wk 8 by huangyuarong

VIEWS: 276 PAGES: 11

									1. (TCO 1) If products are alike, then for costing purposes (Points : 5)
         a simple costing system will yield accurate cost numbers.

         an activity-based costing system should be used.

         multiple indirect-cost rates should be used.

         varying demands will be placed on resources.
  0               1317013830       MultipleChoice

2. (TCO 1) Ireland Company produces a special spray nozzle. The budgeted indirect total cost of
inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 80,000. What
is the budgeted indirect cost allocation rate for this activity? (Points : 5)




                  1317013831       MultipleChoice

3. (TCO 2) Variable overhead costs include (Points : 5)
         machine maintenance.

         depreciation on plant equipment.

         plant-leasing costs.

         the plant manager's salary.

4. (TCO 2) Information pertaining to Brenton Corporation's sales revenue is presented in the following

                                 February           March          April

          Cash Sales             $160,000           $150,000      $120,000
          Credit Sales            300,000            400,000       280,000
          Total Sales            $460,000           $550,000      $400,000

Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible,
75% are collected in the month of sale and the remainder in the month following the sale. Cost of
purchases of inventory each month are 80% of the next month's projected total sales. All purchases of
inventory are on account; 50% are paid in the month of purchase, and the remainder is paid in the month
following the purchase.

Brenton's budgeted total cash receipts in March are

(Points : 5)


  0                                  MultipleChoice   12

5. (TCO 2) Budgeting provides all of the following except (Points : 5)
         a means to communicate the organization's short-term goals to its members.

         support for the management functions of planning and coordination.

         a means to anticipate problems.

         an ethical framework for decision making.
  0                1317013834        MultipleChoice   13

6. (TCO 3) For January, the cost components of a picture frame include $0.20 for the glass, $0.85 for the
wooden frame, and $0.60 for assembly. The assembly desk and tools cost $200. A total of 1,000 frames
is expected to be produced in the coming year. What cost function best represents these costs? (Points
: 5)
         y = 1.80 + 400X

         y = 400 + 1.80X

         y = 200 + 1.65X

         y = 1.00 + 400X
  0                1317013835        MultipleChoice   18

7. (TCO 3) Which cost estimation method uses a formal mathematical method to develop cost functions
based on past data? (Points : 5)

         Quantitative analysis method

         Industrial engineering method

         Account analysis method

         Conference method
  0                1317013836        MultipleChoice   20

8. (TCO 4) Sunk costs (Points : 5)
         have future implications.

         are ignored when evaluating alternatives.

         are differential.

         are relevant.
  0                1317013837        MultipleChoice   24

9. (TCO 5) The theory of constraints is used for cost analysis when (Points : 5)
        a manufacturing company produces multiple products and uses multiple manufacturing facilities
and/or machines.

         using a long-term time horizon.

         operating costs are assumed fixed.

         All of the above
  0               1317013839       MultipleChoice   27

10. (TCO 5) Producing more nonbottleneck output (Points : 5)
         allows for the maximization of overall contribution.

         creates less pressure for the bottleneck workstations.

         creates more inventory and increases throughput contribution.

         creates more inventory, but does not increase throughput contribution.
  0               1317013841       MultipleChoice   29

11. (TCO 6) What type of cost is the result of an event that results in more than one product or service
simultaneously? (Points : 5)

         Byproduct cost

         Joint cost

         Main costs

         Separable cost
  0               1317013843       MultipleChoice   33

12. (TCO 6) Which of the following is a disadvantage of the physical-measure method of allocating joint
costs? (Points : 5)

         The measurement basis for each product may be different.

         There is a need for a common denominator.

         The physical measure may not reflect the product's ability to generate revenues.

         All of the above
  0               1317013845       MultipleChoice   35

13. (TCO 7) An understanding of life-cycle costs can lead to (Points : 5)
         additional costs during the manufacturing cycle.

         less need for evaluation of the competition.

         cost-effective product designs that are easier to service.

         mutually beneficial relationships between buyers and sellers.
  0               1317013847       MultipleChoice   38

14. (TCO 7) Each month, Haddon Company has $300,000 total manufacturing costs (20% fixed) and
$125,000 distribution and marketing costs (75% fixed). Haddon's monthly sales are $600,000.

