ACCT3001 Additional Questions 2024
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Curtin University
School of Accounting, Economics and Finance
ACCT3001 Accounting, Behaviour and Control
Additional Questions
Semester 1, 2024
Page 1
of 12
AQ-1
The following items are used to describe various economic characteristics of costs. a.
Opportunity cost
b.
Out-of-pocket cost
c.
Sunk cost
d.
Differential cost
e.
Marginal cost
f.
Average cost
Required:
Choose one of the terms listed above to characterise each of the amounts described below:
1.
The cost of feeding 500 children in a public-school cafeteria is $800 per day, or $1.60 per child
per day. What economic term describes this $1.60?
2.
The cost of including one extra child in a day-care centre. 3.
The cost of merchandise inventory purchased two years ago, which is now obsolete.
4.
The management of a high-rise office building uses 2,500 square feet of space in the building
for its own management functions. This space could be rented for $250,000. What economic
term describes this $250,000 in lost rental revenue? 5.
The cost of building an automated assembly line in a factory is $800,000. The cost of building a
manually operated assembly line is $375,000. What economic term is used to describe the
difference between these two amounts?
6.
Referring to the preceding questions, what economic term is used to describe the $800,000 cost
of building the automated assembly line?
7.
The cost incurred by a mass customizer such as Dell Computer to produce one more unit in its
most popular line of laptop computers. Page 2
of 12
AQ-2
You just started a summer internship with the successful management consulting firm of Kiri,
Spock and McCoy. Your first day on the job was a busy one, the following problem was
presented to you.
FastQ Company, a specialist in printing, has established 500 convenience copying centers throughout
the country. In order to upgrade its services, the company is considering three new models of laser
copying machines for use in producing high-quality copies. These high-quality copies would be
added to the growing list of products offered in the FastQ shops. The selling price to the customer
for each laser copy would be the same, no matter which machine is installed in the shop. The three
models of laser copying machines under consideration are 1024S, a small-volume model, 1024M, a
medium-volume model; and 1024G, a large volume model. The annual rental costs and the
operating costs vary with the size of each machine. The machine capacities and costs are as follows:
Copier Model
1024S
1024M
1024G
Annual capacity (copies)……………………
100,000
350,000
800,000
Costs:
Annual machine rental ……………………….
$8,000
$11,000
$20,000
Direct material and direct labor……………..
0.02
0.02
0.02
Variable overhead costs………………………
0.12
0.07
0.03
1.
Calculate the volume level in copies where FastQ Company would be indifferent to
acquiring either the small-volume model laser copier, 1024S, or the medium-volume
model laser copier, 1024M.
2.
The management of FastQ Company is able to estimate the number of copies to be sold at
each establishment. Present a decision rule that would enable FastQ Company to select
the most profitable machine without having to make a separate cost calculation for each
establishment. (Hint: to specify a decision rule, determine the volume at which FastQ
would be indifferent between the small and medium copiers. Then determine the volume at
which FastQ would be indifferent between the medium and large copiers.)
Page 3
of 12
AQ-3
Part A.
Define the nature of a cost-leadership strategy. Identify the types of control systems that are
appropriate for firms pursuing a cost leadership strategy.
Part B.
Define product differentiation and discuss the role that customer perceptions play in product
differentiation.
Part C.
Fowler’s Farm is a 1,000 acre dairy and tobacco farm located in Southern Virginia. Jack Fowler,
the owner has been farming since 1982. He initially purchased 235 acres and has made the
following purchases since then: 300 acres in 1985, 150 acres in 1988, dairy equipment and
buildings worth $350,000 in 1988, and 315 acres in 1998. The cost of farmland has inflated over
the years so that, although Jack has a total investment of $1,850,000, the land’s current market
value is $2,650,000. The current net book value of his buildings and equipment is $300,000, with an
estimated replacement cost of $1,250,000. Current price pressures on farm commodities have
affected Fowler’s Farm as well as others across the country. Jack has watched as many of his
neighbours either have quit farming or have been consolidated into larger, more profitable farms.
