Thursday 19 January 2012
Monday 9 January 2012
Update News ( 2 December 2011)
Auditing
Big four auditors face break-up to restore trust
12:28 AM Dec 01, 2011
LONDON - The world's top four audit firms will have to split up and rename themselves under a far-reaching draft European Union law to crack down on conflicts of interest and shortcomings highlighted by the financial crisis
Global Economics
4 challenges facing MAS – Monetary Association of Singapore
PM Lee says developments around the world will have deep implications for central bank
by Lin Yanqin
Updated 09:16 AM Nov 29, 2011
SINGAPORE - The world is undergoing "a fundamental reshaping of the economic and financial landscape" which Singapore must adjust to, said Prime Minister Lee Hsien Loong yesterday.
Calling this "a critical period for the global economy and financial system", he noted the effects of the 2008 crisis "are still being felt" while "underlying problems" - indebtedness and imbalances - remain unresolved, particularly in Europe.
Calling this "a critical period for the global economy and financial system", he noted the effects of the 2008 crisis "are still being felt" while "underlying problems" - indebtedness and imbalances - remain unresolved, particularly in Europe.
Auditing / Corporate Governance
KPMG chair calls for global standards, cites Olympus fraud
HONG KONG |
HONG KONG KPMG'S KPMG.UL chairman on Friday called for a global set of standards for the auditing industry and said the Olympus Corp scandal in Japan reveals evidence of "significant fraud."
Michael Andrew, the chairman, also outlined steps needed to improve the auditing industry in a in a speech entitled, "Fraud, Financial Crises and the Future of the Big Four." He spoke to the Foreign Correspondents Club in Hong Kong.
http://uk.reuters.com/article/2011/11/25/uk-kpmg-hongkong-idUKTRE7AO06U20111125
CSR / Climate Change
Accountants have key role to play in fight against climate change, says ACCA
Accountants have the technical skills and expertise to make a real difference to climate change mitigation activities, according to businesses and climate change experts in a new report from ACCA as COP17, the latest stage in international efforts to limit human impacts on the environment, gets under way in Durban, South Africa.
http://direct.accaglobal.com/jqmc67ipjhc5vexp5c5f5m?a=5&p=19363825&t=19717295
Corporate Reporting / Auditing / Accounting
Restoring confidence in financial statements: the European Commission aims at a higher quality, dynamic and open audit market
The 2008 financial crisis highlighted considerable shortcomings in the European audit system. The proposals adopted today by the European Commission address the current weaknesses in the EU audit market, by eliminating conflicts of interest, ensuring independence and robust supervision and by facilitating more diversity in what is an overly concentrated market, especially at the top-end.
Ethics
IESBA PROPOSES CHANGES TO THE CODE OF ETHICS FOR PROFESSIONAL ACCOUNTANTS TO ADDRESS A BREACH OF A REQUIREMENT IN THE CODE
The International Ethics Standards Board for Accountants (IESBA) has, on 24 October 2011, released an exposure draft “Proposed Changes to the Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code”.
The IESBA believes that any breach of a provision of the Code of Ethics for Professional Accountants (IESBA Code) should be treated as a matter of utmost importance. Therefore, the IESBA has proposed changes to the IESBA Code that will provide guidance to a professional accountant on the action to be taken in such situations. This includes a robust framework for addressing a breach of an independence requirement that will result in greater transparency.
The International Ethics Standards Board for Accountants (IESBA) has, on 24 October 2011, released an exposure draft “Proposed Changes to the Code of Ethics for Professional Accountants Related to Provisions Addressing a Breach of a Requirement of the Code”.
The IESBA believes that any breach of a provision of the Code of Ethics for Professional Accountants (IESBA Code) should be treated as a matter of utmost importance. Therefore, the IESBA has proposed changes to the IESBA Code that will provide guidance to a professional accountant on the action to be taken in such situations. This includes a robust framework for addressing a breach of an independence requirement that will result in greater transparency.
The proposed changes to the IESBA Code include a requirement that a professional accountant take whatever actions that might be available as soon as possible to satisfactorily address the consequences of a breach of a provision of the Code. For a breach of an independence requirement in the IESBA Code, a detailed framework is provided setting out the action to be taken. Specifically, the proposed changes would require a firm to:
| - | terminate, suspend, or eliminate the interest or relationship that caused the breach; |
| - | evaluate the significance of the breach and determine whether action can be taken to satisfactorily address the consequences of the breach; |
| - | communicate all breaches with those charged with governance and obtain their agreement with the proposed course of action; and |
| - | document the actions taken and all the matters discussed with those charged with governance and, if applicable, any relevant regulators. |
The proposed framework will guide accountants and those charged with governance, in determining whether resignation is an appropriate outcome or whether a different outcome can be supported. In addition, disclosure will enhance transparency, and the proposed documentation requirement adds a degree of rigor to the process that will be very useful.
