Cost Accounting - Exam 2 Materials

High-low and regression cost estimation methods are alike in that they both:

Have an intercept term and a slope term.

Joint products are products that:

Have substantial sales value.

Which of the following is a common form of value engineering in which the design team prepares several possible designs of the product, each having similar features with different levels of performance and different costs?

Design analysis.

Caldwell Company desires to enter a market with a new product. As part of this process the following tasks will be performed: 1. Determine a desired profit margin. 2.Use Kaizen costing. 3. Design and engineer the product. 4. Determine the product's cost. 5. Determine the suggested selling price. Which task would Caldwell Company perform first if it plans to use target costing?

Determine the suggested selling price.

Which of the following is not a step in the typical cost estimation process?

Determine the time required for building the model.

Throughput margin is defined as sales less:

Direct material costs.

Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service?

Direct method.

Which is not a common method used to allocate costs under the departmental approach?

Dual method.

A variable used in regression analysis that represents the presence or absence of a condition, e.g., seasonality, is called a(n):

Dummy variable.

Which of the following is not an ethical issue managers encounter with cost allocation?

Governmental agency provides a free service to the public.

Which of the following is a method of reducing cost by identifying parts in different products that are common and interchangeable?

Group technology.

Which of the following is not one of the objectives of cost allocation?

Identify production constraints.

Based on analyzing the relationship of total factory overhead (Y) to direct labor hours (X). The following relationship was found: Y = $1,000 + $2X The relationship is:

Linear.

Generally, firms will price a product more competitively at which stages of the product's sales life cycle?

Maturity and Decline.

During which stage of the sales life cycle of a product do sales continue to increase but at a decreasing rate, and competition tends to focus on cost?

Maturity.

The management accountant at Lang Manufacturing Co. collected the following data in preparation for a life-cycle analysis on one of its products, a leaf blower: ItemThis Year Change Over Last Year Average Annual Change Over the Last Four YearsAnnual sales$2,700,000 +1.8% +23.5%Unit sales price 450 +2.4% +8.3%Unit profit 100 −1.0% +3.0%Total profit 600,000 −1.2% +30.0% The stage of the sales life cycle the product is in is:

Maturity.

Concurrent engineering relies on an integrated approach, in which the engineering/design process takes place throughout the cost life cycle using cross-functional teams. Strategically, this concurrent approach should give a firm all of the following except:

More detailed analysis of product functionality.

Which of the following means that two or more independent variables are highly correlated with each other?

Multicollinearity.

When there are two or more cost drivers, regression is termed:

Multiple.

Which one of the following methods of allocating joint costs allocates joint costs to joint products on the basis of estimated sales values at the split-off point?

Net realizable value method.

The R-squared in a satisfactory regression should be:

greater than 0.7

A key disincentive effect of departmental cost allocation can occur when:

the allocation base is actual usage.

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 The product cost for model B-13 is:

$1,457.82. Cost Pools Costing Rate B-13 Direct materials $164.50 Materials handling$2.40 384.00 Manufacturing supervision$14.80 116.92 Assembly$3.30 528.00 Machine setup$56.50 169.50 Inspection and testing$45.50 77.35 Packaging$19.50 17.55 $1,457.82 Price $1,775.00

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hours. Below are data from the previous fiscal year for maintenance expense and machine hours: Month Maintenance Expense Machine Hours1$3,120 2,200 2 3,310 2,300 3 3,490 2,400 4 3,620 2,430 5 3,620 2,280 6 3,680 2,440 7 3,610 2,420 8 3,420 2,390 9 3,140 2,210 10 2,880 2,080 11 2,780 1,690 12 2,940 2,070 Using the high-low method, unit variable cost is calculated to be:

$1.20. High and low points are months 6 and 11. Unit variable cost = ($3,680 − $2,780)/(2,440 − 1,690) = $1.20

The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the marketing department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

$100,000.

The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the marketing department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$102,222.

The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the marketing department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar; assume the actuarial department goes first):

$104,000.

he Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the sales department using the step method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar; assume that the actuarial department goes first):

$126,000.

The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the sales department using the reciprocal method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$127,778.

