Which of the following are true regarding long-run pricing decisions?
A) they result in maximizing return on investment
B) they include adjusting product mix in a competitive environment
C) the price needs to be sufficient enough to break-even
D) use prices that include a reasonable return on invested capital
The American West Company manufactures several different products. Unit costs
associated with Product ORD210 are as follows:
What are the inventoriable costs per unit associated with Product ORD210?
A) $134
B) $124
C) $144
D) $114
The percentage of processes with real-time feedback would be a measure of which
perspective?
A) marketing
B) customer
C) learning and growth
D) internal-business-process
When managers determine whether it is less expensive to buy products from a vendor
or make them in house they are performing ________.
A) Cost-benefit analysis
B) Supply-chain analysis
C) Value-chain analysis
D) Research and development
Which of the following statement is true of costs of normal and abnormal spoilage?
A) Costs of normal spoilage are shown as an asset in a balance sheet; however,
abnormal spoilage costs are shown as liabilities in a balance sheet.
B) Costs of abnormal spoilage are shown as an asset in a balance sheet; however,
normal spoilage costs are shown as liabilities in a balance sheet.
C) Costs of abnormal spoilage are separately accounted for as losses of the accounting
period in which they are detected.
D) Costs of normal spoilage are separately accounted for as losses of the accounting
period in which they are detected.
Which of the following statements is a valid argument for BarGraphs to reduce its
manufacturing capacity?
A) BarGraphs ‘s strategy is to grow its business as L3 have unlimited demand.
B) BarGraphs can call back the expelled employees if the reduced capacity level proves
to be insufficient.
C) BarGraphs already has a high employee turnover rate and a few more will make no
difference.
D) BarGraphs wants to reduce product costs as they want to be the cost leaders.
Which of the following statements is true?
A) When production is equal to sales, operating income will be greater under variable
costing than under absorption costing.
B) When production is greater than sales, operating income will be lower under variable
costing than absorption costing.
C) When production is less than sales, operating income is higher under absorption
costing than variable costing.
D) When production is greater than sales, operating income is greater under absorption
cost than under variable costing.
Sustainability is a strategy to achieve long term ________.
A) cost reductions and efficiency objectives.
B) financial and quality goals.
C) financial, social, and environmental goals.
D) innovation and technology goals.
Using activity-cost rates rather than department indirect-cost rates to allocate costs
results in different product costs when ________.
A) a single activity accounts for a sizable portion of department costs
B) there are several homogeneous cost pools
C) different activities have the same cost-allocation base
D) different products use different resources in the same proportion
If Premium Company has a safety stock of 480 units and the average daily demand is
68 units, how many days can be covered if the shipment from the supplier is delayed by
4 days?
A) 7 days
B) 4 days
C) 11 days
D) 3 days
What are the three criteria a company should use to evaluate and choose a cost driver?
Briefly explain each of the three criteria.
Globus Autos sells a single product. 8,000 units were sold resulting in $83,000 of sales
revenue, $21,000 of variable costs, and $20,000 of fixed costs. If variable costs
decrease by $1.00 per unit, the new margin of safety is ________. (Round intermediate
calculations to the nearest cent.)
A) $83,000
B) $21,000
C) $59,190
D) $63,000
The Alex Miller 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. Further assume that
actual usage of the Lamp Division was 700 hours and the Flashlight Division was 400
hours for the month of June.
Required:
a. If a single-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Lamp Division each month? For the Flashlight Division each month?
b. For the month of June, if a single-rate cost-allocation method is used, what amount of
cost will be allocated to the Lamp Division? To the Flashlight Division? Assume actual
usage is used to allocate operating costs.
c. If a dual-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Lamp Division each month? For the Flashlight Division each month?
d. For the month of June, if a dual-rate cost-allocation method is used, what amount of cost
will be allocated to the Lamp Division? To the Flashlight Division? Assume budgeted
usage is used to allocate fixed operating costs and actual usage is used to allocate variable
operating costs.
In markets that are not perfectly competitive, ________.
A) the selling division will not have any unused capacity
B) companies can increase their capacity utilization only by decreasing their prices
C) minimum transfer price will equal the incremental cost per unit incurred up to the
point of transfer
D) the opportunity cost will equal the minimum contribution margin
In a strategy map, a strategic objective where many ties spur out from it resulting in the
achievement of many strategic objectives is called ________.
A) distinctive objectives
B) trigger point
C) focal points
D) orphan objectives
Economic value added is equal to ________.
A) After-tax operating income – [Weighted-average cost of capital + (Total assets –
Current liabilities)]
B) Pre-tax operating income – [Weighted-average cost of capital + (Total assets –
Current liabilities)]
C) After-tax operating income – [Weighted-average cost of capital × (Total assets –
Current liabilities)]
D) Pre-tax operating income – [Weighted-average cost of capital × (Total assets –
Current liabilities)]
Excellent Products, Inc., uses a budgeted factory overhead rate to apply overhead to
production. The following data are available for the year ended December 31, 2018.
Required:
a. Determine the budgeted factory overhead rate based on direct labor-hours.
b. What is the applied overhead based on direct labor-hours?
c. Is overhead overapplied or underapplied? Explain.
When using the five-step decision process, which one of the following steps should be
done last?
A) obtain information
B) choose an alternative
C) evaluation and feedback
D) implementing the decision
The major challenge when planning fixed overhead is ________.
A) calculating total costs
B) calculating the cost-allocation rate
C) choosing the appropriate level of capacity
D) choosing the appropriate planning period
Verer Custom Carpentry manufactures chairs in its Processing Department. Direct
materials are included at the inception of the production cycle and must be bundled in
single kits for each unit. Conversion costs are incurred evenly throughout the
production cycle. Inspection takes place as units are placed into production. After
inspection, some units are spoiled due to undetectable material defects. Spoiled units
generally constitute 4% of the good units. Data provided for March 2017 are as follows:
What costs would be associated with normal and abnormal spoilage, respectively, using
the FIFO method of process costing? (Round any cost per unit calculations to the nearest
cent.)
