What are the two direct materials variances? What factors can affect each variance and who is generally responsible for the variance?
> Match each of the terms by inserting the appropriate definition letter in the space provided. Not all definitions will be used. 1. Contribution margin 2. Contribution margin income statement 3. Contribution margin ratio 4. Fixed cost 5. Full absorption c
> Return on investment may be separated into two components. Name them and describe what each can tell you.
> What role do return on investment and residual income play in responsibility accounting?
> How do investment center managers differ from profit center managers?
> Why are profit center managers evaluated on segment margin instead of net operating income?
> Briefly explain the difference between segment margin and net operating income.
> Name the four types of responsibility centers and describe the managers’ responsibilities and authority in each.
> What is the controllability principle and why is it crucial to responsibility accounting?
> What are negotiated transfer prices? Explain two possible disadvantages of allowing managers to negotiate a transfer price.
> Describe the cost-based method of transfer pricing.
> How does excess capacity affect a transfer price?
> Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Schell has a total of $39,060 in overhead. It currently uses a traditional cost system with overhead applied to the product on the basis o
> What is the market-price method of transfer pricing?
> Explain the meaning of minimum and maximum transfer prices and identify who (the buyer or the seller) would determine each.
> Explain why two managers employed by the same company may be diametrically opposed to each other when considering a transfer price.
> What is a transfer price?
> Why does decentralization create the need for responsibility accounting in an organization?
> Why are incentive systems that emphasize long-term performance more consistent with a balanced scorecard approach?
> Why must a company consider its incentive and reward system when implementing a balanced scorecard approach?
> What are the four dimensions of a balanced scorecard? What does each dimension represent?
> Explain the balanced scorecard approach to performance evaluation. What advantages does this approach have over using only financial measurements?
> Other than the one(s) mentioned in the text, give an example of an action that management might take to improve financial performance in the short run that could prove detrimental in the long run.
> Bluefield has decided to use an ABC costing system and has identified the following detailed information about its cost pools and cost drivers: Required: 1. Calculate Bluefield’s activity rate for each cost pool. 2. Determine the amount
> Cartwell Inc. makes picture frames which are sold in a local retail store and through various websites. Required: Determine each of the following: 1. Direct material. 2. Direct labor. 3. Manufacturing overhead. 4. Total manufacturing cost. 5. Total peri
> What are the primary limitations of financial measures of performance?
> How does EVA differ from residual income
> What benefit does residual income offer in comparison to return on investment when evaluating performance?
> How is residual income calculated?
> Explain how relying on return on investment for performance evaluation of investment center managers could lead to goal incongruence.
> Explain how centralized and decentralized companies differ. What are the advantages and disadvantages of each?
> Explain what the terms favorable variance and unfavorable variance mean.
> How do the terms standard and budget relate to one another and how do they differ?
> What is a standard cost card, and why is it important?
> Briefly describe the two types of standards on which a standard cost system relies.
> Bluefield Corp. has two product lines, A and B. Bluefield has identified the following information about its overhead and potential cost drivers: Required: 1. Suppose Bluefield Corp. uses a traditional costing system with number of labor hours as the cos
> What type of standard is best for motivating individuals to work hard?
> What is the difference between ideal and easily attainable standards?
> Explain a standard cost system and how a company uses it.
> What happens to all of the variances that have been recorded during a period?
> What does the term practical capacity mean? How does it differ from budgeted?
> Suppose you have computed a favorable fixed overhead volume variance of $1,000. How would you interpret that variance?
> What is the fixed overhead spending variance? What factors can affect the variance and who is generally responsible for the variance?
> What are standard costs? When are they set?
> What are the two variable overhead variances? What factors can affect each variance and who is generally responsible for the variance?
> What is the key difference between a normal cost system and a standard cost system?
> Fellar Corp. has identified the following information: Activity cost pools Materials handling = $60,000 Machine maintenance = 51,750 Cost drivers Number of materials moves = 960 Number of machine hours = 75,000 Required: 1. Calculate the activity rate fo
> Explain how a manager might make a trade-off between the direct labor rate and the direct labor efficiency variances.
> What are the two direct labor variances? What factors can affect each variance and who is generally responsible for the variance?
> Explain how a manager might make a trade-off between the direct materials price and the direct materials quantity variances.
> The spending variance can be separated into two components. Name and briefly describe them
> What type of variance is calculated by comparing actual costs to the flexible budget
> What type of variance is created by comparing the master budget to the flexible budget?
> How do the master budget, flexible budget, and static budget differ from one another?
