Holt Medical Corporation manufactures two models of a medical device: Model 101
and Model 102.
Below is the current year production data for the company:
The 210,000 units of material had a total cost of $1,365,000. Direct labor is $17 per
hour.
The company has total overhead production costs of $1,850,000.
a. If Holt Medical Corporation applies factory overhead using direct labor hours,
compute the total production cost and the unit cost for each model
b. If Holt Medical Corporation applies factory overhead using machine hours, compute
the total production cost and the unit cost for each model.
c. Assume that Holt Medical Corporation has established the following activity centers,
costs drivers, and costs to apply factory overhead.
Compute the total cost and the unit cost for each model.
d. Explain why the unit cost for each model is different across the three methods of
overhead application. How can such information benefit an organization?
The source document that records the amount of time an employee worked on a job and
his/her pay rate is the
a. job-order cost sheet.
b. employee time sheet.
c. interoffice memo.
d. labor requisition form.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product D?
a. $1,550
b. $1,017
c. $4,263
d. $2,170
How will a favorable volume variance affect net income under each of the following
methods?
a. reduce no
effect
b. reduce increase
c. increase no
effect
d. increase reduce
A cost management system should provide information to
a. all functional areas of the organization.
b. only the accounting area of the organization.
c. only the production area of the organization.
d. organizational managers, but not to staff personnel.
Which of the following is a consistently desirable characteristic in a transfer pricing
system?
a. system is very complex to be the most fair to the buying and selling units
b. effect on subunit performance measures is not easily determined
c. system should reflect organizational goals
d. transfer price remains constant for a period of at least two years
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What is the total cost to account for?
a. $ 93,405
b. $205,653
c. $274,558
d. $299,058
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. How much of the deposit cost will be assigned to the
University branch?
a. $ 1,800
b. $ 3,600
c. $ 5,400
d. $36,000
Industrial Solutions Company
Industrial Solutions Company produces three products from the same process that has
joint processing costs of $4,100. Products R, S, and T are produced in the following
quantities: 250 gallons, 400 gallons, and 750 gallons. Industrial Solutions Company
also incurred advertising costs of $60,000. The ad was used to run sales for all three
products. The three products occupy floor space in the following ratio: 5:4:9. (Round all
answers to the nearest dollar.)
Refer to Industrial Solutions Company. Assume that Industrial Solutions chooses to
allocate its advertising cost among the three products. What amount of advertising cost
is allocated to Product T using the floor space ratio?
a. $911
b. $14,244
c. $13,333
d. $30,000
Predetermined overhead rates are computed based on
a. yes yes
b. yes no
c. no yes
d. no no
Calhoun Corporation
Calhoun Corporation’s order quantity for Material T is 5,000 lbs. The company
maintains a safety stock of T at 500 lbs., and its order point is 1,500 lbs.
Refer to Calhoun Corporation. What would be the total annual carrying costs assuming
the carrying cost per unit is $0.20?
a. $1,000
b. $600
c. $100
d. $1,100
A managerial accountant who communicates information objectively is exercising
which of the following standards?
a. objectivity
b. integrity
c. competence
d. confidentiality
A material requisition form should show all of the following information except
a. job number.
b. quantity required.
c. unit cost.
d. purchase order number.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product C?
a. $4,433
b. $2,276
c. $1,108
d. $1,182
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the materials handing cost allocated to projection TVs would
be:
a. $35,000
b. $45,000
c. $46,875
d. $51,923
Incremental revenues and costs need to be considered when using which allocation
method?
a. yes yes
b. yes no
c. no no
d. no yes
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses total direct labor hours to
allocate factory overhead, the materials handing cost allocated to projection TVs would
be:
a. $35,000
b. $45,000
c. $46,875
d. $51,923
Which of the following strategies is used to deal with uncertaintyrelated to price risk?
a. Statistical analysis
b. Cost restructuring
c. Hedging
d. Insurance
Pearce Company
Pearce Company uses a standard cost system for its production process. Pearce
Company applies overhead based on direct labor hours. The following information is
available for July:
Refer to Pearce Company Using the four-variance approach, what is the fixed overhead
spending variance?
a. $15,900 U
b. $6,330 U
c. $6,930 U
d. $935 F
The peak level of unit sales will occur in which stage of the product life cycle?
a. growth
b. maturity
c. decline
d. introduction
Presently, the Software Division of Bennett Publishing Corporation has a profit margin
of 30%. If total sales rise by $100,000, the net result will be
a. an increase in the profit margin ratio to above 30%.
b. a decrease in the profit margin ratio to below 30%.
c. no change in the profit margin ratio.
d. a change in the profit margin ratio that cannot be determined from this information.
Knight Corporation manufactures three identifiable product lines, Products A, B, and C,
from a basic processing operation. The cost of the basic operation is $320,000 for a
yield of 5,000 tons of Product A; 2,000 tons of Product B; and 1,000 tons of Product C.
The basic processing cost is allocated to the product lines in proportion to the relative
weight produced.
Knight Corporation does both the basic processing work and the further refinement of
the three product lines. After the basic operation, the products can be sold at the
following prices per metric ton:
Product A$60
Product B$53
Product C$35
Costs to refine each of the three product lines follow:
The fixed cost of the refining operation will not be incurred if the product line is not
refined.
