Activity based costing system differs from traditional costing systems in the treatment
of ________.
A) direct labor costs
B) direct material costs
C) prime costs
D) indirect costs
Budgeted production equals ________.
A) beginning finished goods inventory + budgeted unit sales – targeted ending finished
goods inventory
B) targeted ending finished goods inventory + beginning finished goods inventory –
budgeted unit sales
C) budgeted unit sales + targeted ending finished goods inventory – beginning finished
goods inventory
D) budgeted unit sales + targeted ending finished goods inventory + beginning finished
goods inventory
When evaluating a make-or-buy decision, which of the following needs to be
considered?
A) alternative uses of the production capacity
B) the original cost of the production equipment
C) pension costs to the current employees
D) material-handling costs that cannot be eliminated
Hitz Video Rental is evaluating rental prices. Historical data show that Friday and
Saturday have twice the rentals of other days of the week. The following information
pertains to the store’s normal operations per week:
The store manager wants to charge more for rentals on Friday and Saturday. What is the
minimum price that should be charged during peak rental days?
A) $0.61
B) $0.64
C) $0.68
D) $1.01
Pederson Company reported the following:
What is the manufacturing cost for the ending finished goods inventory?
A) $100,000
B) $60,000
C) $744,000
D) $54,000
To allocate corporate costs to divisions, the ideal situation would be for the allocation
base to ________.
A) be an output unit-level base
B) have the best cause-and-effect relationship with the costs
C) combine administrative costs and human resource management costs
D) allocate the fixed costs only
Lubriderm Corporation has the following budgeted unit sales for the next six-month
period:
There were 30,000 units of finished goods in inventory at the beginning of June. Plans are
to have an inventory of finished products that equal 20% of the unit sales for the next
month.
Five pounds of materials are required for each unit produced. Each pound of material costs
$8. Inventory levels for materials are equal to 30% of the needs for the next month.
Materials inventory on June 1 was 15,000 pounds.
Required:
a. Prepare production budgets in units for July, August, and September.
b. Prepare a purchases budget in pounds for July, August, and September, and give total
purchases in both pounds and dollars for each month.
For managers attempting to maximize operating income for a product offering with a
great deal of variety, product-mix decisions must usually take into account:
A) more than one constraining resource
B) just those products with the greatest contribution margin per constraining resource
C) products that produce a profit above the full costs of the product
D) how to maximize the selling price of all the products
The ________ method of profitability analysis recognizes the two basic ingredients in
profit-making: increasing income per dollar of revenues and using assets to generate
more revenues.
A) Balanced Scorecard
B) Residual-Income
C) DuPont
D) Economic Value Added
Merchandising-sectors ________.
A) purchase and then sell tangible products without changing their basic form
B) provide intangible products
C) purchase materials and components and convert them into finished goods
D) purchase and then sell tangible products by changing their basic form
Jupiter Corporation incurred fixed manufacturing costs of $18,000 during 2017. Other
information for 2017 includes:
The budgeted denominator level is 2,400 units.
Units produced total 2,700 units.
Units sold total 1,900 units.
Variable cost per unit is $4
Beginning inventory is zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.
Under absorption costing, total manufacturing costs expensed on the income statement
(excluding adjustments for variances) total ________. (Round any intermediary
calculations to the nearest cent and your final answer to the nearest dollar.)
A) $31,050
B) $21,850
C) $25,050
D) $14,250
A job that shows low profitability may be the result of ________.
A) excessive usage of direct materials
B) inefficient direct manufacturing labor
C) overpricing the job
D) insurance claim of the damaged goods
Swan Manufacturing is approached by a customer to fulfill a one-time-only special
order for a product similar to one offered to domestic customers. The following per unit
data apply for sales to regular customers:
Direct materials $1,825
Direct labor 900
Variable manufacturing support 1,300
Fixed manufacturing support 3,000
Total manufacturing costs $7,025.00
Markup (50%) 3,512.50
Targeted selling price $ 10,537.50
Swan Manufacturing has excess capacity.
Required:
a. What is the full cost of the product per unit if the marketing costs is $3,000?
b. What is the contribution margin per unit?
c. Which costs are relevant for making the decision regarding this one-time-only special
order? Why?
d. For Swan Manufacturing, what is the minimum acceptable price of this
one-time-only special order?
e. For this one-time-only special order, should Parker and Spitzer Manufacturing
consider a price of $5,400 per unit? Why or why not?
