From the Case, Wall Décor Calculates Predeterminated Overhead Rate as Total Estimated Manufacturing Overhead Cost Divided by Total Estimated Cost of Prints. the Advantage of Using the Cost of Each Print as a

In: Business and Management

Submitted By messi19841224
Words 1822
Pages 8
MANAGEMENT ACCOUNTING MULTIPLE CHOICE PRACTICE QUESTIONS FOR TOPIC 1

72. Both direct materials and indirect materials are a. period costs. b. merchandise inventory. c. raw materials. d. manufacturing overhead.

73. Into which one of the following accounts would the work of factory employees that can be physically and directly associated with converting raw materials into finished goods be categorized? a. Direct labor b. Indirect labor c. Manufacturing overhead d. Indirect materials

74. Which one of the following would not be classified as manufacturing overhead? a. Indirect materials b. Insurance on factory building c. Indirect labor d. Direct materials

75. Which one of the following is a product cost? a. Indirect labor b. Office salaries c. Sales person’s salaries d. Advertising costs

76. A company uses sandpaper in its production process. How is the cost of the sandpaper classified? a. Miscellaneous expense b. A direct material c. A period cost d. An indirect material

77. In which classification would the wages of a factory payroll clerk be classified? a. Raw materials b. Indirect labor c. Period cost d. Direct labor

78. Which one of the following is not a manufacturing cost? a. Advertising costs b. Cost of goods sold c. Manufacturing overhead d. Direct materials

79. What effect do current technology changes have on managerial accounting? a. Creation of the middleman b. Increase in product costs c. Reduction of emphasis on the value chain d. Reduction of reporting costs of managerial accounting information

80. What criteria must be met in order to consider the work of factory employees to be direct labor? a. It must be promptly…...

Similar Documents

Managerial Decision Making, Case 2, Greetings Inc. Activity Based Costing

...|Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such...

Words: 1342 - Pages: 6

Analysis of the Alternative Methods for Overhead Cost Assignment

...some cases is not working well and is causing product cost distortion. Analysis of overhead cost assignment using alternative method show that the unit cost of the standard and specialty briefcases needs to be conducted using activity-bases costing instead plantwide method. Analysis of overhead cost using activity-based costing is presenting actual consumption of overhead costs by the standard briefcases and specialty briefcases. Instead pooling costs in plant pool; rates are calculated for each individual overhead activity. Consequently, costs are assigned to standard briefcases and specialty briefcases by multiplying the activity rates by amount consumed by each activity for each product. Breakdown of the manufacturing cost for each of WorkRite’ product is given below using activity-based costing and plantwide rates: Activity-Based Costing Standard Briefcases Specialty Briefcases Setup rate $ 100.00 Inspection rate $ 30.00 Frame Assembly rate $ 8.00 Machine rate $ 4.00 Prime cost per unit $ 10.00 $ 20.00 Overhead costs: Purchasing $ 6,000 $ 9,000 Material handling $ 6,200 $ 9,800 Setup $ 1,000 $ 5,000 Inspection $ 6,000 $ 12,000 Frame Assembly $ 5,600 $ 6,400 Machine $ 20,000 $ 12,000 $ 44,800 $ 54,200 Number of units produced 10,000 2,500 Overhead cost...

Words: 430 - Pages: 2

Overhead Costs

...Decide whether and how to include overhead costs. Reducing overhead costs can save no- profit hospitals thousands of dollars. St. Jude is a non-profit hospital that treats all children regardless of health insurance or financial status. Since no child is ever denied treatment, any type of revenue is welcomed and greatly appreciated. “The daily operating cost for St. Jude is $1.6 million, which is primarily covered by public contributions. On average, 5,700 active patients visit the hospital each year, most of whom are treated on an outpatient basis” (St. Jude Children Research Hospital, 2013). The overhead costs of such an organization are significant and can exceed 35% of total hospital costs. Overall, the hospital’s overhead costs may be caused by volume, capacity, and complexity. In other words, this may include number of patient days, discharges, available beds, and number of medical services. Other overhead costs may come from transport or travel, uniforms, catering, laundry, utilities, furniture and other equipment purchases, and rent. Annual overhead costs can be overwhelming. There are multiple ways to reduce the overhead costs and still be productive. Appreciatively more than 9 million people make contributions to St. Jude each year. The enormous benefit St. Jude has, is that they have an enormous chain of contributors that help with minimizing overhead costs by providing and donating supplies time, and have a family of corporate partners (large......

