1) successful activity-based costing (abc) implementation depends upon the firm:
a.having support of consultants with needed expertise
b.having a thorough activity analysis
c.starting with a relatively simple system
d.having well-trained managers
e.having adequate computer resources
2) marin products produces three products dbb-1, dbb-2, and dbb-3 from a joint
process. each product may be sold at the split-off point or processed further. additional
processing requires no special facilities, and production costs of further processing are
entirely variable and traceable to the products involved. key information about marin’s
production, sales, and costs follows.
the amount of joint costs allocated to product dbb-3 using the sales value at split-off
method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%,
and round all dollar amounts to the nearest whole dollar):
a.$939,240
b.$216,870
c.$447,120
d.$757,800
e.$2,213,640
3) a strategy can be best defined as:
a.an effective use of the organization’s resources
b.a plan for using a firm’s resources to achieve sustainable goals within a competitive
environment
c.a clear and detailed statement of an organization’s mission and vision
d.a plan developing a firm’s mission and vision statements
4) tony’s fashions forecasts sales of $300,000 for the quarter ended december 31 . its
gross profit rate is 20% of sales, and its september 30 inventory is $100,000.if the
december 31 inventory is targeted at $40,000, budgeted purchases for the quarter should
be:
a.$140,000
b.$160,000
c.$180,000
d.$200,000
e.$240,000
5) the following costs were for optimal view inc., a contact lens manufacturer:
at an output level of 500 lenses, per unit total cost is projected to be:
a.$45.85
b.$56.67
c.$39.45
d.$50.40
e.$48.56
6) the euro is:
a.a combination of european nations that cooperate on economic and trade matters
b.a version of disney world located near paris
c.a currency used in many european countries
d.a currency used in all european countries
7) to increase profitability, technology companies such as ibm have shifted their
strategic focus toward:
a.increasing equipment sales
b.improving software applications
c.providing new and enhanced customer services
d.none of the above
8) conrad, inc. recently lost a portion of its records in an office fire. the following
information was salvaged from the accounting records.
direct labor cost incurred during the period amounted to 1.5 times the factory overhead.
the cfo of fisher, inc. has asked you to recalculate the following accounts and to report
to him by the end of the day.
what is the amount of total manufacturing cost?
a.$50,500
b.$52,000
c.$56,400
d.$58,500
9) the independent variable in regression analysis is:
a.the cost to be estimated
b.the cost driver used to estimate the value of the dependent variable
c.hard to define because of its independence
d.usually expressed as a range of values
e.always a volume-based cost driver
10) how will unit (average) cost of manufacturing (materials, labor and overhead)
usually change if the production level rises?
a.it will remain constant
b.it will increase in direct proportion to the production increase
c.it will increase, but inversely with the production increase
d.it will decrease inversely and in direct proportion to the production increases
e.it will decrease, but not in direct proportion to the production increase
11) harmon inc. produces joint products l, m, and n from a joint process. information
concerning a batch produced in may at a joint cost of $75,000 was as follows:
the amount of joint costs allocated to product n using the physical measure 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.$23,438
b.$33,434
c.$40,313
d.$27,109
e.$11,250
12) stylish sitting is a retailer of office chairs located in san francisco, california. due to
increased market competition, the cfo of stylish sitting has grown worried about the
firm’s upcoming income stream. the cfo asked you to use the company financial
information provided below.
if 40,000 office chairs were sold, stylish sitting’s operating income would be:
a.$240,000
b.$280,000
c.$210,000
d.$340,000
e.$120,000
13) apex corporation manufactures a complete line of high quality bits for electric
drills. apex has a good record for product innovation and effective marketing and
distribution. an increase in domestic and international competition during the past two
years has limited the firm’s sales growth to 3 percent per year, down from the previous
five-year average annual growth of 5 percent. in addition, market share declined by 0.5
percent this past year. apex is experiencing profit reductions caused by price
competition and manufacturing cost increases.
required: choose one of the 13 contemporary management techniques introduced in
chapter 1: explain why the technique you selected is appropriate in helping apex
develop a plan for reversing the decline in sales growth and controlling the growth in
costs.
14) motor corp. manufactures machine parts for boat engines. the ceo, james hamilton,
was considering an offer from a subcontractor who would provide 3,000 units of
product ab100 for hamilton for a price of $230,000. if motor corp. does not purchase
these parts from the subcontractor it must produce them in-house with the following
per-unit costs:
in addition to the above costs, if hamilton produces part ab100, he would also have a
retooling and design cost of $10,000. calculate the relevant costs of producing 3,000
units of product ab100 .
15) what strategic factors/considerations are generally relevant to the special order
decision problem (i.e., whether a company should accept a one-time order from a
customer with whom the company does not generally do business)?
16) contrast the budgeting unit (or focus) under a traditional budgeting system and
under an activity-based budgeting (abb) system.
17) in both activity-based and time-driven activity-based systems we calculate
cost-driver rates for support activities (e.g., the cost to ship an item or the cost to
process a customer order) and it is asserted that these rates are best determined by
dividing budgeted resource costs (for a given cost pool) by the practical capacity of
resources supplied.
required:
1> what is the primary advantage of using practical capacity as the volume level for
determining cost allocation rates in an abc or tdabc system?
2> what is the appropriate accounting treatment for unused capacity costs for a given
accounting period?
18) nyi corporation manufactures decorative window glass in two sequential
departments. these data pertain to the month of august:
required: prepare journal entries to record these events:
1> incurrence of direct materials and direct labor. application of factory overhead in
department 1 .
2> transfer of products from department 1 to department 2 .
3> incurrence of direct materials and direct labor. application of factory overhead in
department 2 .
4> transfer of complete products from department 2 to finished goods inventory.
19) as an inspector for a manufacturer of specialized electronic instruments, you head
up the quality assurance program at one of the firm’s manufacturing plants. in recent
days, it has come to your attention that a large order involving several hundred
expensive instruments for an important customer does not meet all the required
specifications. specifically, the circuit which has been designed by your firm to warn
the user of possible malfunction does not appear to work consistently. the firm’s
engineers say that the problem should have no significant results for the customer, as it
does not affect the functionality of the instrument in any way. moreover, the engineers
indicate that it is a high priority for them to find an answer to the mysterious behavior
of the circuit, and they will develop a fix as soon as possible, and make sure the
customer is provided the fix, probably as part of a routine update or maintenance. the
marketing v.p. indicates that the customer wants these instruments urgently, and that no
quality assurance issues will get in the way.
the quality assurance head knows that the order is very important to the firm, as the firm
has faced declining revenues in several recent months. also, while the intentions of the
engineers are likely to be sincere, the quality assurance head knows that they are very
busy with current and new products, and are unlikely to have the time to deal with this
problem in a timely manner.
required: what are the ethical issues involved in the case for the quality assurance head?
what steps would you suggest be taken?