Shiffon Electronics manufactures music player. Its costing system uses two cost
categories, direct materials and conversion costs. Each product must pass through the
Assembly Department, the Programming department, and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Shiffon Electronics uses weighted-average
costing.
The following information is available for the month of March 2017 for the Assembly
department.
The cost details for the month of March are as follows:
What amount of conversion costs is assigned to the ending Work-in-Process account for
March?
(Round intermediary dollar amounts to the nearest cent and unit amounts to the nearest
whole unit.)
A) $182,343
B) $122,792
C) $109,406
D) $270,629
Which of the following statements is true of activity-based costing?
A) In activity-based costing, direct labor-hours is always the best allocation base to
allocate all non-manufacturing indirect costs.
B) Activity based costing is more suited to companies with high product diversity than
companies with single product line.
C) Activity based costing broadly averages or spreads the cost of resources uniformly to
cost objects such as products or services.
D) The main advantage of activity-based costing over peanut-butter costing is the
accurate distribution of all direct costs to the products.
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 are the total relevant costs, assuming the quantity ordered equals 1500 units?
A) $16,405
B) $18,280
C) $16,780
D) $22,405
Arthur’s Plumbing reported the following:
Required:
a. Compute contribution margin.
b. Compute contribution margin percentage.
c. Compute gross margin.
d. Compute gross margin percentage.
e. Compute operating income.
The Alfarm Corporation processes raw milk up to the split-off point where two
products, cream and liquid skim, are produced and sold. There was no beginning
inventory. The following material was collected for the month of February:
The cost of purchasing 780,000 gallons of direct materials and processing it up to the
split-off point to yield a total of 758,500 gallons of good product was $2,310,000. When
using a physical-volume measure, what is the approximate amount of joint costs that will
be allocated to cream and liquid skim? (Round intermediary percentages to the nearest
hundredth.)
A) $1,350,657 and $959,343
B) $1,155,000 and $1,155,000
C) $1,345,524 and $964,476
D) $1,313,442 and $996,558
In an effective balanced scorecard, ________.
A) net income serves as the best indicator for the hard-to measure long-run operational
performance
B) the sales budget serves as one of the leading indicator for the hard-to measure
short-run financial performance
C) the sales budget serves as a leading indicator for the hard-to measure short-run
nonfinancial performance
D) customer satisfaction serves as one of the leading indicator for the hard-to measure
long-run financial performance such as the likelihood of higher sales and income
Pederson Company reported the following:
What is the average manufacturing cost per unit? (Round the answer to the nearest dollar.)
A) $48.00
B) $80.00
C) $60.00
D) $64.00
Query Company sells pillows for $25.00 each. The manufacturing cost, all variable, is
$10 per pillow. The company is planning on renting an exhibition booth for both
display and selling purposes at the annual crafts and art convention. The convention
coordinator allows three options for each participating company. They are:
1. paying a fixed booth fee of $5,010, or
2. paying an $4,000 fee plus 10% of revenue made at the convention, or
3. paying 20% of revenue made at the convention.
Required:
a. Compute the breakeven sales in pillows of each option.
b. Which option should Query Company choose, assuming sales are expected to be 800
pillows?
Coldbrook Company has two sources of funds: long-term debt with a market and book
value of $17,000,000 issued at an interest rate of 11%, and equity capital that has a
market value of $6,000,000 (book value of $5,500,000). Coldbrook Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 15%, while the tax rate is 35%.
What is the EVA for Stonybrook? (Round intermediary calculations to four decimal
places.)
A) $1,184,600
B) $1,755,000
C) $570,400
D) $658,693
The Corata Appliance Manufacturing Corporation manufactures two vacuum cleaners,
the Standard and the Super. The following information was gathered about the two
products:
What is the budgeted sales-mix percentage for the Standard and the Super vacuum
cleaners, respectively?
A) 0.78 and 0.22
B) 0.67 and 0.33
C) 0.22 and 0.78
D) 0.33 and 0.67
Cold Products Corporation manufactured 34,000 ice chests during September. The
variable overhead cost-allocation base is $14.50 per machine-hour. The following
variable overhead data pertain to September:
What is the actual variable overhead cost?
