1) structural cost drivers are to executional cost drivers as:
a.long-term is to short-term
b.fixed is to variable
c.total is to partial
d.direct is to indirect
2) sutherland company listed the following data for 2013:
if overhead is applied based on direct labor hours, the overapplied/underapplied
overhead is:
a.$214,376 underapplied
b.$214,376 overapplied
c.$256,312 underapplied
d.$256,312 overapplied
e.$225,680 underapplied
3) which one of the following is a high value-added activity?
a.set-up
b.rework
c.repair
d.storage
e.processing
4) which of the following illustrates how the level of operating profit changes over
different levels of output/sales volume?
a.revenue-volume graph
b.cost-revenue chart
c.revenue-cost graph
d.profit-volume graph
e.profit-cost graph
5) budgeting for production (i.e., units to be produced in an upcoming budget period):
a.is simply an extension of the sales forecast
b.is prepared after the materials purchases budget is prepared
c.involves the sales budget and both beginning and ending finished goods inventory
amounts
d.is not needed under a jit production philosophy
e.is normally the first major step in the master budgeting process
6) which of the following is an example of an indirect cost?
a.cost of downtime
b.cost of labor
c.cost of materials
d.cost of packaging materials
7) which of the following would likely be the most appropriate cost driver of electric
power used by machines?
a.number of units
b.machine size
c.number of machine hours
d.number of production runs
e.purchase cost of machines
8) abc company listed the following data for the current year:
assuming abc applied overhead based on machine hours, the company’s predetermined
overhead rate for the year is:
a.$43.95 per machine hour
b.$14.38 per machine hour
c.$43.50 per machine hour
d.$14.50 per machine hour
e.$14.28 per machine hour
9) high-low and regression cost estimation methods are alike in that they both:
a.have an intercept term and a slope term
b.have an intercept term but not a slope term
c.have a slope term but not an intercept term
d.use all data points
e.use only a few selected data points
10) the first step in determining process costs is:
a.assigning cost to completed and uncompleted production
b.computing the cost per equivalent unit
c.calculating equivalent units of production
d.analyzing physical flow of production units
e.determining total cost for each manufacturing element
11) for the past 12 years, the blue company has produced the small electric motors that
fit into its main product line of dental drilling equipment. as material costs have steadily
increased, the controller of the company is reviewing the decision to continue to make
the small motors and has identified the following facts:
(1) the equipment used to manufacture the electric motors has a net book value (nbv) of
$150,000.
(2) the space now occupied by the electric motor manufacturing department could be
used to eliminate the need for storage space now being rented.
(3) comparable units can be purchased from an outside supplier for $59.75.
(4) four of those who work in the electric motor manufacturing department would be
terminated and given eight weeks’ severance pay.
(5) a $10,000 unsecured note is still outstanding on the equipment used in the
manufacturing process.
which of the items above are relevant to the controller’s decision analysis?
a.1, 3, and 4
b.2, 3, and 4
c.2, 3, 4, and 5
d.1, 2, 4, and 5
e.4 and 5
12) the total manufacturing cost consists of the costs for materials used, labor, and
________.
a.overhead cost
b.average cost
c.step cost
d.prime cost
13) relative sales value at split-off is used to allocate:
cost beyond
a.option a
b.option b
c.option c
d.option d
14) everlast co. manufactures a variety of drill bits. the company’s plant is partially
automated. the budget for the year includes $432,000 payroll for 4,800 direct
labor-hours. listed below is cost driver information used in the product-costing system:
a current product order has the following requirements:
what is the total manufacturing overhead for the current product order if the firm
assigns overhead costs based on machine hours?
a.$9,960
b.$30,240
c.$43,741
d.$44,268
e.$109,352
15) shaver co. manufactures a variety of electric razors for men and women. the
company’s plant is partially automated. listed below is cost driver information used in
the product-costing system:
in addition, shaver expects to spend $514,368 for 8,037 direct labor-hours. two current
product orders had the following requirements:
what is the total manufacturing overhead assigned to the current order for men’s razors
if the firm uses a volume-based plant wide overhead rate based on direct labor dollars?
a.$112.50
b.$150.00
c.$243.75
d.$7,200.00
e.$15,600.00
16) us best corporation produces and distributes products nationwide, and competes on
cost leadership. in order to maintain its current industry cost and price leadership role,
us best uses cost-based pricing techniques. one of the factors considered in determining
future prices is the consumer price index (cpi). considerable discussion over the past
year on the national level has strongly suggested the monthly cpi inflation adjustment
figure is skewed upward by as much as one percentage point.
required:
what implication does this purported inflation exaggeration in the consumer price index
have on us best corporation’s cost-based pricing changes in the near future?
