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Chapter: 17 -Problem: 4 >> The second ‘Real life’ in ‘Corporate sustainability’ indicates that adoption rates of integrated reporting are low. What are some of the reasons for this? Discuss.
Answer Preview: The voluntary adoption of integrated reports can be cost…

, Chapter: 15 -Problem: 15 >> Explain how activity-based approaches can be used to calculate customer profitability.
Answer Preview: Activity-based costing techniques can be used to calculate customer pro…

, Chapter: 18 -Problem: 16 >> Activity-based costing can be used to increase the accuracy of CVP analysis. Briefly explain how.
Answer Preview: Conventional CVP analysis assumes that product costs are driven by the volume of production, and sel…

, Chapter: 18 -Problem: 20 >> ‘The obvious strategy to increase profitability is to focus on cost structure and ensure high operating leverage. I just don’t understand why more firms don’t go this way.’ Do you agree? Explain your answer.
Answer Preview: This statement is only partially true. A firm with capital intensive proces…

, Chapter: 9 -Problem: 19 >> Explain the advantages of zero-base budgeting.
Answer Preview: Under zero-base budgeting, the budget for virtually every activity in th…

, Chapter: 12 -Problem: 5 >> Explain the differences between a cost centre, revenue centre, profit centre and an investment centre and explain what type of financial performance measure is suitable for the evaluation of each unit.
Answer Preview: Using the criterion that managers should only be evaluated on the basis of the items over which they have significant influence (i e. controllability) …

, Chapter: 19 -Problem: 14 >> Briefly describe the appropriate approach for making a decision about adding or deleting a department. Is this a tactical or long term decision? Explain your answer.
Answer Preview: The appropriate approach to making a decision to add or delete a departmen…

, Chapter: 9 -Problem: 18 >> Explain whether setting more-challenging budget targets will always result in improved performance.
Answer Preview: Setting more challenging targets will not always result in improved performance. Setting targets at …

, Chapter: 9 -Problem: 8 >> Explain how economic trends and changing consumer preferences may impact on the sales forecasting of the Australian Ballet.
Answer Preview: General economic trends and changing consumer preferences are important when forecasting sales of ti…

, Chapter: 12 -Problem: 18 >> When is it more appropriate to use cost-based transfer prices rather than market-based transfer prices?
Answer Preview: It is more appropriate to …

, Chapter: 6 -Problem: 15 >> The CEO of MyInteriors, an interior design firm, asked her accountant about whether it should implement a service costing system. The accountant responded: ‘all our costs are period costs, which means they are expensed in the period they are incurred. So there’s no value in service costing for us’. Evaluate the accountant’s response and explain how service costing could help MyInteriors manage its
Answer Preview: Since service costing is directly concerned with the accumulated costs relating to the services rend…

, Chapter: 19 -Problem: 19 >> What are unitised fixed costs, and how can these cause errors in decision making?
Answer Preview: Unitised fixed costs are created b…

, Chapter: 1 -Problem: 12 >> AirAsia is a Malaysian-based low-cost international airline. What types of management accounting information might AirAsia management use to maintain their cost leader position for passenger travel?
Answer Preview: In a business such as AirAsia that considers cost leadership to be of key strategic impor…

, Chapter: 9 -Problem: 1 >> Explain the differences between strategic plans and budgets.
Answer Preview: Strategic plans are concerned with long-term planning, where…

, Chapter: 10 -Problem: 1 >> Provide an example that demonstrates how the three parts of a control system work to achieve control. (Do not use a thermostat, a budget or standard costing.)
Answer Preview: Possible examples to discuss include an automatic garden watering system and the …

, Chapter: 19 -Problem: 13 >> Using examples from the first ‘Real life’ in ‘Relevant information for some common decisions’, outline some of the advantages and disadvantages of outsourcing. Can you think of any other potential advantages or disadvantages?
Answer Preview: Some advantages of outsourcing would be cost savings, efficie…

, Chapter: 18 -Problem: 7 >> Suppose the fixed costs of a sporting organisation, like the Melbourne Cricket Club, increase. What types of fixed costs might these be? How will this change the break-even point, measured as the number of tickets sold?
Answer Preview: The fixed costs of a sporting association would include line renta…

