ACC 312 Study Guide - Midterm Guide: Sunk Costs, Indirect Costs

39 views3 pages

greenwalrus59

13 Nov 2017

School

Department

Course

Professor

For unlimited access to Study Guides, a Grade+ subscription is required.

Document Summary

Cost classifications for assigning costs to cost objects. Learning objective 6: define and give examples of direct and indirect costs. Cost object anything for which cost data are desired including products, customers, jobs, organizational subunits, etc. For purposes of assigning costs to cost objects, costs are classified two ways: Direct costs costs that can be easily and conveniently traced to a unit of product or other cost object. Indirect costs costs that cannot be easily and conveniently traced to a unit of product or other cost object. Common costs indirect costs incurred to support a number of cost objects. These costs cannot be traced to any individual cost object. Preparing an income statement and a balance sheet. Predicting changes in cost due to changes in activity. Cost classifications: produ(cid:272)t (cid:272)osts, dire(cid:272)t (cid:373)aterials, dire(cid:272)t la(cid:271)or, ma(cid:374)ufa(cid:272)turi(cid:374)g overhead, period (cid:272)osts (cid:894)(cid:374)o(cid:374)(cid:373)a(cid:374)ufa(cid:272)turi(cid:374)g (cid:272)osts(cid:895, marketi(cid:374)g a(cid:374)d selli(cid:374)g (cid:272)osts, administrative costs, varia(cid:271)le (cid:272)osts, fi(cid:454)ed (cid:272)osts.

Related Questions

Please help me answer the following questions:
1. Management accounting:
A) is both retrospective, providing feedback about past operations,and also prospective, incorporating forecasts and estimates aboutfuture events.
B) is primarily oriented to external stakeholders.
C) must be consistent with rules formulated by the FinancialAccounting Standards Board (FASB).
D) provides information that is generally available only on aquarterly or annual basis.

2. Management accounting information is BEST described as:
A) providing a signal that something is wrong.
B) identifying and helping to explain what is wrong.
C) simply summarizing information, but giving no indication thatanything is wrong.
D) measuring overall organizational performance.

3. Which of the following would be MOST helpful for a top managerof a company?
A) profitability report of the company
B) information to monitor hourly and daily operations
C) number of customer complaints
D) operating expense summary reported by department

4. The Balanced Scorecard is said to be "balanced" because itmeasures:
A) short-term and long-term objectives.
B) financial and nonfinancial objectives.
C) internal and external objectives.
D) All of the above are correct.

5. The ________ perspective of the Balanced Scorecard asks, "How issuccess measured by our shareholders?"
A) learning and growth
B) customer
C) financial
D) shareholder

6. Defect rates for products and yield percentages in manufacturingare measures of quality included in the ________ perspective of theBalanced Scorecard.
A) financial
B) production
C) process
D) internal

7. The purpose of the Balanced Scorecard is BEST described ashelping an organization:
A) develop customer relations.
B) mobilize employee skills for continuous improvements inprocessing capabilities, quality, and response times.
C) introduce innovative products and services desired by targetcustomers.
D) translate an organization's mission, vision, and strategy into aset of performance measures that help to implement thestrategy.

8. The FIRST step in developing strategic objectives for theBalanced Scorecard is:
A) defining the long-run financial objectives.
B) identifying the target customer.
C) articulating the organization's vision.
D) select objectives for the customer value proposition.

9. Identify the BEST description of the Balanced Scorecard'scustomer perspective. To achieve our firm's vision andstrategy:
A) How do we lower costs?
B) How do we motivate employees?
C) How can we obtain greater profits?
D) How does the company intend to attract, retain, and deepenrelationships with targeted customers by differentiating itselffrom competitors?

10. Fixed costs:
A) may be either direct or indirect costs.
B) vary with production or sales volume.
C) include parts and materials used to manufacture a product.
D) can be adjusted in the short run to meet actual demands.

