Accounting

Assume that Corn Co. sold 6,900 units of Product A and 3,100 units of Product B during the past year. The unit contribution margins for Products A and B are $31 and $58, respectively. Corn has fixed costs of $363,000. The break-even point in units is

9,220 units

The balanced scorecard provides an action plan for achieving competitive success by focusing management attention on critical success factors. Which of the following is not one of the competitive success factors commonly found on the balanced scorecard?

Competitor business strategies

Johnson Company manufactures a variety of shoes and has received a special one-time-only order directly from a wholesaler. Johnson has sufficient idle capacity to accept the special order to manufacture 15,000 pairs of sneakers at a price of $7.50 per pair. Johnson's normal selling price is $11.50 per pair of sneakers. Variable manufacturing costs are $5.00 per pair, and fixed manufacturing costs are $3.00 per pair. Johnson's variable selling expense for its normal line of sneakers is $1.00 per pair. What would be the effect on Johnson's operating income if the company accepted the special order?

Increase by $37,500

Which of the following statements regarding the balanced scorecard is not correct?

It is directly derived from scientific management theories.

A firm has $100,000 in direct materials costs, $50,000 in direct labor costs, and $80,000 in overhead. Which of the following is true?

Prime costs are $150,000; conversion costs are $130,000.

In measuring the cost of quality, which one of the following is considered an appraisal cost?

Product testing cost

Morrison's Plastics Division, a profit center, sells its products to external customers as well as to other internal profit centers. Which one of the following circumstances would justify the Plastics Division selling a product internally to another profit center at a price that is below the market-based transfer price?

Routine sales commissions and collection costs would be avoided.

Which of the following terms is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and all factory overhead cost?

absorption costing

Principal components of a master budget include

all of these choices

When measuring the cost of quality, the cost of inspecting incoming raw materials is a(n):

appraisal cost.

Sara Bellows, manager of the telecommunication sales team, has the following department budget: Line Item DescriptionAmountBillings - long distance$350,000Billings - phone card75,000Billings - toll free265,000 Her responsibility center is best described as a(n):

c. revenue center.

Which of the following describes the behavior of the fixed cost per unit?

decreases with increasing production

Which of the following is part of factory overhead cost?

depreciation of factory equipment and machines

Under absorption costing, which of the following costs would be included in finished goods inventory?

direct labor, direct materials, and all factory overhead costs

Which of the following is an example of a cost that varies in total as the number of units produced changes?

direct materials cost

Manhattan Corporation has several divisions that operate as decentralized profit centers. At the present time, the Fabrication Division has excess capacity of 5,000 units with respect to the UT-371 circuit board, a popular item in many digital applications. Information about the circuit board follows. Line Item DescriptionAmountMarket price$48Variable selling/distribution costs on external sales5Variable manufacturing cost21Fixed manufacturing cost10 Manhattan's Electronic Assembly Division wants to purchase 4,500 circuit boards. It can purchase the boards in the marketplace for $46 or buy them internally from the Fabrication Division. The Electronic Assembly Division's management feels that if the second alternative is pursued, a price concession is justified, given that both divisions are part of the same firm. The best process to determine the price ultimately charged by the Fabrication Division to the Electronic Assembly Division for the circuit board is to:

establish the price through negotiations between the managers of the two divisions.

In practice, items such as wood screws and glue used in the production of school desks and chairs would most likely be classified as:

factory overhead.

A series of budgets for varying levels of activity is termed a(n) _____ budget.

flexible

Bolger and Co. manufactures large gaskets for the turbine industry. Bolger's per-unit sales price and variable costs for the current year are as follows: Sales price per unit $300Variable costs per unit 210 Bolger's total fixed costs aggregate to $360,000. Bolger's labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a $10-per-unit direct labor increase and a $10,000 reduction in fixed costs. Based on these data, the break-even point would:

increase by 375 units.

Which of the following manufacturing costs is an indirect cost of producing a product?

oil lubricants used for factory machinery

Which of the following methods of applying the cost-plus approach to product pricing includes selling expenses, administrative expenses, and desired profit in the markup?

product cost method

External failure costs include all of the following costs except those related to:

product field testing.

