1) nafta and wto refer to
a.organizations with expertise in business process improvement
b.laws and organizations which regulate international trade
c.laws and regulations regarding sustainability
d.organizations and trade groups that work for global economic development
e.none of the above
2) which of the following activities is a facility-level activity?
a.materials handling
b.plant maintenance
c.product inspection
d.design engineering
e.purchase orders
3) the number of the same or similar units that could have been produced given the
amount of work actually performed on both complete and partially complete units is
referred to as:
a.physical units
b.completed units
c.equivalent units
d.produced units
e.units to account for
4) nerrod company sells its products at $500 per unit, net 30 . the firm’s gross margin
ratio is 40 percent. the firm has estimated the following operating costs:
nerrod company has gathered the following data pertaining to activities it performed for
two of its customers:
what is nerrod’s total sales-sustaining cost applicable to xbt as a customer?
a.$0
b.$920
c.$4,120
d.$6,300
e.$6,420
5) the following table was taken from firm x’s production cost report:
what is the number of fifo equivalent units?
a.40,000
b.50,000
c.48,000
d.38,000
6) neary co. produces three products x, y, and z from a joint process. each product may
be sold at the split-off point or processed further. additional processing requires no
special facilities, and production costs of further processing are entirely variable and
traceable to the products involved. last year all three products were processed beyond
split-off. joint production costs for the year were $80,000. sales values and costs needed
to evaluate neary’s production policy follow.
the amount of joint costs allocated to product z using the sales value at split-off 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.$19,222
b.$35,000
c.$18,450
d.$28,496
e.$17,778
7) income taxes have the following effect on the breakeven point calculation:
a.they generally increase the breakeven point
b.they generally decrease the breakeven point
c.they have no effect on the breakeven point
d.they may increase or decrease the breakeven point, depending on the cost structure of
the organization
e.they increase the variable cost per unit
8) the bambola doll company produces a single product: an inexpensive plastic toy doll.
this item sells for $4.00 per unit, and has variable costs (manufacturing plus marketing)
of $2.50 per unit. monthly fixed costs amount to approximately $60,000. last month,
sales reached 100,000 units. management would like to do some financial planning, the
end result of which wouldit is hopedbe even better future financial performance. as a
management accountant you have been asked to construct a planning model and to
conduct “what-if” analyses with the model you develop.
management has told you to consider the following options, all of which have the
potential to increase the profitability of the company:
a) increase monthly promotional and advertising costs.
b) increase raw material quality and increase the product selling price.
c) increase the product selling price, with no increase in the raw material costs.
required:
1> the sales manager of the company is fairly confident that a well-done marketing
campaign could increase sales volume substantially, perhaps as much as doubling sales
from the current position. the president of the company would like to increase operating
profits by 50% over those of the most recent month. you are asked to determine how
much the company could afford to spend on an intensive marketing campaign, in order
to achieve the projected doubling of sales volume?
2> as an alternative to 1 above, assume that the company increases the quality of its raw
materials going into the manufacturing of its product. this increase would result in a
new variable cost per unit of $3.00. what is the required increase in selling price per
unit that would be needed to maintain the same break-even volume as currently exists?
3> as a final alternative, assume that the company has decided to increase the selling
price of its product by $1 per unit, with no accompanying marketing and promotion
campaign. what is the unit sales volume needed, with the new selling price, for the
company to make the same amount of profit as it did last month?
9) the direct method of departmental cost allocation ignores:
a.the managers’ bias
b.accrual accounting
c.tax implications
d.long-term implications
e.reciprocal flows
10) the management of activities to improve the value received by the customer and the
competitiveness of the organization is:
a.cost driver analysis
b.customer profitability analysis
c.activity-based management
d.performance measurement
e.activity analysis
11) place the following process costing steps in the correct order:
1 – calculate equivalent units
2 – determine the total costs to account for
3 – analyze flow of physical units
4 – assign total manufacturing costs
5 – compute unit costs
a.3, 5, 2, 1, 4
b.2, 1, 5, 4, 3
c.2, 3, 5, 4, 1
d.3, 1, 2, 5, 4
e.none of the above
12) burmer co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. the cost behavior pattern of the maintenance costs must be determined.
data regarding the machine hours and maintenance costs for the last year and the results
of the regression analysis are as follows:
a staff assistant has run regression analyses on the data and obtained the following
output using excel:
regression analysis
y (dependent) variable: maintenance cost
x (independent) variable: maintenance hours
the p-value is a measure of:
a.the precision of the regression
b.the reliability of the independent variable
c.the accuracy of the regression predictions
d.the linearity in the data
13) bob and nancy barnett have recently expanded their television-based educational
film business by shooting 30-second television ads for a regional television market in
southern colorado. they began business about 15 years ago with a contract to film
training videos for the u.s. army, and that business continues to provide a steady
revenue base, currently about 40 percent of total revenue. nancy barnett is the firm’s
accountant, and in a visit to your accounting class last week, made a presentation
detailing her firm’s costing activities. your instructor has asked you to respond to one
particular statement that nancy barnett made: ‘since our contract for military training
films requires us to detail all costs, we use the process cost method that gives the
maximum amount of fixed overhead cost. this almost covers all of our overhead, giving
us an edge in competitively pricing our 30-second tv ads, and explains why we have
grown so much in this sector of our business.”
required: is there an ethical problem with this approach? does it represent acceptable
accounting procedure?
14) the controller for warner mfg. is trying to implement some of the characteristics of a
just-in-time (jit) inventory system. she has accumulated data on warner’s present
inventory system and obtained some projections and estimates of what the results of a
jit system would be.
the inventory holding cost is $0.75 per unit, per month. warner currently purchases
120,000 units every four months. under a jit system warner would purchase 30,000
units every month. the monthly inventory schedule and the controller’s estimate for a jit
system are provided below:
(assume the above trend continues throughout the year.)
required: which system should warner use, and why?
15) you are engaged in the audit of the december 31, 2013, financial statements of
epworth products
corporation. you are attempting to verify the costing of the work-in-process and
finished goods ending inventories that were recorded on epworth’s books as follows:
materials are added to production at the beginning of the manufacturing process, and
overhead is applied to each product at the rate of 60 percent of direct labor costs.
epworth uses the fifo costing method. a review of epworth’s 2013 inventory cost records
disclosed the following information:
required: prepare a production cost report to verify the inventory balances. what is the
amount of potential understatement or overstatement of the ending work-in-process
account?
16) marchant industries, which produces heating blankets, has been trying to get a
customer, home select, inc., to purchase a special order of heating blankets in order to
keep the plant busy at a time when production is expected to be slower than normal.
home select has agreed, but only if the price is reduced to $42. listed below are some
data prepared by marchant. the special order can be produced within available capacity,
and will be made in a single batch.
there are no variable marketing costs associated with the special order, but ruby
marchant, the president of the firm, has spent $1,500 during the past month trying to get
home select to purchase this special order.
required: determine the effect of the special order, if taken, on marchant’s total profit.
17) texfab manufactures two products, gt450 and gt600 that have the following sales
and cost information.
required: round all dollar answers up, to the nearest whole number.
1> what is the breakeven point in dollars if sales remain at the same sales mix reflected
in the income statement presented above?
2> if the texfab company’s sales mix becomes $50,000 of product gt450 and $50,000 of
product gt600, what is the breakeven point in sales dollars? prepare an income
statementin the format given abovefor this scenario.
3> why have the breakeven point and the amount of operating income changed?