The refined products can be sold at the following prices per metric ton:
Product A$75
Product B$65
Product C$40
Required:
Rosewood Corporation
Rosewood Corporation produces a single product. The following cost structure applied
to its first year of operations:
Refer to Rosewood Corporation. Assume for this question only that during the current
year Rosewood Corporation manufactured 5,000 units and sold 3,800. There was no
beginning or ending work-in-process inventory. How much larger or smaller would
Rosewood Corporation’s income be if it uses absorption rather than variable costing?
a. The absorption costing income would be $6,000 larger.
b. The absorption costing income would be $6,000 smaller.
c. The absorption costing income would be $4,800 larger.
d. The absorption costing income would be $4,000 smaller.
Buxton Company
One of the products manufactured by Buxton Company is a plastic tray. The
information below relates to the Tray Production Department:
Which of the following is not a balanced scorecard category?
a. financial measures
b. environmental measures
c. business process measures
d. personnel measures
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using a physical measurement method, what amount
of joint processing cost is allocated to Product E?
a. $3,495
b. $2,447
c. $1,748
d. $1,311
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What are equivalent units of production for material using
weighted average?
a. 86,600
b. 87,500
c. 86,400
d. 85,500
In a production cell,
a. an individual worker may be expected to operate several different machines, do
setups, and perform preventive maintenance on the equipment.
b. each worker becomes an expert in the operation of a single piece of equipment.
c. machines are arranged so that similar machines are grouped together.
d. clear separation is maintained between those workers who operate the machinery and
those workers who set up and maintain the machinery.
A large labor efficiency variance is prorated to which of the following at year-end?
a. no no no
b. no yes yes
c. yes no no
d. yes yes yes
Approximately what percentage of future product costs is determined in the
development stage of the product life cycle?
a. 30%
b. 50%
c. 70%
d. 90%
Refer to Hahn Corporation. In presenting inventory on the balance sheet at December
31, the unit cost under absorption costing is
a. $2.50.
b. $3.00.
c. $3.50.
d. $4.50.
Dillman Company manufactures custom-built conveyor systems for factory and
commercial operations. The cost accountant for Dillman Company is in the process of
educating a new employee, Jerry Cole about the job-order costing system that Dillman
Company uses. (The system is based on normal costs; overhead is applied based on
direct labor cost and rounded to the next whole dollar.) The following job-order cost
records are available for July:
To explain the missing job number, the cost accountant informed Jerry that Job #668
had been completed in June. The accountant also told Jerry that Job #667 was the only
job in process at the beginning of July. At that time, the job had been assigned $4,300
for direct material and $900 for direct labor. At the end of July, Job #671 had not been
completed; all other jobs were complete. The cost accountant asked Jerry several
questions to determine whether he understood the job-order costing system.
Required:Help Jerry answer the following questions:
Residual income is determined as
a. income times the asset turnover rate.
b. income times the inventory turnover rate.
c. income minus (asset base times target rate of return).
d. sales minus (asset base times target rate of return).
Matthews Company has a policy of maintaining an inventory of finished goods equal to
30 percent of the following month’s sales. For the forthcoming month of March,
Matthews has budgeted the beginning inventory at 30,000 units and the ending
inventory at 33,000 units. This suggests that
a. February sales are budgeted at 10,000 units less than March sales.
b. March sales are budgeted at 10,000 units less than April sales.
c. February sales are budgeted at 3,000 units less than March sales.
d. March sales are budgeted at 3,000 units less than April sales.
Terry Smith Corporation used least squares regression analysis to obtain the
following output:
a. What is the total fixed cost?
b. What is the variable cost per employee?
c. Prepare the linear cost function.
d. What is the coefficient of determination? Comment on the goodness of fit.
Grade refers to one of many quality levels that a product or service has relative to the
inclusion or exclusion of certain characteristics to satisfy customer needs.
The manager of an investment center is responsible for generating revenue as well as
controlling expenses.
The balanced scorecard perspective that addresses how well the organization is meeting
specific customer-based criteria is the ______________________________
perspective.
The EOQ formula can be modified to calculate the number of units that should be
manufactured in a production run.
Feedback is another name for an effector.
The transfer of authority, responsibility, and decision-making rights from the top to the
lower level of an organization is referred to as ____________________.
Berkshire Company
The following information is available for Berkshire Company for the current year:
Standard:
Material X: 3.0 pounds per unit @ $4.20 per pound
Material Y: 4.5 pounds per unit @ $3.30 per pound
Class S labor: 3 hours per unit @ $10.50 per hour
Class US labor: 7 hours per unit @ $8.00 per hour
Actual:
Material X: 3.6 pounds per unit @ $4.00 per pound (purchased and used)
Material Y: 4.4 pounds per unit @ $3.25 per pound (purchased and used)
Class S labor: 3.8 hours per unit @ $10.60 per hour
Class US labor: 5.7 hours per unit @ $7.80 per hour
Berkshire Company produced a total of 45,750 units.
Refer to Berkshire Company. Compute the material price, mix, and yield variances
(round to the nearest dollar).
The document that contains all information about the costs of a specific job is a
______________________________.
A judgment regarding which assets an entity should acquire to achieve its stated
objectives is considered to be a(n) _______________________ decision.
What are the two main sources of uncertainty in cost management?
Costs incurred for monitoring or inspecting products are known as
____________________ costs.
A budget manual should include a statement of the budgetary purpose and its desired
results.
The financial perspective of the balanced scorecard addresses the things that an
organization needs to do well to meet customer needs and expectations.
Abnormal continuous losses are absorbed by all units in ending inventory and
transferred out on a EUP basis.