1) 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:
what is the overhead application rate using the firm’s volume-based costing system
(rounded to the nearest percent or cents)?
a.350 percent of direct labor cost
b.$51.89 per direct labor-hour
c.68 per cent of direct labor cost
d.5,189 percent of direct labor cost
e.5,110 percent of direct labor cost
2) revision of a completed and approved budget:
a.should be conducted whenever actual events differ significantly from those
envisioned when the budget was prepared
b.reduces employee commitment to achieve budgeted performance
c.should be discouraged
d.may discourage diligence in its initial preparation
e.is never needed under kaizen budgeting
3) assume the following information pertaining to cub company:
cost of goods manufactured is calculated to be:
a.$289,000
b.$348,000
c.$314,000
d.$297,000
e.$323,000
4) the advantage of the weighted-average method is its:
a.complexity and comprehensiveness
b.ability to handle spoilage and waste
c.appropriateness regardless of inventory level changes
d.effectiveness in a cost leadership strategy
e.simplicity
5) the world resources institute has defined:
a.types of cost management
b.categories for environmental performance indicators
c.methods for achieving sustainability
d.categories for economic performance indicators
e.none of the above
6) sterling glass company uses the high-low method to analyze mixed costs. the
following information relates to the production data for the first six months of the year.
how should the cost function be properly stated?
a.y = $2,025 + $2.50h
b.y = $3,890 + $2.00h
c.y = $4,085 + $2.00h
d.y = $5,260 + $2.50h
7) stephenson company’s computer system recently crashed, erasing much of the
company’s financial data. the following accounting information was discovered soon
afterwards on the cfo’s back-up computer disk.
the cfo of stephenson company has asked you to recalculate the following accounts and
report to him by week’s end.
manufacturing firms use which of the following three inventory accounts?
a.materials, work-in-process, transferred-out
b.materials, work-in-process, finished goods
c.materials, finished goods, transferred-out
d.work-in-process, finished goods, transferred-out
8) armer company is accumulating data to use in preparing its annual profit plan for the
coming year. the cost behavior pattern of the maintenance costs must be determined. the
accounting staff has suggested the use of linear regression to derive an equation for
maintenance hours and costs. data regarding the maintenance hours and costs for the
last year and the results of the regression analysis follow:
based on the data derived from the regression analysis, 420 maintenance hours in a
month mean that maintenance costs should be budgeted to the nearest dollar at
a.$3,780
b.$3,461
c.$3,797
d.$3,746
e.none of the above
9) manders manufacturing corporation uses the following model to determine its
product mix for metal (m) and scrap metal (s):
the two inequality functions above are:
a.contribution margin functions
b.shadow points
c.objective function coefficients
d.resource constraints
e.sensitivity functions
10) reichhold chemical company uses process costing together with:
a.standard costing
b.activity-based costing
c.backflush costing
d.throughput costing
11) princess corporation grows, processes, packages, and sells three apple products:
slices that are used in frozen pies, applesauce, and apple juice. the outside skin of the
apple, which is removed in the cutting department and processed as animal feed, is
treated as a by-product. princess uses the net realizable value method to assign costs of
the joint process to its main products. the apple skin by-product net realizable value is
used to reduce the joint production costs prior to allocation to the main products. details
of princess’ production process follow:
the cutting department washes the apples and removes the outside skin. the department
then cores and trims the apples for slicing. at this point, each of the three main products
and the by-product are recognizable. each product is then transferred to the next
department for final processing.
the slicing department receives the trimmed apples and slices and freezes them. any
juice generated during the slicing operation is frozen with the slices.
the crushing department trims pieces of apple and processes them into applesauce. the
juice generated during this operation is used in the applesauce.
the juicing department pulverizes the core and any surplus apple from the cutting
department into a liquid. this department experiences a loss equal to 8 percent of the
weight of the good output produced.
the feed department chops the outside skin into animal food and packages it. a total of
270,000 pounds of apples entered the cutting department during november. the
following information shows the costs incurred in each department, the proportion by
weight (based on pounds) transferred to the four final processing departments, and the
selling price of each end product. assume no beginning or ending inventory of apple
slices, applesauce, or juice.
required:
1> princess corporation uses the net realizable value method to determine inventory
values for its main products and by-products. for the month of november, calculate each
of the following:
a. output in pounds for apple slices, applesauce, apple juice, and animal feed.
b. net realizable value at the split-off point for each of the three main products.
c. cutting department cost assigned to each of the three main products and to the
by-product in accordance with corporate policy.
d. gross margin in dollars for each of the three main products.
