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Study Resources (Accounting)

Short Answer 1.What are the two types of business strategy? 2.What are the five forces that affect the competitive landscape? 3.What is a value proposition? 4.Traditional management accounting plays a more critical role in firms that follow a cost leadership strategy than in firms that seek to differentiate their products and services. True or.
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81.Which of the following transfer price approaches is most appropriate for a short-term problem in which the selling division has excess capacity? A.Variable cost-based transfer prices. B.Full cost-based transfer prices. C.Market-based transfer prices. D.Negotiated transfer prices. E.None of the above. 82.Which of the following transfer prices, in theory, is the most sound because it provides the.
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  Short Answer 1.What are the two major kinds of production environments? 2.What is a job-costing system? Give two examples of a job-costing system. 3.What is a process-costing system? Give two examples of a process-costing system. 4.In a job-costing system, what costs are traced to define the terms work in process (WIP) inventory, cost of.
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  36.Smith Manufacturing uses the weighted average process costs method.  Smith has provided the follow data: Total Units/CostMaterialConversion Beginning inventory      25,000 Units started during period    175,000 Units completed during period    185,000 Costs from beginning inventory  $641,250   $561,250      $80,000 Costs incurred during period$6,868,750$4,038,750$2,830,000 Units still in process at the end of the period are 100% complete as to material.
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Short Answer Questions 1.Why do firms decentralize? 2.List two benefits and two costs associated with decentralization. 3.What are the three common forms of responsibility centers we find in organizations? 4.What are the responsibilities of a cost center manager? 5.What are the responsibilities of a profit center manager? 6.What are the responsibilities of an investment center manager? .
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Short Answer 1.What production environments are most suitable for process costing? 2.What is the key difference between process costing and job costing? 3.What is an equivalent unit? 4.Why is the concept of an equivalent unit important in process costing? 5.Why is the concept of equivalent units not relevant for job costing? 6.What are the five steps.
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  41.In which of the following accounts do firms accumulate indirect manufacturing costs? A.General and administrative expense accounts. B.Work-in-process inventory accounts. C.Overhead control accounts. D.Over- or under-applied overhead accounts. E.None of the above. 42.Systems like job costing (systems that use predetermined overhead rates to apply overhead) are referred to as: A.Standard costing systems. B.Actual costing systems. C.Normal costing systems. D.Discretionary costing.
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Exercises 1.Target Costing. True to its name, Imaging Technologies produces testing equipment used by forges to test their products. Imaging is considering a new X-ray machine that substantially enhances the functionality of the product it would replace. Imaging believes that it might be able to sell 4,500 units of the new.
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4.Critical success factors (CSF) are performance measures that must “go right” for an organization to implement its strategy successfully and achieve its mission.  Required: Indicate by placing a “Y” for Yes and an “N” for No in the columns indicating whether each of the following items describes a critical success factor.
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4.Watson Bicycle Manufacturing has provided the following information on the current year’s activities.  Watson uses the net book value to compute ROI. Sales $100,000 Variable costs $30,000 Original costs of assets $200,000 Accumulated depreciation $70,000 Replacement costs of assets $170,000 Average investment $120,000 Net profit $45,000 Watson’s minimum required return 30% Required: a.Calculate Watson’s ROI. b.Calculate Watson’s residual income. 5.Most companies issue guidelines for setting transfer prices.  However, they usually.
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MULTIPLE CHOICE 31.Which of the following is a type of decision a regional manager would make? A.Pricing. B.Promotion. C.Office management. D.A and B only. E.A, B and C are decisions a regional manager would make. 32.Which of the following is not a benefit of decentralization? A.Permits timely decisions with the best available information. B.Better coordination of decisions. C.Trains future.
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  41.Which stage in the product life cycle yields the maximum revenue generation? A.Development B. Growth C. Maturity D. Decline 42.When is target costing most effective? A. When firms can obtain substantial and sustainable price premiums B. In firms offering products with well-defined and discrete features C. In firms offering commodity-type products D. In firms that have little.