, Chapter: 21 -Problem: 19 >> In an investment proposal involving new technology, the cash flows related to the proposed investment are sometimes compared to the wrong baseline. Explain this statement.
Answer Preview: Sometimes it is assumed that the current cash flow situation will …

, Chapter: 1 -Problem: 21 >> ABC Learning was Australia’s—and one of the world’s largest providers of early childhood education services until it collapsed spectacularly in the late 2000s, when it came to light that its reported financial success was built on a number of questionable accounting practices. Required:1. Search the internet for information about the ABC Learning corporate collapse and summarise the unethical acco
Answer Preview: 1. There are many ways in which both the accountants inside ABC Learning and its external public accountants behaved unethically, so students may have a variety of answers, including the following poi…

, Chapter: 10 -Problem: 19 >> Explain how and why standard costs are used in product costing.
Answer Preview: Budgets are plans for the use of resources. The cost of resources that are used in producing product…

, Chapter: 9 -Problem: 6 >> Draw flowcharts, similar to those in Exhibits 9.1 and 9.2 , to represent the budgeting process used by a fashion retailer. Exhibit 9.1 Exhibit 9.2 Transcribed Image Text: Strategic planning Budget assumptions Sales budget Cost budgets Capital expenditure budget Budgeted Budgeted Cash budget balance
Answer Preview: The flow chart below depicts the components of the annual budget fo…

, Chapter: 16 -Problem: 5 >> What are value-added activities and non-value-added activities? Give three examples of each for an accounting firm.
Answer Preview: Value-added activities add value for the customer or the business. Value-added activiti…

, Chapter: 6 -Problem: 29 >> Prestige Auto Repair Ltd is a car repair workshop specialising in the repair of luxury European motor vehicles. The company estimates the costs of repair services by recording the cost of labour used to complete the job and the cost of the spare parts used on the repair job and allocating overheads to jobs at 40 per cent of labour cost. Overheads include the wages of the receptionist and secretari
Answer Preview: 1. Cost of each service Cost category Engine replacement Brake overhaul Spare parts $1 600 $1 80 Mec…

, Chapter: 10 -Problem: 27 >> Stephen Ltd is engaged in aerial spraying of vegetables. Operating costs are difficult to control, so standard costs and standard cost variances are reported. The following standards were developed for the ‘maxiprotect’ spraying service. This is one of the company’s major products. During May, Stephen purchased 160 000 kilograms of insecticide at a total cost of $608 000. The total wages for May w
Answer Preview: 1. Following is the computation of required variances as per the given information: 2. (a) When the …

, Chapter: 9 -Problem: 15 >> Explain what is meant by top-down budgeting and bottom-up budgeting. Explain whether both practices can be used in the one budgeting system.
Answer Preview: Top-down budgeting describes the system where senior managers impose budget targets on more junior m…

, Chapter: 14 -Problem: 14 >> Review the second ‘Real life’ in ‘The balanced scorecard’. Explain some of the barriers that may prevent some not-for-profit organisations from adopting an SPMS, such as the balanced scorecard.
Answer Preview: Barriers that may prevent some not-for-profit organisatio…

, Chapter: 14 -Problem: 8 >> The balanced scorecard is often described as an important tool for translating strategy into action. Explain how the balance scorecard fulfils this role.
Answer Preview: The balanced scorecard defines what management means by perfo…

, Chapter: 19 -Problem: 1 >> List the seven steps in the decision-making process. Apply this framework to the decision about whether or not to replace your Apple iPhone 6S.
Answer Preview: The steps in the decision-making process are as follows: clarify the problem specify the decision cr…

, Chapter: 10 -Problem: 6 >> Describe how a law firm might use standard costs.
Answer Preview: A law firm could categorise services into different types according to consultancy provided x repres…

, Chapter: 9 -Problem: 3 >> Explain how a budget can be used to evaluate a manager’s performance and provide incentives.
Answer Preview: A budget can be used to evaluate performance by comparing the actual results t…

, Chapter: 16 -Problem: 6 >> The ‘Real life’ in ‘Managing quality’ outlines techniques used to manage costs and quality at the Flinders Medical Centre. Explain how spare capacity might arise as a result of reducing waiting times and improving patient throughput and how that capacity can be managed to reduce costs.
Answer Preview: Spare capacity could relate to a variety of resources: staff time, wards, equipment and pa…