The Long Term Care Plus Company has two service departments — actuarial and premium rating, and two operations departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below: FROMTO Actuarial Rating Marketing SalesActuarial0% 40% 20% 40%Rating25% 0% 37.5% 37.5% The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial$60,000Premium Rating$40,000Marketing$60,000Sales$70,000 The total cost accumulated in the sales department using the direct method is (calculate all ratios and percentages to 2 decimal places, for example 33.33%, and round all dollar amounts to the nearest whole dollar):

$130,000.

Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells its top of the line "ECC" video player for a price of $250. It costs ECC $210 to make the player. ECC's main competitor is coming to market with a new video player that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%. ECC currently sells 200,000 video players per year.What is the target cost if target profit is 20% of sales and ECC must meet the competitive price of $220?

$176.00. 0.8 × $220 = $176.00

For a simple regression analysis model that is used to allocate factory overhead, an internal auditor finds that the intersection of the line of best fit for the overhead allocation with the y-axis is $5,000. The slope of the line is .20. The independent variable, factory wages, amounts to $900,000 for the month. What is the estimated amount of factory overhead to be allocated for the month?

$185,000. (0.2 × $900,000) + $5,000 = $185,000

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 The profit margin based on manufacturing cost for model F-32 is: Multiple Choice

$239.09. Cost Pools Costing Rate B-13 F-32Direct materials $164.50 $75.60 Materials handling$2.40 384.00 288.00 Manufacturing supervision$14.80 116.92 62.16 Assembly$3.30 528.00 396.00 Machine setup$56.50 169.50 113.00 Inspection and testing$45.50 77.35 36.40 Packaging$19.50 17.55 9.75 $1,457.82 $980.91 Price $1,775.00 $1,220.00 Margin $317.18 $239.09

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total CostsVariable Manufacturing$2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a 40% markup of full manufacturing cost, the price is:

$262.50

Electronic Component Company (ECC) is a producer of high-end video and music equipment. ECC currently sells its top of the line "ECC" video player for a price of $250. It costs ECC $210 to make the player. ECC's main competitor is coming to market with a new video player that will sell for a price of $220. ECC feels that it must reduce its price to $220 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%. ECC currently sells 200,000 video players per year.Irrespective of the competitor's price, what is EEC's required selling price if the target profit is 25% of sales and current costs cannot be reduced?

$280.00. $210/0.75 = $280

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total CostsVariable Manufacturing$2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a 20% markup of life cycle cost, the price is:

$306.00

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 The profit margin based on manufacturing cost for model B-13 is:

$317.18. Cost Pools Costing Rate B-13Direct materials $164.50 Materials handling$2.40 384.00 Manufacturing supervision$14.80 116.92 Assembly$3.30 528.00 Machine setup$56.50 169.50 Inspection and testing$45.50 77.35 Packaging$19.50 17.55 $1,457.82 Price $1,775.00 Margin $317.18

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total CostsVariable Manufacturing$2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price so as to receive a desired return on assets of 15%, the price is:

$330.00

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total CostsVariable Manufacturing$2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a desired return on life cycle costs of 30%, the price is:

$364.29

Johnson Marine has the following costs and expected sales for the coming year. Johnson is considering a number of different methods to determine the price of its product. Total CostsVariable Manufacturing$2,350,000 Variable Selling and Administrative 750,000 Plant-level Fixed Overhead 1,200,000 Fixed Selling and Administrative 600,000 Batch-level Fixed Overhead 200,000 Total Investment in Product Line 10,000,000 Expected Sales (units) 20,000 If Johnson determines price using a desired gross margin percentage of 50%, the price is:

$375.00

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows: MonthMaintenanceCost Machine HoursJan.$5,040 620 Feb. 3,648 420 Mar. 4,320 520 Apr. 3,331 390 May 5,221 650 June 3,550 400 July 3,655 430 Aug. 5,365 690 Sept. 5,110 640 Oct. 4,866 610 Nov. 3,944 460 Dec. 3,790 440 Sum$51,840 6,270 Average$4,320.00 522.50 Average cost per hour ($51,840/6,270) = $8.27 (rounded to the nearest cent)r = 0.99821r2 = 0.99780Using the high-low method, total maintenance cost for 600 hours is calculated to be (round to the nearest dollar):

$4,755. High-low points are August and April Unit variable cost = ($5,365 − $3,331)/(690 − 390) = $6.78 FC = $5,365 − ($6.78 × 690) = $686.80; $3,331 − ($6.78 × 390) = $686.80 rounded to $687. TC = $687 + ($6.78 × 600) = $4,755

Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants are baked?