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  51.Which of the following is not an example of an activity included in the category of service activities? A.Market research. B.Customer support. C.Warranty work. D.Maintenance at the customer site. E.All of the above are examples of service activities. 52.Under differentiation strategy, a firm evaluates activities based on how they enhance the success of a business.
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TRUE/FALSE 1.Decentralizing authority empowers employees at the higher levels. 2.Ensuring smooth succession is important for the survival of any company. 3.Decentralization worsens the problem of divergence between individual and organizational goals by preventing lower-level managers from preparing to move to upper-level positions. 4.Organizations use monitoring, performance evaluation, and incentive schemes to manage the cost.
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51.Firms often view investment centers as: A.Support activities. B.Discretionary cost centers. C.Stand-alone businesses. D.Revenue centers. E.None of the above. 52.Which of the following is not a popular measure of investment center performance? A.Employee turnover. B.Return on investment. C.Residual income. D.Economic value added. E.None of the above. 53.When a company is attempting to increase return on investment (ROI) it should work to: A.Decrease sales. B.Decrease.
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  61.Which of the following is a characteristic of operational critical success factors (CSF)? A.Operational CSFs are short-term measures. B.Operational CSFs focus on the efficiency with which an organization is utilizing its resources. C.Operations CSFs may be financial or non-financial. D.All of the above are characteristics of operational CSFs. E.None of the above are characteristics of.
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71.Which of the following describes ROI? A.It fosters underinvestment. B.It ignores future period considerations. C.It is less suitable for evaluating long-term performance. D.None of the above. E.All of the above. 72.What does return on investment (ROI) measure? A.The profit generated by a segment that exceeds the required rate of return B.The revenue generated per dollar of investment.
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5.Two divisions with exactly the same return on investment (ROI) can have different residual incomes (RI). Why? 6.Some argue that both ROI and RI motivate managers to focus on short-term performance, since both the measures are calculated using operating performance (i.e., operating income). Yet, ROI is widely used as a performance.
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4.Suppose an intensive target costing exercise concludes that a product could not meet its allowable cost. However, the firm’s strategic group argues that the product is vital for retaining the firm’s presence in an important market segment. Should the firm abandon the product or develop it? 5.Consider a professional sports team.
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MULTIPLE CHOICE 31.Techniques that help a firm to incorporate a long-term view when making strategic planning decisions are: A.Life cycle analysis. B.Target costing. C.Kaizen analysis. D.A and B. E.A, B and C. 32.If a company is pursuing a cost leadership strategy, which of the following management accounting functions will not be critical to its success? A.Product differentiation.
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7.What are the two key principles of performance measurement? 8.List three characteristics of an effective performance measure. 9.How are cost center managers commonly evaluated? 10.What does the term kaizen mean? 11.How are profit center managers commonly evaluated? 12.Define ROI. List two advantages and two disadvantages of using ROI as a measure to evaluate investment centers. 13.Define.
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Problems 1.Blue Computers began the current month with zero units of its Model XFD in work in process inventory.  During the month Blue started 2,500 units into production, completing 1,800 units by the end of the month.  Blue estimates that the 700 units still in process are 10% complete with respect.
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TRUE/FALSE 1.Typical inputs in manufacturing include materials, labor and equipment. 2.Most production systems exhibit some characteristic of job shops or some characteristics of process shops, but not both. 3.Job shops and process shops are basically the same in the extent to which we can trace costs to individual units and jobs. 4.In process shops,.
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MULTIPLE CHOICE 16.In manufacturing settings with large batches, different units of the same batch might be at different stages of completion.  Because we still track costs for the entire batch, we need to distribute the costs of making the batch of units still in process to: A.Work in process inventory. B.Cost of goods.
