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33. Refer to Figure 8-8. What is the January ending inventory for Steele Corporation using the variable
costing method?
a.
$260,000
b.
$78,000
c.
$108,000
d.
$90,000
34. Refer to Figure 8-8. What is the March ending inventory for Steele Corporation using the variable
costing method?
a.
$120,000
b.
$104,000
c.
$260,000
d.
$15,000
35. Refer to Figure 8-8. What is the February contribution margin for Steele Corporation using the
variable costing method?
a.
$240,000
b.
$170,000
c.
$119,000
d.
$204,000
Figure 8-9.
The following information pertains to Stark Corporation:
Beginning inventory
0 units
Ending inventory
5,000 units
Direct labor per unit
$20
Direct materials per unit
16
Variable overhead per unit
4
Fixed overhead per unit
10
Variable selling costs per unit
12
Fixed selling costs per unit
16
36. Refer to Figure 8-9. What is the value of ending inventory using the variable costing method?
a.
$310,000
b.
$250,000
c.
$200,000
d.
$390,000
37. Refer to Figure 8-9. Absorption costing income would be ____ the variable costing income.
a.
$50,000 greater than
b.
$70,000 greater than
c.
$70,000 less than
d.
$50,000 less than
38. Refer to Figure 8-9. What is the value of ending inventory using the absorption costing method?
a.
$310,000
b.
$250,000
c.
$200,000
d.
$390,000
39. Redding Company has two divisions with the following segment margins for the current year:
Northern, $200,000; Southern, $400,000. Common expenses of the company are $50,000. What is
Redding Company's income?
a.
$150,000
b.
$550,000
c.
$600,000
d.
$650,000
40. Segment margin is equal to segment sales revenue minus
a.
variable cost of goods sold, variable selling expense, and direct fixed costs.
b.
variable cost of goods sold, variable selling expense, and common fixed costs.
c.
variable cost of goods sold, total selling expense, and direct fixed costs.
d.
variable cost of goods sold, variable selling expense, administrative expense, and direct
fixed costs.
e.
cost of goods sold, variable selling expense, and fixed factory overhead.
41. Which of the following could be considered a segment?
a.
division
b.
product-line
c.
sales territory
d.
All of these.
42. Consider the following portion of a segmented income statement for the year just ended. Assume fixed
expenses of Division X include $30,000 of direct expenses and that the discontinuance of the
department will not affect the sales of the other departments nor reduce the common expenses.
Division X
Sales
$100,000
Variable costs
60,000
Gross profit
$ 40,000
Fixed expenses (direct and selling and administrative)
50,000
Operating income (loss)
$ (10,000)
What is X's divisional segment margin?
a.
($10,000)
b.
$40,000
c.
$10,000
d.
$100,000
43. Grass Valley Mining mines three products. Gold ore sells for $1,000 per ton, variable costs are $400
per ton, and fixed mining costs are $250,000. Last year the segment margin was $(100,000).
How many tons of gold ore did Grass Valley Mining sell last year?
a.
375 tons
b.
1,000 tons
c.
250 tons
d.
200 tons
Figure 8-10.
Nauman Company has the following information pertaining to its two divisions for last year:
Division X
Division Y
Variable selling and admin. expenses
$ 70,000
$ 90,000
Direct fixed expenses
35,000
100,000
Sales
200,000
400,000
Direct fixed selling and admin. expenses
30,000
70,000
Variable expenses
40,000
100,000
Common expenses are $24,000 for the year.
44. Refer to Figure 8-10. What is the segment margin for Division Y?
a.
$310,000
b.
$210,000
c.
$240,000
d.
$40,000
45. Refer to Figure 8-10. What is the income for Nauman Company?
a.
$65,000
b.
$325,000
c.
$300,000
d.
$41,000
Figure 8-11.
Tyler Company has the following information pertaining to its two product lines for last year:
Product A
Product B
Variable selling and admin. expenses
$38,000
$31,000
Direct fixed expenses
19,500
34,500
Sales
250,000
210,000
Direct fixed selling and admin. expenses
38,000
22,000
Variable expenses
42,000
31,000
Operating income
$112,500
$91,500
46. Refer to Figure 8-11. What is the segment margin for Product B?
a.
$155,000
b.
$105,000
c.
$85,000
d.
$91,500
47. Refer to Figure 8-11. What is the income for Tyler Company?
a.
$101,000
b.
$120,500
c.
$99,000
d.
$102,500
Figure 8-12.
Assume the following information for a product line:
Sales
$700,000
Variable expenses
185,000
Direct fixed expenses
115,000
Variable selling and administrative expenses
70,000
Direct fixed selling and admin. expenses
90,000
48. Refer to Figure 8-12. What is the contribution margin of the product line?
a.
$400,000
b.
$525,000
c.
$445,000
d.
$515,000
49. Refer to Figure 8-12. What is the segment margin of the product line?
a.
$200,000
b.
$325,000
c.
$350,000
d.
