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Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing
system uses two cost categories, direct materials and conversion costs. Each product
must pass through the Assembly Department and the Testing Department. Direct
materials are added at the beginning of the production process. Conversion costs are
allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
What is the direct materials cost per equivalent unit during June?
A) $679.51
B) $519.40
C) $504.71
D) $409.86
The method that allocates costs in each cost pool using the same rate per unit is known
as the ________.
A) incremental cost-allocation method
B) reciprocal cost-allocation method
C) single-rate cost allocation method
D) dual-rate cost-allocation method
Feedback on how a company is doing from the perspectives of financial, customer,
internal business processes, and learning and growth.
A) Master budget
B) Product differentiation
C) Differential report
D) Balanced scorecard
Which of the following correctly describes manufacturing cycle time?
A) the amount of time it takes from when an order is ready to start on the production
line to when the product or service is delivered to the customer
B) the amount of time it takes to deliver a completed order to a customer plus its
waiting time
C) the amount of time it takes from when a customer places an order for a product or
requests a service to when the product or service is delivered to the customer
D) the amount of time it takes from when an order is ready to start on the production
line to when it becomes a finished good plus its waiting time
The following information pertains to Monroe Company:
∙ Cash is collected from customers in the following manner:
Month of sale 40%
Month following the sale 60%
∙ 45% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
∙ Labor costs are 30% of sales. Other operating costs are $38,000 per month (including
$10,000 of depreciation). Both of these are paid in the month incurred.
∙ The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at
the end of the month. Money can be borrowed in multiples of $1,000.
How much cash will be disbursed in total in March?
A) $58,300
B) $68,300
C) $108,850
D) $118,850
When a greater proportion of costs are fixed costs, then ________.
A) a small increase in sales results in a small decrease in operating income
B) when demand is low the risk of loss is high
C) a decrease in sales reduces the total fixed cost per unit
D) a decrease in sales reduces the cost per unit
Cysco Corp has a budget of $1,200,000 in 2017 for prevention costs. If it decides to
automate a portion of its prevention activities, it will save $103,000 in variable costs.
The new method will require $51,000 in training costs and $148,000 in annual
equipment costs. Management is willing to adjust the budget for an amount up to the
cost of the new equipment. The budgeted production level is 207,000 units.
Appraisal costs for the year are budgeted at $508,000. The new prevention procedures
will save appraisal costs of $50,000. Internal failure costs average $34 per failed unit of
finished goods. The internal failure rate is expected to be 5% of all completed items.
The proposed changes will cut the internal failure rate by one-half. Internal failure units
are destroyed. External failure costs average $52 per failed unit. The company's average
external failures average 4.5% of units sold. The new proposal will reduce this rate to
1%. Assume all units produced are sold and there are no ending inventories.
Management has offered to allow the prevention changes if all changes take place as
anticipated and the amounts netted are less than the cost of the equipment. What is the
net impact of all the changes created by the preventive changes? Assume that internal
product failures are reduced by 45% with the new procedures.
A) $215,280
B) $(489,095)
C) $(465,540)
D) $(254,000)
The planned operating income is calculated by ________.
A) dividing net income by tax rate
B) dividing net income by 1 − tax rate
C) multiplying net income by tax rate
D) multiplying net income by 1 − tax rate
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:
T-SHIRTS SWEATSHIRTS
Production and sales volume 204,000 units 34,000 units
Selling price $18.00 $29.00
Direct material $1.60 $ 5.00
Direct labor $4.30 $ 7.20
Manufacturing overhead $4.60 $ 3.00
Gross profit $ 7.50 $13.80
Selling and administrative $3.50 $ 7.00
Operating profit $4.00 $ 6.80
Tiger Pride's managers have decided to revise their current assignment of overhead
costs to reflect the following ABC cost information:
Using an ABC system, next year's estimates show manufacturing overhead costs will total
$227,300 for 46,000 T-shirts. If all other T-shirt costs and sales prices remain the same, the
profitability that can be expected is ________. (Round the final answer to the nearest
whole cent.)