Which of the following is the correct flow of manufacturing costs?

raw materials, work in process, finished goods, cost of goods sold

Taylor Corporation is analyzing the cost behavior of three cost items, A, B, and C, to budget for the upcoming year. Past trends have indicated the following dollars were spent at three different levels of output: ItemUnit Levels10,000Unit Levels12,000Unit Levels15,000A costs$25,000$29,000$35,000B costs10,00015,00015,000C costs15,00018,00022,500 In establishing a budget for 14,000 units, Taylor should treat A, B, and C costs as:

semivariable, fixed, and variable, respectively.

Which of the following would be least likely to be considered a managerial accounting report?

statement of stockholders' equity

Most firms allocate corporate and other support costs to divisions and departments for all of the following reasons except to:

stimulate profit center managers to put pressure on central managers to control service costs.

Which of the following is an example of a cost that stays the same in total as the number of units produced changes?

straight-line depreciation on factory equipment

On the variable costing income statement, the figure representing the difference between manufacturing margin and contribution margin is

variable selling and administrative expenses

Which of the following should be ignored in a make-or-buy decision?

whether the supplier will make a profit that would no longer belong to the business

Given the following cost and activity observations for Smithson Company's utilities, use the high-low method to determine Smithson's fixed costs per month. Round your final answer to the nearest dollar. Do not round intermediate calculations. Line Item DescriptionCostMachine HoursJanuary$26,20010,100 February38,60018,400 March28,50011,700 April30,40014,700

$11,111

Patterson Corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor?

$140

Mill Corporation had the following unit costs for the recent calendar year: Line Item DescriptionVariableFixedManufacturing$8.00$3.00Nonmanufacturing2.005.50 Inventory for Mill's sole product totaled 6,000 units on January 1 and 5,200 units on December 31. When compared to variable costing income, Mill's absorption costing income is:

$2,400 lower.

Data for the last fiscal year for Merlene Company are as follows: Line Item DescriptionUnitsBeginning inventory of finished goods100Production during the year700Sales750Ending inventory of finished goods50 Line Item DescriptionPer UnitProduct selling price$200Variable manufacturing cost90Fixed manufacturing cost20*Budgeted selling and administrative costs (all fixed)$45,000 *Denominator level of activity is 750 units for the year Actual selling and administrative costs equaled the budgeted amount, and there were no work in process inventories at the end of the period. Under the variable costing concept, the amount of operating income earned by Merlene for the year was:

$22,500.

Allstar Company invests in a project with expected cash inflows of $9,000 per year for 4 years. All cash flows occur at year-end. The required return on investment is 9%. If the project generates a net present value (NPV) of $3,000, what is the amount of the initial investment in the project? Use the Present Value of $1 at Compound Interest and Present Value of Ordinary Annuity. Round to the nearest dollar.

$26,160

John Sheng, a cost accountant at Starlet Company, is developing departmental factory overhead application rates for the company's Tooling and Fabricating departments. The budgeted overhead for each department and the data for one job are as follows: ToolingDepartmentFabricatingDepartmentSupplies$850$200Supervisors' salaries1,5002,000Indirect labor1,2004,880Depreciation1,0005,500Repairs4,0753,540Total budgeted overhead$8,625$16,120Total direct labor hours460620Direct labor hours on Job 231123 Using the departmental overhead application rates, total overhead applied to Job 231 in the Tooling and Fabricating departments will be:

$303.

Bethany Company has just completed the first month of producing a new product but has not yet shipped any of this product. The product incurred variable manufacturing costs of $5,000,000, fixed manufacturing costs of $2,000,000, variable marketing costs of $1,000,000, and fixed marketing costs of $3,000,000. Under the variable costing concept, the inventory value of the new product would be:

$5,000,000.

Lucy Sportswear manufactures a specialty line of T-shirts using job order costing. During March, the following costs were incurred in completing Job ICU2: direct materials, $13,700; direct labor, $4,800; administrative, $1,400; and selling, $5,600. Factory overhead was applied at the rate of $25 per machine hour, and Job ICU2 required 800 machine hours. If Job ICU2 resulted in 7,000 good shirts, the cost of goods sold per unit would be:

$5.50.