, Chapter: 9 -Problem: 20 >> What is program budgeting? Based on the ‘Real Life’ titled ‘The benefits of program budgeting’ in the section ‘Program budgeting’, identify some of the advantages of program budgeting. How does it differ from line item budgeting?
Answer Preview: Program budgeting involves identifying the various programs underta…

, Chapter: 21 -Problem: 12 >> Explain how to calculate the after-tax amount of an increase in sales and an increase in expenses in capital expenditure analysis.
Answer Preview: The after-tax amount of an i…

, Chapter: 10 -Problem: 2 >> Describe the two methods for setting standards and explain why you would choose to use one approach over the other.
Answer Preview: One method of setting standards is the analysis of historical data. Historical cost data provide an …

, Chapter: 9 -Problem: 13 >> A manager of a market research company made the following comment:"The whole budgeting process is a waste of time. I would rather my managers and finance staff focus on improving the business than spend time putting together detailed budgeting schedules." Comment on this statement.
Answer Preview: Some managers may see budgeting as a constraint on creativity. However, in large orga…

, Chapter: 9 -Problem: 12 >> Give three examples of how a university student club could use a budget for planning purposes.
Answer Preview: A university student club could use budgeting for planning purposes in many ways. For example, there …

, Chapter: 7 -Problem: 45 >> Top Plating Ltd uses electroplating processes to coat products in silver or gold, to customer specifications. Most of the company’s work is obtained through the tender process, where the company responds to an invitation to submit a competitive bid. Over the last few months Top Plating has been very quiet, and the managing director, Adam Cornish, is concerned that the business will fail if it does
Answer Preview: To: Mr Adam Cornish From: Cost management analyst Subject: Tender process Top Platings costing system is based on a single predetermined plantwide ove…

, Chapter: 3 -Problem: 4 >> The first ‘Real Life’ in the section ‘Cost drivers’, titled ‘Health teaching, training and research: studying the cost drivers’ provides an example of how Australian governments are attempting to better understand drivers of health-related costs. Why are governments in Australia and elsewhere becoming more interested in this?
Answer Preview: Activity-based costing is a modern approach to costing that has made major adva…

, Chapter: 16 -Problem: 18 >> Describe the four types of quality costs and provide two examples for each type.
Answer Preview: Quality costs are categorised as: Internal failure costs : incurred when …

, Chapter: 15 -Problem: 32 >> Dazzle Lighting Corporation manufactures a wide range of lighting fixtures for the housing industry. The company recently adopted backflush costing. The following events occurred in June: (a) Raw material costing $750 000 was purchased on credit.(b) Direct labour costs of $300 000 and actual manufacturing overhead costs of $380 000 were incurred. These amounts have not yet been paid in cash.(c) Co
Answer Preview: (a) Raw and in-process inventory 750 000 Accounts Payable 750 000 (b) Conversion Costs 680 000 Wa…

, Chapter: 14 -Problem: 13 >> What problems and challenges can contribute to a poorly functioning balanced scorecard?
Answer Preview: Reasons why the implementation of a BSC may be problematic and challenging include: The translation …

, Chapter: 20 -Problem: 8 >> Explain some ways that a markup can be determined when using cost-plus pricing.
Answer Preview: Markup can be determined using cost-plus; for example, m…

, Chapter: 16 -Problem: 26 >> Integral Data Dynamics Ltd manufactures components for personal computers. It is planning to develop a new Blu-ray burner, BRII, to improve the quality of data retrieval. On the basis of its current product range, the company expects BRII to have prime costs (that is, direct material and direct labour) of $225 and applied manufacturing overhead costs of $150. The marketing manager estimates that B
Answer Preview: 1. At this stage BRII appears to have a gross profit margin of $225 (600 225 150), but many costs ar…

, Chapter: 9 -Problem: 29 >> South Coast University is preparing its budget for the upcoming academic year. This is a specialised private university that charges fees for all degree courses. Currently, 15 000 students are enrolled on campus. However, the university is forecasting a 5 per cent growth in student numbers in the coming year, despite an increase in fees to $3 000 per subject. The following additional information h
Answer Preview: 1. Following is the computation of revenue budget for the upcoming year: Current student enrolment 1…

