What are transferred-in costs?
> What type of risk does sensitivity analysis address?
> Why do management accountants use sensitivity analysis?
> What are the basic assumptions of CVP analysis?
> What is the contribution margin ratio and how is it used?
> Use the appropriate function in Excel (= SLN) to calculate the annual straight-line (SL) depreciation charge for an asset that has a $10,000 acquisition cost, an estimated salvage value of $500, and a useful life of 4 years.
> How is CVP analysis used to calculate the breakeven point for multiple products?
> What is the underlying relationship depicted in a CVP analysis?
> What are nonlinear cost relationships? Give two examples.
> Explain how to choose the dependent and independent variables in regression analysis used for cost estimation.
> How can cost estimation be used in activity-based costing?
> Contrast the use of regression analysis and the high-low method to estimate costs.
> What are the six steps in cost estimation? Which one is the most important? Why?
> Explain the implementation problems in cost estimation.
> List the two methods of cost estimation. Explain the advantages and disadvantages of each.
> Explain the strategic role of cost estimation.
> For a firm facing a marginal income tax rate of 34%, what is the after-tax cash flow effect of (a) a $1,000 increase in contribution margin during the year and (b) a $500 increase in cash operating expenses?
> Carter Dry Cleaning has developed two regression analyses for cost estimation. The accounting manager has presented statistical measures for both of these regressions. Regression A has an R-squared value of .53 and a t-value of 1.08. Regression B has an
> What does the coefficient of determination (R-squared) measure?
> How do we know when high correlation exists? Is high correlation the same as cause and effect?
> Explain what dummy variables are and how they are used in regression analysis.
> List four advantages of regression analysis.
> Define cost estimation and explain its purpose in each of the management functions.
> What are the implementation issues of departmental cost allocation?
> What are the limitations of joint product and departmental cost allocations?
> What are the four methods used in by-product costing, and how do they differ? Which is the preferred method and why?
> Give two or three examples of the use of cost allocation in service industries and not-for-profit organizations.
> Jamison Health Care is trying to decide if it should eliminate its orthopedic care division. Last year, the orthopedic division had a total contribution margin of $100,000 and allocated overhead costs of $200,000, of which $90,000 could be eliminated if
> What are the three phases of the departmental allocation approach? What happens at each phase?
> What are the three methods of departmental cost allocation? Explain how they differ, which is the most preferred, and why.
> What does the term reciprocal mean in the context of departmental cost allocation?
> Explain the difference between joint products and by-products.
> What are some of the ethical issues of cost allocation?
> What are the four objectives in the strategic role of cost allocation? Explain each briefly.
> Specify the advantages of the weighted-average method of process costing in contrast to the FIFO method.
> Identify the conditions under which the weighted-average method of process costing is inappropriate.
> What is the distinction between equivalent units under the FIFO method and equivalent units under the weighted-average method?
> What is a production cost report? What are the five key steps in preparing a production cost report?
> The external purchase price is $35 for a part that can be manufactured for $33 per unit; the $33 manufacturing cost includes $5 per unit allocated fixed cost. What is the per-unit savings to make rather than to buy?
> How is the equivalent unit calculation affected when direct materials are added at the beginning of the process rather than uniformly throughout the process?
> What does the term equivalent units mean?
> Explain the primary differences between job costing and process costing.
> List three types of industries that would likely use process costing.
> Explain activity-based process costing.
> How do cost flows in backflush costing systems differ from those in traditional costing systems?
> What is the main difference between journal entries in process costing and in job costing?
> Under the FIFO method, only current period costs and work are included in equivilent unit costs and equivalent units computation. Under the weighted-average method, what assumptions are made when unit costs and equivalent units are computed?
> Under the weighted-average method, all units transferred out are treated the same way. How does this differ from the FIFO method of handling units transferred out?
> Suppose that manufacturing is performed in sequential production departments. Prepare a journal entry to show a transfer of partially completed units from the first department to the second department. Assume the amount of the costs transferred is $50,00
> Wings Diner has a box lunch that it sells on football game days at the local university. Each box lunch sells for $6.00, which is made up of $2.50 of variable costs and packaging, and $2.50 of fixed cost, plus a $1 markup. In the short run, what is the m
> From the standpoint of cost control, why is the FIFO method superior to the weighted-average method? Is it possible to monitor cost trends using the weighted-average method
> What are the typical characteristics of a company that should use a process costing system?
