Question: What are two basic reasons for a

> Executive Power (EP) manufactures and sells computers and computer peripherals to several nationwide retail chains. Johan Farnham is the manager of the printer division. Its two largest selling printers are P-41 and P-63. The manufacturing cost of each p

> Snappy Tiles is a small distributor of marble tiles. Snappy identifies its three major activities and cost pools as ordering, receiving and storage, and shipping, and it reports the following details for 2015: For 2015, Snappy buys 250,000 marble tiles

> Digital Arts Inc. manufactures game systems. Digital Arts has decided to create and market a new system with wireless controls and excellent video graphics. Digital Arts’s managers are thinking of calling this system the Yew. Based on p

> Bradshaw Repair Shop repairs and services machine tools. A summary of its costs (by activity) for 2014 is as follows: a.Materials and labour for servicing machine tools …………..$800,000 b.Rework costs ……………………………………………………………………75,000 c.Expediting costs ca

> Medical Instruments uses a manufacturing costing system with one direct cost category (direct materials) and three indirect cost categories: a. Setup, production order, and materials-handling costs that vary with the number of batches. b. Manufacturing o

> Manitoba Dairy, maker of specialty cheeses, produces a soft cheese from the milk of Holstein cows raised on a special corn-based diet. One kilogram of soft cheese, which has a contribution margin of $8, requires 4 litres of milk. A well-known gourmet res

> John Beck is the managing partner of a business that has just finished building a 60-room motel. Beck anticipates that he will rent these rooms for 16,000 nights next year (or 16,000 room-nights). All rooms are similar and will rent for the same price. B

> Waterbury, Inc. manufactures and sells RF17, a specialty raft used for whitewater rafting. In 2015, it reported the following: Required: 1. What was the selling price in 2015? What was the percentage markup on full cost? What was the variable cost per

> Body-Builders, Inc., produces two basic types of weightlifting equipment, Model 9 and Model 14. Pertinent data are as follows The weight-lifting craze is such that enough of either Model 9 or Model 14 can be sold to keep the plant operating at full cap

> Nevada Industries manufactures electronic testing equipment. Nevada also installs the equipment at customers’ sites and ensures that it functions smoothly. Additional information on the manufacturing and installation departments is as follows (capacities

> Westford Company produces three products, A110, B382, and C657. Unit data for the three products follow: All three products use the same direct material, Bistide. The demand for the products far exceeds the direct material available to produce the prod

> The Svenson Corporation manufactures cellular modems. It manufactures its own cellular modem circuit boards (CMCB), an important part of the cellular modem. It reports the following cost information about the costs of making CMCBs in 2015 and the expecte

> The following conversation occurred between Brian Richardson, plant manager at Glendale Engineering, and Charles Cheng, plant controller. Glendale manufactures automotive component parts, such as gears and crankshafts, for automobile manufacturers. Richa

> The cooking department of Deli Inc. uses a processcosting system. Direct materials are added at the beginning of the cooking process. Conversion costs are added evenly during the cooking process. Consider the following data for the cooking department of

> Farkas Shoes, a high-end shoe manufacturer, produces two lines of shoes for women. The shoes are identical in design, but differ in the materials used and the trim added to the shoes. The basic shoes are made from a synthetic leather, have a synthetic in

> Margaret Major is the corporate controller of Leisure Suits. Leisure Suits has 20 plants worldwide that manufacture basic suits for retail stores. Each plant uses a process-costing system. At the end of each month, each plant manager submits a production

> Ira Stone, the president of General Hospital, has a meeting with the Medical Economics Group (MEG). MEG is a consulting firm in the health services sector. It reports that General’s billing operations are grossly inefficient. Its standard costing per bil

> Why is the flexible-budget variance the same amount as the rate variance for fixed manufacturing overhead?

> A large metropolitan health-care complex, General Hospital, has had difficulty controlling its accounts receivable. Costs currently available from the information system are inaccurate and have led to gross errors in reports to the various government fun

> As a producer of wine in the Niagara region, you have the opportunity either to lease vineyards from local grape-growers or to purchase grapes from other farmers. In the past you have purchased grapes from the Okanagan Valley in British Columbia, and fro

> Flash Chip Company (FCC) produces memory modules i n a two-step process: chip fabrication and module assembly. In chip fabrication, each batch of raw silicon wafers yields 500 standard chips and 500 deluxe chips. Chips are classified as standard or delux

> In the United States, organ procurement organizations (OPOs), transplant centres, and the medical professions coordinate the organ donation process. The U.S. government pays for this treatment through its Medicare program. What price should the U.S. gove

> Hernandez Corporation is bidding on a new construction contract, here called Contract No. 1. If the bid is accepted, work will begin in a few days, on January 1, 2016. Contract No. 1 requires a special cement. Hernandez has already purchased 10,000 kilog

> 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 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?

> 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?

> 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 Zwatch&acirc

> What criteria might be used to justify cost allocation decisions? Which are the dominant criteria?