...MANAGEMENT ACCOUNTING FOR FINANCIAL SERVICES – Stage-III ISQ Examination (Summer-2008) Q.1 Please write the alphabate of selected choice in the answer column: Q.2 (A) Classify the following costs as fixed (F) , variable (V) or semi-variable (SV). (05) Q.2 (B) Standard cost for Wahab Corporation are listed below: direct materials price direct material efficiency direct labor price direct labor efficiency variable factory overhead fixed factory overhead application rate (25) (02) Rs. 10 per pound 3 pounds per unit Rs. 12 per direct labor hour 4 direct labor hours Rs. 2.20 per direct labor hour Rs. 5 per direct labor hour What is the total standard cost per unit? A) C) Q.3 Rs. 106.80 Rs. 122.60 B) D) Rs. 114.40 Rs. 128.20 The United Corporation currently earns Rs.10,000,000 before interest and taxes. The Corporation’s management is planning an expansion for its production facilities at an estimated cost of Rs.25,000,000 which would increase its earning before interest and taxes to Rs.13,750,000. The necessary finance can be raised either by issuing Term Finance Certificates with a interest rate of 9% or by issuing 781,250 shares. The Corporation’s shares currently has a P/E ratio of 15 which would persist if additional shares were sold. The Term Finance Certificates would reduce the P/E to 13. The Corporation’s current balance sheet and income statement are as follows: Fixed assets Current assets Less:...
Words: 1541 - Pages: 7
...Accounting Theory Philosophy of PAT Million Friedman championed positive theories in economics. He stated that: (part 3 Empirical Research in Accounts of Accounting theory from Jayne Godfrey) The ultimate goal of positive science (i.e. INDUCTIVE) is • The development of a ‘theory ‘ or ‘hypothesis’; • that yields valid and meaningful “Predictions’ • about phenomena not yet “observed”. Consistent with Friedman’s view, Watts and Zimmerman asserts that: The objective of “positive accounting theory” is to “explain” and “predict” accounting practice. • “Explanation” means providing reasons for observed practice. For example, positive accounting theory seeks to explain why firms continue to use historical cost accounting and why certain firms switch between a numbers of accounting techniques. • “Prediction” of accounting practice means that the theory predicts “unobserved phenomena”. Watts and Zimmerman start their book with a fundamental statement of The Role of Theory (Chapter 1).They asserts that the objective of positive accounting theory is to explain and predict accounting practice,(p.2) “Unobserved phenomena” are not necessarily future phenomena; they include phenomena that have occurred, but on which systematic evidence has not been collected. For example – Predicting the reaction of firms to a proposed accounting standard and an explanation of why firms would lobby for and against such a standard, even though the standard has...
Words: 2421 - Pages: 10
...1. (a) Joe Delong is not sure about the difference between cost accouting and a cost accounting system. Explain the difference to Joe. Answer: Cost accounting involves the measuring, recording, and reporting of product costs. A cost accounting system consists of manufacturing cost accounts that are fully integrated into the general ledger of a company. (b) What is an important feature of a cost accounting system? Answer: An important feature of a cost accounting system is the use of a perpetual inventory system that provides immediate, up-to-date information on the cost of a product. 2. (a) Distinguish between the two types of cost accounting systems. Answer: The two principal types of cost accounting systems are: (1) job order cost system and (2) process cost system. Under a job order cost system, costs are assigned to each job or batch of goods; at all times each job or batch of goods can be separately identified. A job order cost system measures costs for each completed job, rather than for set time periods. Under a process cost system, product-related costs are accumulated by or assigned to departments or processes for a set period of time. Job order costing lends itself to specific, special-order manufacturing or servicing while process costing is better suited to similar, large-volume products and continuous process manufacturing. (b) May a company us both types of cost accounting systems? A company may use both types of systems. For example, General Motors...
