1) cost management has moved from a traditional role of product costing and
operational control to a broader strategic focus, which places an emphasis on:
a.competitive pricing
b.domestic marketing
c.short-term thinking
d.strategic thinking
e.independent judgment
2) sheen co. manufacturers laser printers. it has outlined the following overhead cost
drivers:
sheen co. has an order for 1,000 laser printers that has the following production
requirements:
using activity-based costing, applied miscellaneous factory overhead for the 1,000 laser
printers order based on direct labor hours is:
a.$7,800
b.$10,000
c.$10,500
d.$150
e.$21,600
3) o’leary company manufactures product z in a two-stage production cycle in
departments a and b. materials are added at the beginning of the process in department
b. o’leary uses the weighted-average method. conversion costs for department b were
40% complete as to the 5,000 units in the beginning work-in-process (wip) inventory
and 50% complete as to the 7,000 units in the ending work-in-process inventory. 10,000
units were completed and transferred out of department b during october. an analysis of
the costs relating to work-in-process inventories and production activity in department b
for october follows:
the total cost per equivalent unit transferred-out for october of product z, rounded to the
nearest penny, was:
a.$2.75
b.$2.80
c.$2.85
d.$2.90
e.$2.95
4) product costing system design or selection:
a.is cost management expertise
b.requires an understanding of the nature of the business
c.should provide useful cost information for strategic and operational decision needs
d.should be cost effective in design and operation
e.all the above answers are correct
5) job costing in service industries uses recording procedures and accounts similar to
those illustrated in the chapter except for:
a.direct labor
b.overhead costs
c.direct materials
d.cost drivers
6) which of the following industries is more suitable for using a job costing system?
a.chemical plants
b.petroleum product manufacturing
c.medical clinics
d.cement manufacturing
e.food processing
7) target costing determines the desired cost for a product upon the basis of a given
competitive price such that the product will:
a.earn at least a small profit
b.earn a desired profit
c.earn the maximum profit
d.break even
e.sell the highest volume
8) during the current year, outlytech corp. expected to sell 24,000 telephone switches.
fixed costs for the year were expected to be $12,144,000, the unit sales price was
budgeted at $3,200, and unit variable costs were budgeted at $1,440.
outlytech’s margin of safety (mos) in sales dollars is:
a.$76,577,000
b.$87,517,000
c.$82,044,000
d.$54,720,000
e.$66,900,000
9) harmon inc. produces joint products l, m, and n from a joint process. information
concerning a batch produced in may at a joint cost of $75,000 was as follows:
the amount of joint costs allocated to product l using the net realizable value 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.$3,614
b.$4,688
c.$23,438
d.$33,434
e.$46,875
10) grant’s western wear is a retailer of western hats located in atlanta, georgia.
although grant’s carries numerous styles of western hats, each hat has approximately the
same price and invoice purchase cost, as shown below. sales personnel receive large
commissions to encourage them to be more aggressive in their sales efforts. currently
the economy of atlanta is really humming, and sales growth at grant’s has been great.
however, the business is very competitive, and grant has relied on its knowledgeable
and courteous staff to attract and retain customers, who otherwise might go to other
western wear stores. also, because of the rapid growth in sales, grant is finding it more
difficult to manage certain aspects of the business, such as restocking of inventory and
hiring and training new salespeople.
the annual breakeven point in dollar sales is calculated to be:
a.$504,000
b.$576,000
c.$468,000
d.$612,000
e.$540,000
11) job costing in the printing industry often has the following general framework. job
cost equals:
a.direct materials cost plus direct labor plus applied overhead based on machine hours
b.direct materials cost plus conversion costs applied on the basis of labor hours
c.direct materials cost, plus outside purchase costs, plus cost applied on the basis of
labor hours
d.materials purchases, labor incurred and applied overhead based on labor hours
e.none of the above
12) a significant advantage of using either an activity-based budgeting (abb) or a
time-driven activity-based budgeting (tdabb) system is:
a.reduction in the cost of developing budget amounts
b.estimation of the cost of unused capacity, as a by-product of the budgeting process
c.increased levels of budgetary slack, which has a positive influence on motivation
d.elimination of the need to generate a sales forecast for the upcoming period
e.the incorporation of continuous-improvement standards within the budgets
13) 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 average direct labor hours per unit
for the first 800 pistons (including the pilot run) produced is calculated to be (use five
decimal places in calculating the average time):
a.0.20926
b.0.21408
c.0.22528
d.0.23056
e.0.24797
14) sensitivity analysis in linear programming is used to:
a.determine the degree that the constraints vary
b.test the accuracy of the parameters
c.develop the technical matrix
d.determine how the optimal decision would react to changes in parameters
e.develop objective function coefficients
15) joint (common) costs in a joint production process are relevant for determining:
a.whether to produce at all
b.which products should be produced up to the split-off point in the production process
c.which products should be produced internally and which products should be
outsourced
d.the set of products that should be subjected to additional processing
e.the selling price of individual products produced as part of the joint production
process
16) variable costs within the relevant range for a firm are assumed:
a.not to vary per unit
b.not to vary in total
c.to be nonlinear
d.to be curvilinear
e.none of the above are correct
17) an r-squared value that approaches one (1.0) would indicate:
a.an average degree of explanatory power
b.a low degree of explanatory power
c.a high degree of explanatory power
d.the presence of outliers
e.the absence of outliers
18) in the current year, becker sofa company expected to sell 12,000 leather sofas. fixed
costs for the year were expected to be $8,400,000; unit sales price was budgeted at
$4,600; and unit variable costs were expected to be $2,200.
becker sofa company’s margin of safety ratio (mos%) is (rounded to two decimal
places):
a.71.29%
b.77.98%
c.70.83%
d.79.27%
e.73.35%
19) the following problems have occurred at your company: management seems to be
making decisions based on guesses and intuition, there’s a lack of clarity concerning
direction and goals, and profitable opportunities are being missed. what is your
company suffering from?
a.a lack of strategic information; management has not determined its strategic
competitive position
b.managers have too much information
c.the company is not familiar with business reengineering and value chain analysis
d.the company has an inappropriate mission statement
20) omni, inc. manages a medical-expense reimbursement program for colleges and
universities throughout the united states. university employees submit claims for
reimbursement of medical expenses from reimbursement accounts established each year
by the employees. omni then processes reimbursement requests, verifies the legitimacy
of each request, computes the deductible and co-payment required, determines whether
the employee’s expense reimbursement account has adequate funds available, and, if
applicable, issues a reimbursement check to the eligible employee.
omni employs three different types of clerks who manage these reimbursement
accounts: managers, clerical staff-1, and clerical staff-2 . the managers are each paid
$50,000 per year, clerical staff-1 employees are paid $40,000 per year, while clerical
staff-2 employees are paid $35,000 per year. based on prior experience, for every
150,000 claims processed per year, omni needs to budget for one manager’s position,
two clerical staff-1 positions, and six clerical staff-2 positions.
last year, omni processed 2 million reimbursement claims, and employed 14 managers,
30 clerical staff-1 employees, and 83 clerical staff-2 employees.
required
1> based on the data provided, calculate the cost savings or excess staffing costs for
omni during the most recent year. (assume that the policy of the company is to hire only
full-time employees.)
2> what managerial insights are suggested on the basis of your analysis? if you were
attempting to judge the processing efficiency of omni’s staff, what additional
information might you want to have?
21) williams company is an east coast producer of electronic furnace air filters. a
significant jump in new housing starts in the region has triggered a 25 percent increase
in orders for the filter units, especially the quality model that williams sells for $270.
six weeks after increasing production to supply the increased orders, the assistant
controller notices some unusual unit cost data in the monthly report she is preparing.
prior and current month unit values are given below:
required:
(1) suggest some possible causes for the decline in average total cost.
(2) assume now the opposite change has occurred, namely, average total cost has risen
$3.96 per unit, while unit variable cost has fallen by $3.68 per unit. suggest a possible
situation to explain these changes.
22) what is zero-base budgeting (zbb) and how does this approach to budgeting
compare to what can be considered “traditional budgeting”? how is zbb implemented in
practice?
23) advanced technical services, ltd. has many products and services in the medical
field. the clinical division of the company does research and testing of consumer
products on human participants in controlled clinical studies.
required:
determine for each cost below whether it is best classified as a fixed, variable, or
step-fixed cost.
(1) director’s salary
(2) part-time help
(3) payment on purchase of medical equipment
(4) allocation of company-wide advertising
(5) patches used on participants’ arms during the study
(6) stipends paid to participants
24) gordon manufacturing produces high-end furniture products for the luxury hotel
industry. gordon has succeeded through excellence in design, careful attention to quality
in manufacturing and in customer service, and through continuous product innovation.
the manufacturing process at gordon begins with a close consultation with each
customer so that the finished product exactly meets the customer’s specifications. this
commonly means unique designs, special fabrics, and high levels of manufacturing
quality. in addition, gordon believes that a key competitive edge it has over other
competitors is that it has an outstanding design staff that is able to work with customers
to come up with product designs that go beyond the customer’s expectations.
anticipating a growth in the demand for luxury hotel rooms, gordon has expanded its
operations to include one new manufacturing plant, and by refitting some of the older
plants with newer, more efficient equipment. the installation of the new equipment has
caused some delays in filling some customer orders, and gordon has shifted production
from those plants with the delays to other manufacturing plants. the result has been an
increase in some processing costs, transportation costs, and delays in meeting customer
order deadlines. also, the introduction of the new equipment has created some tensions
with employees who see the new, more efficient equipment as a potential threat to their
job security. there is also some disagreement among managers as to whether the new
equipment will improve or reduce quality.
required:
develop a swot analysis for gordon manufacturing. list one or more items in each
category.
25) each of the following cases is independent. use the fifo method.
required: fill in the blanks.
26) companies such as walmart and ups are committed to reducing cost and improving
their competitive position through sustainability efforts. walmart and ups have both
reduced significantly the amount of fuel used in their truck fleets.
required: suggest how regression and correlation analysis might be used to supplement
the efforts of companies like walmart and ups to improve the fuel efficiency of their
trucks.
27) which method of accumulating product costs, job costing or process costing, would
be more appropriate in each of the following situations:
1> a physicians’ clinic
2> a manufacturer of ready-mix cement
3> a custom equipment manufacturing
4> a print shop
5> a chemical manufacturer
6> an automobile repair shop
7> a professional services firm
8> a food processing company
9> a consulting firm
10> an oil refinery
28) the shoecraft company’s budgeted sales for january, february, and march of $80,000,
$60,000, and $50,000, respectively. seventy percent of sales are on credit. the company
collects 60% of its credit sales in the month following sale, 35% in the second month
following sale, and 5% is not collected. shoecraft mailed all statements to credit
customers at the end of the month with a term of 1/30, n/60 . what are shoecraft’s
expected cash receipts for march?