Advanced Managerial Accounting Homework
Question 1 - List and describe the four standards in the IMA's Statement of Ethical Professional Practice. As part of your answer, be sure to provide an example of an action that violates each of the standards. You should have one example for each of the four standards. When thinking of the examples, remember that external auditors are generally not subject to the IMA Statement.
Question 2 - Consider the following information, prepared based on a monthly capacity of 80,000 units:
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Category
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Cost per Unit
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Variable manufacturing costs
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$24
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Fixed manufacturing costs
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$5
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Variable selling costs
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$4
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Fixed selling costs
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$1
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Capacity cannot be added in the month and the firm currently sells the product for $40 per unit.
Consider each of these scenarios independent of each other.
a) The company is currently producing 72,000 units per month. A potential customer has contacted the firm and offered to purchase 8,000 units this month only. The customer is willing to pay $33 per unit. Since the potential customer approached the firm, there will be no variable selling costs incurred. Should the company accept the special order? Why or why not? Be specific.
b) Assume the same facts as in part a, except that the company is producing 80,000 units per month. Should the company accept the special order? Why or why not? Be specific.
c) List and describe other factors (not those addressed in parts a and b) that should be taken into consideration when deciding whether to accept a special order? Be specific in your responses.
Question 3 - a) What is target pricing? Under what specific circumstances can it be most useful? What are some potential problems with using this approach to pricing? Be specific in your responses.
b) What is cost-plus pricing? Under what specific circumstances can it be most useful? What are some potential problems with using this approach to pricing? Be specific in your responses.
c) What is life cycle costing? Under what specific circumstances can it be most useful? What are some potential problems with using this approach to pricing? Be specific in your responses.
Question 4 - a) Describe the differences between unit-related, batch-related, and product-sustaining activities. Give one example of each type of activity.
b) Describe the difference between transaction drivers and duration drivers. When would one type be preferred over the other?