11. Which of the following describes a variable cost?
A) Variable cost are always indirect costs.
B) Variable costs increase in total when the actual level ofactivity increases.
C) Variable costs include most personnel costs and depreciation onmachinery.
D) Variable costs can always be traced directly to the costobject.

12. Cost-volume-profit analysis is used PRIMARILY bymanagement:
A) as a planning tool.
B) for control purposes.
C) to establish a target net income for next year.
D) to attain extremely accurate financial results.

13. The break-even point is the level at which revenues:
A) equal fixed costs.
B) equal variable costs.
C) equal fixed costs minus flexible costs.
D) equal variable costs plus fixed costs.

14. Cost-volume-profit analysis assumes all of the followingEXCEPT:
A) all costs are purely variable or fixed.
B) units manufactured equal units sold.
C) total variable costs remain the same over the relevantrange.
D) total fixed costs remain the same over the relevant range.

In this case, management needs assistance in evaluating andclassifying costs identified within Glaser Health Products in orderto implement an activity-based costing system. Please addressQuestions 1 through 6 at the end of the case. Based on the casequestions, you are required to provide a two to four double-spacedwritten report providing management with the necessary guidance inimplementing an activity-based costing system. The written reportshould be properly formatted according to APA guidelines anddemonstrate research and critical thinking skills. Explanations andrecommendations should be supported by at least 3 scholarly sourcesfrom the Ashford Library or other external sources, excluding thetextbook.

For Questions 1 through 3, create a chart to classify andidentify a cost driver for each of the costs provided in the text.The chart should be included as an appendix to the written report.Explanations of the classifications and identifications within thechart should be included within the written report, supported byreferences to the appendix.

Questions 4 through 6 should be addressed in fully developedexplanations/instructions as part of your written report. Thewritten analysis should be supported by at least three scholarlysources, excluding the textbook.

CASE 5A -- GLASER HEALTH PRODUCTâ:

Glaser Health Products of Ranier Falls, Georgia, is organizedfunctionally into three divisions: Operations, Sales, andAdministrative. Purchasing, receiving, materials and productioncontrol, manufacturing, factory personnel, inventory stores, andshipping activities are under the control of the vice-president foroperations, George Gottlieb. Advertising, market research, andsales are the responsibility of the vicepresident for sales, JakeBogan. Accounting, budgeting, the firm's computer center, andgeneral office management are delegated to the corporate controller(Administrative), Charlie Kaplan. The following cost categories arefound in the company as a whole:

(a) Depreciation on factory equipment.

(b) Depreciation on office equipment.

(d) Advertising manager's salary.

(e) Assembly foreman's salary.

(f) Salespersons' salaries.

(g) Salespersons' travel expenses.

(h) Supplies for the Machining Department.

(i) Advertising supplies used.

(j) Electricity for the Assembly Department.

(k) Lost materials (scrap) in a MachiningDepartment.

(l) Direct labor in the Assembly Department.

(m) Supplies for the sales office.

(n) Sales commissions.

(o) Packing supplies.

(p) Cost of hiring new employees.

(q) Payroll fringe benefits for workers in theShipping Department.

(r) Supplies for Production Scheduling.

(s) Cost of repairing parts improperly manufacturedin the Machining Department.

(t) Paint for the Assembly Department.

(u) Heat, light, and power for the factory.

(v) Leasing of computer equipment for the AccountingDepartment.

Required:

1. Identify each of the costs with the appropriate division:Operations, Sales, Administrative.

2. Identify each of the costs with one of thefollowing: (a) Unit-levelactivities. (c) Product-levelactivities. (b) Batch-levelactivities. (d) Facility-level activities. Organize theseclassifications by division: Operations, Sales, Administrative.

3. Specify an appropriate cost driver for tracing costsassociated with the various levels of activities to the next costobjective or products, whichever is appropriate.