Words: 511 - Pages: 3

Cases for Management Decision

...Cases for Management Decision Making CA-1 suggested uses of cases Case CASE 1 Greetings Inc.: Job Order Costing Overview This case is the first in a series of four cases that presents a business situation in which a traditional retailer decides to employ Internet technology to expand its sales opportunities. It requires the student to employ traditional job order costing techniques and then requests an evaluation of the resulting product costs. (Related to Chapter 2, Job Order Costing.) CASE 2 Greetings Inc.: Activity-Based Costing This case focuses on decision-making benefits of activity-based costing relative to the traditional approach. It also offers an opportunity to discuss the cost/ benefit trade-off between simple ABC systems versus refined systems, and the potential benefit of using capacity rather than expected sales when allocating fixed overhead costs. (Related to Chapter 4, Activity-Based Costing.) CASE 3 Greetings Inc.: Transfer Pricing Issues This case illustrates the importance of proper transfer pricing for decision making as well as performance evaluation. The student is required to evaluate profitability using two different transfer pricing approaches and comment on the terms of the proposed transfer pricing agreement. (Related to Chapter 8, Pricing.) CASE 4 Greetings Inc.: Capital Budgeting This case is set in an environment in which the company is searching for new opportunities for growth. It requires evaluation of a......

Words: 11307 - Pages: 46

Case 2

...Case 2 Greet ings Inc. Greetings Inc.: Activity-Based Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee The Business Situation Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profi ts. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profi table business unit. Your fi rst step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is......

Words: 2386 - Pages: 10

Greetings Case 2 Questions

...Case 2 Greetings Inc. Greetings Inc.: Activity-Based Costing Developed by Thomas L. Zeller, Loyola University Chicago, and Paul D. Kimmel, University of Wisconsin–Milwaukee The Business Situation Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profitable business unit. Your first step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store......

Words: 2342 - Pages: 10

Case I - Greeting Inc.: Job Order Costing

...predetermined manufacturing overhead rate that is applied in a job-order costing system. The predetermined overhead rate is used for estimating the manufacturing overhead cost because companies cannot assign the actual overhead cost to specific job. From the case, Wall Décor uses a traditional job-order costing system. The actual costs of direct materials and direct labor are charged to its specific jobs which are unframed prints, steel-framed with no matting prints, and wood-framed with matting prints. As mentioned, predetermined overhead rate is based on estimates rather than actual results. This is because the predetermined overhead rate is computed before the period begins and is used to apply overhead cost throughout the period. Wall Décor calculates this rate as total estimated manufacturing overhead cost divided by total estimated cost of prints. Then, companies use predetermined overhead rates to allocate manufacturing overhead costs to each unframed or framed print, based on the costs of the prints. In conclusion, Wall Décor can assign this rate to a specific job to determine total cost of each specific job when it is completed. 2. What are the advantages and disadvantages of using the cost of each print as a manufacturing overhead cost driver? From the case, Wall Décor calculates predeterminated overhead rate as total estimated manufacturing overhead cost divided by total estimated cost of prints. The advantage of using the cost of each print as a......

Words: 973 - Pages: 4

Cost

...COST AND VALUE MANAGEMENT IN PROJECTS Ray R. Venkataraman and Jeffrey K. Pinto John Wiley & Sons, Inc. This book is printed on acid-free paper. Copyright  2008 by John Wiley & Sons, Inc. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created...

