Cost Accounting Ch. 6 Solution

In: Business and Management

Submitted By Blackpearl89
Words 3835
Pages 16
CHAPTER 6
MASTER BUDGET AND RESPONSIBILITY ACCOUNTING
6-1 The budgeting cycle includes the following elements:
a. Planning the performance of the company as a whole as well as planning the performance of its subunits. Management agrees on what is expected.
b. Providing a frame of reference, a set of specific expectations against which actual results can be compared.
c. Investigating variations from plans. If necessary, corrective action follows investigation.
d. Planning again, in light of feedback and changed conditions. 6-2 The master budget expresses management’s operating and financial plans for a specified period (usually a fiscal year) and includes a set of budgeted financial statements. It is the initial plan of what the company intends to accomplish in the period. 6-3 Strategy, plans, and budgets are interrelated and affect one another. Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. Strategic analysis underlies both long-run and short-run planning. In turn, these plans lead to the formulation of budgets. Budgets provide feedback to managers about the likely effects of their strategic plans. Managers use this feedback to revise their strategic plans. 6-4 We agree that budgeted performance is a better criterion than past performance for judging managers, because inefficiencies included in past results can be detected and eliminated in budgeting. Also, future conditions may be expected to differ from the past, and these can also be factored into budgets. 6-5 Production and marketing traditionally have operated as relatively independent business functions. Budgets can assist in reducing conflicts between these two functions in two ways. Consider a beverage company such as Coca-Cola or Pepsi-Cola:
• Communication. Marketing could share information…...

Similar Documents

Cost Accounting

...COST ACCOUNTING Cost accounting means the process of collection of data, analyzing the data, summarizing and evaluating various alternative courses of action. Basically, the cost accounting information are commonly used in the financial accounting information. Also the accounting system and financial reports are not subjected to the rules and standards of accounts, like the general accepted accounting principal. Which leads to different application of cost accounting system in different kinds of organization sometimes even in different departments in the same organization. There are five main essential objectives of cost accounting, which are; I. Ascertain of cost They are two main methods of ascertaining cost, which are post costing and continuous costing. Post costing; this means an analysis of actual information as they are recorded in the financial book. Its accurate and mainly used in cost plus pricing. Continuous costing; aims at collecting information about cost as and when the activity takes place so that as soon as a job is completed the cost of completion would be known. This involve careful estimations of the overheads. II. Determination of selling price III. Cost control and cost reduction The following should be observed;  Determine clearly the objective, i.e., pre-determine the desired results;  Measure the actual performance;  Investigate into the causes of failure to perform according to plan; and  Institute corrective......

Words: 4073 - Pages: 17

Cost Accounting

...$3,600 Variable Costs: Beginning Inventory $ 0 $ 200 Variable cost of goods manufactured 700 500 Cost of goods available for sale 700 700 Deduct ending inventorya (200) (100) Variable cost of goods sold 500 600 Variable operating costs 1,000 1,200 Variable costs 1,500 1,800 Contribution Margin 1,500 1,800 Fixed Costs: Fixed manufacturing costs 700 700 Fixed operating costs 400 400 Total fixed costs 1,100 1,100 Operating income $ 400 $ 700 a Unit inventoriable costs: Year 1: $700 / 1,400 = $0.50 per unit; $0.50 x (1,400 – 1,000) Year 2: $500 / 1,000 = $0.50 per unit; $0.50 x (400 + 1,000 – 1,200) (2) Absorption-costing income statements: 2011 2012 Sales 1,000 units Sales 1,200 units Production 1,400 units Production 1,000 units Revenues ($3 per unit) $3,000 $3,600 Cost of goods sold: Beginning Inventory $ 0 $ 400 Variable manufacturing costs 700 500 Fixed manufacturing costsa 700 700 Cost of goods......

Words: 1186 - Pages: 5

Cost Accounting

...Cost Allocation in Multiagent Settings Author(s): Madhav V. Rajan Source: The Accounting Review, Vol. 67, No. 3 (Jul., 1992), pp. 527-545 Published by: American Accounting Association Stable URL: http://www.jstor.org/stable/247976 Accessed: 13/12/2008 09:19 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aaasoc. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit organization founded in 1995 to build trusted digital archives for scholarship. We work with the scholarly community to preserve their work and the materials they rely upon, and to build a common research platform that promotes the discovery and use of these resources. For more information about JSTOR, please contact support@jstor.org. American Accounting Association is collaborating with JSTOR to digitize, preserve and extend access to...