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Short Essays 1.“Variations in the traceability of costs is the key distinction between job- and process-costing systems.” Comment. 2.“Costing systems in hospitals are like job-costing systems in many respects.” Do you agree with this statement? Why or why not? 3.Describe service firms that are likely to have a job costing-like system; a process.
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Exercises 1.Karl Krader oversees a staff of over 200 persons and a budget of close to a million dollars per year. He is responsible for the upkeep of all buildings and equipment at a large university. However, any reconstruction project is budgeted and administered separately. Karl’s responsibilities include selection and evaluation.
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  26.Suppose Smith started 100,000 units during the period, transfers 75,000 units to finished goods and estimates that 25,000 units still in process are only 20 percent complete.  What is the number of equivalent units in WIP inventory at the end of the period? A.20,000 B.5,000 C.15,000 D.60,000 E.80,000 27.Which of the following is not a.
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TRUE/FALSE 1.Process costing systems are suitable for firms that produce customized products in small amounts. 2.The need to distribute the cost of making the batch of units that are still in process and to units that have been completed during the period is central to process costing. 3.In a process costing system, in-process.
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41.A production manager should be held accountable for: A.Production delays. B.Production delays and overall volume of production. C.Changing prices. D.Changing prices and overall volume of production. E.Losses due to natural disasters. 42.Income statements prepared by segment are useful when they are prepared: A.On a cash basis. B.In a multi-step format. C.On a contribution (cost behavior) basis. D.On an accrual basis. 43.The.
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7.What is life-cycle analysis? 8.What are the five stages in a product’s life cycle? 9.What is target costing? 10.Why do organizations use both leading and lagging indicators of performance? 11.What are the three deficiencies of financial measures? 12.How does the problem of managing companies resemble the problem a pilot faces when flying a jetliner? 13.What is.
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  11.A firm’s actual overhead cost and actual activity volume are likely to remain relatively constant from month to month, thus fluctuations in overhead rates remain relatively constant. 12.The predetermined overhead rate is calculated by dividing expected activity level by expected overhead costs for the period. 13.Because of their widespread use, we call.
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6.Suppose your firm disposes of under- or overapplied overhead by writing it off to cost of goods sold. How could you increase the chances of obtaining an income-increasing adjustment at year-end? 7.Suppose a firm, with a normal costing system, uses the number of units produced to allocate overhead to products. Use.
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Short Essays 1.Organizational experts say that decentralization “co-locates knowledge and decision rights.” What does this statement mean? Is decentralization always beneficial? What are the costs associated with delegating decision making to lower levels of an organization? 2.Some argue that decentralization results in maximizing profit division by division. It may not lead to.
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Short Essays 1.Suppose a firm is not legally liable for how its product is disposed. Should it consider disposal costs in its cost analyses? For example, consider a manufacturer of lithium ion batteries such as watches or cathode-ray-tube monitors, such as many computer monitors. 2.Products such as digital cameras sell at increasingly.
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  11.Product life cycle is an important element of a business strategy because it determines the rate at which companies have to develop and introduce new products to compete effectively. 12.In the development stage of a product’s life cycle we expect sales revenue only sufficient to cover costs. 13.In the introduction and growth.
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TRUE/FALSE 1.To build and preserve a significant market share in any competitive market, a firm must offer a unique value proposition, the key source of customer value, to its target market. 2.Firms following Kaizen Strategy couple their strategy with market power to raise significant barriers to potential entrants thereby preserving their market.
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  31.In process costing it is not possible to trace costs to individual units.  All that is required is to determine the cost of an average unit.  Process costing systems accomplish this task by: A.Allocating all costs based on a pre-determined rate. B.Accumulating all costs by department or process. C.Accumulating all costs on a.
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MULTIPLE CHOICE 21.Which of the following entities would not use job costing systems? A.Law firms. B.Manufacturer of electronic equipment used in aircraft. C.Remodeling contractors. D.PepsiCo. E.All of the above would use job costing. 22.The most logical business which would use job order costing would be: A.An oil refinery B.A paper company C.A custom-home builder D.A car dealership 23.Which of the following statements.