The markup percentage on full cost to arrive at the target (existing) selling price is

(Points : 5)



  0                  1317013849      MultipleChoice   41

15. (TCO 8) Transfer prices should be judged by whether they promote (Points : 5)
         goal congruence.

         the balanced scorecard method.

         a high level of subunit autonomy in decision making.

         Both 1 and 2 are correct
  0                  1317013852      MultipleChoice   45

16. (TCO 8) Division A sells soybean paste internally to Division B, which in turn, produces soybean
burgers that sell for $5 per pound. Division A incurs costs of $0.80 per pound while Division B incurs
additional costs of $3 per pound. Which of the following formulas correctly reflects the company's
operating income per pound? (Points : 5)

         $5 - ($1.25 + $2.50) = $1.25

         $5 - ($0.75 + $2.50) = $1.75

         $5 - ($0.80 + $3) = $1.20

         $5 - ($0.25 + $1.25 + $3.50) = 0
  0                  1317013854      MultipleChoice   47

17. (TCO 8) When companies do not want to use market prices or find it too costly, they typically use
________ prices, even though suboptimal decisions may occur. (Points : 5)

         short-run average cost

         long-run cost


  0                  1317013856      MultipleChoice   51

18. (TCO 9) To guide cost allocation decisions, the fairness or equity criterion is (Points : 5)
         the criterion often cited in government contracts.

         superior when the purpose of cost allocation is for economic decisions.
         used more frequently than the other criteria.

         the primary criterion used in activity-based costing.
  0               1317013858        MultipleChoice   53

19. (TCO 9) The Hassan Corporation has an electric mixer division and an electric lamp division. Of a
$20,000,000 bond issuance, the electric mixer division used $14,000,000 and the electric lamp division
used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. Which
corporate costs should be allocated to divisions? (Points : 5)

         Variable costs

         Fixed costs

         Neither fixed nor variable costs

         Both fixed and variable costs
  0               1317013860        MultipleChoice   55

20. (TCO 10) A "what-if" technique that examines how a result will change if the original predicted data
are not achieved or if an underlying assumption changes is called (Points : 5)

         adjusted rate-of-return analysis.

         internal rate-of-return analysis.

         sensitivity analysis.

         net-present-value analysis.
  0               1317013862        MultipleChoice   60

21. (TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost
of $950,000. The investment is expected to generate $400,000 in annual cash flows for a period of four
years. The required rate of return is 12%. The old machine can be sold for $50,000. The machine is
expected to have zero value at the end of the four-year period.
What is the net present value of the investment? Would the company want to purchase the new
machine? Income taxes are not considered. (Points : 5)

         $119,550; Yes

         $314,800; Yes

         $1,019,550; Yes

         $69,550; No
  0               1317013864        MultipleChoice   61

22. (TCO 11) The four cost categories in a cost of quality program are (Points : 5)
         product design, process design, internal success, and external success.

         prevention, appraisal, internal failure, and external failure.

         design, conformance, control, and process.

         design, process specification, on-time delivery, and customer satisfaction.
  0                1317013866      MultipleChoice   66

23. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to
automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will
require $18,000 in training costs and $120,000 in annual equipment costs. Management is willing to
adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is
200,000 units. Appraisal costs for the year are budgeted at $600,000. The new prevention procedures
will save appraisal costs of $30,000. Internal failure costs average $15 per failed unit of finished goods.
The internal failure rate is expected to be 3% of all completed items. The proposed changes will cut the
internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $54
per failed unit. The company's average external failures average 3% of units sold. The new proposal will
reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories.
How much will internal failure costs change if the internal product failures are reduced by 50% with the
new procedures? (Points : 5)

         $500,000 decrease

         $750,000 decrease

         $33,750 decrease

         $45,000 decrease
  0                1317013867      MultipleChoice   67

24. (TCO 12) The costs associated with storage are an example of which cost category? (Points : 5)
         Carrying costs

