Holt Medical Corporation manufactures two models of a medical device: Model 101
and Model 102.
Below is the current year production data for the company:
The 210,000 units of material had a total cost of $1,365,000. Direct labor is $17 per
hour.
The company has total overhead production costs of $1,850,000.
a. If Holt Medical Corporation applies factory overhead using direct labor hours,
compute the total production cost and the unit cost for each model
b. If Holt Medical Corporation applies factory overhead using machine hours, compute
the total production cost and the unit cost for each model.
c. Assume that Holt Medical Corporation has established the following activity centers,
costs drivers, and costs to apply factory overhead.
Compute the total cost and the unit cost for each model.
d. Explain why the unit cost for each model is different across the three methods of
overhead application. How can such information benefit an organization?
Office Systems Center (OSC), a division of Edwards Corporation buys and installs
modular office components. For the most recent year, the division had the following
performance targets:
Actual information concerning the company’s performance for last year follows:
Required:
a. For OSC, compute the segment margin and the average assets for the year.
b. Based on segment margin and average assets, compute the profit margin, asset
turnover and ROI.
c. Evaluate the ROI performance of OSC.
d. Using your answers from part b., compute the residual income of OSC.
e. Compute the EVA of OSC. Why are the EVA and RI levels different?
f. Based on the data given in the problem, discuss why ROI, EVA and RI may be
inappropriate measures of performance for OSC.
The net present value method assumes that all cash inflows can be immediately
reinvested at the
A. cost of capital.
B. discount rate.
C. internal rate of return.
D. rate on the corporation’s short-term debt.
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses total direct labor hours to
allocate factory overhead, the machine maintenance cost allocated to LCD TV’s would
be:
A. $51,923
B. $55,385
C. $69,231
D. $72,000
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product G?
A. $4,433
B. $1,182
C. $1,108
D. $2,276
Cost allocation is the assignment of ____ costs to one or more products using a
reasonable basis.
A. yes yes
B. yes no
C. no no
D. no yes
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What are equivalent units of production for material using
FIFO?
A. 80,000
B. 79,100
C. 78,900
D. 87,500
In capital budgeting, a firm’s cost of capital is frequently used as the
A. internal rate of return.
B. accounting rate of return.
C. discount rate.
D. profitability index.
Engaging in product design for manufacturability reduces
A. yes yes yes
B. no yes yes
C. yes no yes
D. no no no
The Appliance Division
The Appliance Division of Electrotech Corporation reported the following results for a
recent year
Refer to the Appliance Division
What was the asset turnover ratio of The Appliance Division?
A. 1.475
B. 3.48
C. 0.680
D. 1.23
On a balanced scorecard, which of the following would be most appropriate to measure
production process integrity?
A. Rapid time-to-market of new products
B. Corporate financial profits
C. Low employee turnover
D. Decrease in reworked products