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61.The Greenberg Company reported average operating assets of $400,000 and sales of $1,200,000 in 2013.  If the company’s margin is 12%, their ROI must have been: A.24% B.36% C.33.3% D.40% 62.The Allentown Company reported operating income of $25,000 for 2013.  If average operating assets for the year were $80,000 and the company had a.
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Problems 1.The characteristics of a firm’s production process determine the features of its cost accounting system.  However, every process converts inputs to outputs.  Required: Enter the identifying letters in the blanks below to indicate the term that best matches each description. A. Applied overhead F. Operations costing B. Cost accounting G. Over-applied overhead C. Fixed manufacturing overhead H. Predetermined overhead rate D. Job shops I. Process shops E. Normal.
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  21.The balanced scorecard stresses the importance of linking long-term performance measures to the firm’s strategy and for linking the various measures in the organizational perspectives. 22.The balanced scorecard uses only financial measures to evaluate short-term versus long-term objectives, past outcomes versus futures outcomes, and external versus internal factors. 23.An example of a.
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Problems 1.As organizations grow, both the number and type of decisions owners and managers face increase rapidly.  Often, organizations have no other choice but to decentralize.  The decision to decentralize has both benefits and costs. Required: a.What is a decentralized organization? b.List three benefits associated with decentralization. c.List three costs associated with decentralization. 2.Although it is.
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4.Worthington Company employs a job-order costing system. Before disposition of the underapplied or overapplied over-head, selected year-end balances from Worthington’s accounting records were: Cost of goods sold $720,000 Raw material inventory 36,000 Work-in-process inventory 54,000 Finished goods inventory 90,000 Required: If the adjusted ending balance (after proration of underapplied or overapplied overhead) of cost of goods.
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7.Why do firms use predetermined overhead rates? 8.What is a normal costing system? 9.What do the terms underapplied overhead and overapplied overhead mean? 10.If a firm has underapplied overhead at year-end, its actual overhead rate is lower than its pre-determined rate. True or False? Justify your answer. 11.What are the three methods firms can.
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21.When intra-company transfers occur, a legally recognized sale takes place even though the divisions are part of the same company. 22.From the perspective of determining corporate pre-tax income, a transfer price does not serve any useful purpose. 23.Divisional managers have a keen interest in the transfer price because their individual compensation often.
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Exercises 1.Predetermined rates and cost flows (LO2, LO3). Ace Company has the following (unadjusted) amounts in its accounts as of December 31: Cost of goods sold $100,000 Finished goods inventory $75,000 Raw materials inventory $50,000 Work-in-process inventory $25,000 The company prorates over- or underapplied overhead. Required: What will the adjusted balance in work-in-process inventory be if overhead.
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11.Cost center managers serve two roles in organizations – achieving cost targets for a given level of output in the short term, and making continuous improvements to increase revenue in the long term. 12.Organizations typically use budget variances to measure cost center performance in the long-run. 13.Suma is a philosophy of continuous.
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Problems 1.One of the most important tasks for top management is to develop the organization’s strategy.  This decision charts the firm’s long-term course.  The chosen strategy must allow management to create and sustain a business model that will yield sufficient returns to the suppliers of capital. Required: Enter the identifying letters in.
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3.Tabb Manufacturing produces vacuum cleaners.  Tabb uses a job cost system and applies overhead based on direct labor hours.  Only one job, Job #33, remained in progress at the end of the period.  The following information is for the period: Estimated overhead $75,000 Estimated direct labor hours 15,000 Material used during period for Job #33 $2,500 Labor.
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9.Consider the cost of materials. Why is the percentage completion for units that are finished during the period always 100%? 10.Consider the cost of materials added at the end of the process. Why is the percentage completion for units that are still in process always zero? 11.Why do most process-costing systems need.
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