Words: 7156 - Pages: 29

Cost Accounting: Ch.8 Problem 34

...Ch. 8, 34 Budget Information Paint set production Direct manuf. Labor hours per paint set (hours) Direct manuf. Labor rate per hour Variable manuf. OH rate per hour 1) Actual Costs Incurred $693,680.00 Price Variance: Efficiency Variance 2) Actual Costs Incurred 25,000 2 $10 $20 Actual Results 29,000 2.3 $10.40 $18.95 Actual Input Q x Budg. Rate Flexible budget $667,000 $580,000 $26,680.00 Unfavorable $87,000 Unfavorable Actual Input Q x Budg. Rate Flexible Budget $1,263,965.00 $1,334,000 $1,160,000 $70,035.00 Favorable $174,000 Unfavorable Spending Variance Efficiency Variance 3) For variable manufacturing overhead, the favorable spending variance suggests that cheaper items were used, which could p which could be that more skilled/qualified workers were hired, which should lead to favorable labor efficiency variances. Due that the efficiency variances were related to factors other than the cost of the labor or overhead. 4) It depends, Sarah is correct if the variable overhead costs consisted only of costs that were related to direct manufacturing la variance would reflect actual cost overruns due to the inefficient use of labor hours. However, a part of variable overhead ma variable overhead using direct labor as the only base will inflate the effect of inefficient labor usage on the variable overhead and will be captured in a favorable spending variance for variable overhead. items were used, which could possibly have a negative impact on labor......

Words: 372 - Pages: 2

Intermediate Financial Accounting Kieso Solution Manual Chapter 6

...CHAPTER 6 Accounting and the Time Value of Money ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) | | |Brief Exercises | | | |Topics |Questions | |Exercises |Problems | | 1. |Present value concepts. |1, 2, 3, 4, | | | | | | |5, 9, 17 | | | | | 2. |Use of tables. |13, 14 |8 |1 | | | 3. |Present and future value problems: | | | | | | |a. Unknown future amount. |7, 19 |1, 5, 13 |2, 3, 4, 7 | | | |b. Unknown payments. |10, 11, 12 |6, 12, |8, 16, 17 |2, 6 | | | | |15, 17 | | | | ...

Words: 12226 - Pages: 49

Solution Manual Ch 1 Cost Management and Strategy

...CHAPTER 1: COST MANAGEMENT AND STRATEGY EXERCISES 1-24 Strategy; Real Estate Services (15 min) This exercise can be used to provide a good perspective for the students to see the role of cost management in solving business issues, and in placing the management accountant in more of a leadership role in the firm. It also provides an early motivation for the cost behavior issues to be discussed later in chapter 3 and chapter 8. The management accountant has a hunch that the company is about to take on a potentially damaging strategic initiative. This is a great opportunity to begin to play more of a strategic role in the company. The first step should be to obtain the relevant information about projected revenues and costs and do a careful analysis of the likely profitability of developing the new, smaller customers. Here’s how the case might be used in a class discussion. First, ask the class to identify the types of costs likely to be incurred by this company in providing its service. The answers are likely to include labor costs and materials for cleaning and maintenance, in addition to costs for maintaining the firm’s office. As these examples are given, put them on the chalkboard and collect 6 or 8 of them. Then, ask how each of these costs might differ between large and small customers. For example, the cost of cleaning labor and materials will likely be somewhat proportional to the square feet of space each customer occupies, so that cost projections...

Words: 2779 - Pages: 12

Cost Accounting

...* CHAPTER 1: COST MANAGEMENT AND STRATEGY * QUESTIONS 1-1 Firms Using Cost Management. Here are some examples; there are many possible answers. 1. Wal-Mart: to keep costs low by streamlining restocking and sales 2. Dell: to keep costs low by improving manufacturing performance and by using target costing and other management techniques 3. Citicorp: to keep costs low by using activity analysis (see exercise1-31) to identify key operations and to find those that add little or no value 4. A local school district or public agency: to keep costs low in order to provide the best possible service given available funds 5. Procter & Gamble: to assess the profitability of its different products 6. Any other large, diversified manufacturer, like Procter & Gamble: which needs to be able to analyze the relative profitability of its different products, using cost management 7. A small machine shop: which needs cost management to determine whether it should repair or replace a machine 8. A dance studio: to analyze and choose between different compensation plans for its teachers; and to determine whether it should open a new studio 1-2 Firms not expected to be significant users of cost management information: 1. Microsoft: here the focus is on forming strategic alliances, innovation and competition; cost management is more important for other firms in the information technology business, such as Hewlett-Packard, and IBM that compete in part on......