$240,000
50. The two major costs associated with inventory are
a.
ordering costs and setup costs.
b.
setup costs and stockout costs.
c.
stockout costs and carrying costs.
d.
ordering costs and carrying costs.
e.
None of these.
51. The inventory cost that can include insurance, inventory taxes, and obsolescence is called
a.
ordering cost.
b.
carrying cost.
c.
stockout cost.
d.
setup cost.
e.
storing cost.
52. The inventory cost that can include processing costs, cost of insurance for shipping, and unloading is
called
a.
ordering cost.
b.
carrying cost.
c.
stockout cost.
d.
setup cost.
e.
storing cost.
53. The inventory cost that can include lost sales, cost of expediting, and cost of interrupted production is
called
a.
ordering cost.
b.
carrying cost.
c.
stockout cost.
d.
setup cost.
e.
storing cost.
54. Which of the following is not a traditional reason for carrying inventory?
a.
to satisfy customer demand
b.
to avoid shutting down manufacturing facilities
c.
to buffer against unreliable production processes
d.
to hedge against future price increases
e.
all of these are traditional reasons for carrying inventory
55. The formula for ordering cost is the
a.
number of orders per year cost of placing an order.
b.
number of orders per year/cost of placing an order.
c.
average number of units in inventory cost of carrying one unit in inventory.
d.
average number of units in inventory/cost of carrying one unit in inventory.
e.
ordering cost + carrying cost.
56. The formula for total carrying cost is
a.
number of orders per year cost of placing an order.
b.
number of orders per year/cost of placing an order.
c.
average number of units in inventory cost of carrying one unit in inventory.
d.
average number of units in inventory/cost of carrying one unit in inventory.
e.
ordering cost + carrying cost.
57. The economic order quantity (EOQ) is the quantity that
a.
minimizes total ordering cost.
b.
maximizes total profit.
c.
minimizes total inventory-related costs.
d.
maximizes carrying costs.
e.
maximizes ease of ordering.
58. Carter Company orders 250 units at a time, and places 15 orders per year. Total ordering cost is $1,600
and total carrying cost is $1,250. Which of the following statements is true?
a.
The economic order quantity (EOQ) is 250.
b.
The economic order quantity (EOQ) is more than 250.
c.
The economic order quantity (EOQ) is less than 250.
d.
Total inventory-related cost is lower than it would be at the economic order quantity
(EOQ).
e.
None of these.
59. Carter Company orders 250 units at a time, and places 15 orders per year. Total ordering cost is $1,100
and total carrying cost is $1,750. Which of the following statements is true?
a.
The economic order quantity (EOQ) is 250.
b.
The economic order quantity (EOQ) is more than 250.
c.
The economic order quantity (EOQ) is less than 250.
d.
Total inventory-related cost is lower than it would be at the economic order quantity
(EOQ).
e.
None of these.
60. Carter Company orders 250 units at a time, and places 15 orders per year. Total ordering cost is $1,100
and total carrying cost is $1,100. Which of the following statements is true?
a.
The economic order quantity (EOQ) is 250.
b.
The economic order quantity (EOQ) is more than 250.
c.
The economic order quantity (EOQ) is less than 250.
d.
Total inventory-related cost is lower than it would be at the economic order quantity
(EOQ).
e.
None of these.
61. When the economic order quantity (EOQ) model is applied to units produced within the company,
ordering costs become
a.
setup costs.
b.
stockout costs.
c.
carrying costs.
d.
safety-stock costs.
e.
production costs.
62. Under a JIT system,
a.
customer demand pulls units through the production line.
b.
safety stock is set at relatively high levels.
c.
stockouts are never a problem.
d.
inventory levels are set at 10% of total production levels.
e.
production is set at a level to maximize factory output.
63. JIT responds to the problems traditionally solved by carrying inventories by
a.
ensuring that sufficient inventory is on hand to prevent stockouts.
b.
purchasing extra materials when price discounts are offered.
c.
negotiating long-term contracts with supplier to lock in low prices.
d.
selecting an inventory level that minimizes the total of ordering and carrying costs.
e.
choosing a wide number of suppliers to increase the chance of receiving quantity
discounts.
Figure 8-3.
Martin Company uses 625 units of a part each year. The cost of placing one order is $8; the cost of
carrying one unit in inventory for a year is $4.
64. Refer to Figure 8-3. Martin has decided to begin ordering 40 units at a time. What is the average
annual carrying cost of Martin's new policy?
a.
$80
b.
$60
c.
$160
d.
$4
e.
$90
65. Refer to Figure 8-3. Martin has decided to begin ordering 40 units at a time. What is the average
annual ordering cost of Martin's new policy?
a.
$190
b.
$150
c.
$125
d.
$100
e.
$145
66. Refer to Figure 8-3. What is the EOQ for Martin?
a.
100
b.
50
c.
45
d.
30
e.
20
PROBLEM
1. Last year, Baker Company produced 30,000 units and sold 28,000 units. Beginning inventory was
zero. During the period, the following costs were incurred:
Indirect labor (variable)
$ 60,000
