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Target costing is arrived at by taking
a. the selling price minus desired profit
b. the selling price and adding desired profit
c. the selling price and subtracting the budget standard cost
d. the budget standard cost and reducing it by 10%
Answer:
Depending on the capacity of the plant, a company may best be served by further
processing some of the product and leaving the rest as is, with no further processing.
a. True
b. False
Answer:
If the amount of factory overhead cost incurred exceeds the amount applied, the factory
overhead account will have a
a. debit balance and be under applied
b. credit balance and be under applied
c. credit balance and be over applied
d. debit balance and be over applied
Answer:
Flyer Company sells a product in a competitive marketplace. Market analysis indicates
that its product would probably sell at $48 per unit. Flyer management desires a 12.5%
profit margin on sales. Their current full cost for the product is $44 per unit.
If the company meets the new target cost number, how much will it have to cut costs
per unit, if any?
a. $1
b. $3
c. $2
d. $0
Answer:
Below is a table for the present value of $1 at compound interest.
Below is a table for the present value of an annuity of $1 at compound interest.
Using the tables above, what would be the present value of $30,000 to be received 3
years from today, assuming an earnings rate of 6%?
a. $25,200
b. $26,700
c. $23,760
d. $80,190
Answer:
The average rate of return is a measure of profitability computed by dividing the
average annual cash inflows from an asset by the average amount invested in the asset.
a. True
b. False
Answer:
Manufacturing costs for wood and steel used in the bar stools
Bartel Corporation produces bar stools for restaurants. Indicate whether the cost
would typically be considered direct or indirect cost for the cost object given.
a. Direct
b. Indirect
Answer:
Prime costs are
a. direct materials and factory overhead
b. direct materials and direct labor
c. direct labor and factory overhead
d. period costs and factory overhead
Answer:
Hsu Company reported the following on its income statement:
Interest expense was $80,000. Hsu Company's times interest earned is
a. 8 times
b. 6.25 times
c. 5.25 times
d. 5 times
Answer:
Ratio of sales to invested assets
Match the definition that follows with the term (a-e) it defines.
a. Controllable revenues
b. Profit margin
c. Investment turnover
d. Rate of return on investments
e. Residual income
Answer:
conversion costs
Match each phrase that follows with the term (a-h) it describes.
a. direct labor and factory overhead
b. direct labor and direct materials
c. transferred in costs
d. equivalent units
e. process costing
f. job order costing
g. first-in, first-out method
h. cost of production report
Answer:
At the end of the fiscal year, the balance in Factory Overhead is small. The balance
would be
a. transferred to Work in Process
b. transferred to Cost of Goods Sold
c. transferred to Finished Goods
d. allocated between Work in Process and Finished Goods
Answer:
Which of the following systems provides for a separate record of the cost of each
particular quantity of product that passes through the factory?
a. job order cost system
b. general cost system
c. replacement cost system
d. process cost system
Answer:
A measure of the average income as a percent of the average investment
Match the definition that follows with the term (a'“f) it defines.
a. Capital rationing
b. Annuity
c. Capital investment analysis
d. Internal rate of return method
e. Payback period
f. Accounting rate of return
Answer:
Methods that ignore present value in capital investment analysis include the cash
payback method.
a. True
b. False
Answer:
Which equation better describes target costing?
a. Selling price '“ Desired profit = Target costs
b. Selling price + Profit = Target costs
c. Target variable costs + Contribution margin = Selling price
d. Selling price = Profit '“ Target variable costs
Answer:
Which of the following measures would not help managers to control and improve
operations?
a. units produced per time period
b. cost trends of a product
c. yield trends
d. commissions paid per time period
Answer:
The following unit data were assembled for the assembly process of the Super Co. for
the month of April. Direct materials are added at the beginning of the process.
Conversion costs are added uniformly over the production process. The company uses
the FIFO method.
Units
The number of equivalent units produced with respect to conversion costs is
a. 50,200
b. 48,000
c. 53,000
d. 47,200
Answer:
For April, sales revenue is $700,000; sales commissions are 5% of sales; the sales
manager's salary is $98,000; advertising expenses are $90,000; shipping expenses total
2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales.
Total selling expenses for the month of April are
a. $159,100
b. $242,600
c. $186,000
d. $182,100
Answer:
The management of Zesty Corporation is considering the purchase of a new machine
costing $400,000. The company's desired rate of return is 10%. The present value
factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability in this situation:
The cash payback period for this investment is
a. 5 years
b. 4 years
c. 2 years
d. 3 years
Answer:
For an automotive repair shop, the wages of mechanics would be classified as direct
labor cost.
a. True
b. False
Answer:
Multiple production department factory overhead rates are more accurate than are
plantwide factory overhead rates.
a. True
b. False
Answer:
Answer:
Determine the average rate of return for a project that is estimated to yield total income
of $600,000 over 4 years, cost $840,000, and has an $80,000 residual value. Round
percentage answers to one decimal place.
Answer:
To meet projected annual sales, Bluegill Manufacturers, Inc. needs to produce 75,000
machines for the year. The estimated January 1 inventory is 7,000 units, and the desired
December 31 inventory is 12,000 units. What are projected sales units for the year?
Answer:
Product J is one of the many products manufactured and sold by Oceanside Company.
An income statement by product line for the past year indicated a net loss for Product J
of $12,250. This net loss resulted from sales of
$275,000, cost of goods sold of $186,500, and operating expenses of $85,750. It is
estimated that 30% of the cost of goods sold represents fixed factory overhead costs and
that 40% of the operating expense is fixed. If Product J is retained, the revenue, costs,
and expenses are not expected to change significantly from those of the current year.
Because of the large number of products manufactured, the total fixed costs and
expenses are not expected to decline significantly if Product J is discontinued.
Prepare a differential analysis report, dated February 8 of the current year, on the
proposal to discontinue Product J.
Answer:
Prepare an income statement using the following data for New Orleans Adventures for
the year ended December 31:
Answer:
Discuss how job order cost information is used in decision making. What are some
possible reasons that actual cost of materials would exceed expected costs for a job?
Answer:
Rosser Company produces a container that requires 4 yards of material per unit. The
standard price of one yard of material is $4.50. During the month, 9,500 chairs were
manufactured using 37,300 yards of material.
Journalize the entry to record the standard direct materials used in production.
Answer:
Kramer Company started its production operations on August 1. During August, the
Printing Department completed 17,600 units. There were 4,400 units in ending
inventory which were 80% complete with respect to materials and 10% complete with
respect to conversion costs. During August, the department accumulated materials costs
of $45,408 and conversion costs of $76,670.
Answer:
During April, Cavy Company incurred factory overhead as follows:
Record the entry for factory overhead incurred during April.
Answer:
MZE Manufacturing Company has a normal plant capacity of 37,500 units per month.
Because of an extra-large quantity of inventory on hand, it expects to produce only
30,000 units in May. Monthly fixed costs and expenses are $112,500 ($3 per unit at
normal plant capacity) and variable costs and expenses are $8.25 per unit. The present
selling price is $13.50 per unit. The company has an opportunity to sell 7,500 additional
units at $9.90 per unit to an exporter who plans to market the product under its own
brand name in a foreign market. The additional business is therefore not expected to
affect the regular selling price or quantity of sales of MZE Manufacturing Company.
Prepare a differential analysis report, dated April 21 of the current year, on the proposal
to sell at the special price.
Answer:
