1) if a firm has 1,200 completed and transferred out units, 200 equivalent units of
beginning work in process and 500 ending work-in-process equivalent units, what is the
total of equivalent units of production using the weighted-average method?
a.1,500 units
b.1,700 units
c.1,200 units
d.cannot be determined from the above
2) maple mount fishery is a canning company in astoria. the company uses a normal
costing system in which factory overhead is applied on the basis of direct labor costs.
budgeted factory overhead for the year was $680,400, and management budgeted
$324,000 of direct labor costs. during the year, the company incurred the following
actual costs.
the january 1 balances of inventory accounts are shown below.
the december 31 balances of these inventory accounts were ten percent lower.
the cost of goods manufactured during the year is:
a.$1,332,600
b.$1,354,700
c.$1,336,700
d.$1,373,600
e.$1,339,600
3) abc company uses a materials inventory account to record both direct and indirect
materials. abc charges direct materials to wip, while indirect materials are charged to
the factory overhead account. during the month of april, the company has the following
cost information:
the debit to work-in-process inventory account for materials is:
a.$110,000
b.$30,000
c.$90,000
d.$80,000
e.$50.000
4) assume that only the specified parameters change in a sensitivity analysis. the
contribution margin ratio increases when:
a.total short-term fixed costs increase
b.total short-term fixed costs decrease
c.variable cost per unit increases
d.variable cost per unit decreases
5) there is no convenient or economical way to trace a(n) _______ from the cost to the
cost pool or from the cost pool to the cost object.
a.direct cost
b.indirect cost
c.cost assignment
d.cost allocation
6) which one of the following methods of cost allocation is completed by taking the
service flows to production departments only and determining each production
department’s share of that service?
a.direct method
b.indirect method
c.step method
d.reciprocal method
e.cross-functional method
7) national inc. manufactures two models of cmd that can be used as cell phones, mpx,
and digital camcorders.
national uses a volume-based costing system to apply factory overhead based on direct
labor dollars. the unit prime costs of each product were as follows:
national’s controller had been researching activity-based costing and decided to switch
to it. a special study determined national’s two products have the following budgeted
activities:
using the firm’s volume- based costing, applied factory overhead per unit for the great p
model is (rounded to the nearest cent):
a.$61.32
b.$65.43
c.$43.42
d.$45.99
e.$54.04
8) the long term care plus company has two service departments actuarial and premium
rating, and two production departments marketing and sales. the distribution of each
service department’s efforts to the other departments is shown below:
the direct operating costs of the departments (including both variable and fixed costs)
were as follows:
the total cost accumulated in the marketing department using the step method is
(calculate all ratios and percentages to 2 decimal places, for example 33.33%, and
round all dollar amounts to the nearest whole dollar):
a.$100,000
b.$104,000
c.$126,000
d.$130,000
e.$135,000
9) michael porter’s five competitive forces include which one of the following:
a.global competition
b.intensity of demand by customers
c.bargaining power of competitors
d.intensity of rivalry among competitors
e.none of the above
10) fresplanade co. had the following historical pattern for its credit sales:
75% collected in the month of sale
12% collected in the first month after sale
8% collected in the second month after sale
3% collected in the third month after sale
2% uncollectible
the sales on open account (credit sales) have been budgeted for the last six months of
the year as shown below:
july $72,000
august $84,000
september $96,000
october $108,000
november $120,000
december $102,000
the estimated total cash collections by fresplanade co. during november from collection
of accounts receivable is:
a.$113,160
b.$101,400
c.$143,640
d.$125,640
e.$102,420
11) in making decisions about whether to sell or further process joint products,
allocation of common or joint costs is:
a.essential
b.useful
c.irrelevant
d.is useful depending on the method chosen
e.is the only way to get the true total product cost
12) stulce inc. produces joint products a, b, and c from a joint process. information
concerning a batch produced in may at a joint cost of $120,000 was as follows:
required(calculate all ratios, percentages, and unit costs to 2 decimal places, for
example 33.33%, and round all dollar amounts to the nearest whole dollar):
1> allocate the joint costs to the joint products using the physical measures method.
2> calculate the gross margin for each of the three products using the cost allocation for
the physical unit method in part (1) above.
3> allocate the joint costs to the joint products using the net realizable method.
4> calculate the gross margin for each of the three products using the cost allocation for
the net realizable value method in part (3) above.
13) the manager of a business unit of a large corporation made some projections
regarding sales and profits for the upcoming final quarter of the year. the managers’
performance evaluation and compensation depended significantly on his ability to meet
budget goals. the manager discovered that the final quarter would have to be a
particularly good quarter in order to meet these goals. he decided to implement a sales
program offering liberal payment terms in order to pull some sales that would normally
occur next year into the current year. customers accepting delivery in the fourth quarter
would not have to pay the invoice for 140 days. also, he sold some equipment that was
not being used and realized a significant profit on the sale.
required: are these actions ethical? why or why not?
14) flowers inc. has budgeted cost of goods sold for august of $1,000 for plastic
flowers. management also wants to have $500 in inventory at the end of the month to
prepare for the fall season. beginning inventory in august was $400. what dollar amount
of plastic flowers should be purchased to meet the above objectives?
15) lester-smith company manufactures three wood construction components: wood
trusses, wood floor joists, and beams. the plant is operating at full capacity. it can
produce 200 trusses, 1,000 joists, and 600 beams per month and sells everything it
produces. the monthly revenues and expenses for the three products are
required:
1> the firm makes wood trusses mainly to satisfy certain customers by offering a full
line of wood components. lately, it has had a problem making a profit on the trusses and
is considering buying them from another manufacturer at $55 a truss. based solely on a
short-term financial analysis, should the firm buy these trusses or continue to make its
own? (show calculations.)
2> lester-smith has an opportunity to produce an additional 400 beams for a customer at
a price of $100 each. if it accepts this special order, the firm cannot produce trusses
because the plant will be operating at full capacity. should the firm accept this special
order? (show calculations.)
16) in six months you are scheduled to graduate with a degree in business. you have a
major in accounting and minors in finance and management information systems. in the
first few chapters of your cost management text, there are repeated references to the
following two terms: strategic management and the strategic emphasis to cost
management.
required: explain these ideas, using as a framework your need to develop a plan for
interviewing successfully for a challenging professional opportunity within the next six
months.
17) the following data on overhead apply to the acme manufacturing company that
manufactures frames for large trucks in three production departments (j-122, j-123, and
j-125). there are two service departments, the human resources department and the
facilities department.
*allocated on the basis of hours of usage in the hr department.
**allocated on the basis of floor space.
required:
using hours as the application base for the human resources department and square feet
of floor space for the facilities department, apply overhead from these service
departments to the production departments, using the following two methods. calculate
all ratios and percentages to 4 decimal places, for example 33.3333%, and round all
dollar amounts to the nearest whole dollar.
(1) direct method.
(2) step method (assume the human resources department is allocated first).
18) regression analysis is increasingly being used in business applications, often called
“business analytics” (or “predictive analytics”), in which a company studies its
customers to gather information that can be used to make each customer more
profitable. companies that do this include harrah’s and eharmony, among many others.
required:
(1) briefly explain how a company could use regression to improve customer
profitability.
(2) do you see any ethical issues involved in the use of business analytics? explain.
19) as indicated in the text, sensitivity analysis is an important tool for dealing with
uncertainty in the budget preparation process. which estimates, out of all that
management has to deal with, do you think are the most critical in terms of developing
the master budget for the typical profit-seeking organization?