Part -1:

Questions:

1 What is broad averaging and what consequences can it have on costs?

2 Why should managers worry about product overcosting or undercosting?

3 What is costing system refinement? Describe three guidelines for refinement.

4 What is an activity-based approach to designing a costing system?

5 Describe four levels of a cost hierarchy.

6 Why is it important to classify costs into a cost hierarchy?

7 What are the key reasons for product cost differences between simple costing systems and ABC systems?

8 Describe four decisions for which ABC information is useful.

9 "Department indirect-cost rates are never activity-cost rates." Do you agree? Explain.

10 Describe four signs that help indicate when ABC systems are likely to provide the most benefits.

11 What are the main costs and limitations of implementing ABC systems?

12 "ABC systems only apply to manufacturing companies." Do you agree? Explain.

13 "Activity-based costing is the wave of the present and the future. All companies should adopt it." Do you agree? Explain.

14 "Increasing the number of indirect-cost pools is guaranteed to sizably increase the accuracy of product or service costs." Do you agree? Why?

15 The controller of a retail company has just had a $50,000 request to implement an ABC system quickly turned down. A senior vice president, in rejecting the request, noted, "Given a choice, I will always prefer a $50,000 investment in improving things a customer sees or experiences, such as our shelves or our store layout. How does a customer benefit by our spending $50,000 on a supposedly better accounting system?" How should the controller respond?

Part -2:

Questions

1 Differences in operating income between variable costing and absorption costing are due solely to accounting for fixed costs. Do you agree? Explain.

2 Why is the term direct costing a misnomer?

3 Do companies in either the service sector or the merchandising sector make choices about absorption costing versus variable costing?

4 Explain the main conceptual issue under variable costing and absorption costing regarding the timing for the release of fixed manufacturing overhead as expense.

5 "Companies that make no variable-cost/fixed-cost distinctions must use absorption costing, and those that do make variable-cost/fixed-cost distinctions must use variable costing." Do you agree? Explain.

6 The main trouble with variable costing is that it ignores the increasing importance of fixed costs in manufacturing companies. Do you agree? Why?

7 Give an example of how, under absorption costing, operating income could fall even though the unit sales level rises.

8 What are the factors that affect the breakeven point under (a) variable costing and (b) absorption costing?

9 Critics of absorption costing have increasingly emphasized its potential for leading to undesirable incentives for managers. Give an example.

10 What are two ways of reducing the negative aspects associated with using absorption costing to evaluate the performance of a plant manager?

11 What denominator-level capacity concepts emphasize the output a plant can supply? What denominator-level capacity concepts emphasize the output customers demand for products produced by a plant?

12 Describe the downward demand spiral and its implications for pricing decisions.

13 Will the financial statements of a company always differ when different choices at the start of the accounting period are made regarding the denominator-level capacity concept?

14 What is the IRS's requirement for tax reporting regarding the choice of a denominator-level capacity concept?

15 "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.

Part -3:

Questions

1 Define strategy.

2 Describe the five key forces to consider when analyzing an industry.

3 Describe two generic strategies.

4 What is a customer preference map and why is it useful?

5 What is reengineering?

6 What are four key perspectives in the balanced scorecard?

7 What is a strategy map?

8 Describe three features of a good balanced scorecard.

9 What are three important pitfalls to avoid when implementing a balanced scorecard?

10 Describe three key components in doing a strategic analysis of operating income.

11 Why might an analyst incorporate the industry-market-size factor and the interrelationships among the growth, price-recovery, and productivity components into a strategic analysis of operating income?

12 How does an engineered cost differ from a discretionary cost?

13 What is downsizing?

14 What is a partial-productivity measure?

15 "We are already measuring total factor productivity. Measuring partial productivities would be of no value." Do you agree? Comment briefly

Part -4:

Questions

1 Give two examples of industries in which joint costs are found. For each example, what are the individual products at the splitoff point?

2 What is a joint cost? What is a separable cost?

3 Distinguish between a joint product and a byproduct.

4 Why might the number of products in a joint-cost situation differ from the number of outputs? Give an example.

5 Provide three reasons for allocating joint costs to individual products or services.

6 Why does the sales value at splitoff method use the sales value of the total production in the accounting period and not just the revenues from the products sold?

7 Describe a situation in which the sales value at splitoff method cannot be used but the NRV method can be used for joint-cost allocation.

8 Distinguish between the sales value at splitoff method and the NRV method.

9 Give two limitations of the physical-measure method of joint-cost allocation.

10 How might a company simplify its use of the NRV method when final selling prices can vary sizably in an accounting period and management frequently changes the point at which it sells individual products?

11 Why is the constant gross-margin percentage NRV method sometimes called a "joint-cost-allocation and a profit-allocation" method?

12 "Managers must decide whether a product should be sold at splitoff or processed further. The sales value at splitoff method of joint-cost allocation is the best method for generating the information managers need for this decision." Do you agree? Explain.

13 "Managers should consider only additional revenues and separable costs when making decisions about selling at splitoff or processing further." Do you agree? Explain.

14 Describe two major methods to account for byproducts.

15 Why might managers seeking a monthly bonus based on attaining a target operating income prefer the sales method of accounting for byproducts rather than the production method?

Textbook - Cost Accounting, 16th Edition Authors: Charles T. Horngren, Srikant M. Datar, and Madhav V. Rajan, ISBN13: 9780134475585 Edition/Copyright: 16th 2018