Words: 94122 - Pages: 377

Greeting Inc Case Study 1

...the meaning of a manufacturing overhead rate that is applied in a job order costing system. A predetermined overhead rate is based on the relationship between estimated annual overhead costs and annual operating activity. It also used to apply the provisions of the estimated cost of manufacturing overhead cost object for a particular reporting period. This rate is often used to help close the books faster, because it avoids the preparation of the actual manufacturing overhead costs as part of period end closing process. However, the difference between the actual and the estimated overhead should be reconciled at least at the end of each fiscal year. The predetermined rate is from the following calculation: = Estimated Annual Overhead Costs ÷ Expected Cost of Prints | There are some concerns with using a predetermined overhead rate, which includes: * Not realistic. Because both the numerator and denominator of the calculation of the budget, it is likely that the results will not bear much resemblance to the actual overhead rate. * Decision Basis. If sales and production decisions are made based in part on predetermined overhead rates, and the rate was not right, then so too will be the result. * Variation of recognitions. The difference between the actual and the set up can be charged to expense in the current period, which could make a material change in the number of reported profits and asset inventory. * Weak link to historical costs. Use......

Words: 1749 - Pages: 7

Case 2: Greetings Inc

...Case 2* Greetings Inc.: Activity-Based Costing The Business Situation Mr. Burns, president of Greetings Inc., created the Wall Décor unit of Greetings three years ago to increase the company’s revenue and profits. Unfortunately, even though Wall Décor’s revenues have grown quickly, Greetings appears to be losing money on Wall Décor. Mr. Burns has hired you to provide consulting services to Wall Décor’s management. Your assignment is to make Wall Décor a profitable business unit. Your first step is to talk with the Wall Décor work force. From your conversations with store managers you learn that the individual Greetings stores are very happy with the Wall Décor arrangement. The stores are generating additional sales revenue from the sale of unframed and framed prints. They are especially enthusiastic about this revenue source because the online nature of the product enables them to generate revenue without the additional cost of carrying inventory. Wall Décor sells unframed and framed prints to each store at product cost plus 20%. A 20% markup on products is a standard policy of all Greetings intercompany transactions. Each store is allowed to add an additional markup to the unframed and framed print items according to market pressures. That is, the selling price charged by each store for unframed and framed prints is determined by each store manager. This policy ensures competitive pricing in the respective store locations, an important business issue......

Words: 2296 - Pages: 10

Total Cost Approach

...systems or total cost approach in logistics and argue( agree / disagree) how you think it adds significance to the world of business logistics Business logistics refers to a group of related activities all involved in the movement and storage of products and information. business logistics is concerned with the inbound movement of materials and supplies, and the outward movement of finished products. its goal is the delivery of the finished products required by the marketing department to the point where they are needed, when the are needed, in the most economical fashion. The flow of goods, services and information between the point of origin and the point of consumption or application involves the following activities: 1 Demand forecasting 2 Site selection and facility design 3 Procurement 4 Materials handling 5 Packaging 6 Warehouse management 7 Inventory management 8 Order processing 9 Logistics communications 10 Transport 11 Reverse logistics 12 Customer service The total cost approach is generated the idea that all activities that are found within the moving and storing of goods and products need to be thought of as a whole, their total cost. It uses cost trade-offs, when logistics expenses may increase in one area while decreasing in others. The main objective is to find the lowest cost options that will still provide the support for the customer services goals. When this approach is used in the decision making process it’s known as the......

Words: 1234 - Pages: 5

Case 2 - Management Decision Making

...Managerial Decision Making, Case 2, Greetings Inc. Activity Based Costing |Case 2 | | Greetings Inc.: Activity-Based Costing | |This case is from the book: Managerial Accounting: Tools for Business Decision | |Making, 5th Edition | |Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso | |©2010 | |And was answered by some students. | | | | | 1. Activity Based Costing benefits businesses that are more complex in nature. In this case, Greetings. INC has added a new product line, Wall Decor, which permits them to grow without expanding their physical stores; however, they have significantly raised their overhead costs by multiplying their cost drivers. Not to mention the fact that they have incorporated a largely automated system into their product line, which we know calls for an ABC system. The main reason to move to ABC though, I’d say, would be because it will allow management to make better decisions and move away from the “cash machine” and “lemonade stand” metaphor simply because overhead costs will be allocated in such a way that corresponds to either framed or unframed prints instead of considering the same overhead for both products. By doing so managers will be able to price the prints competitively while still maintaining a profitable margin. An activity-based costing system may be appropriate for Wall Décor, when overhead allocation based job-order costing provides product cost distortion. Wall Décor should change its costing system for selling its high......