Hannon Retailing Company prices its products by adding 30% to its cost. Hannon anticipates sales of $715,000 in July, $728,000 in August, and $624,000 in September. Hannon's policy is to have on hand enough inventory at the end of the month to cover 25% of the next month's sales. What will be the cost of the inventory that Hannon should budget for purchase in August?

$540,000

Chassen Company, a cracker and cookie manufacturer, has the following unit costs for the month of June: Line Item DescriptionCost per UnitVariable manufacturing cost$5.00Variable marketing cost3.50Fixed manufacturing cost2.00Fixed marketing cost4.00 A total of 100,000 units were manufactured during June, of which 10,000 remain in ending inventory. Chassen uses the first-in, first-out (FIFO) inventory method, and the 10,000 units are the only finished goods inventory at June 30. Under the absorption costing concept, the value of Chassen's June 30 finished goods inventory would be:

$70,000.

Brock Company's financial information is as follows. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. AssetsLine Item DescriptionAmountCash and short-term investments$41,837 Accounts receivable (net)34,220 Inventory27,510 Property, plant, and equipment203,861 Total assets$307,428 Liabilities and Stockholders' EquityLine Item DescriptionAmountCurrent liabilities$63,828 Long-term liabilities97,867 Common stock, $10 par51,920 Retained earnings93,813 Total liabilities and stockholders' equity$307,428 Income StatementLine Item DescriptionAmountSales$81,028 Cost of goods sold(36,463)Gross profit$44,565 Operating expenses(25,922)Net income$18,643 Number of shares of common stock5,192 Market price of common stock$29 What is the current ratio? Round your answer to two decimal places.

1.62

Staten Corporation is considering two mutually exclusive projects. Both require an initial outlay of $150,000 and will operate for 5 years. The cash flows associated with these projects are as follows: YearProject XProject Y1$47,000 $0 247,000 0 347,000 0 447,000 0 547,000 280,000 Total$235,000 $280,000 Staten's required rate of return is 10%. Using the Present Value of $1 at Compound Interest and Present Value of Ordinary Annuity, which of the following actions would you recommend to

Accept Project X and reject Project Y.

In differential cost analysis, which one of the following best fits the description of a sunk cost?

Cost of a large crane used to move materials

Costs that remain constant in total dollar amount as the level of activity changes are called ________ costs.

Fixed

Which of the following items would not be considered a manufacturing cost?

Sales commissions for a car manufacturer.

Oakes Inc. manufactured 40,000 gallons of Mononate and 60,000 gallons of Beracyl in a joint production process, incurring $250,000 of joint costs. Oakes allocates joint costs based on the physical volume of each product produced. Mononate and Beracyl can each be sold at the split-off point in a semifinished state or, alternatively, processed further. Additional data about the two products are as follows: Line Item DescriptionMononateBeracylSales price per gallon at split-off$7 $15 Sales price per gallon if processed further$10 $18 Variable production costs if processed further$125,000 $115,000 An assistant in the company's cost accounting department was overheard saying "...that when both joint and separable costs are considered, the firm has no business processing either product beyond the split-off point. The extra revenue is simply not worth the effort." Which of the following strategies should be recommended for Oakes?

Sell at split-off; Process further

Which of the following statements best describes the performance elements found on most balanced scorecards?

The balanced scorecard contains both financial and nonfinancial performance measures.

Krouse Company produces two products, forged putter heads and laminated putter heads, which are sold through specialty golf shops. The company is in the process of developing its operating budget for the coming year. Selected data regarding the company's two products are as follows: Line Item DescriptionPutter HeadsForgedPutter HeadsLaminatedRaw materials: Steel2 pounds @ $5/lb.1 pound @ $5/lb. CopperNone1 pound @ $15/lb.Direct labor1/4 hour @ $20/hr.1 hour @ $22/hr.Expected sales (units)8,2002,000Selling price per unit$30$80Ending inventory target (units)10060Beginning inventory (units)30060Beginning inventory (cost)$5,250$3,120 Manufacturing overhead is applied to units using direct labor hours. Variable manufacturing overhead is projected to be $25,000, and fixed manufacturing overhead is expected to be $15,000. The estimated cost to produce one unit of the laminated putter head is:

$52.