Fowler’s Farm consists of three different operating segments: dairy farming, tobacco and corn
and other crops intended for livestock feed. The dairy farm consists of 198 milk-producing cows
that are grazed on 250 acres of farmland. The crop farm consists of the remaining acreage that
covers several types of terrain and has several types of soil. Some of the land is high and hilly,
some of it is low and claylike, and the rest is humus-rich soil. Jack determines the fertilizer mix
for the type of soil and type of crop to be planted by rules of thumb based on his experience.
The farm equipment used consists of automated milking equipment, six tractors, two tandem-
axle grain bed trucks, and numerous discs, plows, wagons, and assorted tractor and hand tools.
The farm has three equipment storage barns, an equipment maintenance shed, and a 90,000
bushel grain elevator/drier. The equipment and buildings have an estimated market value of
$1,500,000.
Jack employs five full-time farmhands, a mechanic and a bookkeeper and has contracted part
time accounting/tax assistance with a local CPA firm in Pittsboro. All employees are salaried;
the farmhands and the bookkeeper make $25,000 a year, and the mechanic makes $32,000
annually. The CPA contract costs $15,000 a year.
In 2006, the farm produced 256,000 gallons of raw milk, 23,000 bushels of tobacco, and 75,300
bushels of corn. Jack sells the tobacco by contract and auction at the end of the harvest. The
revenue in 2006 was $1,345,000, providing Jack a net income after taxes of $233,500.
Jack’s daughter, Kelly, has just returned from college. She knows that the farm is a good business and
believes that the use of proper operating procedures and cost management systems could increase Page 4
of 12
profitability and improve efficiency, allowing her father to have more leisure time. She also knows that her father has always run the farm from his experience and rules of thumb and is wary of scientific concepts and management principles. For example, he has little understanding of the accounting procedures of the farm, has not participated in the process and has adopted few, if any, methods to maintain control over inventories and equipment. He has trusted his employees to maintain the farm appropriately without using any accounting or operating procedures over inventories or equipment, preventative maintenance schedules, or scientific application of crop rotation or livestock management.
Required:
Identify and briefly describe the competitive strategy for Fowler’s Farm and explain your choice.
(Blocher, E., Juras, P.E. and Smith, S.D. 2022. Cost Management: A Strategic Emphasis 9th Ed)
AQ-4
An effective budget converts the goals and objectives of an organization into data. The budget serves as
a blueprint for management’s plans. The budget is also the basis for control. Management performance can be evaluated by comparing actual results with the budget.
Thus, creating the budget is essential for the successful operation of an organization. Finding the resources to implement the budget – that is, getting from the starting point to the ultimate goal – requires the extensive use of human resources. How managers perceive their roles in the process of budgeting is important to the successful use of the budget as an effective tool for planning, communication, and controlling.
Required: 1. Discuss the behavioral implications of planning and control when a company’s management employs
a. a top-down budget approach
b. a bottom-up budget approach
2. Communication plays an important role in the budgetary process, whether a top-down or a bottom-
up budget approach is used.
a. Discuss the differences between communication flows in these two budgetary approaches.
b. Discuss the behavioral implications associated with the communication process for each of the budgetary approaches.
(Hansen & Mowen, 8
Th
Ed, question 8-19)
Page 5
of 12
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Related Questions
11. Choose the scope of cost accounting that is primarily prepared for different level of management.
a.Cost accounting
b.Cost reports
c.Cost analysis
d.Cost comparison
12. according to which method of pricing, issues are made with the current market price.
a.First in first out
b.Simple average
c.Weighted average
d.Last in first out
arrow_forward
В.
Explain the following: Product costs and Period costs and one example of each.
Distinguish clearly between Financial Accounting and Management Accounting under 3
(THREE) different factors, which are: i. Stakeholders, ii. Time frame and iii. Regulations.
С.
Before calculating costs we need to understand how different costs behave. In cost
accounting we typically classify costs by three types of behaviour: Fixed costs - costs
which don't change as the activity level changes Variable costs - costs which change in
direct proportion to changes in the activity level Semi-variable costs- costs which have
both fixed and variable elements. Explain the purpose classifying costs into the behavior
patterns.