4. Glaser Health Products is interested in using activity-basedcosting to identify as many costs as possible with the products.These costs will be used for planning and control decisions ratherthan for inventory valuation. The controller decided that alloperation costs will be related to products but only those salesand administrative costs that are classified as unit-level,batch-level, or product-level costs
should be related to products. Using preliminary stage costdrivers, explain how individual items of costs will be traced toactivity groupings.

5. Using primary stage cost drivers, show how the costs shouldbe related to products.

6. Explain why it is necessary to use preliminary stage andprimary stage cost drivers.

champagnebat418

1. van Abuzi is a house painter. He incurred the following costsduring August 2009, when he painted four houses. In the first weeksof August, Abuzi placed a $60 classified ad for his business in thenewspaper. He also bought two pairs of coveralls for $35 each towear while working. Abuzi spent $25 for a day-planner book in whichhe records hours spent at each job, mileage to and from jobs (at arate of $0.32 per mile), information on referral work, and bidssubmitted for other jobs. Toll road charges for driving to variousjob locations were $0.75 for each section of toll road traveled.Cell phone charges for the month were $60; Abuzi has a cell phoneplan that allows up to 2,000 minutes of nationwide calling, a timeframe that he has never exceeded. Abuzi uses the cell phone forboth business and personal calls. In August approximately 40% ofhis calls were business-related. Materials costs for the month were$500 for paint, $40 for mineral spirits, and $155 for brushes.Abuzi hired a helper who worked 15 hours at $18 per hour on one ofAbuziâs jobs. The insurance on Abuziâs work truck is $509 permonth.

Using the following headings and indicate how each of the Augustcosts incurred by Abuzi would be classified. Assume that the costobject is a house-painting job:

Type of Cost, Variable, Fixed, Direct, Indirect, Period,Product

Type of Cost	Variable	Fixed	Direct	Indirect	Period	Product

2. Use the information below to answer the questions thatfollow:

Month	Procedures	Electricity
Jan	1,000	4,500
Feb	800	3,500
Mar	700	3,025
Apr	900	3,250
May	950	3,300
Jun	1,000	4,400
Jul	1,100	4,200
Aug	1,250	4,800
Sep	1,200	5,000
Oct	1,050	4,500
Nov	1,100	4,250
Dec	900	3,200

Separate the fixed and variable components.

Are the number of procedures a good cost driver?

Assuming 1,000 procedures next month, what would be theprojected total cost of electricity?

3. ChangingTimes sells 185,000 bottles of TempeTingler nailpolish each year. The product, which is very popular with teens,sells for $13 per bottle, and variable cost per unit is $5.50.Total annual fixed costs are $1,260,000.

What is the degree of operating leverage?

If the company can increase unit sales by 20%, what percentageincrease will it experience in income? Prove your answer using anincome statement.

4. Barkley, Inc. has the following revenue and costinformation:

Revenue - $300 per consulting hour
Variable costs - $170 per hour
Fixed costs - $93,600 per month

What is the break-even point per month in consulting hours?

What is the break-even point per month in revenue dollars?

If the average consulting engagement is 28 hours, how manyconsulting engagements per year will Barkley, Inc. need to breakeven?

Assume that Barkley, Inc. wants to earn $7,800 in profits eachmonth and has a 25% tax rate. How many consulting hours does thecompany need to work each month?

How might Barkley, Inc. decrease variable costs per consultinghour? Fixed costs per month?

Assume that Barkley, Inc has decided to limit air travel byconsultants. Instead the company will invest in a state-of-the-artsatellite teleconferencing system. How will these decisions affectvariable and fixed costs? What are the potential drawbacks of thisdecision?

sapphireyak212

ACC 312 Study Guide - Midterm Guide: Sunk Costs, Indirect Costs

Document Summary

Get access

Related Documents

ACC 312 Lecture Notes - Lecture 9: Direct Labor Cost, Finished Good, Interest Expense

ACC 312 Midterm: Measuring Costs

ACC 312 Lecture Notes - Lecture 2: Deferral, Direct Labor Cost, Management Accounting

Related Questions