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# Write a Well-Planned Narrative Answer to the Following Discussion

Discussion Question 1_01

Instructions

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Chapters 2 and 3 introduce you to basic cost behavior, cost-volume relationships, and ways to measure cost behavior. Based on these readings, perform the following. (25 points) (A 1½-page response is required.)

1. Complete a solution set for Fundamental Assignment Material – Exercise 2-A1, “Cost-Volume-Profits and Vending Machines” (p. 66). Be sure to show or explain how you arrive at each answer.
2. Complete the Cognitive Exercises 3-25, 3-26, 3-27, and 3-28 (p. 113).

3-25 Mixed Costs And The Sales Force

Wysocki Company Pays Its Sales Force A Fixed Salary Plus A 5 Commission On All Sales Explain Why Sales Force Costs Would Be Considered A Mixed Cost

3-26 Committed and Discretionary fixed costs in manufacturing

Among the fixed cost of Howarth company are depreciation and research and development (R&D).  Using these two costs as examples, explain the difference between committed and discretionary fixed costs.

3-27 Cost Functions and Decision Making

Why is it important that decision makers in corporation know the cost function for producing the companies’ products?

3-28 Statistical Analysis and Cost Functions

What advantages does using regression analysis have over the visual-fit method for determining costs functions?

Discussion Question 3_07

Instructions

The Enriquez Machine Parts Company Case in Chapter 13 (pp. 530-539) illustrates the use of a job-order costing system. Review the sources documents, the flow of costs (Exhibit 13-2, p. 531), the analysis of transactions, and the accounting for factory overhead, including budgeted overhead application rates and the disposition of under- and over-applied overhead for an understanding of a job-order costing system.

Complete Problem 13-37 (p. 554) on the job-costing system at Dell Computer. Supplement the requirements for this problem by visiting Dell Computer’s Web site (www.dellcomputers.com) for additional information about this company’s products and cost management system to help you respond to the questions. In addition, answer the question “What is a “job” at Dell Computer?” (25 points) (A 1½-page response is required.)

13-37 Job Costing at Dell Computer

Dell Computer Corporation’s manufacturing process at its Austin, Texas, facility consists of assembly, functioning testing, and quality control of the company’s computer systems.

Instructions

Complete Problem 8-43 (p. 342) on the Zurich Chocolate Company. (25 points) (A 1½-page response is required.)

Discussion Question 4_11

Instructions

Case 8-53 (pp. 347-348) is an application to assess your ability to work with flexible budgets. This case provides budgetary information about Springfield Community Hospital, an outpatient clinic. This is a good example of the use of a flexible budget for analyzing performance at a service sector organization. Use the information in the narrative and the supporting schedules to answer the “Required” questions. (25 points) (A 1½-page response is required.)

Discussion Question 5_12

Instructions

Decentralized operations provide unique challenges for organization-wide management. A key cost figure for decentralized operations is transfer pricing across divisions. A transfer price can be based on cost, market-based, variable, or negotiated prices. Attention to behavioral aspects of managing the organization is critical to overall performance.

The key financial measures of performance include return on investment (ROI), residual income (RI), and economic value added (EVA). Please review the material on measures of profitability on pages 407-416, including the discussion of invested capital, asset allocation to division, and gross versus net value of assets to prepare for the discussion questions. See the “Summary Problems for Your Review” on page 417 of the text for an example of ROI and EVA analyses with a solution set. Then complete Problem 10-44 pg 430 these three financial measures. (25 points) (A 2-page response is required.)

Discussion Question 5_13

Instructions

Complete Problem 10-45 (p. 430). (25 points) (A 1-page response is required.)

Discussion Question 6_15

Instructions

For this discussion question, you need to complete Problems 5-53 (pp. 220-221) and 5-55 (pp. 221-222). First, however, you need to perform the following before completing the problems. (40 points) (A 1-page answer is required.)

As a prerequisite to the use of financial information as a basis for managerial decision-making, you must be familiar with the notion of relevance. Relevant information is the predicted future costs and revenues that will differ among the alternatives. For example, sunk costs are always irrelevant; opportunity costs are always relevant. You will examine several decision contexts for the use of financial information within an organization. A decision model is beneficial as a frame of reference. Exhibit 5-1 (p. 184) looks at the decision process and the role of information.

Another important topic is pricing. Read about the concept of pricing, general influences on pricing in practice, and the role of costs in pricing decisions. The traditional bases for pricing have included cost and cost-plus methodologies. The base for cost-plus pricing can be variable cost, fixed cost, total manufacturing cost, or full cost. See Exhibit 5-8 (p. 199) for an illustration of these cost-plus bases for pricing.

The target costing process is diagrammed in Exhibit 5-11 (p. 204). The ITT Automotive case provides a step-by-step example of the target costing methodology. See the “Summary Problem for Your Review” (Custom Graphics, p. 207) and the “Business First” inset (p. 206) for more examples of the use of relevant financial information for making marketing decisions.

Another important topic is pricing. Read about the concept of pricing, general influences on pricing in practice, and the role of costs in pricing decisions. The traditional bases for pricing have included cost and cost-plus methodologies. The base for cost-plus pricing can be variable cost, fixed cost, total manufacturing cost, or full cost. See Exhibit 5-8 (p. 199) for an illustration of these cost-plus bases for pricing.

The target costing process is diagrammed in Exhibit 5-11 (p. 204). The ITT Automotive case provides a step-by-step example of the target costing methodology.

See the “Summary Problem for Your Review” (Custom Graphics, p. 207) and the “Business First” inset (p. 206) for more examples of the use of relevant financial information for making marketing decisions.

Discussion Question 6_16

Instructions