When substituting computerized equipment for direct labor, a firm should treat labor as
which of the following?
A.Fixed (or capacity) costs.
B.Mixed costs.
C.Opportunity costs.
D.Variable costs.
Julia Electronics LLC is preparing a flexible budget for the coming year and the
following maximum capacity estimates for the furniture division are available
Assume that Julia Electronics LLC ‘s normal capacity is 80% of maximum capacity.
What would be the total factory overhead rate, based on direct labor hours, in a flexible
budget at normal capacity?
A.$6.00.
B.$6.50.
C.$7.50.
D.$8.13.
Transfer prices are the prices charged
A.for distributing goods from one warehouse to another.
B.for the goods produced by one division to another division that needs those goods.
C.when delivering goods to the customer.
D.when transferring goods to international divisions.
Engine Division
The Engine Division provides engines for the Tractor Division of a company. The
standard unit costs for Engine Division are as follows:
Refer to the Engine Department. The division has excess capacity. What is the best
transfer price to avoid transfer price problems?
A.$1,350
B.$300
C.$900
D.$2,100
Which of the following represents the margin of safetyin units?
A.The excess of projected (or actual) sales units over the break-even unit sales level.
B.The excess of projected (or actual) sales price per unit over the break-even sales price
in units.
C.The excess of projected (or actual) cost of sales in units over the break-even costs of
sales level in units.
D.None of the answers is correct.
Which of the management methods developed in the private sector are being used by
nonprofit organizations?
A.Balanced scorecard.
B.Deferred stock options.
C.Bonuses based on achieving profit targets.
D.Extended vacation time.
PB Investigators LLC hires one private investigator for every 5 clients. The annual
salary for each private investigator is $60,000 per year. The cost to PB Investigators
LLC for investigators is known as which of the following?
A.fixed cost.
B.variable cost.
C.mixed cost.
D.step cost.
When establishing transfer prices, the objective is to maximize the company’s profit by
A.transferring at the differential outlay cost to the selling division (typically variable
costs).
B.transferring at the opportunity cost to the company of making the internal transfers
($0 if the seller has idle capacity or selling price minus variable costs if the seller is
operating at capacity).
C.transferring at the differential outlay cost to the selling division plus the opportunity
cost to the company of making the internal transfers.
D.None of the answers is correct.
The theory of constraintsfocuses on which of the following?
A.sales dollars minus short-run variable costs (e.g., materials, energy, and piecework
labor).
B.the assets required for production and sales.
C.all operating costs other than short-run variable costs.
D.All of the answers are correct.
Linear programming
A.finds the product mix that will maximize profits given the constraints.
B.provides opportunity costs of constraints.
C.allows for sensitivity analysis.
D.All of the answers are correct.
Boxer Electronics produces flat screen TVs that sell for $1,250. During April, total
operating expenses were:
Required:
a. Use account analysis to determine fixed cost per month and variable cost per TV.
b. Project total cost for May assuming production and sales of 150 units.
c. What is the contribution margin per TV?
d. Estimate total profit assuming production and sales of 150 units.
Doug’s Delivery Company
Doug’s Delivery Company reports the following information for 2010:
Actual:
Standard:
Refer to Doug’s Delivery Company. What is the variable overhead variance for fuel
costs?
A.$20.00 U
B.$20.00 F
C.$2.00 U
D.$2.00 F
Use this information to answer the following question(s):
Refer to the above information; determine the cost of goods manufactured during the
period.
Judy Barker is vice president of finance for Maryland Crab House Restaurant, which is
a chain on the East Coast of the U.S. Judy is considering a coupon promotion which
entitles patrons to a 20% discount. The cost of mailing and printing is estimated to be
$400,000 and the estimated increase in sales for the year is estimated at $2,500,000 less
the 20% coupon discount. To include as part of her analysis, Judy ran a regression on
sales data from last year (operating costs and normal sales) and found the following:
Required:
Based on the limited information provided, what estimate would you give Judy as the
best net effect of the coupon promotion on annual profit, ignoring taxes?
Solving for labor hours. Lance’s Engineering Consulting reports the following direct
labor information for clerical staff:
Required:
What are the actual hours worked, rounded to the nearest hour?
Feed the Hungry Foundation
Feed the Hungry Foundation is a non-profit organization that has a cost of capital of 10
percent. The foundation is considering the replacement of a piece of equipment. The old
machine has a book value of $3,000 and a remaining estimated life of 5 years with no
salvage value at that time. The salvage value of the old machine is currently $1,500.
The new equipment will cost $10,000. It has an estimated life of 5 years with no
salvage value then. Annual cash operating costs are $4,000 for the old machine and
$2,000 for the new machine.
Refer to Feed the Hungry Foundation. What is the present value of salvage value of the
old machine if it is replaced now?