1) maple mount fishery is a canning company in astoria. the company uses a normal
costing system in which factory overhead is applied on the basis of direct labor costs.
budgeted factory overhead for the year was $680,400, and management budgeted
$324,000 of direct labor costs. during the year, the company incurred the following
actual costs.
the january 1 balances of inventory accounts are shown below.
the december 31 balances of these inventory accounts were ten percent lower.
the total manufacturing costs for the year are:
a.$1,332,600
b.$1,354,700
c.$1,336,700
d.$1,373,600
e.$1,339,300
2) multiple regression analysis:
a.establishes a cause and effect relationship
b.does not produce measures of probable error
c.measures the change in one variable associated with the change in one other variable
only
d.measures the change in one variable associated with the change in more than one
other variable
3) which of the following is most likely to be the cost driver for the packaging and
shipping activity?
a.number of setups
b.number of components
c.number of orders
d.hours of testing
e.number of production runs
4) framing house, inc. produces and sells picture frames. variable costs are expected to
be $17 per frame; fixed costs for the year are expected to total $130,000. the budgeted
selling price is $25 per frame.
the sales in units required by framing house to make an after-tax profit of $10,000,
given an income tax rate, t, of 20%, are calculated to be (round up to nearest whole
unit):
a.17,734 units
b.16,583 units
c.17,813 units
d.17,049 units
e.16,366 units
5) both cost leadership and differentiated firms can improve on execution through:
a.improved automation and a higher output of products
b.benchmarking and total quality management
c.cost cutting and downsizing of personnel
d.emphasis on research and product development
e.none of the above
6) burmer co. has accumulated data to use in preparing its annual profit plan for the
upcoming year. the cost behavior pattern of the maintenance costs must be determined.
data regarding the machine hours and maintenance costs for the last year and the results
of the regression analysis are as follows:
a staff assistant has run regression analyses on the data and obtained the following
output using excel:
regression analysis
y (dependent) variable: maintenance cost
x (independent) variable: maintenance hours
using regression analysis, what is the estimated maintenance expense for a month that
the firm expects to operate 600 machine hours (round to nearest whole dollar)?
a.$88
b.$4,050
c.$4,850
d.$6,934
7) a local area consulting firm is trying to increase the long-term strategic focus of its
company reports. therefore, the firm has decided to use the balanced scorecard. what
type of newinformation, that the company currently doesn’t use in its financial reports,
should the company include?
a.non-financial information, including customer satisfaction, innovation, etc
b.additional financial information, such as profitability measures and market value
c.product life cycle information
d.supplemental accounting reports
e.continuous improvement
8) information pertaining to yekstop corp.’s sales revenue is presented below.
management estimates that 4% of credit sales are eventually uncollectible. of the
collectible credit sales, 65% are likely to be collected in the month of sale and the
remainder in the month following the sale. the company desires to begin each month
with an inventory equal to 75% of the sales projected for the month. all purchases of
inventory are on open account; 30% will be paid in the month of purchase, and the
remainder paid in the month following the month of purchase. the purchase costs are
approximately 60% of the selling prices.
budgeted january cash payments for december inventory purchases by yekstop corp.
are:
a.$67,995
b.$103,500
c.$158,655
d.$241,500
e.$289,440
9) brownsville novelty store prepared the following budget information for the month
of may:
sales are budgeted at $360,000. all sales are on account and a provision for bad debts is
made
monthly at three percent of sales.
inventory was $84,000 on april 30 and an increase of $12,000 is planned for may 31 .
all inventory is marked to sell at cost plus fifty percent.
estimated cash disbursements for selling and administrative expenses for the month are
$48,000.
depreciation for may is projected at $6,000.
brownsville’s budgeted bad debts expense for may is:
a.$7,200
b.$10,800
c.$7,560
d.$5,400
e.$14,400
10) which of the following is a batch-level cost driver?
a.output units
b.number of employees
c.number of orders
d.number of parts
e.machine hours
11) which of the following can produce unit product costs that fluctuate significantly?
a.actual costing system
b.standard costing system
c.normal costing system
d.industry costing system
e.none of the above
12) classify each of the following costs as unit-level (u), batch-level (b), product-level
(p), or facility-level (f) costs and identify an appropriate example of a possible cost
driver for each item:
(1) parts administration
(2) production scheduling
(3) materials handling
(4) machine operations
(5) personnel administration and training
(6) plant security
(7) machine setups
(8) engineering changes
(9) product design
(10) rent for factory plant
13) three stars inc. manufactures prefabricated houses. the firm’s president, michelle
brown, is interested in determining whether it would be better to manufacture the doors
used in the houses or to buy them from a supplier. the following information, based on
production of 500 doors, has been gathered to help determine the best option:
of the fixed overhead costs, three stars estimates that it could save $5 per unit of
miscellaneous fixed overhead if it purchases the doors from a supplier and allocates all
other fixed costs elsewhere. the cost to purchase 500 doors would be $55,000.
required: should three stars make or purchase the doors? what is the savings per unit?