Words: 1348 - Pages: 6

Cost Measurementconcepts

...PART 3A COST MEASUREMENT CONCEPTS 457 QUESTIONS [1] Source: CMA 0690 5-27 Costs that arise from periodic budgeting decisions that have no strong input-output relationship are commonly called A. Committed costs. B. Discretionary costs. C. Opportunity costs. D. Differential costs. [Fact Pattern #1] The estimated unit costs for a company using absorption (full) costing and planning to produce and sell at a level of 12,000 units per month are as follows. Estimated Cost Item Unit Cost --------- --------- Direct materials $32 Direct labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 6 Variable selling 3 Fixed selling 4 [2] Source: CMA 1291 3-27 (Refers to Fact Pattern #1) Estimated conversion costs per unit are A. $35. B. $41. C. $48. D. $67. [3] Source: CMA 1291 3-28 (Refers to Fact Pattern #1) Estimated prime costs per unit are A. $73. B. $32. C. $67. D. $52. [4] Source: CMA 1291 3-29 (Refers to Fact Pattern #1) Estimated total variable costs per unit are A. $38. B. $70. C. $52. D. $18. [5] Source: CMA 1291 3-30 (Refers to Fact Pattern #1) Estimated total costs that would be incurred during a month with a production...

Words: 99717 - Pages: 399

Finance Mgmt - Calculate the Overhead Cost (Per Direct Labour Hour) for Each of the Four Producing Departments This Should Include Share of the Service Departments’ Costs

...WE PROVIDE CASE STUDY ANSWERS, ASSIGNMENT SOLUTIONS, PROJECT REPORTS AND THESIS aravind.banakar@gmail.com ARAVIND - 09901366442 – 09902787224 FINANCE MGMT 1. Who are the two parties to this potential lease transaction? 2. How will these alternative decisions impact the company's Capital Structure and its balance sheet? 3. What discount rate should be used in this Net Present Value analysis? Why? 4. In the Purchase Decision, what are the cash flow impacts of the Bank Loan? (Please focus on the after tax cash flows.) 5. Construct a spreadsheet to calculate the payback period, internal rate of return, modified internal rate of return, and net present value of the proposed mine. 6. Based on your analysis, should the company open the mine? 7. If the cost of capital is 8%, which of the 3 projects should the ABC Company accept? 8. As a Statistician, advice what kind of Sampling schemes can we consider, and what factors will influence choice of scheme. What are the questions we should ask Mr. Namdeo, who works in the assembly line? FINANCE MGMT 1. Suppose you are Mr.Keen Kumar, the new manager. What steps will you take for the growth of Cooking LPG Ltd.? 2. (a) As a financial consultant, advise the proprietor whether he should go for the extension of credit facilities. 3. (b) Also prepare cash budget for one year of operation of the firm, ignoring interest. The minimum......

Words: 587 - Pages: 3

Cost Accounting

...Cost Management a s t r a t e g i c e m p h a s i s 5 Fifth Edition Blocher | Stout | Cokins Cost Management A Strategic Emphasis Cost Management A Strategic Emphasis Fifth Edition Edward J. Blocher University of North Carolina at Chapel Hill Kenan-Flagler Business School David E. Stout Youngstown State University Williamson College of Business Administration Gary Cokins Strategist, Performance Management Solutions SAS/Worldwide Strategy COST MANAGEMENT: A STRATEGIC EMPHASIS Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2010, 2008, 2005, 2002, 1999 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 0 9 ISBN 978-0-07-352694-2 MHID 0-07-352694-0 Vice president and editor-in-chief: Brent Gordon Editorial director: Stewart Mattson Executive editor: Richard T. Hercher, Jr. Editorial coordinator: Rebecca Mann Marketing manager:......

Words: 399292 - Pages: 1598