1) Which of the following costs can be classified into both value-added and
non-value-added costs?
A) production control costs
B) machine breakdown costs
C) rework costs
D) direct material costs
2) The cost components of a heater include $30 for the compressor, $10 for the sheet
molded compound frame, and $75 per unit for assembly. The factory machines and
tools cost is $60,000. The company expects to produce 1,000 heaters in the coming
year. What cost function best represents these costs?
A) y = 60,000 + 115X
B) y = 1,000 + 60,000X
C) y = 60,000 + 1,000X
D) y = 1,000 + 115X
3) Gavin and Alex, baseball consultants, are in need of a microcomputer network for
their staff. They have received three proposals, with related facts as follows:
The company uses straight-line depreciation for all capital assets.
Required:
a.Compute the payback period, net present value, and accrual accounting rate of return
with initial investment, for each proposal. Use a required rate of return of 14%.
b.Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best?
Why?
4) Shamokin Manufacturing produces a Tourbillon watch movement called OM362.
Shamokin expects to sell 10,000 units of OM362 and to have an ending finished
inventory of 2,000 units. Currently, it has a beginning finished inventory of 800 units.
Each unit of OM362 requires two labor operations, one labor hour of assembling and
two labor hours of polishing. The direct labor rate for assembling is $10 per assembling
hour and the direct labor rate for polishing is $12.50 per polishing hour.
The expected number of hours of direct labor for OM362 Bigger is ________.
A) 8,800 hours of assembling; 17,600 hours of polishing
B) 11,200 hours of assembling; 22,400 hours of polishing
C) 17,600 hours of assembling; 8,800 hours of polishing
D) 22,400 hours of assembling; 11,200 hours of polishing
5) The Venoid Corporation has an annual cash inflow from operations from its
investment in a capital asset of $16,000 each year for six years. The corporation’s
income tax rate is 30%. Calculate the total after-tax cash inflow from operations for six
years.
A) $96,000
B) $67,200
C) $28,800
D) $16,000
6) Strategic Analysis of Profitability of Ransham Company:
Income Statement Amounts in 2014 Revenue and Cost Effects of Growth
Component in 2015 Revenue and Cost Effects of Price-Recovery Component in
2015 Cost Effect of Productivity Component in 2015 Income Statement Amounts
in 2015
Revenues ($) 34,000 10,000 F 1,000 U (b) (e)
Costs 23,500 (a) 500 U (c) 26,100
Operating income 10,500 5,500 F 1,500 U 2,400 F (d)
What is the revenue amount for 2015 (e)?
A) $9,000
B) $25,000
C) $43,000
D) $16,900
7) A cost of operating a facility, department, activity area, or like cost object that is
shared by two or more users is called a ________.
A) combined cost
B) distinct cost
C) fixed cost
D) common cost
8) The focus in capital budgeting should be on ________.
A) favorable and unfavorable variance
B) expenses under accrual accounting
C) expected future cash flows that differ between alternatives
D) allocation of overheads
9) LaCrosse Products has a budget of $900,000 in 2015 for prevention costs. If it
decides to automate a portion of its prevention activities, it will save $80,000 in
variable costs. The new method will require $40,000 in training costs and $100,000 in
annual equipment costs. Management is willing to adjust the budget for an amount up
to the cost of the new equipment. The budgeted production level is 150,000 units.
Appraisal costs for the year are budgeted at $600,000. The new prevention procedures
will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of
finished goods. The internal failure rate is expected to be 3% of all completed items.
The proposed changes will cut the internal failure rate by one-third. Internal failure
units are destroyed. External failure costs average $54 per failed unit. The company’s
average external failures average 3% of units sold. The new proposal will reduce this
rate by 50%. Assume all units produced are sold and there are no ending inventories.
How much will internal failure costs change if the internal product failures are reduced
by 1/3 with the new procedures?
A) $22,500 decrease
B) $67,500 decrease
C) $500,000 decrease
D) $750,000 decrease
10) Switching production to products that absorb the highest amount of fixed
manufacturing costs is also called ________.
A) cost reduction
B) cherry picking
C) producing for sales
D) throughput costing
11) Life-cycle budgeting and life-cycle costing help highlight ________.
A) an increase in customer-service costs due to using inferior materials
B) high production costs caused by a complex design
C) large ordering costs due to the great number of component parts used
D) an increase in annual operating income resulting from the new product
12) When the activity level declines within the relevant range, what should happen with
respect to the following?
Fixed cost per unit Variable cost per unit
A) No change Increase
B) Increase Increase
C) Increase No change
D) No change No change
13) The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
What are the total relevant costs, assuming the quantity ordered equals 1,000 units?
A) $17,100
B) $16,500
C) $15,500
D) $19,100
14) What is the allocated corporate costs for Division B?
A) $700,000
B) $200,000
C) $500,000
D) $300,000