Mulcahey Automobiles Company fabricates automobiles. Each vehicle includes one
wiring harness, which is currently made in-house. Details of the harness fabrication are
as follows:
An Indonesian factory has offered to supply Mulcahey with ready-made units for a cost
of $15 per wiring harness. Assume that Mulcahey’s fixed costs could be reduced by
$4,000 if it outsources and that Mulcahey will not be able to use the excess capacity in
any profitable manner. If Mulcahey decides to outsource, monthly operating income
will ________.
A) increase by $12,000
B) decrease by $12,000
C) increase by $5,600
D) decrease by $2,400
Donnelley Products sells 2,500 kayaks per year at a sales price of $470 per unit.
Donnelley sells in a highly competitive market and uses target pricing. The company
has $1,000,000 of assets, and the shareholders wish to make a profit of 16% on assets.
Variable cost is $180 per unit and cannot be reduced. Assume all products produced are
sold. What are the target fixed costs?
A) $1,175,000
B) $1,015,000
C) $160,000
D) $565,000
Travel Trails, Inc. manufactures railway coaches and uses the FIFO method of process
costing to record costs. The Work-in-Process Inventory of the Heating Department on
October 1 was 74% complete for materials and 23% complete for conversion costs. On
October 31, its ending Work-in-Process Inventory was 84% complete for materials and
41% complete for conversion costs. This means that for the ending inventory, ________
% of the materials and ________% of the conversion costs were added during October.
A) 74; 41
B) 26; 23
C) 84; 41
D) 41; 84
The management technique whereby managers concentrate on results that are outside
the accepted parameters is called management by ________.
A) variance
B) standard
C) exception
D) budget
Burns Corp. has provided a part of its budget for the second quarter:
The cash balance on April 1 is $12,000. Assume that there will be no financing
transactions or costs during the quarter. Calculate the projected cash balance at the end
of June.
A) $115,300
B) $37,800
C) $81,300
D) $65,300
Which of the following internal business perspective key performance indicators (KPIs)
is commonly used to assess the innovation process?
A) number of new products developed
B) number of warranty claims
C) employee turnover rate
D) rate of on-time deliveries
A company has four vendors and the accounts payable subsidiary ledger shows the
following balances.
Calculate the accounts payable balance in the general ledger.
A) $436,295
B) $564,425
C) $278,821
D) $285,604
The journal entry to record indirect labor costs incurred involves a debit to the
________.
A) Manufacturing Overhead account
B) Wages Payable account
C) Finished Goods Inventory account
D) Work-in-Process Inventory account
The direct materials budget is prepared using information from the ________ budget.
A) cash
B) master
C) capital expenditure
D) production
Jenna Manufacturers produces flooring material. The monthly fixed costs are $16,000
per month. The sales price per unit is $95 and variable cost per unit is $35. If Jenna’s
managers create a CVP graph from volume levels of zero to 800 units, at what sales
level (in units) will the revenue and total cost lines intersect? (Round your answer up to
the nearest whole unit.)
A) 267 units
B) 169 units
C) 458 units
D) 124 units
Cake Lady Bakery is famous for its frosted fruit cake. The main ingredient of the cake
is dried fruit, which Cake Lady purchases by the pound. In addition, the production
requires a certain amount of direct labor. Cake Lady uses a standard cost system, and at
the end of the first quarter, there was an unfavorable direct labor cost variance. Which
of the following is a logical explanation for that variance?
A) The cost of workers’ medical insurance plans jumped up dramatically during the
quarter.
B) The factory lost two experienced workers at the beginning of the quarter, and their
replacements wasted a large amount of direct materials during their training period.
C) The purchasing manager was able to secure a volume discount on dried fruit,
purchasing the fruit for less than the amount set by standard.
D) The production staff changed the work flow process so that production required
fewer direct labor hours.
The phone bill for a corporation consists of both fixed and variable costs. Refer to the
four-month data below and apply the high-low method to answer the question.
If the company uses 390 minutes in May, how much will the total bill be? (Round any
intermediate calculations to the nearest cent and your final answer to the nearest dollar.)
A) $1,842.60
B) $1,829.10
C) $3,672
D) $6,157