D.
arrow_forward
question 1
cost accounting
choose from the choices
arrow_forward
Chapter 21: Cost Behavior and Cost-Volume-Profit Analysis
Requirement 1:
Please explain variable, fixed, and mixed costs. and provide one example of each.
arrow_forward
Problem 6
Listed below are several costs incurred by the loan department of J P Morgan and
Chase Bank. For each cost, indicate which of the following classification best describe
the cost. More than one classification may apply to the same cost item.
Cost classification
Controllable by the loan department
Uncontrollable by the loan department
Direct cost of the loan department
Indirect cost of the loan department
а.
b.
C.
d.
е.
Differential cost
Marginal cost
g. Opportunity cost
f.
h.
Sunk cost
i.
Out-of-pocket cost
Cost items
Salary of the loan department manager
Salary of a loan department clerk
Cost of office supplies used in the loan department
Cost of the department's personal computer purchased by the department
manager last year.
Cost of general advertising by the bank, which is allocated to the loan
department.
Revenue that the loan department would have generated for the bank if a
branch loan office had been located downtown instead of in the next province.
Difference in the…
arrow_forward
Which one is Variable cost
Select one:
a. salaries
b. Direct material
c. Rent
d. Insurance
arrow_forward
QUESTION 2
Identify on which financial statement these costs originally appear.
Period Costs
✓ Product Costs
A. Income Statement
B. Balance Sheet
arrow_forward
Explain the following basic principles in cost management:a. profitsb. life cycle costsc. tangible cost and benefitsd. intangible costs and benefitse. direct and indirect costsf. reserves
arrow_forward
QUESTION 40
Cost AccountingChoose the answer from the choices
arrow_forward
Case 1-26 (Algo) Cost Classification and Cost Behavior [LO1-1, LO1-2, LO1-3, LO1-4]
The Dorilane Company produces a set of wood patio furniture consisting of a table and four chairs. The company has enough
customer demand to justify producing its full capacity of 4,100 sets per year. Annual cost data at full capacity follow:
Direct labor
Advertising
Factory supervision
Property taxes, factory building
Sales commissions
Insurance, factory
Depreciation, administrative office equipment
Lease cost, factory equipment
Indirect materials, factory
Depreciation, factory building
Administrative office supplies (billing)
Administrative office salaries
Direct materials used (wood, bolts, etc.)
Utilities, factory
$ 89,000
$ 104,000
$ 66,000
$
22,000
$
58,000
6,000
2,000
$
$
12,000
$ 16,000
$ 102,000
$
Required 1 Required 2 Required 3
3,000
$ 106,000
$ 434,000
$ 46,000
Required:
1. Enter the dollar amount of each cost item under the appropriate headings. Note that each cost item is classified in two…
arrow_forward
Question 2
Managers must classify all costs as either product costs or period costs to:
Measure operating income for an accounting period.
Predict future costs at an expected level of activity.
O Assign costs to operating segments.
Choose between alternative courses of action.
arrow_forward
What is cost-efficiency according to:
1. Profit Projection
2. Cost estimates
arrow_forward
Question Content Area
Which of the following graphs in Figure 1 illustrates the behavior of a total variable cost?
arrow_forward
Question 6.1
For each item listed, select the appropriate purpose of cost allocation from the list below. A purpose may be used more than once.
A - To provide information for economic decisions
B - To motivate managers and other employees
C - To measure income and assets for reports to external parties
D - To justify costs or compute reimbursement amounts
Required
To encourage simpler product design
To cost inventories for reporting on a company's tax return
To encourage the sales department to focus on high-margin products
To evaluate a make or buy decision
To cost inventories for the balance sheet
To decide whether to add or delete a product line
To decide on an appropriate selling price for a special-order product
To cost a product at a fair price for government contracts
arrow_forward
1. Multiple-Choice Question - FIFO
When using FIFO,
A) Identical costs go to the balance sheet and the income statement.
B) Management uses average costs to assign to the balance sheet and the income statement.
C) Older costs go to the income statement; newer costs go to the balance sheet.
D) Older costs go to the balance sheet; newer costs go to the income statement.
Explain for the answer chosen please.
arrow_forward
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