Baldwin Printing Company uses job order costing and applies overhead based on machine hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for 1,000 units was completed and incurred the following: Line Item DescriptionAmountDirect material costs$1,000Direct labor costs$1,500Actual overhead$1,980Machine hours450 The accountant computed the inventory cost of this order to be $4.30 per unit. The annual budgeted overhead in dollars was:

$600,000.

Kimber Company has the following unit costs for the current year: Line Item DescriptionUnit CostRaw materials$20.00Direct labor25.00Variable manufacturing overhead10.00Fixed manufacturing overhead15.00Total unit cost$70.00 Fixed manufacturing cost is based on an annual activity level of 8,000 units. Based on these data, the total manufacturing cost expected to be incurred to manufacture 9,000 units in the current year is:

$615,000.

A review of Plunkett Corporation's accounting records revealed the following selected information for the previous year: Line Item DescriptionAmountDirect materials used$56,000Direct labor179,100Manufacturing overhead421,000Selling expenses235,900Administrative expenses229,400 In addition, the company suffered a $27,700 uninsured factory fire loss during the year. What were Plunkett's product costs and period costs for last year?

$656,100$493,000

Foster Manufacturing is analyzing a capital investment project that is forecasted to produce the following cash flows and net income: YearAfter-TaxCash FlowsNet Income0$(20,000) $0 16,000 2,000 26,000 2,000 38,000 2,000 48,000 2,000 Using the Present Value of $1 at Compound Interest and Present Value of Ordinary Annuity (rounded to the nearest whole percentage) internal rate of return is:

14%.

A widely used activity base for developing factory overhead rates in highly automated settings is

machine hours

When compared to static budgets, flexible budgets:

offer managers a more realistic comparison of budgeted and actual revenue and cost items under their control.

A sign of the successful implementation of a balanced scorecard is the presence of cause-and-effect relationships. An example of this success for a hotel is meeting the target of:

receiving more 5-star ratings from customers, which causes an increase in profit.

Which of the following costs is an example of a cost that remains the same in total as the number of units produced changes?

salary of a factory supervisor

Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each month for use in production. The facilities now being used to produce Part 730 have fixed monthly overhead costs of $150,000 and a theoretical capacity to produce 60,000 units per month. If Aril were to buy Part 730 from an outside supplier, the facilities would be idle, and 40% of fixed costs would continue to be incurred. There are no alternative uses for the facilities. The variable production costs of Part 730 are $11 per unit. Fixed overhead is allocated based on planned production levels. If Aril Industries continues to use 30,000 units of Part 730 each month, it would realize a net benefit by purchasing Part 730 from an outside supplier only if the supplier's unit price is less than:

$14.00.

Leese Inc. has the following quality financial data for its most recent fiscal year. Line Item DescriptionAmountRework costs$110,000Warranty repair costs280,000Product line inspection95,000Design engineering300,000Supplier evaluation240,000Labor training150,000Product testing65,000Breakdown maintenance70,000Product scrap195,000Cost of returned goods180,000Customer support35,000Product liability claims80,000 The total amount of prevention costs that should be reported in a cost of quality report for the year is:

$690,000.

Eagle Brand Inc. produces two products as follows: Line Item DescriptionProduct XProduct YSelling price per unit$100$130Variable costs per unit$80$100Raw materials used per unit4 lbs.10 lbs. Eagle Brand has 1,000 lbs. of raw materials that can be used to produce Products X and Y. Which of the following alternatives should Eagle Brand accept to maximize the contribution margin?

250 units of Product X.

Foster Manufacturing is analyzing a capital investment project that is forecast to produce the following cash flows and net income: YearAfter-TaxCash FlowsNet Income0$(20,000) $0 16,000 2,000 26,000 2,000 38,000 2,000 48,000 2,000 The payback period of this project will be:

3.0 years.

Ming Company has budgeted sales at 6,300 units for July, and desires to have 590 good units on hand on July 31. Inventory is 470 units on July 1. Ming has found from past experience that 10% of all units produced do not pass final inspection and must therefore be destroyed. How many units should Ming plan to produce in July?

7,133