1) the journal entry to record the application of factory overhead to work in process
would include a credit to:
a.work-in-process
b.cost of goods sold
c.factory overhead
d.materials inventory
e.finished goods inventory
2) which of the following is not a correct pair between the activity and the potential cost
driver?
a.provide cashier service-number of customers
b.process loan applications-number of loan applications processed
c.mail customer statements-number of accounts by customer type and size
d.advise customers on banking services-number of atm transactions
3) the car lot is a new york car dealership located in a highly visible area along a
prominent highway. fred barns, owner of the car lot, was deciding how much front-row
space along the highway to devote to four different car models. fred had a maximum
front-row space of 200 feet to devote to the four car models. he wanted a minimum of
twenty feet and a maximum of eighty feet of front-row space for each car model.
appropriate data on the four car models follow:
the convertible model’s monthly contribution per 10 feet of front-row space is
calculated to be:
a.$70,000
b.$60,000
c.$90,000
d.$80,000
e.$30,000
4) elimination of low-value-added activities in a firm should:
a.be discouraged because of potential harmful effects
b.not affect customer value
c.not have priority because low-value-added activities have little effect on a firm’s
performance
d.have priority only when a firm is operating at a loss
e.happen naturally if the firm is well-managed
5) jackson inc. listed the following data for 2013:
assuming jackson inc. applied overhead based on machine hours, the firm’s
predetermined overhead rate for 2013 is:
a.$28.42 per machine hour
b.$32.25 per machine hour
c.$31.00 per machine hour
d.$33.50 per machine hour
e.$37.41 per machine hour
6) the income statement for a merchandising company includes:
a.direct labor
b.factory overhead
c.total manufacturing cost
d.cost of goods sold
e.none of the above
7) 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 m 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
8) all of the following are low-value-added activities except:
a.processing
b.reworking
c.moving
d.inspection
e.warranty service
9) the robinson-patman act, administered by the u.s. federal trade commission,
addresses pricing that could substantially damage the competition in an industry. this
pricing is called:
a.competitive pricing
b.predatory pricing
c.cost-benefit pricing
d.variable pricing
e.incentive pricing
10) normal spoilage is defined as:
a.spoilage that occurs under efficient operations
b.scrap
c.uncontrollable waste as a result of a special production run
d.spoilage that arises under inefficient operations
e.controllable spoilage
11) daley co. manufactures computer monitors. following is a summary of its basic cost
and revenue data:
assume that daley co. is currently selling 700 computer monitors per month. fixed costs
are expected to be $96,000.
required: calculate daley co.’s margin of safety ratio (mos%) if 700 units are sold.
round your answer to 2 decimal places, e.g., 0.1234 would be 12.34%.
12) austen co. produced a pilot run of eighty units of a recently developed part used in
the finished products. austen co. expects to produce and sell 2,560 units annually. the
pilot run required 40 direct labor hours for the eighty units, averaging 0.5 direct labor
hours per unit. austen experiences an eighty percent learning curve.
required:
calculate the average direct labor hours per unit for the first 2,560 units (including the
pilot run) produced.
13) cost pools and cost drivers based on a recent study of its manufacturing operations
johnston manufacturing corporation has identified six resource consumption cost
drivers. these cost drivers and their budgeted activity levels for the coming year are:
the firm has budgeted the following costs for the year:
with the exception of the factory space cost pool, which uses machine-hours as the
activity consumption cost driver, other cost pools have identical resource and activity
consumption cost drivers.
required:
1> identify the most appropriate activity cost pool for each of the cost items and cost
driver for each activity cost pool you identified.
2> johnston has received a request to quote the price for 4,000 units of a new product.
the production will require 100 engineering-hours and 4,250 machine-hours. what is the
manufacturing overhead per unit the firm should use in determining the price?
