In a responsibility accounting environment, which of the following is not a
classification of organizational units?
a. Cost centers
b. Revenue centers
c. Profit centers
d. Investment centers
The following financial statement items are shown for J&T Manufacturing.
Calculate the common-size percentage for Gross Margin.
a. 0.8%
b. 11.6%
c. 42.8%
d. 57.1%
Direct labor costs include all of the following except
a. Wages of workers who transform direct materials into the finished product.
b. Supervisors who oversee the production process.
c. Wages of workers who actually have his or her hands on the product or on the
machine as the product is being made.
d. Benefits paid to the workers who transform direct materials into finished products.
Bill Jones, Flooring ‘s accountant, has prepared the following income statement for the
month of May.
In preparing the income statement, Bill was unsure what to do with $240,000 in
corporate fixed expenses that cannot be traced to a particular division. Since these costs
were incurred to run the business as a whole, and he believed that each division
benefited equally, he just allocated half to each division.
Required
a. How do you think Bill should have handled the $240,000 in corporate fixed
expenses?
b. Prepare a segment margin income statement that highlights each division ‘s
contribution to corporate profits.
Jenny’s Cutting Station is a new concept in haircuts; low cost and very quick. Set in a
local mall, Jenny’s offers 15 minute haircuts for harried shoppers who do not have time
for lengthy appointments. To ensure that the clients are in and out quickly, she
schedules her 5 employees based on expected client traffic. Each of the employees is
paid $1,200 per month, with part of their pay coming from client tips. Jenny pays rent
and overhead costs of $2,000 per month. Because of the quick nature of the service,
Jenny doesn’t have time to clean combs in between clients, so she uses a new comb for
each customer, at a cost of $.55 each. She also provides shampoo and conditioner for
each client at a cost of $.95 per client. The average price for a haircut is $12. Jenny pays
herself $5,000 per month. Calculate Jenny’s net operating income assuming 1,400
haircuts this month.
a.$1,700
b.$3,800
c.$6,500
d.$2,900
Mantle Co. manufactures baseball bats. The company’s total overhead consists of
assembly costs and inspection costs. The following data is available:
Total overhead assigned to wood bats assuming a single overhead rate and using
activity based costing, respectively, are:
a. $63,000 and $75,000
b. $63,000 and $57,000
c. $57,000 and $45,000
d. $57,000 and $75,000
Identifying activities performed in the organization is the first step in developing
activity-based product costs. Which of the following is a way to identify these
activities?
a. Asking employees what they do
b. Observe what employees do
c. Both asking employees what they do and observing what employees do.
d. Neither asking employees what they do nor observing what employees do.
Which of the following is not a measure that relates to the internal business processes
perspective?
a. Percentage of on-time deliveries
b. Response time to customer request
c. Delivery cycle time
d. Product return rate
Bend Manufacturers is considering investing in a new truck that will be used to deliver
its custom-made furniture. Ron Shop, Controller of Bend Manufacturers, is considering
a truck which will cost $80,000 and which has a useful life of 5 years. The new truck
will save $9,600 per year in operating costs which are realized at the end of each year.
Ron believes if the new truck is purchased it could be sold for $64,500 at the end of its
useful life. Bend’s required rate of return is 10%. What is the new truck’s net present
value?
a. ($80)
b. ($8,049)
c. ($3,559)
d. $18,658
Which of the following is not another term companies use to refer to manufacturing
overhead?
a. Facility cost
b. Manufacturing support
c. Factory support
d. Manufacturing burden
Which of the following is not a factor that influences the discount rate?
a.
b. Inflation
c. Investor’s expected rate of return
d. All of these answer choices are factors that influence the discount rate
An example of a committed fixed cost for a clothing manufacturer is
a.An annual contract for television advertising cost.
b.A 10-year lease on an office building.
c.Yards of fabric used.
d.None of these answer choices are correct.
The New Age Pet Store sells Diva Doggie pet waste disposal systems for $50 each. The
systems include the unit and a one-year supply of enzyme digester waste terminator.
The cost of the unit and enzyme is $35. The only other costs are fixed costs of $3,000.
During the current period, New Age sold 600 of the units through the store’s new
on-line catalog division.
Required:
a. What is the contribution margin per unit?
b. What is the contribution margin ratio?
c. What is the breakeven point in units? In dollars?
d. What is the margin of safety in units? In dollars?
On a common-size income statement, interest expense is shown as a percentage of
a. Operating income.
b. Net sales revenue.
c. Net income.
d. Gross profit.
In an activity-based costing system, which of the following is not a category in which
activities are classified?
a. Product-level
b. Operations-level
c. Customer-level
d. Organization-level
If a company sells it product for $30 and has a unit cost of $12, what is the company’s
markup percentage?
a. 35%
b. 40%
c. 25%
d. 150%
Mounce, Inc. produces and sells free-standing quilt frames. In budgeting for production
needs, the company requires that 10% of the next month ‘s sales be on hand at the end
of each month. Budgeted sales of quilt frames over the next four months are:
Budgeted production for October would be
a. 26,650.
b. 34,400.
c. 35,100.
d. 37,600.