Short Grass Incorporated is a distributor of golf balls. Martin’s Golf Supplies is a local
retail outlet which sells golf balls. Martin’s purchases the golf balls from Short Grass
Incorporated at $1.15 per ball; the golf balls are shipped in cartons of 72. Short Grass
Incorporated pays all incoming freight, and Martin’s Golf Supplies does not inspect the
balls due to Short Grass’ reputation for high quality. Annual demand is 158,520 golf
balls at a rate of 3891 balls per week. Martin’s Golf Supplies earns 8% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
What is the economic order quantity? (Round costs to the nearest cent and quantities to the
nearest whole number.)
A) 183 cartons
B) 274 cartons
C) 275 cartons
D) 367 cartons
Aunt Ethel’s Fancy Cookie Company manufactures and sells three flavors of cookies:
Macaroon, Sugar, and Buttercream. The batch size for the cookies is limited to 1,000
cookies based on the size of the ovens and cookie molds owned by the company. Based
on budgetary projections, the information listed below is available:
Macaroon Sugar Buttercream
Projected sales in units 500,000 800,000 600,000
PER UNIT data:
Selling price $0.80 $0.75 $0.60
Direct materials $0.20 $0.15 $0.14
Direct labor $0.04 $0.02 $0.02
Hours per 1000-unit batch:
Direct labor hours 2 1 1
Oven hours 1 1 1
Packaging hours 0.5 0.5 0.5
Total overhead costs and activity levels for the year are estimated as follows:
Required:
a. Determine the activity-cost-driver rate for packaging costs.
b. Using the ABC system, for the sugar cookie:
1. compute the estimated overhead costs per thousand cookies.
2. compute the estimated operating profit per thousand cookies.
c. Using a traditional system (with direct labor hours as the overhead allocation base), for
the sugar cookie:.
1. compute the estimated overhead costs per thousand cookies.
2. compute the estimated operating profit per thousand cookies.
d. Explain the difference between the profits obtained from the traditional system and the
ABC system. Which system provides a better estimate of profitability? Why?
To complete the first setup on a new machine took an employee 200 minutes. Using an
64% incremental unit-time learning model indicates that the second setup on the new
machine is expected to take ________.
A) 128.0 minutes
B) 312.5 minutes
C) 328.0 minutes
D) 72.0 minutes
Zirconia Fantasy sells only necklaces. 11,000 units were sold resulting in $270,000 of
sales revenue, $80,000 of variable costs, and $40,000 of fixed costs. The breakeven
point in total sales dollars is ________.
A) $40,000
B) $56,843
C) $120,000
D) $72,000
What is gross margin for 2018?
B) $228,000
C) $244,000
D) $122,000
A transfer-pricing method leads to goal congruence when ________.
A) there is a price difference in different markets due to market inefficiencies
B) managers do no act for their own best interest and work for the long-term best
interest of the manager’s subunit
C) managers act in their own best interest and the decision is in the long-term best
interest of the company
D) there is a low degree of centralization
The Chair Company manufactures two modular types of chairs: one for the residential
market, and the other for the office market. Budgeted and actual operating data for the
year 2015 are:
Required:
Compute the following variances in terms of contribution margin:
a. Compute the total static-budget variance, the total flexible-budget variance, and the total
sales-volume variance.
b. Compute the sale-mix variance and the sales-quantity variance by type of chair, and in
total.
Advanced Manufacturing Company reported:
To isolate these variances at the end of the accounting period, John would debit Fixed
Manufacturing Overhead Allocated for ________.
A) $411,000
B) $425,000
C) $430,000
D) $435,000
Inflation clouds the real economic returns on an asset and ________.
A) makes variable-cost-based ROI higher
B) makes historical-cost-based ROI lower.
C) makes historical-cost-based ROI higher
D) makes variable-cost-based ROI lower
When variable overhead efficiency variance is favorable, it can be safely assumed that
the ________.
A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity
Waldorf Company has two sources of funds: long-term debt with a market and book
value of $5,200,000 issued at an interest rate of 13%, and equity capital that has a
market value of $4,200,000 (book value of $2,400,000). Waldorf Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 13%, while the tax rate is 35%.
What is the EVA for St. Louis? (Round intermediary calculations to four decimal places.)
A) $65,739
B) $51,048
C) $312,000
D) $260,952
Buildz Manufacturing currently produces 2,000 tables per month. The following per
unit data for 2,000 tables apply for sales to regular customers:
The plant has capacity for 4,000 tables and is considering expanding production to 4,000
tables. What is the total cost of producing 4,000 tables?