, Chapter: 16 -Problem: 8 >> What is business process re-engineering? How does it differ from process improvement?
Answer Preview: Business process re-engineering (BPR) is the radical restructuring of processes in the organi…

, Chapter: 21 -Problem: 13 >> Give two examples of cash flows relevant to capital expenditure decisions that are not included in a firm’s income statement. Explain why these cash flows are omitted from the income statement.
Answer Preview: Two examples of cash flows not included in the income statement are an investment allowance and p…

, Chapter: 12 -Problem: 6 >> What are shared services? What benefits can result from creating shared services units?
Answer Preview: Shared services are the consolidation or centralisation of similar activities in …

, Chapter: 9 -Problem: 2 >> How can a budget facilitate communication and coordination?
Answer Preview: A budget may facilitate communication and coordination …

, Chapter: 13 -Problem: 33 >> PlumbWare Corporation has three divisions. The home plumbing division manufactures copper pipes for tradespersons and home renovators. These areas of the economy are in decline. The home plumbing division is operating with spare capacity and is using machinery that was acquired many years ago. The industrial pipes division produces pipes for heavy manufacturing industries involved in chemical refi
Answer Preview: 1. Home plumbing division Industrial pipes division Hardware division Sales revenue $25 000 000 $5 000 000 e $2 000 000 l Profit 5 000 000 1 000 000 5…

, Chapter: 16 -Problem: 39 >> Pickwick Paper Company’s Mount Gambier plant manufactures paperboard. Its production process involves the following operations:(a) Harvested trees arrive by rail in the woodyard and are stored outside.(b) Logs are moved by a forklift truck into the plant, where they are passed through a debarker and cut up into chips.(c) The chips are stored in large bins near the chipping machines.(d) The chips a
Answer Preview: 1. Candidates for non-value-added activities include the following. Storing logs. Logs should come i…

, Chapter: 9 -Problem: 5 >> Explain how the budgeting process can be used to achieve accountability within a responsibility accounting framework.
Answer Preview: Managers are responsible and accountable for the operations and outcomes of one part of the organisa…

, Chapter: 12 -Problem: 4 >> What benefits potentially accrue to organisations that decentralise? What negative consequences can arise from decentralisation?
Answer Preview: Benefits that potentially accrue to organisations that decentralise are as follows: (a) The managers …

, Chapter: 1 -Problem: 14 >> Describe some planning and control activities that TVNZ (New Zealand’s national television broadcaster) management would engage in.
Answer Preview: As part of the management accounting system, TVNZ ca…

, Chapter: 13 -Problem: 4 >> How can using ROI as a performance measure for investment centres lead to bad decision making? What steps can be taken to mitigate this effect?
Answer Preview: There are several ways of using ROI as a performance measure for investment centres that may help t…

, Chapter: 20 -Problem: 31 >> Razzle Ltd is developing a new clothes dryer, Dry Master, that it plans to sell to coin-operated laundries. Currently, the market leader is a product called DryWell, which is sold by a competitor. The managing director of Razzle Ltd, Fred Price, has engaged a market research agency to help assess the appropriate selling price for the new clothes dryer.The agency has surveyed a range of laundries a
Answer Preview: 1. (a) Notation: X denotes the quantity of Zanide produced per day Y denotes the q…

, Chapter: 15 -Problem: 1 >> Using your own words, explain the meaning of supply chain management (SCM), and why some organisations see SCM as valuable.
Answer Preview: Supply Chain Management (SCM) is the management of all proce…

, Chapter: 9 -Problem: 10 >> In the ‘Real Life’ titled ‘Budgeting for major events: the Olympic Games’ in the section ‘Budgeting at AVJennings Ltd’, the difficulty of budgeting for the Olympic Games is outlined. Search the internet to find information about the difficulties in managing budgets for other types of major events. Prepare a summary of these issues for class discussion.
Answer Preview: Other major events you may research include the Football W…

, Chapter: 10 -Problem: 9 >> What is the meaning of the direct material price variance? What are some possible causes?
Answer Preview: A direct material price variance is the effect of purchasi…

, Chapter: 16 -Problem: 7 >> Explain the role of activity-based performance measures in reducing costs.
Answer Preview: Activity-based performance measures focus on aspects deemed vital to the success of the business. Th…