2> comment on the significance to management of the gross margin dollar information
by main product for planning and control purposes as opposed to inventory valuation.
3> list the important issues that princess faces as a global company. what are its critical
success factors? which key issues arise because princess operates in several countries?
should any of these issues affect the way princess allocates costs, as determined in
requirement 1?
12) ez carry corp. is the maker of high quality golf bags. they currently have three
different lines of bags, which they sell to sporting goods and golf shops throughout the
world. ez carry sells a constant mix of 4 small bags for each medium-sized bag and 5
medium bags for each large-sized bag. total fixed costs for the year are expected to be
$2,027,562. (note: round all decimals to three decimal places.)
the breakeven point in units (for the year) would be:
a.32,400 small, 8,100 medium, 1,620 large
b.34,808 small, 8,700 medium, 1,740 large
c.37,010 small, 9250 medium, 1,850 large
d.38,505 small, 9,625 medium, 1,925 large
13) general manufacturing expects to have 40,000 pounds of raw materials inventory on
hand on june 30, the end of the current year. the company has budgeted the following
production for the first four months of the coming year:
for the budgeting period, the firm desires each month’s ending raw materials inventory
to be 20% of the next month’s production needs. a finished unit requires two pounds of
raw materials.
general manufacturing’s budgeted purchases of raw materials during july (in lbs.)
should be:
a.48,000 lbs
b.200,000 lbs
c.208,000 lbs
d.248,000 lbs
e.296,000 lbs
14) the equation method for cvp analysis:
a.can be used to determine the breakeven point in units sold but not in sales dollars
b.can be used to determine the breakeven point in sales dollars but not in units sold
c.cannot be used to determine the breakeven point in units sold
d.cannot be used to determine the breakeven point in sales dollars
e.can be used to determine the breakeven point in units sold or sales dollars
15) which of the following is not a potential benefit of having a sound budgeting
process?
a.improved decision-making
b.improved performance-evaluation process
c.improved coordination of business activities
d.improved motivation for company employees
e.lower acceptance rate for capital budgeting projects
16) the departmental approach of cost allocation recognizes that the typical
manufacturing operation involves which type(s) of departments?
a.service departments and production departments
b.production departments and assembly departments
c.joint product departments and separable departments
d.cost pools and cost objects
e.support departments and other service departments
17) stephenson company’s computer system recently crashed, erasing much of the
company’s financial data. the following accounting information was discovered soon
afterwards on the cfo’s back-up computer disk.
the cfo of stephenson company has asked you to recalculate the following accounts and
report to him by week’s end.
what should be the amount of direct materials used?
a.$112,000
b.$183,000
c.$189,000
d.$204,000
18) which of the following is not a “production” department in a service firm?
a.accounting department
b.operations department
c.marketing department
d.factory engineering and maintenance
19) zeta company is preparing its annual profit plan. as part of its analysis of the
profitability of individual products, the controller estimates the amount of
manufacturing overhead that should be assigned to each of the two product lines from
the information given below.
budgeted material-handling costs are $50,000 .
the material-handling cost per wall mirror under abc is:
a.$0
b.$500
c.$1,000
d.$2,000
e.$5,000
20) marshall co. produced a pilot run of fifty units of a recently developed piston used
in one of its products. marshall expected to produce and sell 1,950 units annually. the
pilot run required an average of .55 direct labor hours per piston for 50 pistons.
marshall experienced an eighty percent learning curve on the direct labor hours needed
to produce new pistons. past experience indicated that learning tends to cease by the
time 800 pistons are produced.
marshall’s manufacturing costs for pistons are presented below.
marshall received a quote of $9 per unit from kytel machine co. for the additional 1,900
needed pistons. marshall frequently subcontracts this type of work and has always been
satisfied with the quality of the units produced by kytel.
if the pistons are manufactured by marshall co., the total direct labor hours for the first
800 pistons (including the pilot run) produced is calculated to be (round to two digits
after the decimal point):
a.167.11
b.173.69
c.176.95
d.180.22
e.192.04