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Accounting for Decision Making and Control
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Solutions Manual For Accounting for Decision Making andControl 10th Edition By Jerold Zimmerman 9781259969492
ALL Chapters .
Opening Inventory + cost of production =? - ANSWER: Cost of Sales + Closing
Inventory
If inventory levels increase, which costing method would create the largest profit
and why? - ANSWER: Absorption Costing, because more of the costs incurred are
pushed into the next period
If inventory levels Decrease, which costing method would create the largest profit
and why? - ANSWER: Marginal Costing, Because more of the cost from the previous
period are set against income
If there is no change in inventory levels, which costing method would create the
largest profit? - ANSWER: Either, assuming that unit costs remain the same then
there will be no difference in profit
What happens if costs are under-absorbed? - ANSWER: The costs are debited to the
profit or loss statement
What happens if costs are over-absorbed? - ANSWER: The costs are credited to the
Profit or Loss statement
What are the main uses of management accounting? (3) - ANSWER: Planning
Monitor / Control
Decision making
What is stated in IAS2 regarding the valuation of inventory? - ANSWER: "..Valuation
of inventory requires that fixed and variable overheads are included as part of the
'cost of conversion'"
What is minimum price-setting? - ANSWER: The marginal cost that can be used as
the absolute minimum that can be charged per product or service to cover the costs
What is break-even Analysis? - ANSWER: The calculation of number of items or sales
value that will result in neither a profit or loss, this can be used as a base target.
What is the margin of safety? - ANSWER: This calculation shows how far away the
planned volume level is from the break-even volume.
What is contribution Analysis? - ANSWER: This calculation shows the profit
(contribution) per unit by deducting the variable costs from the selling price.
, What is 'What if?' Analysis? - ANSWER: A tool used to test outcomes from possible
scenarios.
How is the high-low method incorporated with stepped costs? - ANSWER: Difference
in cost - stepped increase
/
difference in units
How is the high-low method incorporated with quantity discount to variable costs if
you know the unit discount? - ANSWER: First you will have to calculate the costs with
the discount ignored. The divide the difference in cost by the difference in units.
You can less the unit discount from the result to give the variable cost per
discounted unit.
What is discounted cash flow? - ANSWER: A method used with long term decision
making which takes in to account the time-value of money. It converts cash flow to
present cash flow.
What is the initial rate of return? - ANSWER: The interest rate when applied to cash
flows from a project which results in a net present value of zero.
What is the net present Value? - ANSWER: Comparing the present values of all future
cash flows, the original cost is a negative, costs are positive. If the net present value
is negative this means that the outgoing cash flow is less than the incoming cash
flow,which means the project would be worthwhile.
What are the three types of standard costing? - ANSWER: Ideal
Attainable
Basic
What is Ideal standard costing? - ANSWER: Ideal standard makes no allowances for
inefficiency or wastage of labour or materials, which therefore assumes perfect
conditions
What is Attainable Standard costing? - ANSWER: Attainable standard allows for a
small amount of normal wastage and inefficiency, but is set at a level that is
considered to be a challenging target based on current conditions
What is Basic Standard costing? - ANSWER: Basic standard is a historical (out-of-
date) standard that allows comparisons to be carried out over long periods.
What are current standards? - ANSWER: Current standards are base on current
conditions
What are 'normal' standards? - ANSWER: Normal standards are set at the expected
level under normal conditions
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