A) $8.60 per t-shirt
B) $4.94 per t-shirt
C) $3.66 per t-shirt
D) ($0.27) per t-shirt
Tony Manufacturing produces a single product that sells for $100. Variable costs per
unit equal $45. The company expects total fixed costs to be $78,000 for the next month
at the projected sales level of 3,000 units. In an attempt to improve performance,
management is considering a number of alternative actions. Each situation is to be
evaluated separately. Suppose management believes that a $85,000 increase in the
monthly advertising expense will result in a considerable increase in sales. Sales must
increase by ________ to justify this additional expenditure?
A) 850 units
B) 1,546 units
C) 1,412 units
D) 1,419 units
Which of the following is true of a bottleneck?
A) It occurs in an operation when the work to be performed approaches or exceeds the
capacity available to do it.
B) It occurs in an operation when there is excess capacity to complete the work given.
C) It is the uncertainty about when customers will order products or services.
D) It is the time taken by a manufacturing department to produce a finished product.
The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22
per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the
make-or-buy decision ________.
A) incremental revenues are $4 per unit
B) incremental costs are $2 per unit
C) net relevant costs are $2 per unit
D) differential costs are $4 per unit
Which of the following is true of ISO 9000?
A) It is a quality management system comprising different process improvement such
as six sigma and lean manufacturing.
B) It is mandatory for all listed companies in US to get ISO certified.
C) It helps companies monitor, document, and certify the elements of their production
processes that lead to quality.
D) It is a disciplined, data-driven, and statistical approach to improve the quality of
products or services by identifying and removing the causes of defects.
Which of the strategic perspectives of the balanced scorecard focuses on a company's
own operations that create value for customers that, in turn, help achieve financial
objectives?
A) Financial
B) Customer
C) Internal-business-process
D) Learning-and-growth
Which of the following is true of a budgeting system?
A) It compels managers to plan ahead.
B) It increases agency costs.
C) It is easy to measure the exact benefits of a budgeting system.
D) It leads to operational inefficiency.
________ is the process of assigning indirect costs to products.
A) Cost allocation
B) Job cost recording
C) Cost pooling
D) Cost tracing
The cost components of a heater include $35 for the compressor, $11 for the sheet
molded compound frame, and $74 per unit for assembly. The factory machines and
tools cost is $55,000. The company expects to produce 1,300 heaters in the coming
year. What cost function best represents these costs?
A) y = 55,000 + 120X
B) y = 1,300 + 55,000X
C) y = 55,000 + 1,300X
D) y = 1,300 + 120X
Anglico's most recent income statement is given below.
Required:
a. Contribution margin per unit is $ ________ per unit
b. If sales are doubled total variable costs will equal $ ________
c. If sales are doubled total fixed costs will equal $ ________
d. If 20 more units are sold, profits will increase by $ ________
e. Compute how many units must be sold to break even. # ________
f. Compute how many units must be sold to achieve
operating income of $60,000. # ________
g. Compute the revenue needed to achieve an after tax
income of $30,000 given a tax rate of 30%. $ ________
Which of the following companies is part of the merchandising sector of our economy?
A) Jaguar
B) Hewlett Packard
C) Whole Foods Market
D) KPMG
The number of units in the sales budget and the production budget may differ because
of a change in ________.
A) ending finished goods inventory levels
B) total overhead charges for the year
C) beginning direct material inventory levels
D) sales returns and allowances
In multiple regression, when two or more independent variables are highly correlated
with one another, the situation is known as ________.
A) heteroscedasticity
B) homoscedasticity
C) multicollinearity
D) autocorrelation
For Heavy Manufacturing Company, labor-hours are 40,000 and wages $144,000 at the
high point of the relevant range, and labor-hours are 24,000 and wages $96,000 at the
low point of the relevant range.
What is the slope coefficient?
A) $3.75
B) $3.00
C) $3.60
D) $4.00
For a company with diverse products, undercosting overhead of a product will lead to
product-cross -subsidization which means that:
A) direct labor costs of the product are misallocated
B) direct material costs of the product are misallocated
C) indirect costs of another product are misallocated
D) direct costs of another product are misallocated
In certain high-cost defense contracts involving new weapons and equipment, contracts
are rarely subject to competitive bidding because ________.
