Athmer Corporation
Athmer Corporation sells a product for $18 per unit, and the standard cost card for the
product shows the following costs:
Refer to Athmer Corporation. Athmer received a special order for 1,000 units of the
product. The only additional cost to Athmer would be foreign import taxes of $1 per
unit. If Athmer is able to sell all of the current production domestically, what would be
the minimum sales price that Athmer would consider for this special order?
A. $18.00
B. $11.00
C. $5.40
D. $19.00
An ad hoc sales discount is
A. an allowance for an inferior quality of marketed goods.
B. a discount that an ad hoc committee must decide on.
C. brought about by competitive pressures.
D. none of the above.
Which of the following is a primary element of a cost management system?
A. yes yes yes yes
B. no yes yes no
C. yes no no yes
D. yes yes yes no
The following information pertains to Venus Company’s cost-volume-profit
relationships:
How much will be contributed to profit before taxes by the 1,001st unit sold?
A. $650
B. $500
C. $150
D. $0
Arnold Company processes raw material in Department 1 from which come two main
products, A and B, and a by-product, C. A is further processed in Department 2, B in
Department 3, and C in Department 4. The value of the by-product reduces the cost of
the main products, and sales value is used to allocate joint costs.
Required:
Crosby Corporation
Crosby Corporation has two service departments: Data Processing and
Administration/Personnel. The company also has three divisions: X, Y, and Z. Data
Processing costs are allocated based on hours of use and Administration/Personnel costs
are allocated based on number of employees.
Assume that Data Processing provides more service than Administration/Personnel.
Refer to Crosby Corporation. Using the direct method, what amount of Data Processing
costs is allocated to X (round to the nearest dollar)?
A. $180,000
B. $129,661
C. $0
D. $84,706
A service department includes which of the following?
A. yes no
B. yes yes
C. no yes
D. no no
Kaizen costing is used for which of the following types of products?
A. yes yes
B. no yes
C. no no
D. yes no
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What are the equivalent units for material using the weighted
average method?
A. 120,000
B. 123,860
C. 128,360
D. 130,000
Conversion of inputs to outputs is recorded in the
A. Work in Process Inventory account.
B. Finished Goods Inventory account.
C. Raw Material Inventory account.
D. both a and b.
Knight Corporation manufactures three identifiable product lines, Products A, B, and
C, from a basic processing operation. The cost of the basic operation is $320,000 for a
yield of 5,000 tons of Product A; 2,000 tons of Product B; and 1,000 tons of Product C.
The basic processing cost is allocated to the product lines in proportion to the relative
weight produced.
Knight Corporation does both the basic processing work and the further refinement of
the three product lines. After the basic operation, the products can be sold at the
following prices per metric ton:
Product A-$60
Product B-$53
Product C-$35
Costs to refine each of the three product lines follow:
The fixed cost of the refining operation will not be incurred if the product line is not
refined.
The refined products can be sold at the following prices per metric ton:
Product A-$75
Product B-$65
Product C-$40
Required:
Global competition has forced American industry to
A. seek increased governmental regulation.
B. improve product quality and customer service.
C. narrow product lines.
D. decrease its social responsibility.
If an actual discretionary cost is exactly equal to the budgeted level of that cost, which
of the following statements is true?
A. Funds were appropriately spent.
B. The discretionary activity was efficient.
C. The discretionary activity was effective.
D. None of the above.
If economic activity slows down, total costs could easily decline in which of the
following categories?
A. variable costs and committed fixed costs
B. variable costs and discretionary fixed costs
C. variable costs only
D. committed fixed costs only
If a firm uses variable costing, fixed manufacturing overhead will be included
A. only on the balance sheet.
B. only on the income statement.
C. on both the balance sheet and income statement.
D. on neither the balance sheet nor income statement.
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Boston Bakers. The $5,000 of annual operating costs that are common to both
the old and the new machine are an example of a(n)
A. sunk cost.
B. irrelevant cost.
C. future avoidable cost.
D. opportunity cost.
A major difference between committed and discretionary fixed costs is that
A. incurring committed fixed costs is less risky than using discretionary costs.
B. managers are usually responsible for committed fixed costs but not for discretionary
fixed costs.
C. incurring discretionary fixed costs rather than committed fixed costs gives a
company more flexibility in controlling costs.
D. companies are using more discretionary fixed costs because labor is easier to
“remove” than technology.