Woodruff Flowering Plants provides the following information for the month of May:
What is the budgeted contribution margin per composite unit for the actual mix? (Round
any intermediary calculations two decimal places.)
A) $21.22
B) $21.00
C) $20.50
D) $20.20
Period costs ________.
A) are treated as expenses in the period they are incurred
B) are directly traceable to products
C) are treated as expenses in the following period they are incurred
D) are also referred to as manufacturing overhead costs
Canton’s Corp. manufactures two sizes of ceramic paperweights, regular and jumbo.
The following information applies to their expectations for the planning period:
Production Estimates
Production units:
Regular = 11,000,000 units
Jumbo = 22,000,000 units
Machine-hours = 300,000 mh
Labor-hours = 600,000 dlh
Expected direct costs amounts to $928,000 for the period. Support cost requirements of
both products are substantially different from one another. Canton’s uses an ABC costing
system.
The inspections activity-cost driver rate is ________.
A) $0.44
B) $5.70
C) $6.20
D) $13.08
The net initial investment for a piece of construction equipment is $2,900,000. Annual
cash inflows are expected to increase by $500,000 per year. The equipment has an
10-year useful life. What is the payback period?
A) 10.00 years
B) 7.40 years
C) 5.80 years
D) 4.80 years
When using a normal costing system, manufacturing overhead is allocated using the
________ manufacturing overhead rate and the ________ quantity of the allocation
base.
A) budgeted; actual
B) budgeted; budgeted
C) actual; budgeted
D) actual; actual
To guide cost allocation decisions, the fairness or equity criterion ________.
A) considers reasonableness as a matter of judgment rather than an operational criterion
B) allocates cost among the beneficiaries in proportion to the benefits each receives
C) is used more frequently than any other criteria
D) is the primary criterion used in activity-based costing
Which one of the following items is a direct cost?
A) Customer-service costs of a multiproduct firm; Product A is the cost object.
B) Printing costs incurred for payroll check processing; payroll check processing is the
cost object.
C) The salary of a maintenance supervisor in a multiproduct manufacturing plant;
Product B is the cost object.
D) Utility costs of the administrative offices; the accounting department is the cost
object.
A.C. Tech Manufacturing Appliances manufactures three sizes of kitchen appliances:
small, medium, and large. Product information is provided below.
Small Medium Large
Unit selling price $450 $620 $1,240
Unit costs:
Variable manufacturing (240) (280) (530)
Fixed manufacturing (80) (140) (250)
Fixed selling and administrative (110) (125) (130)
Unit profit $20 $75 $330
Demand in units 110 140 110
Machine-hours per unit 40 70 110
The maximum machine-hours available are 6,500 per week.
What is the contribution margin per machine-hour for a medium appliance?
A) $0.54
B) $1.07
C) $4.86
D) $7.79
A data warehouse or infobarn ________.
A) is reserved for exclusive use by the CFO
B) is primarily used for financial reporting purposes
C) stores information used by different managers for multiple purposes
D) gathers only nonfinancial information
The advantage of using normal costing instead of actual costing is ________.
A) indirect costs are assigned at the end of the year when they are known
B) the job cost is more accurate under normal costing
C) indirect costs are assigned to a job on a timely basis
D) normal costing provides a higher gross profit margin
Kinnane’s Fine Furniture manufactures two models, Standard and Premium. Weekly
demand is estimated to be 106 units of the Standard Model and 74 units of the Premium
Model. The following per unit data apply:
Standard Premium
Contribution margin per unit $21 $24
Number of machine-hours required 3 6
If there are 495 machine-hours available per week, how many rockers of each model
should Kinnane produce to maximize profits?
A) 106 units of Standard and 29 units of Premium
B) 17 units of Standard and 74 units of Premium
C) 106 units of Standard and 74 units of Premium
D) 83 units of Standard and 41 units of Premium
Illumination Corporation operates one central plant that has two divisions, the
Flashlight Division and the Night Light Division. The following data apply to the
coming budget year:
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1500 hours and by the Night
Light Division was 800 hours. If a single-rate cost-allocation method is used, what amount
of cost will be allocated to the Flashlight Division? Assume actual usage is used to allocate
operating costs.