> Briefly describe the difference between budgetary planning and control.
> Briefly explain how each of the following helps to minimize dysfunctional behaviors caused by budgeting: (a) Different budgets for different purposes. (b) Continuous budgeting. (c) Zero-based budgeting
> Refer to the information presented in E4–3. Suppose that Gable Company manufactures three products. Information about its three products follows: Required: 1. Using activity proportions, determine the amount of overhead assigned to each
> What is budgetary slack and why might it be detrimental to a company?
> What are the advantages and disadvantages of participative budgeting compared to top-down budgeting?
> Suppose a company chooses not to develop budgets. Describe three potential negative consequences of this Decision.
> Identify and briefly discuss the benefits of budgeting.
> Suppose that your strategic plan is to retire comfortably at the age of 55. List several long-term objectives, short-term objectives, and tactics that would enable you to accomplish this goal.
> What is a strategic plan and how does it relate to short- and long-term goals?
> How is a merchandiser’s budgeting process different from that of a manufacturing company?
> What role do budgets play in the planning and control cycle?
> How does the budgeting process differ for a service company compared to a manufacturing company?
> In preparing a cash budget, why must an adjustment be made for depreciation expenses?
> Refer to the information presented in E4–3. Suppose that Gable Company manufactures three products, A, B, and C. Information about these products follows: Required: Using the activity rates calculated in E4–3, determin
> In preparing a cash budget, why must an adjustment be made for depreciation expenses?
> Why is the preparation of a cash budget important?
> How are the operating budgets, cash budget, and the budgeted balance sheet interrelated?
> What are the components of the cash budget?
> What are the components of the operating budgets?
> What sources does a company utilize to determine its sales forecast? What could happen if one of the sources used is inaccurate?
> Explain why the sales budget is the starting point for a company’s budgeting process. Which budgets does the sales budget affect? Which budgets are not affected by the sales budget?
> What is the master budget, and what are its components?
> Briefly describe why budgetary planning is important to managers.
> How are the concepts of full capacity and opportunity cost interrelated?
> Gable Company uses three activity cost pools. Each pool has a cost driver. Information for Gable Company follows: Required: 1. Compute the activity rate for each activity. 2. Classify each activity as facility, product, batch, or unit level.
> Explain excess capacity and full capacity. Include the implications that each has for a company’s production decisions.
> Why should opportunity costs be factored into the decision making process, and why is it often difficult to do so?
> Explain opportunity cost and list two opportunity costs of your decision to enroll in classes this semester.
> How is an avoidable cost related to a relevant cost?
> What are the criteria for a cost to be considered relevant to any decision?
> Tom Ellis recently bought a plasma television and has since stated that he would not recommend it to others. This indicates that Tom has completed which step of the decision-making process?
> Why do decisions involve a constrained resource focus on contribution margin instead of profit margin?
> Explain how a constrained resource impacts management decisions in both the long term and the short term.
> Suppose you are considering a part-time job to earn some extra spending money. List four factors that could affect that decision and would be included in Step 3 of your decision-making process.
> Identify three opportunity costs that might result from a decision to eliminate a business segment.
> Classify each of the following as Prevention (P), Appraisal or Inspection (AI), Internal Failure (IF), or External Failure (EF) costs. 1. Cost of scrapped product. 2. Damage to company’s reputation. 3. Cost of rework. 4. Quality training. 5. Costs of the
> Briefly explain what happens to total variable costs when a product line is dropped.
> How might the decision to drop a product line affect a company’s remaining products?
> How do opportunity costs affect make-or-buy decisions? How are opportunity costs shown in a make-or-buy analysis?
> How do opportunity costs affect make-or-buy decisions? How are opportunity costs shown in a make-or-buy analysis?
> Briefly describe three problems that might result from a decision to buy a component part from an external supplier. For each problem, identify one way to avoid or correct it.
> Suppose that you are the manager of a local deli. Give an example of each of the following decisions that you might have to make and identify three factors that would be relevant to each decision: a. Special order. b. Make or buy. c. Keep or drop.
> How does excess capacity impact a special-order decision?
> How might the acceptance of a special order have negative consequences for a company?
> What is a special-order decision? Why can managers ignore fixed overhead costs when making special-order decisions?
> Briefly describe the five steps of the management decision making process.
> Your co-worker has come to you for help for several things the boss mentioned recently. Specifically, the boss was discussing the company’s move to a TQM approach for its manufacturing process and repeatedly mentioned multiple types of quality costs and