14) the non-profit university hospital is contemplating purchasing a new blood gas
machine at a cost of $1,500,000. useful life of this machine is 10 years. the hospital
currently serves 5,000 patients per year, 40 percent of whom need blood gas analysis
data as part of the diagnostic tests. the blood samples are presently sent to a private
laboratory that charges $150 per sample. in-house variable expenses are estimated to be
$85 per sample if the hospital purchases the analysis machine.
required: round your answers up, to the nearest whole number.
1> determine the indifference point (expressed in number of tests per year) between
purchasing the machine and using the private laboratory.
2> determine how many additional patients would be needed so that the hospital would
be indifferent between purchasing the analysis machine and paying the $150 lab charge.
3> determine the amount of the private laboratory charge so that the hospital would be
indifferent as to purchasing the machine or using the private laboratory, assuming the
current service level of 5,000 patients per year.
15) walker corp. is a retail store that sells shoes and boots. in the past, it has bought all
its shoes from a supplier for $15 per unit. however, walker has the opportunity to
acquire a small manufacturing facility where it could produce its own shoes. the
projected data for producing its own shoes are as follows, for a pair of shoes: selling
price $25; variable costs, $5; total fixed costs (per year), $125,000.
required:
1> if walker acquired the manufacturing facility, how many pairs of shoes (per year)
would it have to produce in order to break even (round your answer up, to the nearest
whole unit)?
2> to earn an annual after-tax profit of $100,000, how many pairs of shoes would
walker have to sell if it buys the shoes from the supplier? how many pairs would it have
to sell if it produces its own shoes? walker’s combined income tax rate is estimated as
35%. round up your answers, to the nearest whole number of units.
3> at what annual volume of sales (in units) would walker be indifferent between the
two decision alternatives (ignore income tax effects)? show a computation of operating
incomes to prove your answer.
16) sportscards inc. manufactures baseball cards sold in packs of 10 in drugstores and
grocery stores throughout the country. it is the second leading firm in an industry with
four major firms. sportscards has been approached by zip cereal inc., which would like
to order a special edition of cards to use as a promotion with its new cereal. sportscards
would be solely responsible for designing and producing the cards. zip wants to order
30,000 sets and has offered $25,500 for the total order. each set will consist of 30 cards.
sportscards currently produces cards in sheets of 120 .
sportscards would incur no marketing costs for the special order. it has the capacity to
accept this order without interrupting regular production.
required:
1> based solely on a short-term financial analysis, should sportscards accept the special
order? why or why not? support your answer with appropriate calculations.
2> what are the important strategic issues in the decision?
17) allmakes software budgeted august purchases of new software at $140,000.the store
had software costing $6,000 on hand at the beginning of august, and to cover part of
anticipated back-to-school sales in september they expect to have $15,000 of software
on hand at the end of august.
required: what was the budgeted cost of goods sold for august?
18) train express co., which manufactures locomotive engines, is attempting to predict
its maintenance costs more accurately. maintenance costs are a mixed cost. maintenance
costs and machine hours for the first four months of the year are as follows:
required: using the high-low method, calculate unit variable cost and monthly fixed
costs.
19) ted brown is the chief financial officer of haywood inc., a large manufacturer of
cosmetics and other personal care products. ted is conducting a financial analysis of the
firm’s line of hand lotions which consists of three products: skinsalve, skincream, and
skinbalm. total sales for the three products in the recent year were $400,000, $250,000
and $500,000, respectively. because there is a small amount of additional processing
cost for each of the three products, which differs between the products ($20,000,
$50,000 and $30,000, respectively), ted has been using the net realizable value method
for allocating the joint production cost of $500,000. however, he is not satisfied with the
result of somewhat different gross margin percentage ratios (gross margin/sales) for the
three products when using this approach. he knows only of the physical units method,
the sales value at split-off method, and the net realizable value method for allocating
joint cost.
required: devise a new method of cost allocation for ted so that after allocation of joint
costs and separable costs, the gross margin percentage is the same for all three products.