14) the following unit cost information pertained to the trumpet division of wgn music
co. and was based on monthly demand and sales of 100 units:
assume that the trumpet division was evaluating whether or not it would accept a
special order for ten trumpets at $500 per unit.
required:
1> calculate total relevant cost per unit.
2> should wgn accept the special order; why or why not?
15) the controller of one division of a large diversified firm is compensated by salary
plus bonus. the bonus is a significant part of total compensation, and is based directly
on the profits of the division. thus, the controller has an incentive to find ways to
increase profits, including the delay of discretionary expenses such as research and
development, delay of maintenance and repair of manufacturing equipment, and delay
of sales promotions.
required:
is finding ways to increase profits as described above unethical? why or why not? who
is to blame, if anyone?
16) old vine vineyard produces premium wine. its success in the industry is due to its
quality, although all of its customers, wine shops and specialty grocery stores, are very
cost conscious and negotiate for price cuts on all large orders. noting that the wine
industry is becoming increasingly competitive, old vine is looking for a way to meet the
challenge. it is negotiating with eastern seasons, a regional specialty grocery store, to
purchase a large order of wine. old vine is currently producing at under-capacity and
would like to keep its production facilities, gaining better economies of scale by
increasing production. eastern seasons has agreed to a large order but only at a price of
$39 per bottle. the special order can be purchased in one batch with available capacity.
old vine prepared these data:
next month’s operating information (per unit, for 10,000 bottles, made in 10 batches of
1,000 each):
no variable marketing costs are associated with this order, but old vine has spent $2,500
during the past two months trying to get eastern seasons to purchase the special order.
required:
1> how much will the special order change old vine’s total operating income?
2> how much would the special order change old vine’s total operating income if old
vine is operating at full capacity and would lose the sale of the 2,000 bottles to regular
customers?
3> how might the special order fit into old vine’s competitive strategy?
17) compare and contrast traditional budgeting and activity-based budgeting (abb)
along the following dimensions: budgeting unit; primary focus; time orientation; roles
of suppliers and customers; and, control objective.
18) chen manufacturing uses backflush costing. chen has the following information for
the most recent month of activity:
required
1> prepare the journal entries for purchase of materials, conversion costs, the
completion of product during the month, the sale of product, and the closing entries for
conversion costs and material costs.
2> what is the final amount for cost of goods sold?
3> under what conditions is backflush costing used in practice?
19) daley co. manufactures computer monitors. following is a summary of its basic cost
and revenue data:
assume that daley co. is currently selling 700 computer monitors per month. fixed costs
are $96,000.
required: calculate daley co.’s:
1> breakeven sales volume, in units (round your answer up, to the nearest whole
number)
2> current level of operating income.
20) gordon manufacturing produces high-end furniture products for the luxury hotel
industry. gordon has succeeded through excellence in design, careful attention to quality
in manufacturing and in customer service, and through continuous product innovation.
the manufacturing process at gordon begins with a close consultation with each
customer so that the finished product exactly meets the customer’s specifications. this
commonly means unique designs, special fabrics, and high levels of manufacturing
quality. in addition, gordon believes that a key competitive edge it has over other
competitors is that it has an outstanding design staff that is able to work with customers
to come up with product designs that go beyond the customer’s expectations.
required:
present a value chain for gordon manufacturing with at least five activities and explain
the role of each activity in the value chain.
21) amos and son manufacturing company of asheville, tennessee, produces about
1,000 units of hand-crafted wooden chairs per month. their chairs are known for quality
and durability. most of the chairs are marketed through two furniture outlets with over
200 stores in the southwestern united states. you have been hired as a cost consultant to
recommend improvements in amos and son’s process cost system, a system installed
some fifty years ago. since then, the number of product lines has increased tenfold, and
the units sold each year have increased from 3,000 to 12,000 . you discover a process
cost system driven by volume only, with a single rate for factory overhead based on
units produced.
required: given these limited facts, explain what impact changing to an activity-based
process costing/management system (abc/abm) would have on amos and son’s costing
and pricing activities.