1) armer company is accumulating data to use in preparing its annual profit plan for the
coming year. the cost behavior pattern of the maintenance costs must be determined. the
accounting staff has suggested the use of linear regression to derive an equation for
maintenance hours and costs. data regarding the maintenance hours and costs for the
last year and the results of the regression analysis follow:
the percent of the total variance that can be explained by the regression equation is
a.99.724%
b.69.613%
c.80.982%
d.99.862%
e.none of the above
2) east bay fisheries inc. processes king salmon for various distributors. two
departments are involved processing and packaging. data relating to tons of king
salmon processed in the processing department during june 2013 are provided below:
total equivalent units for materials under the fifo method are calculated to be:
a.6,830 equivalent units
b.8,180 equivalent units
c.6,980 equivalent units
d.7,140 equivalent units
e.7,620 equivalent units
3) volume-based cost accounting systems often do a poor job of product costing
because they:
a.use only volume-based cost drivers
b.fail to recognize the impact of overhead in product cost
c.often do not reflect changes in major cost categories caused by plant automation
d.too often use an allocation base that does not have a cause-effect relationship to
resource usage
e.product costs involve both fixed and variable costs
4) which of the following is not a cost element on the job cost sheet?
a.materials
b.labor
c.hours
d.overhead
5) which one of the following is the most useful measure for comparing the risk of two
alternative products?
a.contribution margin ratio
b.margin of safety ratio (mos%)
c.financial leverage
d.breakeven point
e.regression analysis
6) a plan of dollar amounts to be spent on long-term projects is called a:
a.cash budget
b.capital budget
c.rolling budget
d.sales budget
e.rolling financial forecast
7) when a firm has surplus capacity as opposed to constrained capacity (i.e., resource
constraints), relevant costs for decision-making (e.g., determining short-term product
mix) will be:
a.lower
b.the same
c.greater
d.it variesthat is, it is impossible to tell without further information
8) a firm succeeds on its ability to deliver products to customers more quickly than rival
companies in its industry. this skill is an example of the firm’s:
a.core competency
b.research effectiveness
c.production efficiency
d.cost control effectiveness
e.value-chain analysis
9) conrad, inc. recently lost a portion of its records in an office fire. the following
information was salvaged from the accounting records.
direct labor cost incurred during the period amounted to 1.5 times the factory overhead.
the cfo of fisher, inc. has asked you to recalculate the following accounts and to report
to him by the end of the day.
what is the amount in the finished goods inventory at the beginning of the year?
a.$10,500
b.$15,000
c.$20,000
d.$25,000
10) the contribution income statement would require a firm to:
a.separate costs into fixed and variable categories
b.separate revenue into different categories
c.round off amounts to the nearest dollar
d.ignore some estimated fixed expenses, such as depreciation, that don’t involve a cash
outlay
e.restructure its accounting system to accommodate activity-based costing
11) the examination of the efficiency of each of a firm’s activities is:
a.activity analysis
b.pareto analysis
c.activity-based management
d.performance measurement
e.attribute-based management
12) when there are two or more cost drivers, regression is termed:
a.simple
b.binary
c.multiple
d.curvilinear
e.synergistic
13) the cost of goods that were finished and transferred out of work-in-process during
the current period is:
a.cost of goods sold
b.cost of goods available for use
c.cost of goods manufactured
d.cost of goods available for sale
e.cost of goods purchased
14) keego enterprises manufactures two products, boat wax and car wax, in two
departments, mixing and packaging. the mixing department has 800 hours per month
available while the packaging department has 1,200 hours per month available.
production of the two products cannot exceed 36,000 pounds. data on the two products
follow:
the mixing constraint for the keego linear program would be:
a.2.4m + 6p 36,000
b.5b + 2.4c 800
c.5b + 2.4c 800
d.5b + 2.4c = 800
e.7.4m + 9.6p 36,000
15) the crown company must decide whether to make or buy part 128pc. although
crown’s idle equipment could be used to produce up to 10,000 units of the part, the
company presently needs only 7,000 units. the following shows the estimated cost of
making part 128pc.
reuten company will sell part 128pc to the crown company for $20 per unit.
required: determine whether crown should make or buy the part, and explain why.
