accounting theory questions

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Description

1
List and describe the four standards in the IMA’s Statement of Ethical Practice. As part of your
answer, be sure to provide an example of an action that violates the standard.

Question #2 (14 points)
Consider the following information, prepared based on a monthly capacity of 50,000 units:
Category
Variable manufacturing costs
Fixed manufacturing costs
Variable marketing costs
Fixed marketing costs

Cost per Unit
$12.00
$1.00
$3.00
$2.00

Capacity cannot be added in the short run and the firm currently sells the product for $20
per unit.
Consider each of these scenarios independent of each other.
a) The company is currently producing 50,000 units per month. A potential customer has
contacted the firm and offered to purchase 10,000 units this month only. The customer is
willing to pay $18 per unit. Since the potential customer approached the firm, there will be no
variable marketing costs incurred. Should the company accept the special order? Why or why
not? Be specific.
b) The company is currently producing 40,000 units per month. A potential customer has
contacted the firm and offered to purchase 10,000 units this month only. Since the potential
customer approached the firm, there will be no variable marketing costs incurred. What is the
minimum amount that the firm should be willing to accept for this order?

Question #3 (44 points)
Consider the following information:
Beginning inventory (units)
Budgeted units to be produced
Actual units produced
Units sold
Variable manufacturing costs per unit produced
Variable marketing costs per unit sold
Budgeted fixed manufacturing costs
Fixed marketing costs
Selling price per unit
Variable costing operating income
Absorption costing operating income
Variable costing beginning inventory ($)
Absorption costing beginning inventory ($)
Variable costing ending inventory ($)
Absorption costing ending inventory ($)
PVV
Allocated fixed manufacturing costs

Q1
0
20,000
19,000

Q2

J

A
$150
$20
$500,000
$200,000
$300

B

20,000
20,600
20,600
$150
$20
$500,000
$200,000
$300
$1,978,00
0

Q3
1,100
20,000

Q
R
$150
$20
$500,000
$200,000
$300

S

K

$1,859,000

$165,000

C
D
E
F
G
H
I

T
U

L
M
N
O
P

$75,000
$87,500

V
$480,000

There are no price, efficiency, or spending variances, and any production-volume variance
is directly written off to cost of goods in the quarter in which it occurs.
Complete the missing figures from the above Table. You need to show your work in order to
be eligible for partial credit.
Q1
A
B
C
D
E
F
G
H
I

Q2
J
K
L
M
N
O
P

Q3
Q
R
S
T
U
V

Question #4 (12 points)
a) What is the goal of the EOQ model?

b) Why does a firm hold “safety stock?”

c) What costs are a firm trying to balance when it decides on how much safety stock to hold?

Question #5 (9 points)
What are some accounting changes that a firm should make if it decides to implement a JIT
inventory management system? Why are those changes necessary? Be specific!

Question #6 (5 points)
What is the justification for using backflush costing? Be specific!

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