Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing
system uses two cost categories, direct materials and conversion costs. Each product
must pass through the Assembly Department and the Testing Department. Direct
materials are added at the beginning of the production process. Conversion costs are
allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
What are the equivalent units for direct materials and conversion costs, respectively, for
June? (Round final answers to the nearest unit.)
A) 1340 units; 1050 units
B) 1340 units; 1290 units
C) 1220 units; 1220 units
D) 1248 units; 1120 units
A patient had a 1:00 pm appointment with a doctor and leaves the office to go home at
2:00 pm. The patient spends 5 minutes filling out insurance forms, 25 minutes alone in
the examination room, and 6 minutes with the nurse and doctor. What is the service
cycle efficiency ratio?
A) 0.10
B) 0.67
C) 0.90
D) 1.0
The costs of unused capacity are highlighted when ________.
A) actual usage based allocations are used
B) budgeted usage allocations are used
C) practical capacity-based allocations are used
D) the dual-rate cost-allocation method allocates fixed costs based on actual usage
Kinnane’s Fine Furniture manufactures two models, Standard and Premium. Weekly
demand is estimated to be 100 units of the Standard Model and 77 units of the Premium
Model. The following per unit data apply:
Standard Premium
Contribution margin per unit $24 $24
Number of machine-hours required 6 6
The contribution per machine-hour is ________.
A) $24 for Standard, $24 for Premium
B) $144 for Standard, $144 for Premium
C) $18 for Standard, $18 for Premium
D) $4 for Standard, $4 for Premium
Yancy Company manufactures chairs. Because the efforts of manufacturing are
approximately equal between labor and machinery, management is considering other
possible cost drivers. By considering different cost drivers, it is anticipated that the
estimating process can be improved. The following cost estimating equations with their
r2 values have been determined for 2017:
1. X = cutting time y = $19,500 + $20X r2 = 0.65
2. X = labor y = $5,000 + $25X r2 = 0.49
3. X = machinery y = $44,500 + $5X r2 = 0.55
Required:
a. Which equation should be selected for the analysis?
b. What other factors should be included in the selection of the estimating equation?
Samantha’s Office Supplies manufactures desk organizers 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 5% of the good units. Data provided for February 2017 are as
follows:
What are the total costs of all the units that were started during February and subsequently
shipped before the end of the period? (Round any cost per unit calculations to the nearest
cent.)
A) $605,673
B) $503,366
C) $560,549
D) $397,248
In the cost classification system used by manufacturing firms, assembly workers’ wages
would be included in ________.
A) irrelevant cost
B) direct manufacturing costs
C) indirect manufacturing costs
D) period cost
A shift towards a higher proportion of sales of products with a lower contribution
margin per unit will most likely result in a(n) ________.
A) unfavorable sales-mix variance
B) unfavorable sales-quantity variance
C) favorable sales-mix variance
D) favorable sales-quantity variance
Effectiveness is ________.
A) the relative amount of inputs used to achieve a given output level
B) the continuous process of comparing a firm’s performance levels against the best
levels of performance in competing companies
C) the degree to which a predetermined objective or target is met
D) is a practice whereby managers focus more closely on areas that are not operating as
expected and less closely on areas that are
For next year, Roberts, Inc., has budgeted sales of 20,000 units, targeted ending finished
goods inventory of 1,650 units, and beginning finished goods inventory of 750 units.
All other inventories are zero. How many units should be produced next year?
A) 19,100 units
B) 20,000 units
C) 20,900 units
D) 22,400 units
________ is an after-sale support provided to customers.
A) Distribution
B) Customer service
C) Production
D) Marketing
For manufacturing firms, inventoriable costs include ________.
A) plant supervisor salaries
B) advertising costs to promote the sale of finished goods
C) costs of dealing with customer questions about warranties after the sale
D) distribution costs such the cost of operating a fleet of delivery vehicles
Which of the following is true about designing an accounting-based performance
measure?
A) The decisions made in steps are followed in a hierarchial order.
B) The issues considered in each step are independent.
C) Management’s beliefs are not required during the analyses.
D) Behavioral criteria are important when evaluating the steps.
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 15% from 2017 to 2018. The following additional data are
available for 2017 and 2018:
What is the revenue effect of the growth component?
A) $1,782,000 U
B) $418,500 F
C) $418,500 U
D) $1,782,000 F
Jenkins Corporation sells one product. The following information is available for the
current month:
What is the absorption costing breakeven point in units? (Round your final answer up to
the next whole unit.)
A) 6,272 units
B) 840 units
C) 2,744 units
D) 8,344 units
Book & Bible Bookstore desires to buy a new coding machine to help control book
inventories. The machine sells for $36,586 and requires working capital of $4,000. Its
estimated useful life is five years and will have a salvage value of $4,000. Recovery of
working capital will be $4,000 at the end of its useful life. Annual cash savings from the
purchase of the machine will be $10,000.
Required:
a. Compute the net present value at a 14% required rate of return.
b. Compute the internal rate of return.
c. Determine the payback period of the investment.
Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the incremental method, what amount of revenue will be allocated to Math Fun in
the package that contains all three products? Assume Reading Fun is the primary product,
followed by Math Fun, and then Analysis. (Do not round any intermediary calculations.)
A) $20.89
B) $37.00
C) $28.62
D) $35.69
How is value-engineering relevant to a well done customer profitability analysis,
especially when an ABC system is utilized to calculate customer profits (or losses)?
A) ABC will satisfy GAAP and provide input into value-engineering decisions
B) ABC offers the opportunity to analyze the costs of activities assigned to each
customer and to determine if improvements can be made to optimize profits
C) customer profitability analysis will reveal that the cost drivers of less profitable
customers are the problem and that value-engineering is the solution
D) Only value-added activities will be shown in the cost analysis and thus all other
costs will be eliminated via value-engineering
Early inspections can ________.
A) prevent any further conversion costs being wasted on units that are already good
B) increase conversion costs on units that are already spoiled
C) increase any further costs being spent on units that are already spoiled
D) prevent any further costs being wasted on units that are already spoiled
First Class, Inc., expects to sell 22,000 pool cues for $12 each. Direct materials costs
are $3, direct manufacturing labor is $4, and manufacturing overhead is $0.84 per pool
cue. The following inventory levels apply to 2019:
On the 2019 budgeted income statement, what amount will be reported for sales?
A) $277,200
B) $264,000
C) $396,000
D) $409,200
What is budgetary slack? What are the pros and cons of building slack into the budget
from the point of view of (a) an employee and (b) a senior manager?
All of the following are ways to calculate different versions of ROI except ________.
A) Revenues/Total Assets
B) Return on sales x investment turnover
C) Income/Investments
D) Operating Income/Revenues x Revenues/Total Assets
________ measures the relationship between actual inputs used and actual outputs
achieved.
A) Strategy map
B) Planning variance
C) Productivity
D) Discretionary costs
________ is considered while choosing a cost allocation base for activity costs in ABC
costing.
A) Marketing strategy and material price level
B) Availability of reliable data and measures
C) Product price level
D) Market share of a product
Jane Industries manufactures plastic toys. During October, Jane’s Fabrication
Department started work on 10,200 models. During the month, the company completed
11,200 models, and transferred them to the Distribution Department. The company
ended the month with 2500 models in ending inventory. There were 3500 models in
beginning inventory. All direct materials costs are added at the beginning of the
production cycle and conversion costs are added uniformly throughout the production
process. The FIFO method of process costing is being followed. Beginning work in
process was 30% complete as to conversion costs, while ending work in process was
55% complete as to conversion costs.
What is the cost assigned to ending inventory during October? (Round intermediary
calculations to the nearest cent.)
A) $46,010
B) $53,705
C) $58,971
D) $40,918
The American West Company manufactures several different products. Unit costs
associated with Product ORD210 are as follows:
What are the period costs per unit associated with Product ORD210?
A) $18
B) $38
C) $56
D) $66
Cost of spoiled units equals ________.
A) all costs incurred in producing them up to the point of delivery
B) all costs incurred in producing them up to the point of inspection
C) all costs incurred in producing them up to the point of selling
D) all costs incurred in producing them up to the point of packaging
If the distress price is used as the transfer price, ________.
A) the selling division will show a loss because the distress price will not exceed the
full cost of the division
B) the buying division will show a loss because the distress price will not exceed the
full cost of the division
C) the selling division will show a loss because the distress price will exceed the full
cost of the division
D) the buying division will show a loss because the distress price will exceed the full
cost of the division
James Ford an architect charges $150 per hour for his time spent drawing blueprints for
clients. His budgeted annual cost to run his office is $12,000 a year (rent and utilities)
and he allocates these indirect costs based on direct labor hours. Ford predicts that he
will work about 1,000 billable hours per year for his clients. Recently, Ford completed a
set of blueprints for a garage for one of his clients and involving 30 hours of work, How
much indirect costs should ford allocate to the garage blueprints job when considering
how much to charge his client and cover his costs?
A) $450
B) $810
C) $360
D) $330
Which of the following reasons explain why a physical-measure to allocate joint costs
is less preferred than the sales value at split-off point?
A) a physical measure such as volume is difficult to estimate than sales value
B) physical volume usually has little relationship to the revenue producing power of
products
C) a physical measure usually results in less costs being allocated to the product that
weighs the most
D) customers will easily understand that the products are overpriced
Following a strategy of product differentiation, Izzy’s Limited Company makes a
high-end Appliance, XT15. Izzy’s Limited presents the following data for the years
2017 and 2018:
Izzy’s Limited produces no defective units but it wants to reduce direct materials usage per
unit of XT15. Manufacturing conversion costs in each year depend on production capacity
defined in terms of XT15 units that can be produced. Selling and customer-service costs
depend on the number of customers that the customer and service functions are designed to
support. Izzy’s Limited had 165 customers in 2017 and 170 customers in 2018.
What is the net effect on operating income as a result of the growth component? (Round
any intermediary calculations to two decimals and your final answer to the nearest dollar.)
A) $2,977,094 F
B) $473,600 F
C) $473,600 U
D) $2,977,094 U