Question:

> “Managers should be rewarded only on the basis of their performance measures. They should be paid no salary.” Do you agree? Explain.

> Give examples of financial and nonfinancial performance measures that can be found in each of the four perspectives of the balanced scorecard.

> “Transfer pricing is confined to profit centers.” Do you agree? Explain.

> Name three benefits and two costs of decentralization.

> How should managers consider income tax issues when choosing a transfer-pricing method?

> In each of the following situations, determine whether job costing or process costing would be more appropriate. a. A CPA firm b. An oil refinery c. A custom furniture manufacturer d. A tire manufacturer e. A textbook publisher f. A home builder g.

> “Under the general guideline for transfer pricing, the minimum transfer price will vary depending on whether the supplying division has unused capacity or not.” Do you agree? Explain.

> “Cost and price information play no role in negotiated transfer prices.” Do you agree? Explain.

> Give two reasons why the dual-pricing system of transfer pricing is not widely used.

> What is one potential limitation of full-cost-based transfer prices?

> Under what conditions is a market-based transfer price optimal?

> “Let’s be more practical. DCF is not the gospel. Managers should not become so enchanted with DCF that strategic considerations are overlooked.” Do you agree? Explain.

> “The trouble with discounted cash flow methods is that they ignore depreciation.” Do you agree? Explain.

> Describe the accrual accounting rate-of-return method. What are its main strengths and weaknesses?

> What is the payback method? What are its main strengths and weaknesses?

> “Only quantitative outcomes are relevant in capital budgeting analyses.” Do you agree? Explain.

> The Walliston Group (WG) provides tax advice to multinational firms. WG charges clients for (a) direct professional time (at an hourly rate) and (b) support services (at 30% of the direct professional costs billed). The three professionals in WG and th

> “Relevant costs for pricing decisions are full costs of the product.” Do you agree? Explain.

> What is the essence of the discounted cash flow methods?

> List and briefly describe each of the five stages in capital budgeting.

> Distinguish the nominal rate of return from the real rate of return.

> How can capital budgeting tools assist in evaluating a manager who is responsible for retaining customers of a cellular telephone company?

> Describe three ways income taxes can affect the cash inflows or outflows in a motor-vehicle-replacement decision by a taxpaying company.

> Distinguish different categories of cash flows to be considered in an equipment-replacement decision by a taxpaying company.

> Bill Watts, president of Western Publications, accepts a capital budgeting project proposed by division X. This is the division in which the president spent his first 10 years with the company. On the same day, the president rejects a capital budgeting p

> “All overhead costs are relevant in NPV analysis.” Do you agree? Explain.

> What are three factors causing reductions in the cost to place purchase orders for materials?

> “JIT purchasing has many benefits but also some risks.” Do you agree? Explain briefly.

> Vineyard Test Laboratories does heat testing (HT) and stress testing (ST) on materials and operates at capacity. Under its current simple costing system, Vineyard aggregates all operating costs of $1,190,000 into a single overhead cost pool. Vineyard cal

> Why might goal-congruence issues arise when managers use an EOQ model to guide decisions on how much to order?

> What are the steps in computing the cost of a prediction error when using the EOQ decision model?

> Give three examples of opportunity costs that typically are not recorded in accounting systems, although they are relevant when using the EOQ model in the presence of demand uncertainty.

> What assumptions are made when using the simplest version of the economic-order-quantity (EOQ) decision model?

> Discuss the differences between lean accounting and traditional cost accounting.

> Describe three different versions of backflush costing.

> Distinguish inventory-costing systems using sequential tracking from those using backflush costing.

> What are the main features of JIT production, and what are its benefits and costs?

> What is supply-chain analysis, and how can it benefit manufacturers and retailers?

> “You should always choose the supplier who offers the lowest price per unit.” Do you agree? Explain.

> Roberta, Inc., manufactures elliptical machines for several well-known companies. The machines differ significantly in their complexity and their manufacturing batch sizes. The following costs were incurred in 2017: a. Indirect manufacturing labor costs

> Why do better decisions regarding the purchasing and managing of goods for sale frequently cause dramatic percentage increases in net income?

> Give two examples of nonfinancial measures of internal-business-process quality.

> Give two examples of nonfinancial measures of customer satisfaction relating to quality.

> “Companies should focus on financial measures of quality because these are the only measures of quality that can be linked to bottom-line performance.” Do you agree? Explain.

> Describe three methods that companies use to identify quality problems.

> Distinguish between internal failure costs and external failure costs.

> “When evaluating a company’s performance on the time dimension, managers should only consider financial measures.” Do you agree? Explain.