Words: 478 - Pages: 2
...Utilising different labour from standard; Price changes due to economic conditions; scarcity of supplies; Choosing to incur additional discretionary fixed costs; More (or less) overtime hours used than budgeted. 2. Efficiency/usage/quantity variances: Standard is out of date, set without due care; Inefficient use of material/labour, deliberate or otherwise; Poor supervision/equipment/maintenance.Changes in the production process.Learning period associated with process changes.Efficiencies from different quality of material or labour from standard; More efficient manufacturing than expected in the standard; Materials not being available causing idle time; Poor production scheduling; Industrial disputes; Materials not properly recorded in and out of storeroom. 3.Fixed overhead volume: Standard is out of date; Standard set without due care, i.e. poor estimation of denominator activity; Any occurrence causing the firm to produce a number of units different from budgeted production. Standard costing is an acceptable method of valuing inventories under AASB102 provided the following requirements satisfied: results approximate actual ; normal levels of materials, labour, efficiency, capacity; variances treated appropriately Standard costing involves: Determining the std cost of DM, DL (as above) and OH; and Entering those amounts on the job cost sheets and through MATERIALS, WIP, FG and COGS. Budgeted qty (BQ) means the qty (of material, labour etc) we: should have used for units we expected...
Words: 3492 - Pages: 14
... Financial accounting Cost accounting Revenue cycle Question 2 20 out of 20 points In accouting, Duality means: Selected Answer: Assets = Liabilities + Equity Answers: Assets = Equity Equity = Assets + Liabilities Assets = Liabilities + Equity Liabilities = Equity + Assets Question 3 In ________________, transactions are recognized when that are received or paid. Selected Answer: Cash accounting Answers: Stable monetary unit Cash accounting Accrual accounting Duality Question 4 20 out of 20 points Money the organization spends to maintain and grow operations is called: Selected Answer: Expenses Answers: Liabilities Assets Revenue Expenses Question 5 0 out of 20 points A laboratory purchases a microscope, on credit, for $50,000. The result would be an increase of $50,000 in _________________ and an increase of $50,000 in ____________________. Selected Answer: Liabilities, Equity Answers: Assets, Equity Assets, Liabilities Liabilities, Equity Assets, Equity Question 1 | | | Which of the following is the primary goal of a not-for-profit healthcare organization? | | | | | Selected Answer: | To serve the community throught he provision of health care services. | | | | | Question 2 | | | Washington County Hospital has the lowest cost of any hospital in its region...
Words: 829 - Pages: 4
...Introduction There is an increasing trend that more timely and sophisticated financial information are required by the general public as well as owners and managers. There are two possible solutions to this increasing demand. Either let the market force decides what information to be supplied or through regulations. It is more than evident that accounting standard setting is becoming highly regulated all over the world. The question is whether a free-market approach to standard setting should be adapted? Free Market Approach Free market approach to standard setting basically means eliminating regulations and relying on the ‘invisible hands’ to guide the supply of financial information. This is based on the assumption that markets are efficient and there will be incentives to encourage the managers to disclose financial information, including bad news. One of the major incentives is to gain access to capital market. When investors don’t have a certain level of information to gain confidence in the entity, they require a higher rate of return to compensate the risk they are bearing. In order to avoid paying a higher price for capital, managers will have incentives to voluntary disclose financial information. Interestingly, advocates argue that manager also have incentives to disclose bad news. This can be explained in a in the used car market. Sellers of used cars tend to disclose as much as information as they can, including the existing problems of the car. Not like a...
Words: 958 - Pages: 4
...Material Cost Classifications Consult Ch. 6 & 7 of Health Care Finance and other sources to complete the form. This worksheet requires you to match the definitions and examples of types of cost, and the types of centers where costs occur. Part 1: For each term in Column A, select the correct definition from Column B on the right. Write the corresponding letter of the definition next to the term. Column A F 1. Indirect costs A 2. Direct costs D 3. Fixed costs I E H B C G 4. Variable costs 5. Step-fixed costs 6. Responsibility centers 7. Revenue centers 8. Cost centers 9. Shadow cost centers Column B – Definitions A. Costs incurred directly as a result of providing a specific service or good B. Centers charged with controlling costs and generate revenue C. Have no revenue budget and no obligation to earn revenue D. Costs that do not vary as service volume varies E. Fixed over some range of service volume, but rise to a new level for a higher range of service volume F. Costs that cannot be tied directly to the patient’s stay in the bed G. Exist as budgets on paper only H. The places where costs occur and have budgets I. Costs that change as volume changes Part II: For each real-world example, select the correct term from the list on the left. Write the corresponding letter of the real-world example next to the term. Column A K 1. Indirect costs M 2. Direct costs P 3....
