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Question 1

  • Explain the difference between variable and full costing.
  • Explain why income calculated under full absorption costing will be greater than income calculated under variable costing when production exceeds sales.
  • Explain how a manufacturing company can “bury” fixed manufacturing costs in ending inventory under full absorption costing.
  • If the fixed manufacturing overhead cost per unit under full costing is multiplied by the change in inventory between the beginning and ending of the period, what does the resulting number represent?

Question 2

Read the following case and then discuss your thoughts with classmates:

An imaginary new country called Mazoa is attempting to create a capitalistic society with free markets but maintain some discretion over price control and market regulation. Since the country is new, private enterprise is generally not controlled by the government and accounting standards do not currently exist. Leaders of the private sector and government officials are meeting in an attempt to determine the best course of action in regard to accounting standards. Some have suggested adopting international accounting standards while others want the country to develop their own standards because IFRS is not suitable for Mazoa’s fragile economy. Regardless of what step is taken, accounting standards must be developed to show the rest of the world that Mazoa has a stable economy and to encourage foreign investment.

Based on the above scenario, what type of accounting system would you recommend for Mazoa? Discuss the factors that would influence your decision.

Question 3

SWOT begins with an analysis of the general business environment. It then identifies the strengths and weaknesses of the firm. This part of SWOT involves internal analysis, which can normally be done fairly easily because it deals with areas within the company.

Besides the SWOT analysis, name a couple of other internal analyses that could be used to help improve your business or marketing plan. Also explain a couple different tactics, within these internal analyses, that can be applied in preventing your strengths from becoming weaknesses.

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