Innovation - marketing
Why Geeks Are the Best Marketers
How "Moneyball Marketing" is helping thinly funded companies beat big spenders
In the movie Moneyball, the cash-strapped Oakland Athletics baseball team finds a way to compete with the high-spending New York Yankees by using superior analytics called “Sabermetrics,” a term coined by baseball statistics guru Bill James
Costing Questions And Answers
Questions and answers
Set 1
Answer the following questions:
1 Which of the following describes a cost unit?
A cost per unit of output
B direct costs
C unit of product
D production department
2 The following classifications may be applied to costs:
(i) direct
(ii) fixed
(iii) period
(iv) production
Which of the above classifications could be applied to the cost of raw materials
used by a company in the manufacture of its range of products?
A (i) only
B (i) and (iv) only
C (ii) and (iii) only
D (ii), (iii) and (iv) only
3 Total production costs and output over three periods have been:
Period Production costs Output
1 $230,485 12,610 units
2 $254,554 14,870 units
3 $248,755 14,350 units
What are the estimated variable production costs per unit if the high–low method is
applied?
A $10·50
B $10·65
C $11·15
D $15·50
4 What is prime cost?
A total direct costs only
B total indirect costs only
C total non-production costs
D total production costs
5 The following charts demonstrate various costs in relation to activity:
Which of the above charts represents fixed cost per unit?
A Chart 1
B Chart 2
C Chart 3
D Chart 4
6 The order quantity of a raw material is 2,000 kg. Safety stock of 1,200 kg is held. The
stockholding cost of the raw material is $1·20 per kg per annum.
What is the total annual stockholding cost of the raw material?
A $1,200
B $1,920
C $2,640
D $3,840
7 The following items are some of the costs incurred by a company:
(i) training of direct operatives
(ii) wages of distribution staff
(iii) normal idle time in the factory
(iv) productive time of direct operatives
(v) sales personnel salaries
Which of the above items will usually be treated as production overhead costs?
A (i) and (ii) only
B (i) and (iii) only
C (i), (iii) and (iv) only
D (ii), (iv) and (v) only
8 A company pays direct operatives a basic wage of $8·50 per hour plus a productivity
bonus. The bonus is calculated as:
[(time allowed – time taken) x (basic rate per hour ÷ 3)]
The time allowed is 2·4 minutes per unit of output. An operative produced 1,065 units in a
371/2 hour week.
What were the total earnings of the operative in the week?
A $318·75
B $333·20
C $340·40
D $362·10
9 In a cost accounting system what would be the entry to record the completion of
production?
Debit Credit
A Cost of Sales Account Finished Goods Account
B Finished Goods Account Cost of Sales Account
C Finished Goods Account Work-in-Progress Account
D Work-in-Progress Account Finished Goods Account
10 The following production overhead costs relate to a production cost centre:
Budget $124,000
Actual $126,740
Absorbed $125,200
Which of the following statements is true?
A overheads were over-absorbed by $1,200
B overheads were over-absorbed by $1,540
C overheads were under-absorbed by $1,200
D overheads were under-absorbed by $1,540
11 In a cost bookkeeping system what would be the entry for the absorption of
production overhead?
Debit Credit
A Cost Ledger Control Account Production Overhead Account
B Production Overhead Account Work-in-Progress Account
C Work-in-Progress Account Cost Ledger Control Account
D Work-in-Progress Account Production Overhead Account
12 33,300 units of a product were manufactured in a period during which 33,950 units were
sold for a total revenue of $1,391,950. Opening stock of the product was 1,700 units. The
company uses absorption costing. Unit costs of the product were:
Variable manufacturing costs $16·30
Fixed manufacturing costs $11·60
Variable selling and administration costs $3·40
Fixed selling and administration costs $7·10
What was the change in the value of finished goods stock over the period?
A $10,595
B $18,135
C $24,960
D $29,295
Answers
1 C
2 B
3 B
High–low method:
Variable production costs per unit =
14,870 12,610
$254,554 230,485
−
−
=
2,260
$24,069
= $10.65 per unit
4 A
5 D
6 C
Average stock = 1,200 + (2,000 ÷ 2) = 2,200 kg
Annual stock holding cost = 2,200 kg x $1·20 per kg = $2,640
7 B
Wages of distribution staff and sales personnel salaries are not production costs.
Productive time of direct operatives is a direct cost.
