Managerial Accounting Solution-Chapter 3,Hilton - 10795 Words

CHAPTER 3 Product Costing and Cost Accumulation in a Batch Production Environment ANSWERS TO REVIEW QUESTIONS 3-1 (a) Use in financial accounting: In financial accounting, product costs are needed to determine the value of inventory on the balance sheet and to compute the cost-of-goods-sold expense on the income statement. b) Use in managerial accounting: In managerial accounting, product costs are needed for planning, for cost control, and for decision making. c) Use in cost management: In order to manage, control, or reduce the costs of manufacturing products or providing services, management needs a clear idea of what those costs are. (d) Use in reporting to interested organizations: Product cost†¦show more content†¦Under actual costing, applied overhead is the product of the actual overhead rate (computed at the end of the period) and the actual amount of the cost driver used. Under normal costing, applied overhead is the product of the predetermined overhead rate (computed at the beginning of the period) and the actual amount of the cost driver used. 3-10 When a single volume-based cost driver is used to apply manufacturing overhead, the managerial accountants primary objective is to select a cost driver that varies in a pattern similar to the pattern in which manufacturing overhead varies. Moreover, if a single cost driver is used, it should be some productive input that is common to all of the firms products. 3-11 The benefit of using multiple overhead rates is that the resulting product-costing information is more accurate and more useful for decision making than is the information that results from using a single overhead rate. However, the use of multiple cost drivers and overhead rates is more complicated and more costly. 3-12 The development of departmental overhead rates involves a two-stage process. In stage one, overhead costs are assigned to the firms production departments. First, overhead costs are distributed to all departments, including both service and production departments. Second, costs are allocated from the service departments to the production departments. At the end of stageShow MoreRelatedManagement Accounting: Information for Creating Value and Managing Resources9692 Words   |  39 PagesCHAPTER 1 MANAGEMENT ACCOUNTING: INFORMATION FOR CREATING VALUE AND MANAGING RESOURCES ANSWERS TO QUESTIONS 1.1 There are several possible answers to the question. QANTAS, the national airline of Australia, has faced a number of changes to the business environment in recent years, including deregulation of the domestic aviation industry. This resulted in increased competition as new firms attempted to enter the industry. 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