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Depreciation expense'”factory
The following are some of the costs incurred by Cupcake Company. Identify them as
either:
a. Prime costs
b. Conversion costs
c. Both prime and conversion costs
d. Neither prime or conversion costs
Answer:
Just-in-time processing is a business philosophy that focuses on reducing time and cost
and eliminating poor quality. This is accomplished in manufacturing and
nonmanufacturing processes by
a. moving a product from process to process as each function is completed
b. combining processing functions into work centers and cross-training workers to
perform more than one function
c. having production supervisors attempt to enter enough materials into manufacturing
to keep all manufacturing departments operating
d. having workers typically perform one function on a continuous basis
Answer:
T-Bone Company is contemplating investing in a new piece of manufacturing
machinery. The amount to be invested is $150,000. The present value of the future cash
flows is $141,000. Should the company invest in this project?
a. yes, because net present value is +$9,000
b. yes, because net present value is '“$9,000
c. no, because net present value is +$9,000
d. no, because net present value is '“$9,000
Answer:
Magpie Corporation uses the total cost concept of product pricing. Below is cost
information for the production and sale of 60,000 units of its sole product. Magpie
desires a profit equal to a 25% rate of return on invested assets of $700,000.
The dollar amount of desired profit from the production and sale of the company's
product is
a. $175,000
b. $67,200
c. $73,500
d. $96,000
Answer:
Companies recognizing the need to simultaneously produce products with high quality,
low cost, and instant availability have adopted a just-in-time processing philosophy.
a. True
b. False
Answer:
Which of the following is characteristic of a lean production layout?
a. Decentralized maintenance and small production batches
b. Decentralized maintenance and organization around processes
c. Organization around processes and small production batches
d. Large production batches and organization around processes.
Answer:
The rate of earnings is 6% and the cash to be received in 4 years is $20,000. The present
value amount, using the following partial table of present value of $1 at compound
interest is
a. $13,660
b. $12,720
c. $15,840
d. $16,800
Answer:
A setup is the time required to prepare an operation for a new production run.
a. True
b. False
Answer:
The process by which management plans, evaluates, and controls long-term investment
decisions involving fixed assets is called capital investment analysis.
a. True
b. False
Answer:
The cost graphs in the illustration below shows various types of cost behaviors.
For each of the following costs, identify the cost graph that best describes its cost
behavior as the number of units produced and sold increases:(a) Sales commissions
of $6,000 plus $0.05 for each item sold.(b) Rent on warehouse of $12,000 per month.
(c) Insurance costs of $2,500 per month.(d) Per-unit cost of direct labor.(e) Total
salaries of quality control supervisors. One supervisor must be added for each
additional work shift.(f) Total employer pension costs of $0.35 per direct labor hour.
(g) Per-unit straight-line depreciation costs.(h) Per-unit cost of direct materials.
(i) Total direct materials cost.(j) Electricity costs of $5,000 per month plus $0.0004
per kilowatt-hour.(k) Per-unit cost of plant superintendent's salary.(l) Salary of the
night-time security guard of $3,800 per month.(m) Repairs and maintenance costs of
$3,000 for each 2,000 hours of factory machine usage.(n) Total direct labor cost.(o)
Straight-line depreciation on factory equipment.
Answer:
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000
units of Y. Related data are:
What was Rusty Co.'s sales mix last year?
a. 58% X, 42% Y
b. 60% X, 40% Y
c. 30% X, 70% Y
d. 12.5% X, 87.5% Y
Answer:
Axelgold Company produces parts for the auto industry. Part X2 is machined in
Department #1, which has the following budgeted conversion costs:
All costs are driven by machine hours. Total possible hours for the year are 2,800. It
takes .03 hours to machine one unit of Part X2.
(a) Compute Department #1's budgeted cell conversion cost rate for the current year.
Round to the nearest cent.
(b) Compute Part X2's budgeted cell conversion cost per unit. Round to the nearest
cent.
Answer:
Which of the following is a value-added activity?
a. scrap processing
b. rework
c. preventive maintenance
d. warranty work
Answer:
In a job order cost accounting system used by a service business, which of the
following items would normally not be included as part of overhead?
a. materials
b. direct labor
c. rent
d. supplies
Answer:
Which of the following would appear as an extraordinary item on the income
statement?
a. loss resulting from the sale of fixed assets
b. gain resulting from the disposal of a segment of the business
c. loss from land condemned for public use
d. liquidating dividend
Answer:
Often referred to as the discounted cash flow method
Match the definition that follows with the term (a'“e) it defines.
f. Capital investment analysis
g. Time value of money concept
h. Net present value method
i. Average rate of return
j. Cash payback period
Answer:
The cost of direct materials transferred into the Bottling Department of the Mountain
Springs Water Company is $28,072. The conversion cost for the period in the Bottling
Department is $10,275. The total equivalent units for direct materials and conversion
are 63,800 and 68,500, respectively. Determine the direct materials and conversion cost
per equivalent unit. Round answers to nearest cent.
Answer:
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in
the month following the sale. Sales on account are budgeted to be $225,000 for March
and $250,000 for April. What are the budgeted cash receipts from sales on account for
April?
Answer:
Lark Art Company sells unfinished wooden decorations at a price of $15.00. The
current profit margin is $5.00 per decoration. The company is considering taking
individual orders and customizing them for customers. To finish the decoration, the
company would have to pay additional labor of $3.00 per unit, additional materials
costing an average of $4.00 per unit, and fixed costs would increase by $1,500. If the
company estimates that it can sell 600 units for $25.00 per unit each month, should it
start taking the orders?
Answer:
Dickerson Co. is evaluating a project requiring a capital expenditure of $810,000. The
project has an estimated life of 4 years and no salvage value. The estimated net income
and net cash flow from the project are as follows:
The company's minimum desired rate of return is 12%. The present value of $1 at
compound interest of 12% for 1, 2, 3, and 4 years is 0.893, 0.797, 0.712, and 0.636,
respectively.
Answer:
Robin Company purchased and used 520 pounds of direct materials to produce a
product with a 510 pound standard direct materials requirement. The standard materials
price is $2.10 per pound. The actual materials price was $2.00 per pound.
Prepare the journal entries to record (1) the purchase of the materials and (2) the
material entering production.
Answer:
Osprey Cycles, Inc. projected sales of 75,000 bicycles for the year. The estimated
January 1 inventory is 5,000 units, and the desired December 31 inventory is 8,000
units. What is the budgeted production (in units) for the year?
Answer:
Using the data below for the Ace Guitar Company, determine the divisional income
from operations for the A and B regions.
Allocate service department expenses proportional to the sales of each region. Round
percentage of sales allocation to one decimal place.
Answer:
Xang Company's costs were over budget by $46,000. The Xang Company is divided in
two regions. The first region's costs were over budget by $7,000.
Determine the amount that the second region's cost was over or under budget.
Answer:
Define operating leverage. Explain the relationship between a company's operating
leverage and how a change in sales is expected to impact profits.
Answer:
