The economic order quantity is the square root of 2 times
A.the demand for the period divided by the cost of carrying one unit in inventory for the
period.
B.order set up cost divided by the cost of carrying one unit in inventory for the period.
C.the cost of carrying one unit in inventory for the period divided by the order set up
cost.
D.order set up cost times the demand for the period divided by the cost of carrying one
unit in inventory for the period.
Central corporate administrative costs are fixed and considered to be which of the
following?
A.customer-level activities.
B.facility-level activities.
C.product-level activities.
D.unit-level activities.
Quality improvement. Trimline Frames makes bicycle frames in two processes, tubing
and welding. The tubing process has a capacity of 50,000 units per year; welding has a
capacity of 75,000 units per year. Cost information follows:
The company enjoys high demand for its products. Trimline Frames can sell whatever
output it can produce for the market price of $60 per frame. Trimline Frames can start
only 50,000 units into production in the tubing department because of capacity
constraints on the tubing machines. The company scraps all defective units produced in
the tubing department. Of the 50,000 units started in the tubing operation, 5,000 units
(10 percent) are scrapped at the end of the production process. Scrap costs, based on
total (fixed and variable) manufacturing costs incurred in the tubing operation, equal
$38 per unit as follows:
The €$10 fixed cost” is the portion of the total fixed costs of $500,000 allocated to
each unit, whether good or defective. The good units from the tubing department are
sent to the welding department. Variable manufacturing costs in the welding department
are $3.00 per unit. There is no scrap in the welding department. Therefore, Trimline
Frames’ total sales quantity equals the tubing department’s output. Trimline Frames
incurs no other variable costs. Trimline Frames’ designers have discovered that using a
different type of material in the tubing operation would reduce scrap to zero, but it
would increase the variable costs per unit in the tubing department by $1.50. Recall that
only 50,000 units can be started each year.
Required:
a. What is the additional direct materials cost of implementing the new method?
b. What is the additional benefit to Trimline Frames from using the new material and
improving quality?
c. Should Trimline Frames use the new materials?
d. What other nonfinancial and qualitative factors should Trimline Frames consider in
making the decision?
With just-in-time inventory, what does a firm attempt to do?
A.Produce each item only as needed for the next step in the production process.
B.Time purchases so that items arrive just in time for production.
C.Time purchases so that items arrive just in time for sale.
D.All of the answers are correct.
The appropriate discount rate that analysts use in computing the present value of future
cash flows is composed of a pure interest rate and a premium for the risk of the
investment, but no increase to reflect expected inflation. What is this rate called?
A.risk-free rate.
B.real interest rate.
C.nominal interest rate.
D.none of the above.
Income forgone from not using an asset in its best economic alternative is an example
of which of the following type of cost?
A.outlay cost.
B.direct cost.
C.indirect cost.
D.opportunity cost.
Which of the following is true regarding waste and spoilage?
A.Accountants typically include the cost of normal waste in the cost of goods
manufactured during the period.
B.Accountants typically treat the cost of abnormal waste as an expense during the
period.
C.Companies concerned about quality production do not treat waste or spoiled goods as
normal and remove all waste and spoilage costs from the product cost.
D.All of the answers are correct.
If the firm must choose one from a set of mutually exclusive alternatives with the same
life span, which alternative should be selected?
A.Select the alternative with the largest net present value of cash flows.
B.Select the alternative with the smallest net present value of cash flows.
C.Select the alternative with the largest net present value of cash inflows.
D.Select the alternative with the smallest net present value of cash outflows.
Dukes Computing Systems
Dukes Computing Systems manufactures and sells various computer products and has
two decentralized divisions: (1) Production and (2) Marketing. The Marketing Division
has always purchased a particular motherboard from Production at $65 per unit. The
Production Division is considering raising the price to $75 per unit. The Production
Division’s costs related to the motherboard production is as follows:
The Marketing Division handles the promotion and distribution of the motherboard
purchases from the Production Division and sells each motherboard for $125.
Marketing Division incurs monthly fixed costs of $5,000. Marketing Division sells
2,000 units per month. Marketing Division can buy the same motherboard from outside
suppliers for $75.
Refer to Dukes Computing Systems. The Production Division is operating at maximum
capacity because of strong worldwide demand for the product and the Production
Division can sell all it produces to outside customers for $75 per motherboard.
What should be the motherboard transfer price between the Production Division and
Marketing Division in order for Dukes’ to optimize profits?
A.$ 55
B.$ 65
C.$ 75
D.$125
Stephanie Company
Stephanie Company has two production departments: D and J. Stephanie also has 3
service departments: Personnel, Administration, and Shipping. Shipping costs are
allocated on the basis of number of packages, while Personnel and Administration costs
are allocated using number of employees. Assume that the ranking of the benefits
provided is in the order listed below.
Refer to Stephanie Company. Using the step method, what amount of Personnel costs is
allocated to Department D (rounded to the nearest $)?
A.$ 73,171
B.$100,000
C.$105,263
D.$240,000
Which of the following activities performed by a manufacturer of bicycles best
describes one that is not a value-added activity?
A.Transfer of direct materials to appropriate points on the assembly line.
B.Reworking of poor quality bicycles.
C.Inspection of direct materials upon receipt from suppliers.
D.Bar code tagging of direct materials to ensure that the right parts are used for
production.
What would the periodic cash flows associated with an investment project include?
A.receipts from sales.
B.opportunity costs of undertaking this particular project.
C.expenditures for fixed and variable production costs.
D.all of the above.
Explain the role of the audit committee in deterring financial fraud.
An investment that costs $79,100 will reduce operating costs by $14,000 per year for 10
years.
Required:
Determine the internal rate of return of the investment (ignoring taxes). Should the
investment be undertaken if the required rate of return is 18 percent?
What issues must be addressed when using return on investment (ROI) as a divisional
performance measure?
Discuss how managers can use accounting information to implement strategies.
What are the difficulties in implementing advanced cost-management system?
Discuss what is meant by the expression, “products consume activities; activities
consume resources.”
How do you calculate the mix variance portion of the efficiency variance?
Leon Manufacturing Company
Leon Manufacturing Company uses a normal costing system. During the current year,
the following events took place:
Refer to Leon Manufacturing Company. Calculate the work-in-process ending
inventory (there was no beginning work-in-process inventory).
How do environmental conditions influence fraudulent conduct?