A) the government taxes the defense companies at a higher level than that of other
public sector companies
B) there is an implicit agreement among defense contractors to "share contracts"
C) all defense contractors have essentially the same cost structure
D) no contractor is willing to assume all the risk of receiving a fixed price for the
contract
Which cost estimation method would involve analyzing direct labor subsidiary accounts
and classifying costs as as variable, fixed, or mixed to derive cost estimation formulas?
A) the account analysis method
B) the conference method
C) the marginal costing method
D) the incremental costing method
A general rule in capital budgeting is that a project is accepted only if the internal rate
of return equals or ________.
A) exceeds the required rate of return
B) exceeds the inflation rate
C) exceeds the risk-free rate
D) exceeds the accrual accounting rate of return
High Tech Manufacturing Inc., incurred total indirect manufacturing labor costs of
$550,000. The company is labor intensive. Total labor hours during the period were
4,400. Using qualitative analysis, the manager and the management accountant
determine that over the period the indirect manufacturing labor costs are mixed costs
with only one cost driver–labor-hours. They separated the total indirect manufacturing
labor costs into costs that are fixed ($120,000 based on 8,700 hours of labor) and costs
that are variable ($430,000) based on the number of labor-hours used. The company has
estimated 6,900 labor hours during the next period.
What will be the total variable cost for the estimated 6,900 hours? (Round any
intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A) $341,034
B) $674,337
C) $862,500
D) $436,207
Puritan Apparels is a clothing manufacturer. Unit costs associated with one of its
products, Product FGS1156 are as follows:
What are the inventoriable costs per unit associated with Product FGS1156?
A) $196
B) $165
C) $178
D) $143
Which of the following best describes scrap?
A) units of production that do not meet the specifications required by customers but that
are
subsequently repaired and sold as good finished units
B) products of a joint production process that have low total sales values relative to the
total sales
value of the main product
C) residual material that results from manufacturing a product
D) units of production whether fully or partially completed, that do not meet the
specifications
required by customers for good units and are discarded or sold at reduced prices
Which of the following statements is true of decentralization?
A) A decentralized structure does not empower employees to handle customer
complaints directly.
B) A decentralized structure forces top management to lose some control over the
organization.
C) Decentralization slows responsiveness to local needs for decision making.
D) A decentralized structure only delegates recurring and structured decisions to lower
levels.
Compared to variable overhead costs planning, fixed overhead cost planning has an
additional strategic issue beyond undertaking only essential activities and efficient
operations. That additional requirement is best described as:
A) focusing on the highest possible quality
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of capacity that will benefit the company in the
long-run
D) identifying essential value-adding activities
The Microchip Division of Silicon Computers produces computer chips that are sold to
the Personal Computer Division and to outsiders. Operating data for the Microchip
Division for 20X5 are as follows:
The Personal Computer Division has just received an offer from an outside supplier to
furnish chips at $8.90 each. The manager of Microchip Division is not willing to meet the
$8.90 price. She argues that it costs her $9.00 to produce and sell each chip. Sales to
outside customers are at a maximum of 200,000 chips.
Required:
a. Verify the Microchip Division's $9.00 unit cost figure.
b. Should the Microchip Division meet the outside price of $8.90? Explain.
c. Could the $8.60 price be met and still show a profit for the Microchip Division sales to
the Personal Computer Division? Show computations.
A company sets up cost pools for indirect cost allocation. Management sees clear
cause-and-effect relationships between the incurrence of costs and the chosen the
cost-allocation base. What other common relationships or basis with a cost allocation
base might management utilize to allocate costs?
A) R&D expenses
B) benefits -received
C) Capital investment in a related process
D) gross profit proportions
Inventoriable costs are costs of a product that are considered ________.
A) assets in a company's balance sheet when the costs are incurred and that are
expensed as cost of goods sold only when the product is sold
B) liabilities in a company's balance sheet when the costs are incurred and that are
expensed only when the product is sold
C) assets in a company's income statement when the costs are capitalized and that are
expensed as cost of goods sold only when the product is sold
D) liabilities in a company's income statement when the costs are capitalized and that
are expensed only when the product is sold