A) $540,000
B) $500,000
C) $390,000
D) $620,000
Mount Carmel Company sells only two products, Product A and Product B.
Mount Carmel sells two units of Product A for each unit it sells of Product B. Mount
Carmel faces a tax rate of 30%.
Required:
a. What is the breakeven point in units for each product assuming the sales mix is 2 units
of Product A for each unit of Product B?
b. What is the breakeven point if Mount Carmel’s tax rate is reduced to 25%, assuming the
sales mix is 2 units of Product A for each unit of Product B?
c. How many units of each product would be sold if Mount Carmel desired an after-tax net
income of $73,500, facing a tax rate of 30%?
Branded Shoe Company manufactures only one type of shoe and has two divisions, the
Stitching Division and the Polishing Division. The Stitching Division manufactures
shoes for the Polishing Division, which completes the shoes and sells them to retailers.
The Stitching Division “sells” shoes to the Polishing Division. The market price for the
Polishing Division to purchase a pair of shoes is $48. (Ignore changes in inventory.)
The fixed costs for the Stitching Division are assumed to be the same over the range of
40,000-101,000 units. The fixed costs for the Polishing Division are assumed to be $17
per pair at 101,000 units.
Stitching‘s costs per pair of shoes are:
Direct materials $11
Direct labor $9
Variable overhead $7
Division fixed costs $5
Polishing‘s costs per completed pair of shoes are:
Direct materials $20
Direct labor $9
Variable overhead $8
Division fixed costs $18
What is the market-based transfer price per pair of shoes from the Stitching Division to
the Polishing Division?
A) $23
B) $36
C) $48
D) $59
The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 31,000 gallons
The costs of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 31,000 gallons of saleable product was $146,450.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. What is the allocated joint costs of Condensed Milk?
A) $120,000
B) $14,500
C) $33,900
D) $26,450
Variable cost per labor-hour is $0.82 Fixed cost is $18,500. Machine hours during the
period are 90. Calculate the total cost for 360 labor hours.
A) $18,574
B) $18,795
C) $18,869
D) $369
Which of the following costs is irrelevant in the decision making of a special order
when there is idle production capacity – enough excess capacity to accept the order?
A) fixed manufacturing costs
B) units sold
C) material cost
D) labor hours incurred
Which of the following describes who the direct allocation method allocates
support-department costs?
A) it allocates support-department costs to operating departments by fully recognizing
the mutual services provided among all support departments
B) it allocates support-department costs to other support departments and to operating
departments in a sequential manner that partially recognizes the mutual services
provided among all support departments
C) it allocates each support-department’s costs to operating departments only
D) it requires managers to rank the support departments in the order that the step-down
allocation is to proceed
Craylon Corp has three divisions, which operate autonomously. Their results for 2015
were as follows:
The company’s desired rate of return is 15%.
Required:
a. Compute each division’s ROI. Round to three decimal places.
b. Compute each division’s residual income.
The following data for the Panoid Garden Supplies Company pertains to the production
of 2,000 garden spades during March. The spade consists of a wooden handle and a
metal forged tool that comes in contact with the ground.
Direct Materials (all materials purchased were used):
Standard cost: $1.00 per handle and $3.00 per metal tool.
Total actual cost: $9,000.
Materials flexible-budget efficiency variance was $500 unfavorable.
Direct Manufacturing Labor:
Standard cost is 5 garden spades per hour at $20.00 per hour.
Actual cost per hour was $21.00.
Labor efficiency variance was $500 favorable.
Required:
a. What is the standard direct material amount per garden spade?
b. What is the standard cost allowed for all units produced?
c. What is the total direct materials flexible-budget variance?
d. What is the direct material flexible-budget price variance?
e. What is the total actual cost of direct manufacturing labor?
f. What is the labor price variance for direct manufacturing labor?
Lucas Manufacturing has three cost objects that it uses to accumulate costs for its
manufacturing plants. They are:
Cost object #1: The physical buildings and equipment
Cost object #2: The use of buildings and equipment
Cost object #3: The availability and use of manufacturing labor
The following manufacturing overhead cost categories are found in the accounting
records:
a. Depreciation on buildings and equipment
b. Lubricants for machines
c. Property insurance
d. Supervisors salaries
e. Fringe benefits
f. Property taxes
g. Utilities
Required:
Assign each of the above costs to the most appropriate cost object.