16) kurt helfter graduated with a b.s. degree in mechanical engineering and joined
andrew consulting, a firm specializing in hvac (heating, ventilation, and air
conditioning) for small to medium-size business structures. kurt is knowledgeable in the
use of cad (computer-assisted design) and was pleased during his initial employment to
find andrew consulting a leader in the use of cad software.
during kurt’s third year at andrew, he felt a sense of unease with the firm’s slow pace in
updating computer hardware and software. although not directly involved in budgeting
for the firm, kurt has been satisfied with the resources that andrew provided for his use.
kurt felt the need to detail his concerns in a memo to his superior, in which he requested
significant investment in computer resources to “allow us to respond to clients’ needs,
both in quantity and quality.” kurt was surprised and hurt when he received his
superior’s response, which suggested that resource allocation in the firm is decided at a
higher administrative level. “but all i wanted to do was help keep our firm competitive,”
kurt responded to his boss when visiting him about the rejection memo. ‘sorry, kurt,” his
boss said, “that’s how things get done in this firm.” kurt now feels lost, wondering if it’s
time to look for another job.
does this situation suggest what type of budgeting process the company is using? is
there a problem with individual and company goal congruence in andrew consulting? if
so, how might kurt’s supervisor have prevented the problem?
17) the tire business is becoming increasingly competitive as new manufacturers from
southeast asia and elsewhere enter the global marketplace. at the same time, customer
expectations for performance, tread life, and safety continue to increase. an increasing
variety of vehicles, from the small and innovative gas/electric vehicles to the large suvs,
place more demands on tire designers and on tire manufacturing flexibility. established
brands such as goodyear and firestone must look to new ways to compete and maintain
profitability.
required:
1> is the competitive strategy of a global tire maker cost leadership or differentiation?
explain your answer.
2> what are the ethical issues, if any, for tire manufacturers?
18) one of the behavioral considerations associated with the budgeting process relates
to the difficulty level embodied in the budget (i.e., how difficult or easy it is to achieve
budgeted results).
1> explain the negative consequences of budgetary targets that are too easy or too
difficult to achieve.
2> what is meant by the term “highly achievable (budget) target”?
3> what are the primary advantages of using “highly achievable targets” in terms of
budgetary expectations?
19) uecker enterprise expects sales of 20,000 units of t1 in september. t1is its most
popular high performance desktop model. the sales manager is confident that, between
october and december, the total sales will have a 50% growth rate each month from the
month before. each unit requires 40 sets of the alpha-5 chip. the firm has a policy to
maintain inventory at the end of each month equal to 1% of the following month’s
estimated sales. the same policy applies also to the chips and components required to
assemble the finished product.
1> what is the budgeted production (in units) for each of the months september, october,
and november?
2> how many sets of alpha-5 does the company plan to purchase in september and in
october?
20) what is the focus of activity-based budgeting (abb)? what is the principal advantage
of abb?
21) fastq company, a specialist in printing, has established 500 convenience copying
centers throughout the country. in order to upgrade its services, the company is
considering three new models of laser copying machines for use in producing
high-quality copies. these high-quality copies would be added to the growing list of
products offered in the fastq shops. the selling price to the customer for each laser copy
would be the same, no matter which machine is installed in the shop. the three models
of laser copying machines under consideration are 1024s (a small-volume model),
1024m (a medium-volume model), and 1024g (a large-volume model). the annual rental
costs and the variable operating costs vary with the size of the machine. the machine
capacities and costs are shown below
required:
1> determine the volume level in copies where fastq company would be indifferent
between acquiring either the small-volume model laser copier (1024s) or the medium
volume model laser copier (1024m).
2> the management of fastq company is able to estimate the number of copies to be
sold at each establishment. present an analysis that would enable fastq company to
select the most profitable machine without having to make a separate cost calculation
for each establishment.
(cma adapted)
22) clothes for u is a large merchandiser of apparel for budget-minded families.
management recently became concerned about the amount of inventory carrying costs
and transportation costs between warehouses and retail outlets. as a starting point in
further analyses, gregory gonzales, the controller, wants to test different forecasting
methods and then use the best one to forecast quarterly expenses for 2013 . the relevant
data for the previous three years follows:
the results of a simple regression analysis using all 12 data points yielded an intercept
of $11,854.55 and a coefficient for the independent variable of $126.22 (r-squared = .
19, t = 1.5, se = 974).
required:
(1) calculate the quarterly forecasts for 2013 using the high-low method and regression
analysis. recommend which method gregory should use and explain why.
(2) how does your analysis in requirement 1 change if clothes for u is involved in global
sourcing of products for its stores?