> “Companies should always make and sell all products whose selling prices exceed variable costs.” Assuming fixed costs are irrelevant, do you agree? Explain.

> Give two reasons why delays occur.

> What are three important pitfalls to avoid when implementing a balanced scorecard?

> Distinguish between customer-response time and manufacturing cycle time.

> “When evaluating alternative ways to improve quality, managers need to consider the fully allocated costs of quality.” Do you agree? Explain.

> “Total input includes abnormal as well as normal spoilage and is, therefore, inappropriate as a basis for computing normal spoilage.” Do you agree? Explain.

> Distinguish among spoilage, rework, and scrap.

> How do managers use information about scrap?

> “Abnormal rework costs should be charged to a loss account, not to manufacturing overhead.” Do you agree? Explain.

> “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.

> Describe the distinctive characteristic of FIFO computations in assigning costs to units completed and to units in ending work in process.

> Name the five steps in process costing when equivalent units are computed.

> What problems might arise in estimating the degree of completion of semiconductor chips in a semiconductor plant?

> What are the five types of conditions to consider when evaluating a strategy map?

> Explain equivalent units. Why are equivalent-unit calculations necessary in process costing?

> In process costing, why are costs often divided into two main classifications?

> “There’s no reason for me to get excited about the choice between the weighted-average and FIFO methods in my process-costing system. I have long-term contracts with my materials suppliers at fixed prices.” Do you agree with this statement made by a plan

> Why should the accountant distinguish between transferred-in costs and additional direct materials costs for each subsequent department in a process-costing system?

> “The standard-costing method is particularly applicable to process-costing situations.” Do you agree? Why?

> Give two limitations of the physical-measure method of joint-cost allocation.

> Distinguish between the sales value at splitoff method and the NRV method.

> Describe a situation in which the sales value at splitoff method cannot be used but the NRV method can be used for joint-cost allocation.

> Provide three reasons for allocating joint costs to individual products or services.

> Why might the number of products in a joint-cost situation differ from the number of outputs? Give an example.

> “We are already measuring total factor productivity. Measuring partial productivities would be of no value.” Do you agree? Comment briefly.

> Distinguish between a joint product and a byproduct.

> Why might managers seeking a monthly bonus based on attaining a target operating income prefer the sales method of accounting for byproducts rather than the production method?

> “Managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing further.” Do you agree? Explain.

> “Managers must decide whether a product should be sold at splitoff or processed further. The sales value at splitoff method of joint-cost allocation is the best method for generating the information managers need for this decision.” Do you agree? Explain

> Why is the constant gross-margin percentage NRV method sometimes called a “joint-cost-allocation and a profit-allocation” method?

> Distinguish among the three methods of allocating the costs of support departments to operating departments.

> Why might a manager prefer that budgeted rather than actual cost-allocation rates be used for costs being allocated to his or her department from another department?

> Identify and discuss arguments that individual product managers may put forward to support their preferred revenue-allocation method. 

> Distinguish between the stand-alone and the incremental revenue-allocation methods.

> Why might an analyst incorporate the industry-market-size factor and the interrelationships among the growth, price-recovery, and productivity components into a strategic analysis of operating income?

> What are the challenges of using the incremental cost allocation method when allocating common costs and how might they be overcome?

> Distinguish between the single-rate and the dual-rate methods.

> “Once a company allocates corporate costs to divisions, these costs should not be reallocated to the indirect-cost pools of the division.” Do you agree? Explain.

> What criteria might managers use to guide cost-allocation decisions? Which are the dominant criteria?

> “A company should not allocate all of its corporate costs to its divisions.” Do you agree? Explain.

> Give examples of three different levels of costs in a customer-cost hierarchy.

> “A customer-profitability profile highlights those customers a company should drop to improve profitability.” Do you agree? Explain.

> How can the sales-quantity variance be decomposed further?

> How can the concept of a composite unit be used to explain why an unfavorable total sales-mix variance of contribution margin occurs?

> Show how managers can gain insight into the causes of a sales-volume variance by subdividing the components of this variance.

> “Managers will always choose the alternative that maximizes operating income or minimizes costs in the decision model.” Do you agree? Why?

> How should a company decide on the number of cost pools it should use to allocate costs to divisions, channels, and customers?

> “A company should not allocate costs that are fixed in the short run to customers.” Do you agree? Explain briefly.

> Give two examples of a value-added cost and two examples of a non-value-added cost.

> Describe two alternative approaches to long-run pricing decisions.

> Define predatory pricing, dumping, and collusive pricing.

> What are three benefits of using a product life-cycle reporting format?

> Give two examples in which the difference in the costs of two products or services is much smaller than the difference in their prices.