Words: 9648 - Pages: 39

Investmenets Solution Ch.6

...CHAPTER 6: RISK AVERSION AND CAPITAL ALLOCATION TO RISKY ASSETS PROBLEM SETS 1. (e) 2. (b) A higher borrowing rate is a consequence of the risk of the borrowers’ default. In perfect markets with no additional cost of default, this increment would equal the value of the borrower’s option to default, and the Sharpe measure, with appropriate treatment of the default option, would be the same. However, in reality there are costs to default so that this part of the increment lowers the Sharpe ratio. Also, notice that answer (c) is not correct because doubling the expected return with a fixed risk-free rate will more than double the risk premium and the Sharpe ratio. 3. Assuming no change in risk tolerance, that is, an unchanged risk aversion coefficient (A), then higher perceived volatility increases the denominator of the equation for the optimal investment in the risky portfolio (Equation 6.7). The proportion invested in the risky portfolio will therefore decrease. 4. a. The expected cash flow is: (0.5 × $70,000) + (0.5 × 200,000) = $135,000 With a risk premium of 8% over the risk-free rate of 6%, the required rate of return is 14%. Therefore, the present value of the portfolio is: $135,000/1.14 = $118,421 b. If the portfolio is purchased for $118,421, and provides an expected cash inflow of $135,000, then the expected rate of return [E(r)] is as follows: $118,421 × [1 + E(r)] = $135,000 ...

Words: 3057 - Pages: 13

Solution Accounting

...Advanced Accounting Beams Anthony 11th Edition Solutions Manual Click here to download immediately!!! http://solutionsmanualtestbanks.blogspot.com/2011/10/advanced-accountingbeams-anthony-11th.html ----------------------------------------------------------------------Advanced Advanced Advanced Advanced Accounting Accounting Accounting Accounting Beams Beams Beams Beams Anthony Anthony Anthony Anthony 11th 11th 11th 11th Edition Edition Edition Edition Solutions Solutions Solutions Solutions Manual Manual Manual Manual -------------------------------------------------------------------------***THIS IS NOT THE ACTUAL BOOK. YOU ARE BUYING the Solution Manual in e-version of the following book*** Name: Advanced Accounting Author: Beams Anthony Edition: 11th ISBN-10: 0132568969 Type: Solutions Manual - The file contains solutions and questions to all chapters and all questions. All the files are carefully checked and accuracy is ensured. - The file is either in .doc, .pdf, excel, or zipped in the package and can easily be read on PCs and Macs. - Delivery is INSTANT. You can download the files IMMEDIATELY once payment is done. If you have any questions, please feel free to contact us. Our response is the fastest. All questions will always be answered in 6 hours. This is the quality of service we are providing and we hope to be your helper. Delivery is in the next moment. Solution Manual is accurate. Buy now below and the DOWNLOAD LINK WILL APPEAR IMMEDIATELY once payment......

Words: 19905 - Pages: 80

Accounting Solutions

...AP | 32. | 3 | AP | *41. | 5 | AP | 6. | 1 | AP | 15. | 2,3 | AN | 24. | 2,3 | AP | 33. | 3 | AP | | | | 7. | 1,2 | AP | 16. | 2,3 | AN | 25. | 2,3 | AP | 34. | 3 | AP | | | | 8. | 1,2 | AP | 17. | 2,3 | AP | 26. | 2,3 | AP | 35. | 4 | AP | | | | 9. | 1,2 | AP | 18. | 2,3 | AP | 27. | 2,3 | AP | 36. | 4 | AP | | | | Note: C = Comprehension AN = Analysis AP = Application * This topic is dealt with in an Appendix to the chapter. SUMMARY OF QUESTIONS BY LEVEL OF DIFFICULTY (LOD) Item | SO | LOD | Item | SO | LOD | Item | SO | LOD | Item | SO | LOD | Item | SO | LOD | Exercises | 1. | 1 | M | 10. | 2 | E | 19. | 2,3 | E | 28. | 2,3 | H | *37. | 5 | M | 2. | 1 | E | 11. | 2 | M | 20. | 2,3 | E | 29. | 2,3,4 | H | *38. | 5 | H | 3. | 1 | M | 12. | 2 | H | 21. | 2,3 | E | 30. | 2,3,4 | H | *39. | 5 | H | 4. | 1 | E | 13. | 2,3 | H | 22. | 2,3 | M | 31. | 3 | E | *40. | 5 | E | 5. | 1 | E | 14. | 2,3 | H | 23. | 2,3 | E | 32. | 3 | M | *41. | 5 | E | 6. | 1 | M | 15. | 2,3 | E | 24. | 2,3 | H | 33. | 3 | M | | | | 7. | 1,2 | E | 16. | 2,3 | E | 25. | 2,3 | H | 34. | 3 | M | | | | 8. | 1,2 | E | 17. | 2,3 | M | 26. | 2,3 | H | 35. | 4 | E | | | | 9. | 1,2 | M | 18. | 2,3 | M | 27. | 2,3 | H | 36. | 4 | M | | | | Note: E = Easy M = Medium H=Hard * This topic is dealt with in an Appendix to the chapter. CHAPTER STUDY OBJECTIVES 1. Explain accrual basis accounting, and when to recognize revenues and......