A) $2,050,000
B) $1,850,000
C) $1,200,000
D) $1,537,500
Job-costing is likely to be used by________.
A) oil refining companies
B) advertising agencies
C) Mortgage payment processors
D) breakfast cereal producers
Branded Shoe Company manufactures only one type of shoe and has two divisions, the
Stitching Division and the Polishing Division. The Stitching Division manufactures
shoes for the Polishing Division, which completes the shoes and sells them to retailers.
The Stitching Division “sells” shoes to the Polishing Division. The market price for the
Polishing Division to purchase a pair of shoes is $42. (Ignore changes in inventory.)
The fixed costs for the Stitching Division are assumed to be the same over the range of
40,000-101,000 units. The fixed costs for the Polishing Division are assumed to be $23
per pair at 101,000 units.
Stitching‘s costs per pair of shoes are:
Direct materials $19
Direct labor $17
Variable overhead $15
Division fixed costs $13
Polishing‘s costs per completed pair of shoes are:
Direct materials $18
Direct labor $6
Variable overhead $10
Division fixed costs $19
If the Polishing Division sells 101,000 pairs of shoes at a price of $180 a pair to
customers, what is the operating income of both divisions together?
A) $12,221,000
B) $9,595,000
C) $7,878,000
D) $6,363,000
Sensitivity analysis helps managers evaluate risks ________.
A) by showing the effects of changes to the original data or an underlying assumption
B) by identifying inconsistencies in underlying assumptions and actual conditions
C) by removing the effects of foreign currency exposure and other uncontrollable
factors
D) by identifying gaps in the production process using information on setups needed to
manufacture products
Which of the following statements is true about analyzing a single variance?
A) It should be overemphasized to take proper decision.
B) It should be evaluated in isolation from other variances.
C) It can lead to different other variances.
D) It should be used for quality evaluation.
Which of the following is an example of price discrimination?
A) Larry’s offers a 30% discount to buyers making repeat purchases within 30 days.
B) Enrique Corp sells different kind of goods at different prices.
C) Chang sells his wares at different prices based on the market conditions.
D) Nathan sells his ice-creams for a discount during winter season.
The following information pertains to the January operating budget for Murphy
Corporation, a retailer:
Budgeted sales are $210,000 for January
Collections of sales are 40% in the month of sale and 60% the next month
Cost of goods sold averages 66% of sales
Merchandise purchases total $159,000 in January
Marketing costs are $3,600 each month
Distribution costs are $5,300 each month
Administrative costs are $10,100 each month
For January, the amount budgeted for the nonmanufacturing costs budget is ________.
A) $90,400
B) $10,100
C) $178,000
D) $19,000
Trusted Products Company makes a household appliance with model number L800.
The goal for 2018 is to reduce direct materials usage per unit. No defective units are
currently produced. Manufacturing conversion costs depend on production capacity
defined in terms of L800 units that can be produced. The industry market size for
appliances increased 10% from 2017 to 2018. The following additional data are
available for 2017 and 2018:
What is the cost effect of the growth component for direct materials?
A) $291,400 U
B) $1,326,000 F
C) $1,326,000 U
D) $291,400 F
Which of the following is a function of a controller?
A) operations administration
B) controlling the stock price
C) communication with the shareholders
D) interest-rate risk management
An example of a nonfinancial measure for customer satisfaction is ________.
A) number of defective units shipped as a percentage of total units shipped
B) warranty claims by customers
C) liability claims incurred to the company
D) rework costs due to inefficiency
A leather shoe manufacturer makes “duck” boots that consist of leather and rubber.
Some of the books are defective and are sold in the factory store at deep discounts.
Leather strips from the cutting process and rubber shavings are byproducts of the
process. The leather strips have no use and are discarded while the rubber scraps are
collected and periodically picked up by a recycling company at no cost to the shoe
manufacturer. Which of the following classifications of these items would be accurate?
A) the defective boots are spoilage and the leather and the rubber are scrap
B) the defective boots, leather and rubber are scrap but the shoes are more valuable
scrap as they can be sold
C) the defective boots are spoilage , the leather strips are scrap, and the rubber is
rework
D) all three items are spoilage
Which of the following are potential problems managers face in relevant-cost analysis?