A) $156,600
B) $177,480
C) $212,800
D) $220,400
Assembly department of Zahra Technologies had 200 units as work in process at the
beginning of the month. These units were 45% complete. It has 300 units which are
35% complete at the end of the month. During the month, it completed and transferred
500 units. Direct materials are added at the beginning of production. Conversion costs
are allocated evenly throughout production. Zahra uses weighted-average
process-costing method. Calculate the total equivalent units in ending inventory for
assignment of conversion costs?
A) 200 units
B) 105 units
C) 195 units
D) 300 units
The best method to determining weights for the stand-alone revenue-allocation method
is ________.
A) selling prices revenue-allocation method because the weights explicitly consider the
prices customers are willing to pay for the individual products
B) unit cost revenue-allocation method because it can be used on all occasions
C) the direct revenue-allocation method since selling prices or unit costs are difficult to
calculate for individual products
D) physical-units revenue-allocation method because the physical units explicitly value
the prices customers are willing to pay for the individual products
Marvelous Motors is a small motor supply outlet that sells motors to companies that
make various small motorized appliances. The fixed operating costs of the company are
$300,000 per year. The controlling shareholder, interested in product profitability and
pricing, wants all costs allocated to the motors and wants to review the company status
on a quarterly basis. The shareholder is trying to determine whether the costs should be
allocated each quarter based on the 25% of the annual fixed operating costs ($75,000)
or by using an annual forecast budget to allocate the costs. The following information is
provided for the operations of the company:
Required:
a. What amount of fixed operating costs are assigned to each motor by quarter when actual
sales are used as the allocation base and $75,000 is allocated?
b. How much fixed cost is recovered each quarter under requirement a.?
c. What amount of fixed operating costs are assigned to each motor by quarter when
forecast sales are used as the allocation base and the rate is calculated annually as part of
the budgetary process?
d. How much fixed cost is recovered each quarter under requirement c.?
e. Which method seems more appropriate in this case? Explain.
Crimpson Company has invested $2,100,000 in a plant to make commercial juicer
machines. The target operating income desired from the plant is $305,000 annually. The
company plans annual sales of 7400 juicer machines at a selling price of $600 each.
What is the target rate of return on investment for Crimpson Company?
A) 6.9%
B) 7.4%
C) 14.5%
D) 12.5%
Coldbrook Company has two sources of funds: long-term debt with a market and book
value of $19,000,000 issued at an interest rate of 11%, and equity capital that has a
market value of $7,000,000 (book value of $5,000,000). Coldbrook Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 16%, while the tax rate is 35%.
What is the EVA for Brooksville? (Round intermediary calculations to four decimal
places.)
A) $715,000
B) $390,730
C) $166,179
D) $324,270
Which of the following is a performance measure?
A) retained earnings
B) market value
C) present value of cash flows
D) economic value added
Torid Company processes 18,025 gallons of direct materials to produce two products,
Product X and Product Y. Product X sells for $5 per gallon and Product Y, the main
product, sells for $170 per gallon. The following information is for December:
The manufacturing costs totalled $26,000.
Under production method, Product X NRV would be offset against the costs of Product Y
by how much?
A) $28,500
B) $29,000
C) $17,000
D) $500
An advantage of using budgeted costs for transfer pricing among divisions is that
________.
A) overall corporate profitability is usually higher
B) it usually provides a basis for optimal decision making
C) the divisions know the transfer price in advance
D) it promotes subunit autonomy
Dantley’s Furniture manufactures rustic furniture. The cost accounting system estimates
manufacturing costs to be $190 per table, consisting of 80% variable costs and 20%
fixed costs. The company has surplus capacity available. It is Back Forrest’s policy to
add a 45% markup to full costs. Dantley’s Furniture is invited to bid on a one-time-only
special order to supply 180 rustic tables. What is the lowest price Dantley’s Furniture
should bid on this special order?
A) $22,230
B) $27,360
C) $34,200
D) $42,750
At the Wild Cat Group Company, the cost of the library and information center has
always been charged to the various departments based upon number of employees.
Recently, opinions gathered from the department managers indicate that the number of
engineers within a department might be a better predictor of library and information
center costs.
Total library and information center costs are $202,000.
Department A B C
Number of employees 175 525 140
Number of engineers 5 85 35
Which cost estimation method is being used by Wild Cat Group Company?