Words: 423 - Pages: 2
...Value Chain Business 1_ Introduction: The concept and benefits of Value Chain Analysis in preparing business strategies: To survive in today's highly competitive business environment, any organization must achieve, at least temporarily, a competitive advantage. A low cost/price strategy: focuses on providing goods, services at a lower cost than the competition. This strategy requires as well a tight cost-control system, benefiting from economies of scale in production and experience curve effects. Differentiation strategies: The firm ability to offer products and services that are perceived by the customer as being superior and unique relative to those of its competitors like Coca-Cola in the soft drink industry...... A value chain can be described as the key activities engaged in by the organisation or industry.: Value chain analysis may benefit an organisation in a number of ways including: - Value chain framework: complements other recent initiatives like strategic cost management, which refers to the simultaneous focus on reducing costs and strengthening an organisation's strategic position. This commonly involves taking a longer-term view of cost management and decision making - Provides a foundation for strategic alliance decisions. A value chain framework serves as the foundation for considering decisions such as outsourcing of particular parts of the value chain and for considering the formation of strategic alliances with say a distributor. In this way, the...
Words: 3025 - Pages: 13
...year” There is a demand Incomes and populations have increased Pros and Cons PROS Income Educational People-oriented Fun CONS Cost Marketing People business Liability . . . Regulations Long hours Labor Management Different Agritainment Steps to Consider: Goals and philosophies (profit vs. non-profit) Market research . . . Market development People skills Site selection Liability Regulations Labor Finances What to offer? Agritainment Enterprises should be considered, evaluated and planned carefully . . . with as much vigor as any new enterprise What to offer: Bed & Breakfast Pick-Your-Own Hay Rides Maze (hay, corn, sudan) Pumpkin Patch Orchard Tours Petting Zoo General Store Workshops & Seminars Festivals Camps Trails Cabins Picnic Barnyard Olympics Museums Games Options? “List all the things others have done . . . then challenge yourself to create that many more new ones” Targeted Audience: Tourists Locals Groups Groups to Target? School Day Care Church Seniors Civic Clubs Others? Targeting Elementary School Groups UT Extension Publication - - PB 1669 Survey of Elementary School Teachers Results of Survey: Likelihood to take farm field trip? Number of field trips taken? Number of students/adults per trip? Maximum distance to travel? Cost limitations for trips? Willingness to pay? When trips are planned . . . and taken? How trips are selected Important factors when selecting...
Words: 320 - Pages: 2
...according to Hubspot, cost 62% less than leads from outbound marketing. But don’t expect that cost advantage to last. One of two things is happening: Inbound isn’t really more cost effective. Maybe Hubspot’s sample is biased or methodology is bad, but for whatever reason, the 62% isn’t true. Inbound really is more cost effective today and early adopters are reaping the benefit. If reports of inbound marketing’s cost effectiveness are wrong, then inbound today may be far more expensive than Hubspot’s research indicates. If not, it will be soon. THE COST OF INBOUND MARKETING: AN ECONOMICS PRIMER Remember the old supply and demand curves from Economics 101? Here is the Cliff Notes version you need for today: Price will eventually be set where the supply and demand curves meet in a competitive market. Supply increases as cost increases, while demand decreases. Inbound and outbound marketing can be substitutes for each other. The utility (value) of perfect substitute products will eventually be equal as demand shifts from one product (outbound) to another product (inbound) in order to equalize value. This shifts the demand curve for inbound out, increasing the cost to marketers, until the value of outbound and inbound are in equilibrium. HOW INBOUND MARKETING COSTS WILL INCREASE If inbound is more cost effective, investment will shift from outbound marketing to inbound marketing. As investment shifts, we will see at least three changes that drive up the cost of inbound marketing: ...
Words: 407 - Pages: 2
...that can effectively hire strong candidates and keep them on staff add value to their business over the long run” (Staffing issues, para. 1). Employee turnover is very costly to an organization. Employees are a valuable resource and when a qualified employee leaves a company, the productivity, efficiency, and profits of that company will be affected. Calculations by retention/turnover experts that it costs a company 150% of an employee’s base salary to replace him or her. For example, it will cost $90,000 to replace a $60,000 a year employee when costs for recruiting, interviewing, training, and lost productivity are taken into consideration (“How Managing Employee Turnover Impacts the Bottom Line,” 2005). Although employee turnover can have a major impact on the financial bottom line of a company, the same could be said for keeping low-performing employees. Instead of merely retaining employees for the sake of keeping the turnover rate low, attention should also be given to the type of employee who is desirable for the company. Proper documentation of costs and savings produced by employee turnover can result in financial gains that supersede any losses incurred (Braun Consulting, 2005). The best way to manage turnover may not be just trying to keep it as low as possible. Perhaps the optimal approach to managing turnover is...
