94. Life-cycle cost management emphasizes
95. The difference between the sales price needed to capture a predetermined market share and the desired
profit per unit is called:
96. Figure 11-4
the Algonquin Company developed the following budgeted life-cycle income statement for two proposed
products. Each product’s life cycle is expected to be two years.
Product A
Product B
Total
Sales
$280,000
$200,000
$480,000
Cost of goods sold
200,000
130,000
330,000
Gross profit
$ 80,000
$ 70,000
$150,000
Period expenses:
Research and development
(70,000)
Marketing
(50,000)
Life-cycle income
$ 30,000
A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were
going to be dropped.
Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the
research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.
Refer to Figure 11-4. If research and development costs and marketing costs are traced to each product, life-cycle income for Product A would be
97. Figure 11-4
the Algonquin Company developed the following budgeted life-cycle income statement for two proposed
products. Each product’s life cycle is expected to be two years.
Product A
Product B
Sales
$280,000
$200,000
Cost of goods sold
200,000
130,000
Gross profit
$ 80,000
$ 70,000
Period expenses:
Research and development
Marketing
Life-cycle income
A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were
going to be dropped.
Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the
research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.
Refer to figure 11-4. If research and development costs and marketing costs are traced to each product, life-cycle income for Product B would be
98. Figure 11-4
the Algonquin Company developed the following budgeted life-cycle income statement for two proposed
products. Each product’s life cycle is expected to be two years.
Product A
Product B
Sales
$280,000
$200,000
Cost of goods sold
200,000
130,000
Gross profit
$ 80,000
$ 70,000
Period expenses:
Research and development
Marketing
Life-cycle income
A 10 percent return on sales is required for new products. Because the proposed products did not have a 10 percent return on sales, the products were
going to be dropped.
Relative to Product B, Product A requires more research and development costs but fewer resources to market the product. Sixty percent of the
research and development costs are traceable to Product A, and 30 percent of the marketing costs are traceable to Product A.
Refer to Figure 11-4. Return on sales for Product A would be
99. Lavalier Company developed the following budgeted life-cycle income statement for two proposed
products. Each product’s life cycle is expected to be two years.
Product AA
Product BB
Sales
$400,000
$350,000
Cost of goods sold
300,000
200,000
Gross profit
$100,000
$150,000
Period expenses:
Research and development
Marketing
Life-cycle income
A 12 percent return on sales is required for new products. Because the proposed products did not have a 12 percent return on sales, the products were
going to be dropped.
Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product. Sixty-five percent of
the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.
If research and development costs and marketing costs are traced to each product, life-cycle income for Product AA would be
100. Lavalier Company developed the following budgeted life-cycle income statement for two proposed
products. Each product’s life cycle is expected to be two years.
Product AA
Product BB
Sales
$400,000
$350,000
Cost of goods sold
300,000
200,000
Gross profit
$100,000
$150,000
Period expenses:
Research and development
Marketing
Life-cycle income
A 12 percent return on sales is required for new products. Because the proposed products did not have a 12 percent return on sales, the products were
going to be dropped.
Relative to Product BB, Product AA requires more research and development costs but fewer resources to market the product. Sixty-five percent of
the research and development costs are traceable to Product AA, and 40 percent of the marketing costs are traceable to Product AA.
If research and development costs and marketing costs are traced to each product, life-cycle income for Product BB would be
101. Luminous Company sells a product for $450 per unit. Its market share is 25 percent. The marketing
manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The
product is currently earning a profit of $72 per unit. The president of Luminous Company feels that the $72
profit per unit must be maintained. What is the target price per unit?
102. Luminous Company sells a product for $450 per unit. Its market share is 25 percent. The marketing
manager feels that the market share can be increased to 33 percent with a reduction in price to $390. The
product is currently earning a profit of $72 per unit. The president of Luminous Company feels that the $72
profit per unit must be maintained. What is the original cost per unit?
103. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager
feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is
currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must
be maintained. What is the target price per unit?
104. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager
feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is
currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must
be maintained. What is the original cost per unit?
105. Dot Company sells a product for $225 per unit. Its market share is 20 percent. The marketing manager
feels that the market share can be increased to 30 percent with a reduction in price to $195. The product is
currently earning a profit of $36 per unit. The president of Dot Company feels that the $36 profit per unit must
be maintained. What is the target cost per unit?
106. The manufacturing which reduces inventory levels because production is geared to demand is called:
107. Traditional manufacturing uses which of the following philosophies of quality control?
108. Which of the following is a trait of a traditional manufacturing system?
109. Which of the following is NOT a trait of a traditional manufacturing system?
110. Which of the following is a trait of a JIT system?
111. JIT manufacturing differs from traditional manufacturing in all of the following ways EXCEPT
112. JIT manufacturing uses which of the following philosophies of quality control?
113. Which of the following is NOT a trait of a JIT system?
114. The goal of total quality control is
115. The approach to quality control which attempts to achieve zero defects is called:
116. the traditional approach of permitting defects to occur as long as they do NOT exceed a certain level is
called
117. If traditional manufacturing is used, which of the following is considered direct costs?
118. In a JIT manufacturing environment, product-costing information is used mainly for all of the following
EXCEPT
119. Which of the following manufacturing costs is assigned to products in a traditional environment using
direct tracing?