A) the regression analysis method
B) the marginal costing method
C) the conference method
D) the operating costing method
The Marietta Company has fixed costs of $75,000 and variable costs are 75% of the
selling price. To realize operating income of $10,000 from sales of 80,000 units, the
selling price per unit ________. (Round the answer to the nearest cent.)
A) must be $1.06
B) must be $1.42
C) must be $4.25
D) must be $3.75
Estate Corp., has the following information:
Purchases are paid for in the following manner:
15% of the purchase amount in the month of purchase
35% of the purchase amount in the month after purchase
50% of the purchase amount in the second month after purchase
What is the expected Accounts Payable balance as of May 31?
A) $34,196
B) $33,503
C) $38,768
D) $4,572
At the Spring Valley Company, the cost of the personnel department has always been
charged to production departments based upon number of employees. Recently,
opinions gathered from the department managers indicate that the number of new hires
might be a better predictor of personnel costs.
Total personnel department costs are $298,000.
Department A B C
Number of employees 50 285 200
Number of new hires 30 13 12
Which cost estimation method is being used by Spring Valley Company?
A) the simple regression method
B) the conference method
C) the account analysis method
D) the marginal costing method
Lancelot Corporation manufactures tennis gear and uses budgeted machine-hours to
allocate variable manufacturing overhead. The following information relates to the
company’s manufacturing overhead data:
What is the amount of the budgeted variable manufacturing overhead cost per unit?
A) $2.40 per unit
B) $6.98 per unit
C) $7.20 per unit
D) $25.51 per unit
Which of the following methods ranks individual products in a bundle for revenue
allocation?
A) stand-alone revenue-allocation method
B) incremental revenue-allocation method
C) unit-cost weighting method
D) physical-unit weighting method
The following information pertains to Expert System Corporation:
What is the gross profit margin earned by the company?
A) $56,000
B) $63,000
C) $68,000
D) $66,000
Outose Concept manufactures small tables in its Processing Department. Direct
materials are added at the initiation of the production cycle and must be bundled in
single kits for each unit. Conversion costs are incurred evenly throughout the
production cycle. Before inspection, some units are spoiled due to undetectable
materials defects. Spoiled units generally constitute 4% of the good units. Data for
December 2017 are as follows:
Normal spoilage totals ________.
A) 3180 units
B) 6800 units
C) 2908 units
D) 3892 units
In the formula for calculating the average waiting time, the squared manufacturing time
indicates ________.
A) that the shorter the manufacturing time, the greater the chance that the machine will
remain idle in the process
B) that the shorter the manufacturing time, the greater the chance that the machine will
be in use when an order arrives
C) the disproportionately large impact the manufacturing time has on the waiting time
D) a measure of the unused capacity or cushion
Which of the following describes boundary control systems?
A) set limits by instituting and communicating standards of behavior and codes of
conduct expected of all employees
B) articulate the mission, purpose, and core values of a company
C) are formal information systems managers use to focus the company’s attention and
learning on key strategic issues
D) describe the geographic limits of a company and help organize its layout
The formal process of choosing between alternatives is known as a(n) ________.
A) relevant model
B) decision model
C) alternative model
D) prediction model
Tom’s Tire Tower, Inc., sells tires for $110. The unit variable cost per tire is $85. Fixed
costs total $475,000.
Required:
a. What is the contribution margin per tire?
b. What is the breakeven point in tires?
c. How many tires must be sold to earn a pretax income of $450,000?
d. What is the margin of safety, assuming 33,000 tires are sold?
Axelia Corporation has two divisions, Refining and Extraction. The company’s primary
product is Luboil Oil. Each division’s costs are provided below:
Extraction: Variable costs per barrel of oil $14
Fixed costs per barrel of oil $5
Refining: Variable costs per barrel of oil $27
Fixed costs per barrel of oil $31
The Refining Division has been operating at a capacity of 40,200 barrels a day and
usually purchases 25,100 barrels of oil from the Extraction Division and 15,600 barrels
from other suppliers at $58 per barrel.
What is the transfer price per barrel from the Extraction Division to the Refining
Division, assuming the method used to place a value on each barrel of oil is 180% of
variable costs?
A) $25.20
B) $34.20
C) $77.00
D) $138.60