Words: 398 - Pages: 2
...related) Explicit costs: payment made to outside suppliers of inputs e.g. salaries/wages, raw material, overhead costs implicit costs: do not involve direct payment of money, sacrifice of some alternative e.g. salary forgone/interest forgone (factors are already owned by firm) accounting cost: explicit cost economic costs → opportunity cost to society (explicit + implicit costs) traditional objective = profit maximization profit = revenues – cost. Non traditional objectives - received decent dividend - maximize long term value of omapny - maximize own utility: salary, status, power, professional excellence - aim to maximize short run TR /LR TR - maximize growth in sales volume PRODUCTION IN THE SHORT RUN To increase production of g/s, need to employ more FOP Short run → time period over which there is at least 1 fixed factor. Cannot increase level of production by altering fixed factors. Variable factors can be increased in supply in SR Long run → time period long enough for all FOP to be varied Law of diminishing marginal returns - as more units of a variable factor are applied to a given quantity of a fixed factor, there is a point beyond which the extra output from add. Units of factor will eventually diminish - output will eventually increase by a smaller amt - fixed factor will be used up - overcrowding FOP due to worsening factor combination FIXED COST - even if output is 0 TOTAL FIXED COST - sum of all COP...
Words: 1216 - Pages: 5
...success lies in providing beers to a particular beer market. The idea is a small, regional, niche market with a focus on customers which enjoy craft brewed, quality beers, as opposed to a large mainstream high volume business catering the majority of the beer drinking public. The process of brewing beer, whether it is on a large scale or small, is the same. The main components of direct materials used to produce beer are; hops, barley, select spices and water. Because these ingredients are grown naturally and supply can changes based on growing conditions, they are a commodity, resulting in price fluctuations depending on demand and the health of the crop in a growing season. The commodity nature of these ingredients, effects the way in which cost are accounted for. In this small brewing company, the direct labor consists of eight employees that help with brewing and packaging process and two mangers responsible for production process. In the packaging process components to consider as direct materials are going to...
Words: 883 - Pages: 4
...is aimed to meet customers needs, and logistics is part of it * Customer Service Level: how rapidly and dependably a firm can deliver what the customer wants * Don’t care how it got there * Physical Distribution is (and should be) a art of marketing that is “invisible” to consumers * Only catches their attention when something is wrong (too late) * Those in U.S. don’t think much about it * Market-directed macro-marketing system is working pretty well * Trade-offs of costs, service, and sales * Most people want the best service at the lowest prices (not possible) * IT has lead to improve d service levels and lower costs * Better information makes logistics easier to coordinate Physical Distribution Concept Focuses on the Whole Distribution System Physical Distribution Concept: says that all transporting, storing, and product- handling activities of a business and a whole channel systemshould be coordinated as one system that seeks to minimize cost of distribution for a given customer service level * Cant be...
Words: 1674 - Pages: 7
...materials necessary to complete a task 2) Why aren't resources assigned to summary tasks? Summary tasks are simply a grouping for a set of related tasks. The indiv tasks require resources but the summary task is just a compilation of those resources. 3) What is the difference between Start, Prorated and End in association with costs? Start – cost applied at the beginning of the task Prorated – cost applied as work is completed End – cost applied when the task is completed 4) Give a real-world example of the difference between a fixed cost and a cost per use? Give a real-world example of the difference between a fixed cost and a cost per use? Fixed Cost: (buy equipment) company bids $500 to clean carpet, cost of airline ticket… Cost Per Use: (rent equipment) Hourly rate on moving van, rental of shampoo machine, landing fee each time plane lands… 5) Why is a fixed cost entered with the task and not the resource? Because the cost is the same no matter how many people, hours, materials used. Not dependent upon the amount of time or number of resources it takes to complete. 6) Why is the resource cost for the Wiring Contractor $0.00? Because the installation of the wiring is a fixed contractual price of $4000 – it will not matter how many hours the contractor takes – still the same price. 7) Which resource is Overallocated and why? Systems Administrator, scheduled to work more than 8 hours in a day…For example: 12/5 scheduled...
Words: 283 - Pages: 2