120. Which of the following manufacturing costs is assigned to products in a traditional and JIT environment
using direct tracing?
121. If JIT manufacturing is used and each manufacturing cell produces a single product, which of the
following is considered a direct product cost?
122. If JIT manufacturing is used and each manufacturing cell produces a single product, all of the following
are considered direct product costs EXCEPT
123. Which of the following manufacturing costs is assigned to products in a traditional and JIT environment
using allocation?
124. Which of the following manufacturing costs is assigned to products in JIT environment using direct
tracing?
125. Which of the following manufacturing costs is assigned to products in a traditional environment using
driver tracing?
126. Which of the following manufacturing costs is assigned to products in a JIT environment using allocation?
127. Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to
its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The
machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
4-inch
5,000
15,000 rolls
6-inch
12,000
12,500 rolls
9-inch
7,000
11,200 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the
three cells still totaled $432,000; however, these costs are now traceable to each cell.
Cell, 4-inch
$125,000
Cell, 6-inch
175,000
Cell, 9-inch
165,000
128. Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to
its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The
machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
4-inch
5,000
15,000 rolls
6-inch
12,000
12,500 rolls
9-inch
7,000
11,200 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the
three cells still totaled $432,000; however, these costs are now traceable to each cell.
Cell, 4-inch
$125,000
Cell, 6-inch
175,000
Cell, 9-inch
165,000
The maintenance cost per roll of 9-inch insulation before JIT is installed would be
129. Prior to installing a JIT system, Grindstone Company used machine hours to assign maintenance costs to
its three products of 4-inch, 6-inch, and 9-inch insulation. The maintenance costs totaled $432,000 per year. The
machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
4-inch
5,000
15,000 rolls
6-inch
12,000
12,500 rolls
9-inch
7,000
11,200 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the
three cells still totaled $432,000; however, these costs are now traceable to each cell.
Cell, 4-inch
$125,000
Cell, 6-inch
175,000
Cell, 9-inch
165,000
After installing JIT, the maintenance cost per roll of 6-inch insulation is
130. A firm that has implemented JIT had the following transactions:
1.
Materials were purchased on account for $40,000.
2.
Materials were placed into production.
3.
Actual direct labor costs were $6,000.
4.
Actual overhead costs were $40,000.
5.
Conversion costs applied were $42,000.
6.
All work was completed for the month.
7.
All completed work was sold.
8.
The variance is recognized.
What will be the entry to record material purchases using the traditional approach?
131. A firm that has implemented JIT had the following transactions:
1.
Materials were purchased on account for $40,000.
2.
Materials were placed into production.
3.
Actual direct labor costs were $6,000.
4.
Actual overhead costs were $40,000.
5.
Conversion costs applied were $42,000.
6.
All work was completed for the month.
7.
All completed work was sold.
8.
The variance is recognized.
What will be the entry to record material purchases using the backflush approach?
132. A firm that has implemented JIT had the following transactions:
1.
Materials were purchased on account for $40,000.
2.
Materials were placed into production.
3.
Actual direct labor costs were $6,000.
4.
Actual overhead costs were $40,000.
5.
Conversion costs applied were $42,000.
6.
All work was completed for the month.
7.
All completed work was sold.
8.
The variance is recognized.
What will be the entry to record material placed into production using the traditional approach?
133. A firm that has implemented JIT had the following transactions:
1.
Materials were purchased on account for $40,000.
2.
Materials were placed into production.
3.
Actual direct labor costs were $6,000.
4.
Actual overhead costs were $40,000.
5.
Conversion costs applied were $42,000.
6.
All work was completed for the month.
7.
All completed work was sold.
8.
The variance is recognized.
What will be the entry to record materials placed into production using the backflush approach?
134. A firm that has implemented JIT had the following transactions:
1.
Materials were purchased on account for $40,000.
2.
Materials were placed into production.
3.
Actual direct labor costs were $6,000.
4.
Actual overhead costs were $40,000.
5.
Conversion costs applied were $42,000.
6.
All work was completed for the month.
7.
All completed work was sold.
8.
The variance is recognized.
Which of the following would NOT be an entry under the backflush system, assuming the second trigger point is the completion of goods?
135. Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its
three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The
machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
6-inch
12,000
31,250 rolls
8-inch
20,000
25,000 rolls
11-inch
18,000
12,000 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the
three cells still totaled $400,000; however, these costs are now traceable to each cell.
Cell, 6-inch
$100,000
Cell, 8-inch
120,000
Cell, 11-inch
180,000
The maintenance cost per roll of 8-inch insulation before JIT is installed would be
136. Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its
three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The
machine hours used by each product and the quantity produced of each product are as follows:
Machine Hours
Quantity Produced
6-inch
12,000
31,250 rolls
8-inch
20,000
25,000 rolls
11-inch
18,000
12,000 rolls
After installing JIT, three manufacturing cells were created and the cell workers were trained to perform maintenance. Maintenance costs for the
three cells still totaled $400,000; however, these costs are now traceable to each cell.
Cell, 6-inch
$100,000
Cell, 8-inch
120,000
Cell, 11-inch
180,000
After installing JIT, the maintenance cost per roll of 6-inch insulation would be