, Chapter: 20 -Problem: 20 >> Explain the meaning of the following terms: constraints, decision variables, feasible region and objective function. Explain their relevance to product mix decisions.
Answer Preview: Constraints: the limitations faced by an organisation, including l…

, Chapter: 9 -Problem: 14 >> Describe the typical role of the accountant in the budgeting process.
Answer Preview: The accountant often specifies the process by which budget …

, Chapter: 16 -Problem: 14 >> What is kaizen costing? How does it relate to target costing?
Answer Preview: Kaizen is a cost reduction system where products currently in production are revie…

, Chapter: 7 -Problem: 24 >> Review Exhibit 7.5 , which outlines the the steps involved in the two-stage allocation process for overhead costs. Describe examples of each of these steps for a hospital where the cost object is a patient-day of hospital care (i.e. one day of care for one patient).In developing your answer, you will need to identify appropriate production departments that are directly involved with the treatment
Answer Preview: In a hospital, examples of costs are: overhead costs from the activity cost pools a…

, Chapter: 15 -Problem: 10 >> Comment on this statement: ‘JIT doesn’t make sense. Companies that implement JIT are putting themselves in danger of downtime and stock outs’.
Answer Preview: A just-in-time (JIT) inventory and production system is a comprehensive syst…

, Chapter: 20 -Problem: 7 >> In the ‘Real life’ titled ‘Ticket pricing in the Australian Football League’ in the section ‘Pricing strategies’, the AFL’s variable ticket pricing strategy was discussed. Explain why this is an example of value-based pricing.
Answer Preview: As stated in the answer to the previous question, v alue-based pri…

, Chapter: 1 -Problem: 15 >> Explain how the management of Caribee (an Australian producer of backpacks, travel and outdoor products) can use a budget to assist with their planning and control activities.
Answer Preview: Budgets are not control systems; they are a component part of planning and control systems. In the c…

, Chapter: 9 -Problem: 4 >> In the ‘Real Life’ titled ‘“Beyond budgeting” and other budget adaptations’ in the section ‘Responsibility accounting’, the Beyond Budgeting movement is mentioned. Search the internet to find the Beyond Budgeting Round Table website. Do you believe organisations should abandon budgets? Why, or why not?
Answer Preview: Proponents of Beyond Budgeting criticise traditional budgeting as a met…

, Chapter: 21 -Problem: 20 >> ‘Managers evaluating capital expenditure projects only need to consider social and environmental concerns to the extent that they affect the firm’s cash flows.’ Do you agree? Discuss.
Answer Preview: Social and environmental concerns can be part of the cons…

, Chapter: 14 -Problem: 16 >> Explain why improved performance in customer service and wait time for a fast food chain may not necessarily flow through to improved financial returns.
Answer Preview: Improved performance in customer service and wait time for a fast food chain …

, Chapter: 19 -Problem: 16 >> ‘Classifying an output as a product or as a by-product has implications for the allocation of joint production costs.’ Explain this statement, drawing on one of the examples provided in the second ‘Real life’ in ‘Relevant information for some common decisions’.
Answer Preview: A by-product has little value in comparison with other joint products and its outpu…

, Chapter: 9 -Problem: 11 >> Distinguish between operating budgets and financial budgets. Explain this within the context of formulating the annual budget for a university.
Answer Preview: Operating budgets include the sales budget and a series of cost budgets that specify how an …

, Chapter: 16 -Problem: 19 >> Explain the possible interactions between the four categories of quality costs.
Answer Preview: Internal failure costs are incurred when a product is found to be defective before it leaves the bus…

, Chapter: 10 -Problem: 16 >> The ‘Real life’ titled ‘Cost pressures and variance analysis in hospitals’ in the section ‘Calculating standard cost variances’ explains how labour cost variances are used in a hospital. Search the internet to find another organisation that uses standard costing or variance analysis. Contrast your findings with the techniques that are described in this chapter.
Answer Preview: There can be var…

, Chapter: 9 -Problem: 7 >> Explain why many companies believe that cash flow budgeting is important.
Answer Preview: Cash budgets record the amount and expected timing of the receipt and payment of cash. They forecast …

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8 Reviews for Management Accounting Information for creating and managing value Textbook Questions And Answers