$448. Use high-low method: 1. (720 × $0.65) − (600 × $0.70)/(720 − 600) = $0.40 = unit variable cost 2. Fixed cost = 720 × ($0.65 − 0.40) = 180; 600 × ($0.70 − $0.40) = $180 3. at 670; $180 + ($0.40 × 670) = $448; (average cost is $448/670 = $0.67)

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hours. Below are data from the previous fiscal year for maintenance expense and machine hours: Month Maintenance Expense Machine Hours1$3,120 2,200 2 3,310 2,300 3 3,490 2,400 4 3,620 2,430 5 3,620 2,280 6 3,680 2,440 7 3,610 2,420 8 3,420 2,390 9 3,140 2,210 10 2,880 2,080 11 2,780 1,690 12 2,940 2,070 Using the high-low method, total monthly fixed cost is calculated to be:

$752. High and low points are months 6 and 11. Unit variable cost = ($3,680 − $2,780)/(2,440 − 1,690) = $1.20 Fixed cost = $3,680 − ($1.20 × 2,440) = $752 or Fixed cost = $2,780 − ($1.20 × 1,690) = $752

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. UnitsSales Value atIf Processed FurtherProductProducedSplit OffSales ValueAdditional Costsx6,000 $40,000 $80,000 $1,200 y3,000 15,000 40,000 3,000 z1,000 16,000 30,000 1,500 The amount of joint costs allocated to product X using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$65,530.

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. UnitsSales Value atIf Processed FurtherProductProducedSplit OffSales ValueAdditional Costsx6,000 $40,000 $80,000 $1,200 y3,000 15,000 40,000 3,000 z1,000 16,000 30,000 1,500 The amount of joint costs allocated to product X using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$67,606.

Garrison Co. produces three products — X, Y, and Z — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $120,000. Sales values and costs needed to evaluate Garrison's production policy follow. UnitsSales Value atIf Processed FurtherProductProducedSplit OffSales ValueAdditional Costsx6,000 $40,000 $80,000 $1,200 y3,000 15,000 40,000 3,000 z1,000 16,000 30,000 1,500 The amount of joint costs allocated to product X using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):

$72,000. Explanation XYZTotalUnits Sold 6,000 3,000 1,000 10,000 Price (after addt'l processing) Separable Processing cost$1,200 $3,000 $1,500 $5,700 Units Produced 6,000 3,000 1,000 10,000 Total Joint Cost $120,000 Sales Price at Split-off Sales Value (after addt'l processing)$80,000 $40,000 $30,000 $150,000 Sales Value at Split Off$40,000 $15,000 $16,000 $71,000 Physical Measure Method XYZTotalUnits of Production 6,000 3,000 1,000 10,000 Percent of Total 60.0000% 30.0000% 10.0000% 100.0000%Joint Cost Allocation$72,000 $36,000 $12,000 $120,000

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 The product cost for model F-32 is:

$980.91. Cost Pools Costing Rate F-32Direct materials $75.60 Materials handling$2.40 288.00 Manufacturing supervision$14.80 62.16 Assembly$3.30 396.00 Machine setup$56.50 113.00 Inspection and testing$45.50 36.40 Packaging$19.50 9.75 $980.91 Price $1,220.00

Place the six cost estimation steps into the correct order: 1. determine the cost drivers 2. Graph the data 3. Select and employ the appropriate estimation method 4. Define the cost object for which the related costs are to be estimated 5. Evaluate the accuracy of the cost estimate 6. Collect consistent and accurate data on the cost object and the cost drivers

4,1,6,2,3,5.

The coefficient of determination is a number between:

0 and 1

A p-value of less than _______ is typically considered statistically significant.

0.05

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 The market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

15 ($1,458 − $1,378)/($2.4 + $3.30) = 14.03, round up to 15

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3.00 2.00 The market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from F-32 in order to achieve the target cost for F-32 (round up to whole units)?

22 ($981 − $856)/($2.40 + $3.30) = 21.9, round up to 22

Place the five steps in implementing a target costing approach in the proper order: 1 - Determine desired profit 2 - Use kaizen costing and operational control to reduce costs 3 - Determine the market price 4 - Use value engineering to identify ways to reduce product costs 5 - Calculate the target cost at market price less desired profit

3,1,5,4,2.

