Estimating flexible selling expense budget and computing variances. Georgia
Peaches estimates the following selling expenses next period:
Required:
a. Derive the cost equation (y = a + bx) for selling expenses. (Hint: y = a + bx + cy.
b. Assume that Georgia actually sells 50,000 units during the period at an average price
of $6 per unit. The company had budgeted sales for the period to be: volume, 65,000
units; price, $5.50. Calculate the sales price and volume variance.
c. The actual selling expenses incurred during the period were $80,000 fixed and
$30,000 variable. Prepare a profit variance analysis for sales revenue and selling
expenses.
Fred’s Fine Roasted Coffee
Fred’s Fine Roasted Coffee reports the following data for April 2010 where 500,000
pounds of roasted gourmet coffee beans were actually produced (note: standard costs do
not allow for any wastage),
Refer to Fred’s Fine Roasted Coffee. Calculate the direct materials price variance.
A.$51,000 U
B.$56,000 U
C.$5,000 U
D.$40,500 U
Normal costing does not use which of the following to measure product costs?
A.Actual direct material costs
B.Actual direct labor costs
C.An amount representing “normal” manufacturing overhead
D.Actual manufacturing overhead
To support total quality management, __________ should collect the information and
use it to get feedback and solve problems.
A.production supervisors
B.factory clerks
C.managerial accountants
D.line employees
Resources used versus resources supplied. Selected information about resources for
Morton Industries, which produces various products, is as follows:
Required:
a. Prepare an activity-based management income statement (e.g., Exhibit 3.9).
b. Write a short report stating why managers should know the difference between
resources used and resources supplied. Give examples of how managers could use the
information about resources used and resources supplied.
c. Management wants to keep the cost of unused capacity to less than 20 percent of total
costs. How well is the company doing?
Which of the following is a cost incurred when customers discover nonconforming
products and services at delivery?
A.prevention costs.
B.appraisal costs.
C.internal failure costs.
D.external failure costs.
The Chewy Chocolate Division of the Delight Confection Company had a rate of return
on investment (ROI) of 12 percent (= $1,200,000/$10,000,000) during Year 5, based on
sales of $20,000,000. In an effort to improve its performance during Year 6, the
company instituted several cost-saving programs, including the substitution of
automatic equipment for work previously done by workers and the purchase of raw
materials in large quantities to obtain quantity discounts. Despite these cost-saving
programs, the company’s ROI for Year 6 was 10 percent (= $1,100,000/$11,000,000),
based on sales of $20,000,000.
Required:
a. Break down the ROI for Year 5 and Year 6 into profit margin and investment
turnover ratios.
b. Explain the reason for the decrease in ROI between the two years using the results
from part a.
Which of the following is the term that describes the period that elapses from the
moment a customer places an order for a product or requests service to the moment the
firm delivers the product or service to the customer?
A.throughput time.
B.customer response time.
C.order fulfillment time.
D.delivery time.
Why do managers use cost behavior patterns?
A.to estimate how activities affect costs.
B.to forecast costs.
C.both “a” and “b”.
D.none of the above.
TopSail Company
TopSail Company produces one type of machine with the following costs and revenues
for the year
Refer to the TopSail Company. Calculate the contribution margin per unit.
A.$ 6
B.$ 2
C.$ 4
D.$12
Which costing system is generally used by companies producing high value,
customized products?
A.a process costing system.
B.a variable costing system.
C.a job costing system.
D.a direct costing system.
Which of these is a common fraud in financial reporting?
A.understating revenues.
B.overstating inventory.
C.overstating liabilities.
D.understating assets.
Carson’s Machining produces specialized equipment. Currently, overhead costs are
allocated at a rate of $5 per machine hour produced and the company used 20,000
machine hours last year. Carson’s CEO has heard about ABC, and would like to see if it
makes any difference in the costs allocated to jobs at the company. The accounting staff
has provided the following information about manufacturing overhead:
The company estimates that it will perform 150 setups and 1,000 inspections each year
and will use 2,000 machine hours. Job #222 will require 18 setups, 85 machine hours,
and 60 inspections.
Required:
A. Using ABC, what amount of manufacturing overhead will be allocated to Job #222?
B. What amount would Carson allocate to job #222 using their current, traditional
system?
C. Why do the two methods yield such different answers?
A quality improvement program attempts to achieve zero defects while minimizing
costs. Cost of quality reports do not explicitly report the
A.end-of-process sampling costs.
B.quality training and material inspection costs.
C.opportunity cost of lost business.
D.scrap costs.
Who is the chief accounting officer that oversees providing information to managers?
A.Chief financial officer.
B.Controller.
C.Treasurer.
D.Internal auditor.
What costs result from the joint use of a facility or a service by several products,
departments, or process?
A.Opportunity
B.Direct
C.Common (or indirect) costs
D.All of the answers are correct.
In producing joint products, which are the relevant costs for decisions to sell or process
further?
A.Costs incurred up to the splitoff point
B.Costs incurred after the splitoff point
C.Joint costs
D.Sunk costs
What enables analysts to test the interaction of economic variables in a variety of
settings?
A.A benchmark
B.A PERT chart
C.The value chain
D.A financial model
Using activity-based costing to analyze customer profitability requires the analyst to
determine the cost to acquire the customer, which includes such activities as
A.promoting the product.
B.conducting a campaign to win back lost customers.
C.running advertising campaigns.
D.All of the answers are correct.