decisions? Which are the dominant criteria?
> Describe three key components of a strategic analysis of operating income.
> Give two examples where the difference in the costs of two products or services is much smaller than the difference in their prices.
> How does collusive pricing differ from predatory pricing?
> What does product life cycle mean?
> Describe two alternative approaches to long-run pricing decisions.
> When might a company price below full cost?
> Describe the four key steps in managing bottleneck resources.
> Distinguish between quantitative and qualitative factors in decision making.
> Provide examples of interdependencies and relate them to the decision framework.
> Electron Inc. is a semiconductor company based in Winnipeg. In 2015, it produced a new router system for its corporate clients. The average wholesale selling price of the system is $1,200 each. For 2015, Electron estimates that it will sell 10,000 router
> What is the difference between the coefficient of determination, r 2 , and the goodness of fit?
> When using the high–low method, should you base the high and low observations on the outcome variable or on the predictor variable?
> Discuss the conference method for estimating a cost function. What are advantages of this method?
> What is a discontinuous linear cost function? What types of analyses can be done to improve cost control when the data sets indicate a discontinuous linear cost function?
> What is a linear cost function? Describe three alternative linear cost functions.
> The Singapore division of a Canadian telecommunications company uses a standard cost system for its machine-based production of telephone equipment. Data regarding production during June are as follows: Variable manufacturing overhead costs incurred &ac
> An analysis of La Flamme’s operating income changes between 2015 and 2016 shows the following: Operating income for 2016 ………………………………$1,700,000 Add growth component …………………………………………70,000 Deduct price-recovery component ………………………(60,000) Add productivi
> Ring Delights is a new company that manufactures custom jewellery. Ring Delights currently has six customers referenced by customer number: 01, 02, 03, 04, 05, and 06. Besides the costs of making the jewellery, the company has the following activities: 1
> Patterson Corporation has four operating divisions. During the first quarter of 2015, the company reported total income from operations of $55,000 and the following results for each division: Further analysis of costs reveals the following percentages
> Orca Company is a large manufacturer of optical storage systems based in British Columbia. Its practical annual capacity is 7,500 units, and, for the past few years, its budgeted and actual sales and production volume have been 7,500 units per year. Orca
> Worldwide Cell Phones (WCP) has developed a cell phone that can be used anywhere in the world (even in countries such as Japan that have a relatively unique cell phone system). WCP has been receiving complaints about the phone. For the past two years, WC
> Industrial Fluids Ltd. (IFL) manufactures and sells fluids used by metal-cutting plants. These fluids enable metal-cutting to be done more accurately and more safely. IFL has more than 1,000 customers. It is currently undertaking a customer profitability
> Copeland Sporting Goods is evaluating two suppliers of footballs: Big Red and Quality Sports. Pertinent information about each potential supplier follows: Required: Calculate the relevant costs of purchasing (1) from Big Red and (2) from Quality Sports
