104. Cost accounting is an integral part of the ________ function in an organization.
105. All of the following actions enhance the new focus on making cost accounting information
more relevant in helping a firm achieve strategic goals except
106. All of the following are examples of total quality management practices except
107. The Institute of Management Accountants’ (IMA) standards of ethical conduct for
management accountants includes the elements of
108. According to the IMA Code of Ethics, what should a management accountant do if a
significant ethical situation can’t be resolved?
109. With the enactment of the Sarbanes-Oxley Act of 2002, all public companies are now
required by the SEC to disclose whether or not the company has
110. Which of the following is not an ethical standard of competence in the Standards of
Ethical Conduct for Management Accountants?
111. The Sarbanes Oxley Act of 2002 requires an effective internal control system for publicly
owned firms. Therefore, with regards to strategic investment decisions, it is important that
management consider including
112. Where there is a lack of good performance measures, it is difficult to motivate managers
by using
113. Which of the following is a true statement regarding performance evaluation?
114. Honda incurs many types of costs in its operations. Place the number of the appropriate
stage in the value chain in Column 2 in the blank next to each cost in column 1.
115. Northern King is an integrated provider of genetically engineered corn. Many types of
costs are incurred in its operations. Place the number of the appropriate stage in the value chain
in Column 2 in the blank next to each cost in column 1.
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116. Cindy’s Limo Service provides transportation services in and around Middleville. Its profits
have been declining, and management is planning to add a package delivery service that is
expected to increase revenue by $275,000 per year. The total cost to lease additional delivery
vehicles from the local dealer is $60,000 per year. The present manager will continue to supervise
all services. However, labor and utilities costs will increase by 40% and rent and other costs will
increase by 15% when the package delivery service is added.
a. Prepare a report of the differential costs and revenues if the delivery service is added.
b. Should management start up the delivery service? Explain your answer.
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117. Looman Inc. is a management consulting firm that specializes in management training
programs. In-Line Manufacturing Inc. has approached Looman to contract for management
training for a one-year period. Last year’s income statement for Looman is as follows:
To satisfy the In-Line contract, another part-time trainer will need to be hired at $42,000. Supplies
will increase by 12% and other costs will increase by 15%. In addition, new equipment will need to
be leased at a cost of $2,500.
a. What are the differential costs that would be incurred if the In-Line contract is signed?
b. If In-Line will pay $55,000 for one year, should Looman accept the contract? Explain your
answer.
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118. The Anderson Company reported the following results for the manufacture and sale of one
of its products known as Bangers during the most recent year.
The Anderson Company is trying to determine whether or not to discontinue the manufacture and
sale of Bangers. The operating results reported above for last year are expected to continue in the
foreseeable future if the product is not dropped. The building costs represent the costs of
production facilities and equipment that the Bangers product shares with other products produced
by Anderson. If the Bangers product were dropped, there would be no change in the building costs
of the company. Management has determined that discontinuing the manufacture and sale of
Bangers will have no effect on the company’s other product lines. Determine the change in
operating profits that will happen if the manufacture and sale of Bangers is discontinued.
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119. The management of Godzilla Corporation is considering dropping product XYZ123. Data
from the company’s accounting system appear below:
All building expenses of the company are fully allocated to products in the company’s accounting
system. Further investigation has revealed that $42,000 of the building expenses and $48,000 of
the selling and administrative expenses will not be incurred if product XYZ123 is discontinued.
a. According to the company’s accounting system, what are the operating profits earned by
product XYZ123?
b. What would be the impact on the company’s overall operating profits if product XYZ123 is
dropped? Should the product be dropped?
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120. The management of Mystical Corporation has been concerned for some time with the
financial performance of its product E35R and has considered discontinuing it on several
occasions. Data from the company’s accounting system appear below:
In the company’s accounting system all building expenses of the company are fully allocated to
products. Further investigation has revealed that $95,000 of the building expenses and $85,000 of
the selling and administrative expenses will not be incurred if product E35R is discontinued.
a. According to the company’s accounting system, what are the operating profits (losses) earned
by productE35R?
b. What would be the effect on the company’s overall operating profits if product E35R is
dropped?
121. Place the letter of the appropriate element of an organization’s value chain in Column 2 in
the blank next to each operation in Column 1.
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122. 131 Flavors is a local ice cream shop. The company currently is showing an operating loss,
as evidenced by the income statement below:
The President of the company is considering adding sandwiches to the menu. Sales will be
expected to increase by $60,000. The cost of sandwich supplies would be $30,000. Labor costs
would increase 40% and other costs 10%. The current manager will continue to manage the
operation.
a. Prepare a quantitative analysis of the decision to add sandwiches to the menu.
b. What qualitative considerations should the company consider in this decision?
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123. The Callahan family currently lives in a suburb of a major city. They have a lovely home
close to major routes of transportation. Both Mr. and Mrs. Callahan have convenient commutes of
30 minutes or less. Because the school system in their town does not have a quality reputation,
they currently send their daughter to private school, conveniently located less than one mile from
their home. The family’s current monthly living expenses are listed below:
The Callahans are considering moving to a town approximately 20 minutes away. Because of the
desirability of the local schools and strict zoning, housing is very expensive in this town. Their
daughter would attend public schools. The Facts estimate that their monthly mortgage, taxes and
insurance would increase to $7,000 per month, while the cost of running automobiles would
increase 20% and other utilities 10%. Mortgage interest costs are tax deductible and the Facts are
in the 25% tax bracket. Assume that $700 of the increase in their monthly budget is for mortgage
interest. What are the costs and benefits of moving? Which can be quantified and which cannot?
124. Place the letter of the appropriate business function of the value chain in Column 2 in the
blank next to each cost item in Column 1.
125. Springfield Manufacturing produces electronic storage devices, and uses the following
three-part classification for its manufacturing costs: materials, labor, and support costs. Total
support costs for January were $300 million, and were allocated to each product on the basis of
labor costs of each line. Summary data (in millions) for January for the most popular electronic
storage device, the Big Bertha, was:
a. Compute the manufacturing cost per unit for each product produced in January.
b. Suppose production will be reduced to 30,000 units in February. Speculate as to whether the
unit costs in February will most likely be higher or lower than unit costs in January; it is not
necessary to calculate the exact February unit cost. Briefly explain your reasoning.
126. The list of representative cost drivers in the right column below are randomized with
respect to the list of functions in the left column. That is, they do not match.
Required:
Match each business function with its representative cost driver.