1) many companies in the consumer products and electronics industries such as walmart
and texas instruments compete using a strategy of:
a.professionalism
b.growth
c.cost leadership
d.abc costing
e.target costing
2) financial budgets include the:
a.pro forma balance sheet
b.projected income statement
c.budgeted selling and administrative expenses
d.sales budget
e.budgeted retained earnings statement
3) which of the following would likely not be considered part of the value chain in a
service firm?
a.inspection of product
b.advertising
c.employee training
d.customer service
e.materials handling
4) national inc. manufactures two models of cmd that can be used as cell phones, mpx,
and digital camcorders.
national uses a volume-based costing system to apply factory overhead based on direct
labor dollars. the unit prime costs of each product were as follows:
national’s controller had been researching activity-based costing and decided to switch
to it. a special study determined national’s two products have the following budgeted
activities:
using activity-based costing, applied quality control factory overhead for the high f
model per unit is (rounded to the nearest cent):
a.$6.13
b.$11.86
c.$16.28
d.$32.46
e.$66.73
5) nellibell’s caf bakes croissants that are sold to local restaurants and grocery stores in
the columbia, south carolina area. when 600 croissants are baked, the average cost is
$0.70. when 720 croissants are baked, the average cost is $0.65. what is the total cost
when 670 croissants are baked?
a.$568
b.$588
c.$448
d.$532
e.$500
6) everlast co. manufactures a variety of drill bits. the company’s plant is partially
automated. the budget for the year includes $432,000 payroll for 4,800 direct
labor-hours. listed below is cost driver information used in the product-costing system:
a current product order has the following requirements:
using abc, how much machine setup overhead is assigned to the order?
a.$19,200
b.$8,000
c.$11,108
d.$9,960
e.$7,272
7) the five steps of strategic decision making include all of the following except:
a.based on strategy and analysis, choose and implement the desired alternative
b.identify the alternative actions
c.determine the strategic issues surrounding the problem
d.select the proper cost management technique
e.provide an ongoing evaluation of the effectiveness of the decision
8) neary co. produces three products x, y, and z from a joint process. each product may
be sold at the split-off point or processed further. additional processing requires no
special facilities, and production costs of further processing are entirely variable and
traceable to the products involved. last year all three products were processed beyond
split-off. joint production costs for the year were $80,000. sales values and costs needed
to evaluate neary’s production policy follow.
the amount of joint costs allocated to product x using the physical measure method is
(calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and
round all dollar amounts to the nearest whole dollar):
a.$19,280
b.$42,450
c.$23,222
d.$48,950
e.$56,000
9) cvp analysis for revenue and cost planning has the primary objective of:
a.maximizing revenue
b.minimizing costs
c.both revenue maximization and cost minimization
d.achieving a desired level of sales and profits
e.consistently producing sales above the breakeven level
10) for the current year, power cords corp. expected to sell 42,000 industrial power
cords. fixed costs were expected to total $1,650,000; unit sales price was expected to be
$3,750; and unit variable costs were budgeted at $2,250.
power cord corp.’s margin of safety ratio (mos%) is (rounded to two decimal points):
a.91.59%
b.97.38%
c.90.71%
d.99.47%
e.93.15%
11) which of the following budgets is not a financial budget?
a.sales budget
b.cash receipts budget
c.budgeted cash-flow statement
d.budgeted balance sheet
12) premium beds is a retailer of luxury bed frames located in los angeles, california.
due to a recent industry-wide financial crisis, the cfo of premium beds fears a
significant drop in the firm’s upcoming income stream. the cfo asked you to use the
company financial information provided below.
the annual breakeven point, in dollar sales, is calculated to be:
a.$4,800,000
b.$4,500,000
c.$4,100,000
d.$4,600,000
e.$4,300,000
13) jeffrey’s bottling co. incurred the following costs during november:
if direct materials cost was $140,000 in november, what was the conversion cost for
november?
a.$255,000
b.$240,000
c.$215,000
d.$235,000
14) opportunity costs:
a.result in a cash outlay
b.unless zero are always relevant for decision making
c.should be maximized for the best decision
d.are recorded in the accounting records
e.are the result of a completed event or transaction
15) accurate cost estimates are required by strategic management for all except:
a.to facilitate strategic positioning analysis
b.to facilitate target costing and life-cycle costing
c.to facilitate value-chain analysis
d.accounting internal control
16) the following information is for stier company for the month of november:
a. factory overhead costs are applied to jobs at the predetermined rate of $80 per
labor-hour. job x-14 incurred 2,300 labor-hours; job sm-4 used 1,850 labor-hours.
b. job x-14 was shipped to customers during november.
the company closed the overapplied or underapplied overhead to the cost of goods sold
account at the end of november
c. factory utilities, factory depreciation, and factory insurance incurred is summarized
by these factory vouchers, invoices, and cost memos:
d. the company purchased the following direct materials and indirect materials:
e. direct materials and indirect materials used are as follows:
f. factory labor incurred for the two jobs and indirect labor is as follows:
required:
1>calculate the amount of overapplied or underapplied overhead and state whether the
cost of goods sold account will be increased or decreased by the adjustment.
