Assignment: Management Accounting
Question 1
Discuss some of the advantages and disadvantages of using the operating budget as a control device. You should support your discussion by readings and research evidence and real world examples.
Question 2
Go Lightly P/L reports the year-end information from 20X5 as follows:
Sales (100,000 units) $250,000
Less: Cost of goods sold 150,000
Gross profit 100,000
Operating expenses (includes $10,000 of Depreciation) 60,000
Net income $ 40,000
Michelle is developing the 20X6 budget. In 20X6 the company would like to increase selling prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold as a percentage of sales is expected to increase to 62%. Other than depreciation, all operating costs are variable.
Required:
a. Prepare a budgeted income statement for 20X6.
b. Explain how to reduce budgetary slack?
Question 3
Wilson P/L manufactures jackets and other wool clothing. A certain designed ski parka requires the following:
Direct materials standard 2 square yards at $13.50 per yard
Direct manufacturing labor standard 1.5 hours at $20.00 per hour
During the third quarter, the company made 1,500 parkas and used 3,150 square yards of fabric costing $39,375. Direct labor totaled 2,100 hours for $45,150.
Required:
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Question 4
a. Discuss whether all separable costs in joint-cost allocations are always incremental costs?
b. What revenue or expense amounts are necessary to make a sell-or-process-further decision and why? What items are irrelevant to the decision and why? Your discussion should be supported by readings and real world examples.