1) in the situation where a firm produces multiple products and the firm has a single
resource constraint (e.g., machine hours), the most profitable use of available capacity
(machine hours) requires that we assess:
a.total demand for each product
b.the selling price per unit for each product
c.non production-related costs (e.g., selling costs) associated with each product
d.the contribution margin of each product per machine hour
e.the gross profit per unit of each product
2) which of the following is not an example of a product cost?
a.salary of manufacturing supervisor
b.power for equipment
c.depreciation on company-owned sales outlets
d.depreciation on company-owned manufacturing plant
3) universal automotive group is a maker of engines for high performance cars and uses
a process costing system. the following information pertains to the final department of
manufacturing for universal’s most popular engine, the “atomic 8”.
universal automotive group calculates separate costs of spoilage by computing both
normal and abnormal spoiled units. normal spoilage costs are reallocated to good units
and abnormal spoilage costs are charged as a loss. the units of the atomic 8 that are
spoiled are the result of defects not discovered before inspection of finished units. using
the weighted-average method, answer the following question:
what are the unit conversion costs?
a.$534.54
b.$583.14
c.$605.81
d.$649.08
4) rtp corp. is developing a new computer processor to compete against intel’s
successful product line. rtp has already determined the market price and the required
profit margin on each processor sold in order to be successful. which costing method
will rtp most likely use to reduce costs and obtain the desired results?
a.target costing
b.product costing
c.relevant costing
d.cost management
e.life cycle costing
5) grant’s western wear is a retailer of western hats located in atlanta, georgia. although
grant’s carries numerous styles of western hats, each hat has approximately the same
price and invoice purchase cost, as shown below. sales personnel receive large
commissions to encourage them to be more aggressive in their sales efforts. currently
the economy of atlanta is really humming, and sales growth at grant’s has been great.
however, the business is very competitive, and grant has relied on its knowledgeable
and courteous staff to attract and retain customers, who otherwise might go to other
western wear stores. also, because of the rapid growth in sales, grant is finding it more
difficult to manage certain aspects of the business, such as restocking of inventory and
hiring and training new salespeople.
the annual breakeven point in unit sales is calculated to be:
a.15,000 units
b.14,000 units
c.16,000 units
d.13,000 units
e.17,000 units
6) barstow manufacturing company has two service departments product design and
engineering support, and two production departments assembly and finishing. 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 finishing department using the direct method is
(calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and
round all dollar amounts to the nearest whole dollar):
a.$1,033,333
b.$1,690,000
c.$686,667
d.$646,667
e.$693,333
7) which of the following is not an assumption of conventional cost/volume/profit (cvp)
analysis?
a.the variable cost per unit varies over the relevant range of activity
b.the sales mix is unchanged over the relevant range of activity
c.total fixed cost is constant over the relevant range of activity
d.total variable cost changes in direct proportion to changes in the level of activity over
the relevant range
e.the total revenue function is linear within the relevant range
8) when performing value chain analysis, which of the following should a firm take into
account?
a.the firm’s competitive position
b.opportunities to reduce cost
c.possible opportunities where value can be added
d.the decision to enter or leave an activity in the value chain
e.all the above
9) if a firm decided to reevaluate and reorganize the way it did business, in hopes of
creating competitive advantage, by changing or decreasing jobs, the company would be
using which of the following management technique?
a.the value chain
b.business intelligence
c.business process improvement
d.product reevaluation
e.life cycle costing
10) preston industries, inc. currently manufactures part qx100, which is used in several
products it produces. monthly production costs for 10,000 units of qx100 are as follows:
accounting has estimated that 20% of the fixed overhead costs assigned to qx100 would
not be needed if the company chose to purchase the part from an outside supplier.
preston has the option of purchasing the part from an outside supplier at $16.00 per
unit.
if the company accepts the offer from the outside supplier, the monthly avoidable costs
(costs that would no longer be incurred) would be:
a.$32,000
b.$82,000
c.$158,000
d.$190,000
e.$110,000
11) the practice of setting prices below average variable cost and plans to raise prices
later to recover the losses from the lower prices, is referred to as:
a.marginal cost pricing
b.activity-based pricing
c.menu-based pricing
d.cost-plus pricing
e.predatory pricing