17) rivera company manufactured two products, a and b, during april. for purposes of
product costing, an overhead rate of $2.00 per direct-labor hour was used, based on
budgeted annual factory overhead of $500,000 and 250,000 budgeted annual
direct-labor hours, as follows:
the number of labor hours required to manufacture each of these products was:
during april, production units for products a and b were 1,000 and 3,000, respectively.
required:
(1) using a plantwide overhead rate, what are total overhead costs assigned to products
a and b, respectively?
(2) using departmental overhead rates, what are total overhead costs assigned to
products a and b, respectively?
(3) assume that materials and labor costs per unit of product b are $10 and that the
selling price is established by adding 40% of total costs to cover profit and selling and
administrative expenses. what difference in selling price would result from the use of
departmental overhead rates?
18) new hope corporation manufactures replacement windshield wiper blades for the
u.s. domestic market, and is recognized in the industry for quality and product design
innovations. new hope has just received a patent for a superior rubberized plastic wiper
insert and wants you to help plan several strategic directions for manufacturing and
distributing the new product.
required:
1> incremental material, labor, and variable overhead costs to produce and distribute
the new blade insert total $0.073 per blade. incremental fixed costs of production and
distribution total $62,500 per month. marketing research indicates that new hope can
raise the price of their new product by $0.37 per package of two-blade inserts. what
would be the package breakeven sales for the new blade inserts? round your answer up,
to the nearest whole number.
2> without prejudice to your answer to part 1, assume the annual breakeven sales for
the new blade is 276,000 packages. calculate the incremental profit new hope should
earn with projected sales of 316,000 packages.
3> assume once again the annual 276,000 package breakeven sales in part 2 . if sales
are expected to range between 280,000 and 300,000 packages annually, what added
information or refinement of information would you want before recommending
production and distribution of the new wiper blades?
19) skateline inc. designs and manufactures roller skates. the following data pertain to
two of its major
customers: fantasticskates and skatetoday.
required: compare the net proceeds from each customer to skateline inc. 30 days after
sale. (rounded to nearest dollar for each step where applicable).
20) over the years, alternative approaches to traditional budgeting practices have been
proposed to facilitate budget preparation and usefulness. first, define what is meant by
the term “traditional budgeting.” next, compare and contrast the following alternative
budgeting approaches to a traditional budgeting process: zero base budgeting (zbb);
activity-based budgeting (abb); time-driven abb; and, kaizen budgeting.
21) 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 expected to be $96,000.
required:
1> calculate daley co.’s degree of operating leverage (dol) if 700 units are sold. round
your answer to 3 decimal places.
2> define what is meant by the dol.
3> of what purpose/value is the dol to decision makers?
22) downtontractor company manufactures small tractors on an assembly-line basis. the
units are started in department y. on january 1 of this year, the work-in-process
inventory of department y consisted of 200 units 100% complete as to materials and
20% complete as to conversion. during the month, 800 units were started and 500 units
were completed and transferred out. the work-in-process on january 31 was 100%
complete as to materials and 20% complete as to conversion.
costs in process at the beginning of the period amounted to $100,000 for materials and
$25,000 for conversion. costs added during the period were materials costs of $200,000
and conversion costs of $143,000.
required: prepare a production cost report using the weighted-average method.
23) over the past three decades, the cost structure for a typical manufacturing firm has
shifted dramatically from labor and material as the primary costs in the 1970s, with
overhead now the major cost category in the 2000s. what are the implications of this
cost structure shift for strategic relevant cost analysis?