2>calculate the total manufacturing cost for job x-14 and job sm-4 for november.
17) the controller for ocean sailboats inc., a company which uses an automated process
to make sailboats, established the following overhead cost pools and cost drivers:
a recent order for sailboats used:
required:
1> what is the overhead rate per machine hour if the number of machine hours is used
as a single cost driver under traditional costing system?
2> utilizing traditional costing, how much overhead is assigned to the order based on
machine hours as a single cost driver?
3> utilizing abc, how much total overhead is assigned to the order?
18) boston manufacturing company had the following cost information for may.
the labor rate in department 1 is $10.50 and in department 2 is $9.50. the overhead rate
in department 1 is based on direct labor-hours, at $4.50 per hour; in department 2 the
rate is 125 percent of direct labor cost. boston had no beginning work-in-process
inventory for may.
required: calculate the direct materials, direct labor, factory overhead, and total costs for
each job.
19) olde corporation is preparing a cash budget for the first two months of the coming
year. the following data have been forecasted:
additional data:
(1) sales are 40% cash and 60% credit. the term of credit sales is 2/10, n/30 . the
collection pattern for credit sales is 80% in the month following the month of sale (of
which 75% are collected within 10 days), and 20% in the month thereafter. total sales in
december of the prior year were $1,000,000.
(2) purchases are all on credit, with 40% paid in the month of purchase and the balance
the following month.
(3) operating expenses are paid in the month incurred.
(4) the firm desires to maintain its cash balance at $150,000 at the end of each month.
(5) loans are used to maintain the minimum cash balance. at the end of each month,
interest of 1% per month is paid on the outstanding loan balance as of the beginning of
the month. repayments are made (at the end of the month) whenever the cash balance
exceeds $150,000.
required: prepare the cash budget, in the form of a statement of cash flow, for february.
what is the amount of the loan balance at the end of the month (after loan repayments, if
any)?
20) ramirez company uses a predetermined overhead rate. overhead for the next twelve
months is estimated to be $500,000. ramirez applies overhead as a percentage of direct
labor cost. direct labor costs are estimated to be $625,000 for the next year. during the
year actual direct labor costs amounted to $600,000 and the actual overhead was as
follows:
required:
(1) calculate the over/under-applied overhead for the year.
(2) prepare the journal entry to close the overhead accounts, assuming that the
over/under-applied overhead is closed to cost of goods sold.
21) amy and jay golden have worked for five years in a firm specializing in restoration
of historical buildings. amy has focused on interior reconditioning and jay on
architectural and structural design. they have specialized in residential structures for the
past two years, and are thinking of forming their own residential restoration firm. they
plan to do all the structural and decorative design, and subcontract the actual
construction and decorative work. one of their concerns is to have an accounting system
in place when they begin their business. you have been asked to assist them by
answering the following questions.
required:
(1) since we have a very basic service-type firm, can a simple accounting system be
developed?
(2) what kinds of information does the accounting system need to collect?
22) customer profitability analysis spring company collected the following data
pertaining to its activities with selected customers.
spring company mails monthly statements on or before the first day of each month. hs
pays all of its account payables within the payment discount periods. adventix does not
take the early payment discounts. in fact, the company pays half of its accounts on the
date that these accounts are due and pays the remainder at the end of the following
month. baldwin also does not take advantage of discounts for early payments. however,
it pays its accounts on the specified due date. cost of goods sold is sixty percent of gross
sales price. joan lieberman, the controller of spring company, has estimated that the cost
of working capital is approximately 2 percent per month.
lieberman also gathered the following cost data:
required:
prepare and interpret a customer profitability analysis for spring company. how does it
help spring company become more competitive and profitable?
23) ardan company’s sales budget showed the following projections for the coming
year:
inventory on december 31 of the current year is expected to be 3,000 units. the quantity
of finished goods inventory at the end of each quarter was to equal five percent of the
next quarter’s budgeted units to be sold.
required: calculate the units to be produced during the second quarter.