> What are batch-level activities? Give two examples of batch-level activities.
> What are unit-level activities? Give two examples of unit-level activities.
> What type of company can benefit from an activity-based costing system?
> Briefly describe the first- and second-stage procedures in assigning costs to products when using an activity-based costing system.
> Identify the general levels of cost hierarchy in activity-based costing systems.
> What is activity-based costing, and how can it improve an organization’s costing system?
> Explain why a costing system that uses a volume-based rate is likely to produce distorted product costs.
> Adams Furniture receives a special order for 10 sofas for a special price of $3,000. The direct materials and direct labor for each sofa amount to $100. In addition, supervision and other fixed overhead costs average $150 per sofa. Should Adams accept th
> Brief Exercises 7-11 through 7-14 involve departmental cost allocation with two service departments and two production departments. Use the following information for these four exercises: What is the total cost in P1 and P2 and what is the amount of se
> Firms sell products with high costs at high prices. High selling prices increase revenues and profits. Why then should managers worry about product overcosting?
> Identify opportunities afforded by performing a customer profitability analysis.
> How can activity-based costing and management be used in service organizations?
> What is activity-based management?
> Why do product costing systems using a single, volume-based cost driver tend to over-cost high-volume products? Will there be any undesirable strategic effects from such product cost distortion?
> What are facility-level activities? Give two examples of facility-level activities.
> What are product-level activities? Give two examples of product-level activities.
> “Undercosting a product increases the profit from the product and benefits the firm.” Do you agree? Why?
> What does the following statement mean? “Accounting for overhead involves an important cost-benefit issue.” Why is that issue important?
> What is the role of materials requisitions in a job costing system? Time tickets? Bills of materials?
> ElecPlus Batteries has two different products, AAA and AA batteries. The AA batteries have a contribution margin of $1 per package, and the AAA batteries have a contribution margin of $2 per package. ElecPlus has a capacity for 1,000,000 batteries per mo
> Explain how predetermined factory overhead rates are computed and why they are used to apply factory overhead to units of products instead of actual overhead costs.
> What document is prepared to accumulate costs for each separate job in a job costing system? What types of costs are recorded in the document?
> Which costing system is extensively used in the service industry for hospitals, law firms, or accounting firms? Explain why.
> Explain when companies are likely to use a job costing system or a process costing system. Provide examples.
> Distinguish between job costing and process costing.
> Identify the three characteristics of costing systems.
> How is job costing in a service firm different from job costing in a manufacturer?
> What is the difference between normal and abnormal spoilage?
> What is the best way to choose an appropriate cost driver or cost drivers when applying factory overhead?
> Distinguish between an actual costing system and a normal costing system. What are the components of actual manufacturing costs and the components of normal manufacturing costs?
> Lance’s Diner has a hot-lunch special each weekday and Sunday afternoon. The cost of food and other variable costs for each meal served is $3.50; weekly fixed costs (e.g., building depreciation and equipment rental costs) are $6,000, regardless of the ho
> Explain why overhead might be overapplied in a given period.
> Why would a manufacturing firm switch from direct labor hours to machine hours as the cost driver for factory overhead application?
> What do underapplied overhead and overapplied overhead mean? How are these amounts disposed of at the end of a period?
> Describe the flow of costs through a job costing system from materials through finished product.
> What is the strategic role of a costing system?
> What are conversion costs? What are prime costs?
> Define relevant range and explain its use.
> Explain step costs and give an example.
> What is the difference between variable and fixed costs?
> Define cost driver.
> Sweet Dream Hotel has labor costs that are mostly fixed, including registration desk, maintenance and general repairs and cleaning. The housekeeping staff is hired in sufficient numbers to clean the number of rooms that need cleaning so that housekeeping
> Are all fixed costs indirect? Explain.
> Are all direct costs variable? Explain.
> Provide an example of an indirect labor cost.
> Distinguish between direct and indirect costs and give several examples of each.
> Provide an example of an indirect materials cost.
> Provide an example of a structural cost driver.
> Provide an example of an executional cost driver.