         Ordering costs

         Quality costs

         Labor costs
  0                1317013873      MultipleChoice   72

25. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag
display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and
the cost to initiate a production run is $60. There are no flag displays on hand but Liberty had scheduled
60 equal production runs of the display sets for the coming year, the first of which is to be run
immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly
throughout the year and that production is instantaneous.
If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag
displays for the coming year is (Points : 5)




1. (TCO 2) Russell Company has the following projected account balances for June 30, 20X9:
Accounts payable                                            $ 60,000      Sales                         $         800,000
Accounts receivable                                         $ 100,000     Capital stock                 $         400,000
Depreciation, factory                                       $ 36,000      Retained earnings             ?
Inventories (5/31 & 6/30)                                   $ 180,000     Cash                          $          56,000
Direct materials used                                       $ 210,000     Equipment, net                $         260,000
Office salaries                                             $ 92,000      Buildings, net                $         400,000
Insurance, factory                                          $   4,000     Utilities, factory            $          16,000
Plant wages                                                 $ 140,000     Selling expenses              $          50,000
Bonds payable                                               $ 160,000     Maintenance, factory          $          28,000

Prepare a budgeted income statement AND a budgeted balance sheet as of June 30, 20X9.

(Points : 25)

     0               1317013884       Essay             2


(TCO 5) Paul's Medical Equipment Company manufactures hospital beds. Its most popular model, Deluxe, sells for
$5,000. It has variable costs totaling $2,800 and fixed costs of $1,000 per unit, based on an average production run
of 5,000 units. It normally has four production runs a year, with $500,000 in setup costs each time. Plant capacity
can handle up to six runs a year for a total of 30,000 beds.

A competitor is introducing a new hospital bed similar to Deluxe that will sell for $4,000. Management believes it
must lower the price to compete. Marketing believes that the new price will increase sales by 25% a year. The plant
manager thinks that production can increase by 25% with the same level of fixed costs. The company sells all the
Deluxe beds it can produce.

Question 1: What is the annual operating income from Deluxe at the price of $5,000?

Question 2: What is the annual operating income from Deluxe if the price is reduced to $4,000 and sales in units
increase by 25%?

(Points : 25)

     0                1317013888       Essay              5


(TCO 7) Mercy Greeting Cards Incorporated is starting a new business venture and is in the process of
evaluating its product lines. Information for one new product, traditional parchment grade cards, is as

∙   For 16 times each year, a new card design will be put into production. Each new design will
require $100 in setup costs.

∙   The parchment grade card product line incurred $75,000 in development costs and is expected to be
produced over the next four years.

∙        Direct costs of producing the designs average $0.50 each.

∙        Indirect manufacturing costs are estimated at $50,000 per year.
∙        Customer service expenses average $0.10 per card.

∙        Current sales are expected to be 2,500 units of each card design. Each card sells for $3.50.

∙        Sales units equal production units each year.

What is the total estimated life-cycle operating income?

(Points : 25)

     0                1317013889       Essay             7


(TCO 8) Motormart Company manufactures automobiles. The red car division sells its red cars for
$25,000 each to the general public. The red cars have manufacturing costs of $12,500 each for variable
and $5,000 each for fixed costs. The division's total fixed manufacturing costs are $25,000,000 at the
normal volume of 5,000 units.

The blue car division has been unable to meet the demand for its cars this year. It has offered to
buy 1,000 cars from the red car division at the full cost of $16,000. The red car division has excess
capacity and the 1,000 units can be produced without interfering with the outside sales of 5,000. The
6,000 volume is within the division's relevant operating range.

Explain whether the red car division should accept the offer. Support your decision showing all

(Points : 25)
  0                1317013890        Essay             11

5. (TCO 11) For supply item LK, Boatman Company has been ordering 125 units based on the recommendation of
the salesperson who calls on the company monthly. The company has hired a new purchasing agent, who wants to
start using the economic-order-quantity method and its supporting decision elements. She has gathered the
following information:
Annual demand in units                           250
Days used per year                               250
Lead time, in days                                13
Ordering costs                                  $100
Annual unit carrying costs                       $20

Determine the EOQ, average inventory, orders per year, average daily demand, reorder point, annual ordering costs,
and annual carrying costs.

(Points : 25)

To top