8 B
Time allowed = 1,065 units x (2·4 ÷ 60) = 42·6 hours
Bonus = (42·6 – 37·5 hours) x ($8·50 ÷ 3) = $14·45
Basic pay = 37·5 hours at $8·50 = $318·75
Total earnings = $333·20 ($318·75 + 14·45)
9 C
10 D
Absorbed – actual = over/(under) absorbed
$125,200 – 126,740 = $1,540 under-absorbed
11 D
12 B
Decrease in stock = 33,300 – 33,950 units = 650 units
x $27·90 per unit = $18,135 change in finished goods stock value
Set 1
Answer the following questions:
1 Which of the following describes a cost unit?
A cost per unit of output
B direct costs
C unit of product
D production department
2 The following classifications may be applied to costs:
(i) direct
(ii) fixed
(iii) period
(iv) production
Which of the above classifications could be applied to the cost of raw materials
used by a company in the manufacture of its range of products?
A (i) only
B (i) and (iv) only
C (ii) and (iii) only
D (ii), (iii) and (iv) only
3 Total production costs and output over three periods have been:
Period Production costs Output
1 $230,485 12,610 units
2 $254,554 14,870 units
3 $248,755 14,350 units
What are the estimated variable production costs per unit if the high–low method is
applied?
A $10·50
B $10·65
C $11·15
D $15·50
4 What is prime cost?
A total direct costs only
B total indirect costs only
C total non-production costs
D total production costs
5 The following charts demonstrate various costs in relation to activity:
Which of the above charts represents fixed cost per unit?
A Chart 1
B Chart 2
C Chart 3
D Chart 4
6 The order quantity of a raw material is 2,000 kg. Safety stock of 1,200 kg is held. The
stockholding cost of the raw material is $1·20 per kg per annum.
What is the total annual stockholding cost of the raw material?
A $1,200
B $1,920
C $2,640
D $3,840
7 The following items are some of the costs incurred by a company:
(i) training of direct operatives
(ii) wages of distribution staff
(iii) normal idle time in the factory
(iv) productive time of direct operatives
(v) sales personnel salaries
Which of the above items will usually be treated as production overhead costs?
A (i) and (ii) only
B (i) and (iii) only
C (i), (iii) and (iv) only
D (ii), (iv) and (v) only
8 A company pays direct operatives a basic wage of $8·50 per hour plus a productivity
bonus. The bonus is calculated as:
[(time allowed – time taken) x (basic rate per hour ÷ 3)]
The time allowed is 2·4 minutes per unit of output. An operative produced 1,065 units in a
371/2 hour week.
What were the total earnings of the operative in the week?
A $318·75
B $333·20
C $340·40
D $362·10
9 In a cost accounting system what would be the entry to record the completion of
production?
Debit Credit
A Cost of Sales Account Finished Goods Account
B Finished Goods Account Cost of Sales Account
C Finished Goods Account Work-in-Progress Account
D Work-in-Progress Account Finished Goods Account
10 The following production overhead costs relate to a production cost centre:
Budget $124,000
Actual $126,740
Absorbed $125,200
Which of the following statements is true?
A overheads were over-absorbed by $1,200
B overheads were over-absorbed by $1,540
C overheads were under-absorbed by $1,200
D overheads were under-absorbed by $1,540
11 In a cost bookkeeping system what would be the entry for the absorption of
production overhead?
Debit Credit
A Cost Ledger Control Account Production Overhead Account
B Production Overhead Account Work-in-Progress Account
C Work-in-Progress Account Cost Ledger Control Account
D Work-in-Progress Account Production Overhead Account
12 33,300 units of a product were manufactured in a period during which 33,950 units were
sold for a total revenue of $1,391,950. Opening stock of the product was 1,700 units. The
company uses absorption costing. Unit costs of the product were:
Variable manufacturing costs $16·30
Fixed manufacturing costs $11·60
Variable selling and administration costs $3·40
Fixed selling and administration costs $7·10
What was the change in the value of finished goods stock over the period?
A $10,595
B $18,135
C $24,960
D $29,295
Answers
1 C
2 B
3 B
High–low method:
Variable production costs per unit =
14,870 12,610
$254,554 230,485
−
−
=
2,260
$24,069
= $10.65 per unit
4 A
5 D
6 C
Average stock = 1,200 + (2,000 ÷ 2) = 2,200 kg
Annual stock holding cost = 2,200 kg x $1·20 per kg = $2,640
7 B
Wages of distribution staff and sales personnel salaries are not production costs.
Productive time of direct operatives is a direct cost.
8 B
Time allowed = 1,065 units x (2·4 ÷ 60) = 42·6 hours
Bonus = (42·6 – 37·5 hours) x ($8·50 ÷ 3) = $14·45
Basic pay = 37·5 hours at $8·50 = $318·75
Total earnings = $333·20 ($318·75 + 14·45)
9 C
10 D
Absorbed – actual = over/(under) absorbed
$125,200 – 126,740 = $1,540 under-absorbed
11 D
12 B
Decrease in stock = 33,300 – 33,950 units = 650 units
x $27·90 per unit = $18,135 change in finished goods stock value
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