A) Including only relevant costs and relevant revenues in an analysis
B) incorrect assumptions such as all variable costs are relevant and all fixed costs are
not
C) considering past historical costs when making predictions about future costs
D) examining differences in expected total future revenues and expected total future
costs among alternatives
The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Annual demand is 33,000 packages per year. The purchase price per package is $50.
What is the annual relevant carrying costs?
A) $16,308
B) $13,702
C) $10,491
D) $2894
Which of the following is referred to as the bottom-up aspect of the budgeting process?
A) lower-level managers setting their individual targets that aggregate to be the
company-wide target
B) senior managers consulting middle- and lower-level managers to investigate any
deviations from the budget
C) lower-level managers implementing the budgets with senior managers monitoring
progress and investigating deviations
D) lower-level managers providing inputs to the budgeting process based on their
specialized knowledge and familiarity of the operation
A mathematical inequality or equality that must be appeased is known as a(n)
________.
A) objective function
B) constraint
C) operating policy
D) business function
Freetown Corporation incurred fixed manufacturing costs of $30,000 during 2017.
Other information for 2017 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,800 units.
Units sold total 1,300 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs included in ending inventory total ________. (Round any
intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A) $8,333
B) $11,538
C) $7,500
D) $0
Expo Manufacturing Inc., is in the process of evaluating a new product using the
following information:
∙ A new transformer has three production runs each year, each with $15,000 in setup
costs.
∙ The new transformer incurred $50,000 in development costs and is expected to be
produced over the next three years.
∙ Direct costs of producing the transformers are $40,000 per run of 5700 transformers
each.
∙ Indirect manufacturing costs charged to each run are $115,000.
∙ Destination charges for each transformer average $2.00.
∙ Customer service expenses average $0.70 per transformer.
∙ The transformers are selling for $35 the first year and will increase by $2 each year
thereafter.
∙ Sales units equal production units each year.
What is the estimated life-cycle operating income for the first three years?
A) $556,170
B) $2,221,170
C) $179,590
D) $2,196,970
When target costing and target pricing are used together ________.
A) the target cost is established first, then the target price
B) the target cost is the estimated long-run cost that enables a product or service to
achieve a desired profit
C) the focus of target pricing is to undercut the competition
D) target costs are generally higher than current costs
Which of the following is true of corporate-sustaining costs?
A) are common to all individual customers
B) have a clear cause-and-effect relationship with several cost-allocation bases
C) should be allocated for decisions regarding reducing customer costs
D) evaluates the effectiveness of sales personnel
Which of the following is true of master budgets?
A) They include only financial aspects of a plan and exclude nonfinancial aspects.
B) Includes both financial and nonfinancial aspects of management’s plans.
C) They aid in quantifying the expectations of all stakeholders.
D) They must be administered rigidly after they are committed to.
If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced
for the month, the total cost for belts is ________.
A) considered to be a direct fixed cost
B) considered to be a direct variable cost
C) considered to be an indirect fixed cost
D) considered to be an indirect variable cost
Sales of Granite City Products Inc. have been on a steady decline for the last 12
months. A market research study conducted revealed that the product of Granite City
Products Inc. can be sold only for $420 as opposed to the current market price charged
of $520 per unit. Granite City Products Inc. has decided to revise its sales price to $420.
The annual sales target volume of the product after price revision is 280 units. Granite
City Products Inc. wants to earn 30% on its sales amount.
What is the target operating income?
A) $82,320
B) $35,280
C) $117,600
D) $152,880
Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products has a
policy of adding a 10% markup to full costs and currently has excess capacity. The
following information pertains to the company’s normal operations per month:
Grounded Coffee Products is approached by an overseas customer to fulfill a
one-time-only special order for 5000 units. All cost relationships remain the same except
for a one-time setup charge of $60,000. No additional design, marketing, or distribution
costs will be incurred. What is the minimum acceptable bid per unit on this one-time-only
special order? (Round your final answer to the nearest cent.)
A) $184.00
B) $484.00
C) $172.00
D) $238.00
Hockey Accessories Corporation manufactured 22,400 duffle bags during March. The
following fixed overhead data pertain to March:
What is the flexible-budget amount?
A) $451,700
B) $472,321
C) $460,000
D) $448,000