Question & Answer

1.              : Continue the current policy that leaves it up to the Muslim workers as to when they leave the assembly line to perform their sunset rituals.

Ethical Decision making — promoting inappropriate uses of ABC When activity-based costing was first developed, consultants sometimes promoted it for inappropriate uses. Many consulting services focused on using ABC information for short-term decisions such as pricing and product emphasis. Yet in the early stages of ABC and activity-based management development, both flexible and committed costs were included in ABC cost pools and were not tracked separately. As a result, ABC unit costs included both fixed and variable costs, even when the fixed costs were irrelevant for decision making. ABC promoters suggested that all costs were variable in the long run, and they ignored criticism of their methods.   If the ABC cost rates include fixed costs, their unquestioned use in setting prices is detrimental to operations. If demand falls, then production volumes might fall too, causing costs per unit to increase followed by increases in prices. This type of pricing policy can lead to a death spiral, in which prices increase inappropriately as volumes decline.   After ABC was developed, it was quickly added to cost accounting curriculums at many different universities. However, a few academics were highly critical of ABC and eventually provided evidence that overhead costs included a large portion of fixed costs, even in the long run.80 As research evidence accumulated, ABC consultants advised entities not to allocate facility-level costs and to categorise costs within each activity cost pool as flexible and committed. Then total costs could be used to analyse processes and improve operations, but flexible cost information could be retrieved for decision making.   Currently, ‘incremental ABC cost analysis’ services are being promoted. These services are sometimes called predictive accounting. Because consulting services can be expensive and judging the outcome of new ideas difficult, managers need to incorporate healthy scepticism when considering the potential costs and benefits of products and services promoted by consultants.81   Required What ethical problems might arise for managers when considering the use of consultants to develop ABC techniques for sustainability opportunities? Your answers should relate to the promotion of ABC for pricing, other short-term decision, incremental ABC or predictive accounting relating to sustainability opportunities? Answers should also consider the potential for consultant bias and whether the technique will benefit their client particularly when the consulting service might have uncertain outcomes.             (LO2 and 4)

What are likely reasons for weak bank performance? (LO3)

Explain why many savings institutions experience financial problems at the same time. (LO3)

How do hot assets affect the character of gain or loss on the sale of a partnership interest?

Under what conditions is an employer required to accrue a liability for sick pay? Under what conditions is an employer permitted but not required to accrue a liability for sick pay?

1. (a) What discount factor is used to weight benefits that occur in three months’ time for a person with a per-monthly discount factor of 0.9? (b) What does this make the present value of £20 of benefits received in three months’ time? 2. Assume that the good costs £10, which has to be paid today. How long would the maximum delay in (whole) months before receiving the £20 of benefits have to be before a person with a monthly discount of 0.9 would no longer purchase the good.

List at least three possible allocation bases that could be used to allocate accounting department costs to other departments. Give one advantage and one disadvantage of using each allocation base.

1.              : What are Krista Russell’s options for responding to Tate’s decision? What should she do now? Why?

This year, Major Healy paid $40,000 of interest on a mortgage on his home (he borrowed $800,000 to buy the residence in 2015; $900,000 original purchase price and value at purchase), $6,000 of interest on a $120,000 home-equity loan on his home (loan proceeds were used to buy antique cars), and $10,000 of interest on a mortgage on his vacation home (borrowed $200,000 to purchase the home in 2010). Major Healy’s AGI is $220,000. How much interest expense can Major Healy deduct as an itemized deduction?

Recall the various strategies that rival oligopolists can adopt. What parallels there are in union and management strategies?

1.    : One of the benefits of a strategy map is that it clearly communicates goals and how they are linked to everyone in the organization. Does a minimum-wage maintenance worker in a hospital really need to understand any goals beyond keeping the place clean? Discuss.

In 12 samples of size n = 7, the average value of the sample means is x = 6.860 cm for the dimension of interest, and the mean of the ranges of the samples is R = 0.027 cm. Determine (a) lower and upper control limits for the x chart and (b) lower and upper control limits for the R chart. (c) What is your best estimate of the standard deviation of the process?

1.      : What type of team does the new CIO have? What do you see as the key problem with the team?

1.       Give five examples of business processes at Tesla.  How do they create business value for Tesla and its shareholders?

Tyrone recently read a regulation that Congress specifically requested the IRS to issue.  What type of regulation is this?  How does this regulation’s authoritative weight compare to other regulations?

Johnstone Co. purchased a put option on Ewing common shares on July 7, 2014, for $240. The put option is for 200 shares, and the strike price is $70. (The market price of a share of Ewing stock on that date is $70.) The option expires on January 31, 2015. The following  data are available with respect to the put option. Date Market Price of Ewing Shares Time Value of Put Option September 30, 2014 $77 per share $125 December 31, 2014 75 per share 50 January 31, 2015 78 per share 0 Instructions Prepare the journal entries for Johnstone Co. for the following dates. (a) July 7, 2014—Investment in put option on Ewing shares. (b) September 30, 2014—Johnstone prepares financial statements. (c) December 31, 2014—Johnstone prepares financial statements. (d) January 31, 2015—Put option expires.

Is it possible for shareholders to defer or avoid the second level of tax on corporate income altogether? Briefly explain.

A recent financial magazine indicated that the airline industry has poor financial flexibility. What is meant by financial flexibility, and why is it important?

The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statments, can be accessed at the book’s companion website, www.wiley.com/college/kieso. Instructions Refer to P&G’s financial statements and the related information in the annual report to answer the following questions. (a) What alternative formats could P&G have adopted for its balance sheet? Which format did it adopt? (b) Identify the various techniques of disclosure P&G might have used to disclose additional pertinent financial information. Which technique does it use in its financials? (c) In what classifications are P&G’s investments reported? What valuation basis does P&G use to report its investments? How much working capital did P&G have on June 30, 2011? On June 30, 2010? (d) What were P&G’s cash flows from its operating, investing, and financing activities for 2011? What were its trends in net cash provided by operating activities over the period 2009 to 2011? Explain why the change in accounts payable and in accrued and other liabilities is added to net income to arrive at net cash provided by operating activities. (e) Compute P&G’s (1) current cash debt coverage, (2) cash debt coverage, and (3) free cash flow for 2011. What do these ratios indicate about P&G’s financial condition?

: Explain how factors such as creating an open communication climate, the choice of communication channels, candor, questions, and nonverbal communications influence the quality of communication.

For Problem 13.11, assume the material is acrylic. (a) Using Figure 13.2, determine the temperature of the polymer melt. (b) If the temperature is lowered 20°C, estimate the resulting viscosity of the polymer melt. (Hint: the y-axis of Figure 13.2 is a log scale, not linear)

What is a best-efforts agreement? (LO1)

1.       : A report published by Hay Group found that some managers have personalities suited to horizontal relationships, such as project management, and achieve results with little formal authority. Other managers are more suited to operating roles with much formal authority in a vertical structure. In what type of structure—functional, matrix, team, or virtual network—do you believe your personality would best fit? Which structure would be the most challenging for you? Give your reasons.

On December 31, 2014, Grando Company sells production equipment to Fargo Inc. for $50,000. Grando includes a 1-year warranty service with the sale of all its equipment. The customer receives and pays for the equipment on December 31, 2014. Grando estimates the prices to be $48,800 for the equipment and $1,200 for the warranty. Instructions (a) Prepare the journal entry to record this transaction on December 31, 2014. (b) Indicate how much (if any) revenue should be recognized on January 31, 2015, and for the year 2015.