Reference no: EM132530760

ACCT-304 Intermediate Managerial Accounting - A'Sharqiyah University

Question 1. You have been asked to provide the managing director with an approximate cost function for the entity's activities, and it must be done by this afternoon. Some members of the board of directors want to understand why performance varies so much across store locations. They have asked for a quick analysis today and want a more detailed analysis next week. Which cost estimation technique(s) should you consider using? Explain.

Question 2. You are about to start a tea shop business. Identify the likely key costs and classify each as a fixed or variable and explain why?

Question 3. Following are sales and administrative cost data for King Burgers for the last four months:

Administrative cost is a mixed cost, and sales is a potential cost driver.

Required
(a) Using the high-low method, create a cost function for administrative costs.
(b) In your own words, explain why the high-low method might not be a good method for estimating the cost function.

Question 4. The School Lounge has been reporting losses in past months. In July, for example, the loss was $5000.

The Lounge purchases prepared food directly from University Food Services. This charge varies proportionately with the number and kind of meals served. Personnel who are paid by the Lounge serve the food, tend the cash register, waiting and clean tables, and wash dishes. The staffing levels in the Lounge rarely change; the existing staff can usually handle daily fluctuations in volume. Administrative costs are primarily the salaries of the Lounge manager and her office staff. The university charges the Lounge a surcharge of 10 per cent of its revenue. Utility costs are the costs of cooling, heating, and lighting the Lounge during its normal operating hours.
The university's management is considering shutting the Lounge down because it has been operating at a loss.

Required
(a) List the fixed expenses of the Lounge.
(b) List the variable expenses of the Lounge and the most likely cost driver for each expense.
(c) Write out the cost function for running the Lounge.
(d) Estimate the profit or loss for August if the revenues of the Lounge increase to $80 000.

Question 5. In the role of cost manager why you need to measure, monitor, and motivate performance?

Question 6. Determine whether each of the following activities is likely to be value-added or non-value-added and explain your choice. (Answer page 9 font size 10) (Marks 6)

(a) Inspection activities
(b) Moving materials to work stations
(c) Manufacturing extra inventory to keep employees busy
(d) Packing to fill a customer order
(e) Product design initiatives

Question 7. As a cost & management accountant you have to calculate 3 (direct, step-down, and reciprocal) methods and what choice you make for the cost allocation method among these 3 methods in your company and why; direct, step-down, and reciprocal? Justify each method in what conditions it works?