Variable Cost

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The University of Business and International Studies Geneva, Switzerland.

COURSE TITLE:

ACCOUNTING FOR DECISION MAKING
Student : NGUYEN THANH DAM

COURSE CODE:
Accounting for decision making – final assigment

Lecturer: Pham Quang Huy
Page 1

ACCT 601

UBIS INTAKE 2012 - 2013

The University of Business and International Studies Geneva, Switzerland.

PROBLEM
Part 1: Optional Section In this part, the learners have to choose four of eight questions for answering. If you give the right responses, you will obtain 2.5 marks per one statement (i.e. this part is for 10 marks). 1. Why is adherence to ethical standards important for the smooth functioning of an advanced market economy? 2. Briefly describe what is meant by enterprise risk management. 3. Describe what is meant by a “pull” production system. 4. Describe the schedule of cost goods manufactured. How does it tie into the income statement? 5. Why are product costs sometimes called inventoriable costs? Describe the flow of such costs in a manufacturing company from the point of incurrence until they finally become expenses on the income statement. 6. Is it possible for costs such as salaries or depreciation to end up assets on the balance sheet? Explain. 7. “The variable cost per unit varies with output, whereas the fixed cost per unit is constant.” Do you agree? Explain. 8. Only variable costs can be differential costs. Do you agree? Explain. Part 2: Compulsory Section Problem 1 (15 marks) Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before finalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the financial reporting for there test stores, and she and other management personnel were offered bonuses based on the sales growth and financial of these stores. While completing the financial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the financial results and their bonuses. Required Accounting for decision making – final assigment Page 2

The University of Business and International Studies Geneva, Switzerland.

a. According to the IMA’s Statement of Ethical Professional Practice, would it be ethical for Perlmand not to report the inventory as obsolete? b. Would it be easy for Perlman to take the ethical action in this situation? Problem 2 (30 marks) Builder Products, Inc., manufactures a caulking compound that goes through three processing stages prior to completion. Information on work in the first department, Cooking, is given below for May:

Production data: Pounds in process, May 1; materials 100% complete; conversion 80% complete ……………………………….. Pounds started into production during May………………... Pounds completed and trasferred out………………………. Pounds in process, May 31; materials 60% complete; conversion 20% complete………………………………... Cost data: Work in process inventory, May 1;………………………… Materials cost…………………………………………….. Conversion cost ………………………………………….. Cost added during May: Materials cost…………………………………………….. Conversion cost………………………………………….. The company uses the weighted-average method. Required

10,000 100,000 ? 15,000 $1,500 $7,200 $154,500 $90,800

a. Compute the equivalent units of production. b. Compute the costs per equivalent unit for the month. c. Determine the cost of ending work in process inventory and of the units transferred out to the next department. d. Prepare a cost reconciliation report for the month.

Problem 3 (25 marks) Weston Products manufactures an industrial cleaning compound that goes through three processing departments-Grinding, Mixing, and Cooking....
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