Words: 12342 - Pages: 50

Cost Accounting

...for liquidation of a solvent limited liability partnership having an almost insolvent partner who cannot pay entire loan from partnership or capital deficit. Pr. 3–3 Hal, Ian, Jay & Kay LLP (20 minutes, easy) Preparation of cash distribution program for a liquidating limited liability partnership. Pr. 3–4 Carson & Worden LLP (20 minutes, easy) Cash distribution program for liquidation of a limited liability partnership, and journal entries for realization of assets and distributions of cash to creditors and partners. Pr. 3–5 Luke, Mayo & Nomura LLP (20 minutes, easy) Given the statement of realization and liquidation for a limited liability partnership, prepare journal entries for the liquidation. Pr. 3–6 Luna, Nava & Ruby LLP (30 minutes, easy) Compute total loss from liquidation of a limited liability partnership, prepare a statement of realization and liquidation, and prepare journal entries for the liquidation. Pr. 3–7 Haye & Lee LLP (20 minutes, easy) Partners accept bonds in exchange for certain limited liability partnership assets and withdraw noncash assets during liquidation. Journal entries for transactions completed in carrying out liquidation of the partnership. Pr. 3–8 Adams, Barna & Coleman LLP (30 minutes, easy) A limited liability partnership is insolvent, as is one of the three partners. Given a balance sheet of the partnership and a summary of the financial status of partners, prepare......

Words: 6976 - Pages: 28

Solution Manual Chapter 2 Cost Accounting

...Solutions Manual COST ACCOUNTING © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren Solutions Manual COST ACCOUNTING Fourteenth Edition Charles T. Horngren Srikant M. Datar Madhav Rajan Upper Saddle River, NJ 07458 © 2012 Pearson Education, Inc. Publishing as Prentice Hall © 2012 Pearson Education, Inc. Publishing as Prentice Hall. SM Cost Accounting 14/e by Horngren This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. Acquisition Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Editorial Assistant: Brian Reilly Project Manager, Production: Lynne Breitfeller Operations Specialist: Natacha Moore Printer/Binder: OPM Digital Print Services Cover Printer: OPM Digital Print Services Credits and......

Words: 289926 - Pages: 1160

Ch. 1 Solutions Fi504

...Proprietorships and partnerships receive favorable tax treatment compared to corporations and are easier to form than corporations. They are also owner controlled. Disadvantages of proprietorships and partnerships are unlimited liability (proprietors/partners are personally liable for all debts) and difficulty in obtaining financing compared to corporations.  4. Yes. A person cannot earn a living, spend money, buy on credit, make an investment, or pay taxes without receiving, using, or dispensing financial information. Accounting provides financial information to interested users through the preparation and distribution of financial statements.  5. Internal users are managers who plan, organize, and run a business. To assist management, accounting provides timely internal reports. Examples include financial comparisons of operating alternatives, projections of income from new sales campaigns, forecasts of cash needs for the next year, and financial statements.  6. External users are those outside the business who have either a present or potential direct financial interest (investors and creditors) or an indirect financial interest (taxing authorities, regulatory agencies, labor unions, customers, and economic planners).  7. The three types of business activity are financing activities, investing activities, and operating activities. Financing activities include borrowing money and selling shares of stock. Investing activities include the purchase and sale of......

Words: 3539 - Pages: 15

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

Cost Accounting

... | COST ACCOUNTING AREA: CONTROL IMBA NUMBER OF SESSIONS: 20 PROFESSOR: SALVADOR CARMONA □ Ph.D (Accounting). Universidad de Sevilla. □ Last version, November 2006 COURSE DESCRIPTION A cost accounting system collects and classifies costs and assigns them to cost objects. The goal of a cost accounting system is to measure the cost of designing, developing, producing (or purchasing), selling, distributing, and servicing particular products or services. Cost allocation is at the heart of most accounting systems. Cost behavior -how the activities of an organization affect its costs- is also fundamental to cost accounting systems. The data provided by a cost accounting system is used for various purposes, which include product costing, planning and control, and decision making. This course mainly focuses on the first of these objectives -products costing. COURSE GOALS Students, as future managers, will utilize, at a minimum, the output of cost systems, which are the primary internal information systems in a firm. Students taking this course will gain an understanding of cost accounting systems, which includes a familiarization with: The goals of cost accounting systems; the fundamental features and design of cost accounting systems; and the various uses of the data provided by cost accounting decisions. A sound understanding of these issues is necessary to interpret cost accounting system outputs; to transform them......

Words: 1350 - Pages: 6