A) $149,611; $5290
B) $1250; $4858
C) $4858; $2297
D) $10,651; $2297
The Green Company processes unprocessed goat milk up to the split-off point where
two products, condensed goat milk and skim goat milk result. The following
information was collected for the month of October:
The costs of purchasing the of unprocessed goat milk and processing it up to the split-off
point to yield a total of 102,500 gallons of saleable product was $186,480. There were no
inventory balances of either product. Condensed goat milk may be processed further to
yield 42,500 gallons (the remainder is shrinkage) of a medicinal milk product, Xyla, for an
additional processing cost of $3 per usable gallon. Xyla can be sold for $21 per gallon.
Skim goat milk can be processed further to yield 58,200 gallons of skim goat ice cream,
for an additional processing cost per usable gallon of $3. The product can be sold for $8
per gallon.
There are no beginning and ending inventory balances.
Using the sales value at split-off method, what is the gross-margin percentage for
condensed goat milk at the split-off point? (Round intermediary percentages to the nearest
hundredth.)
A) 49.63%
B) 50.00%
C) 42.60%
D) 50.37%
The following information pertains to the January operating budget for Casey
Corporation.
∙ Budgeted sales for January $209,000 and February $108,000.
∙ Collections for sales are 50% in the month of sale and 50% the next month.
∙ Gross margin is 30% of sales.
∙ Administrative costs are $13,000 each month.
∙ Beginning accounts receivable is $28,000.
∙ Beginning inventory is $16,000.
∙ Beginning accounts payable is $70,000. (All from inventory purchases.)
∙ Purchases are paid in full the following month.
∙ Desired ending inventory is 20% of next month’s cost of goods sold (COGS).
For January, budgeted cash payments for purchases are ________.
A) $108,000
B) $75,600
C) $70,000
D) $49,700
Which of the following is a reason to gather data, associate revenues with each
customer and develop a system of allocating costs to each customer?
A) GAAP requirements for external reporting including 10K disclosures
B) to assure that highly profitable customers get the appropriate level of care and
attention
C) ABC systems cannot be implemented without customer-profitability reporting
D) to assure that more resources are committed to loss-making customers in an attempt
to retain all customers
Which of the following is an example of a nonfinancial measure for customer
satisfaction?
A) average manufacturing time for key products
B) contribution margin earned on popular products
C) on time delivery rates
D) time and effort spent on machine repairs
Which of the following is true of the calculation of the cost per good unit (a unit that is
completed and transferred out) under the weighted-average process costing method?
A) the equivalent units in the denominator include goods completed and transferred out
and all units that were spoiled
B) the numerator only includes the materials and conversion costs of good units and
excludes the costs of spoiled units
C) the equivalent units in the denominator include goods completed and transferred out
and excludes the units that were spoiled
D) the calculation is total costs transferred out divided by the good units that were
transferred out
Teddy Company uses a standard cost system. In May, $234,000 of variable
manufacturing overhead costs were incurred and the flexible-budget amount for the
month was $240,000. Which of the following variable manufacturing overhead entries
would have been recorded for May?
Network Service Center is considering purchasing a new computer network for
$82,000. It will require additional working capital of $13,000. Its anticipated eight-year
life will generate additional client revenue of $33,000 annually with operating costs,
excluding depreciation, of $15,000. At the end of eight years, it will have a salvage
value of $9,500 and return $5,000 in working capital. Taxes are not considered.
Required:
a. If the company has a required rate of return of 14%, what is the net present value of
the proposed investment?
b. What is the internal rate of return?
Castleton Corporation manufactured 36,000 units during March. The following fixed
overhead data relates to March:
What is the flexible-budget amount?
A) $170,379.31
B) $156,400.00
C) $165,600.00
D) $164,700.00
A company’s balanced scorecard measures yield, order-delivery time, cycle time, and
errors as part of which of the following perspectives?
A) Financial
B) Customer
C) Internal-business-process
D) Learning-and-growth
What is the gross margin for 2018?
A) $135,000
B) $46,000
C) $163,000
D) $149,000
The cost of the personnel department at the Speedy Process Company has always been
charged to the production departments based upon number of employees. Recently,
opinions gathered from the department managers indicated that the number of new hires
might also be a predictor of personnel costs to be assigned. Total personnel department
costs are $200.000.
Department Department Department
Cost Driver A B C
Number of employees 390 325 65
The number of new hires 30 40 25
Required:
Using the above data, prepare a report that contrasts the different amounts of personnel
department cost that would be allocated to each of the production departments if the
cost driver used is:
a. number of employees.
b. the number of new hires.
c. Which cost estimation method is being used by Speedy Company?
A distinct feature of the FIFO process-costing method is that the ________.
A) work done on beginning inventory before the current period is blended with the
work done during the current period in the calculation of equivalent units
B) work done on beginning inventory before the current period is kept separate from
the work done during the current period in the calculation of equivalent units
C) work done on ending inventory is kept separate from the work done during the
current period in the calculation of equivalent units and is usually not included in the
calculation
D) FIFO process-costing method is only minimally different from the weighted-average
process-costing method
The NPV method is the preferred method over IRR for selecting projects because
________.
A) its result is expressed in dollars and management can make an assessment as to its
financial impact on the value of the business
B) it accounts for the time value of money better than IRR
C) it assumes that cash flows are reinvested at the internal rate of return for each and
every year of the useful life
D) it gives a project ranking consistent with that of IRR