A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed: Y = 10 + 0.51X1 + 0.45X2 The coefficient of determination is 0.96 This coefficient of determination explains that:

96% of sales variations are explained by the equation.

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed to derive an equation for maintenance hours and costs. Data regarding the maintenance hours and costs for the last year and the results of the regression analysis are as follows: MonthMaintenanceCost Machine HoursJan.$5,040 620 Feb. 3,648 420 Mar. 4,320 520 Apr. 3,331 390 May 5,221 650 June 3,550 400 July 3,655 430 Aug. 5,365 690 Sept. 5,110 640 Oct. 4,866 610 Nov. 3,944 460 Dec. 3,790 440 Sum$51,840 6,270 Average$4,320.00 522.50 Average cost per hour ($51,840/6,270) = $8.27 (rounded to the nearest cent)r = 0.99821r2 = 0.99780The percent of the total variance that can be explained by the regression equation is:

99.780%.

A range around the regression line within which the management accountant can rely that the actual value of the predicted cost will fall is referred to as:

A confidence interval.

Many firms choose to achieve target cost through redesign of the product or service because they recognize that design decisions:

Account for much of the total product life cycle costs.

A data point that is outside the normal distribution of data is called an "outlier," which is often removed from the data before analysis because it:

Can distort the results of the data analysis.

The most clear and unbiased basis for cost allocation exists when which one of the following can be determined?

Cause-and-effect relationship.

The high-low method:

Chooses the data points that are likely to produce a line that is representative of the data.

Target cost can be defined as:

Competitive price - desired profit.

Data collected on the cost objects and cost drivers for cost estimation must be:

Consistent and accurate.

_________________________ is an important first step in value engineering because it identifies critical consumer preferences that will define the product's desired functionality.

Consumer analysis

Cost allocation provides a service firm a basis for evaluating the:

Cost and profitability of its services.

The sequence of activities within the firm which begins with research and development, followed by design, and manufacturing, marketing/distribution, and customer service is the:

Cost life cycle.

The management accountant at Jang Manufacturing Co. collected the following data in preparation for a life-cycle analysis on one of its products, a leaf blower: ItemThis Year Change Over Last Year Average Annual Change Over the Last Four YearsAnnual sales$3,200,000 −2.4% +3.5%Unit sales price 500 −2.1% +3.3%Unit profit 100 −10.0% +2.0%Total profit 700,000 −1.2% +3.0% The stage of the sales life cycle the product is in is:

Decline.

In least squares regression analysis, the cost to be estimated is the:

Dependent variable.

The learning curve in cost estimation is a good example of:

Non-linear cost behavior.

David Corporation manufactures a single product that has a cost of $250. The company uses a 60% markup on manufacturing cost to arrive at a selling price of $400, which results in a price that is higher than that of the leading competitors. If David adopts the approach known as target costing, the company will first:

Obtain a better understanding of the competitors' prices.

Simple regression analysis involves the use of: DependentVariablesIndependentVariablesA)OneNoneB)OneOneC)OneTwoD)NoneTwo

Option B One dependent variable one independent variables

Which one of the following is true concerning the theory of constraints (TOC)?

Option C Has Short term focus - Yes Uses cost drivers - No

Baldwin produces bicycles in a highly competitive market. During the past year, the company has added a 20% markup on the $300 manufacturing cost for one of its most popular models. A new competitor recently entered the market with a competitive model that is priced at $320, seriously eroding Baldwin's market share. Management now desires to use a target-costing approach to remain competitive and is willing to accept a 20% return on sales.If target costing is used, which of the following choices correctly denotes (1) Baldwin's selling price and (2) Baldwin's target cost? Selling Price Target CostA)$360 $288 B)$360 $256 C)$320 $256 D)$320 $288 E)None of these answer choices is correct.

Option C Selling Price $320 Target Cost $256

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models - one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools: Cost PoolsAllocation BaseCosting RateMaterials handlingNumber of parts$2.40per partManufacturing supervisionHours of machine time$14.80per hourAssemblyNumber of parts$3.30per partMachine setupEach setup$56.50per setupInspection and testingLogged hours$45.50per hourPackagingLogged hours$19.50per hour LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows: B-13 F-32Direct materials$164.50 $75.60 Number of parts 160 120 Machine hours 7.90 4.20 Inspection time 1.70 0.80 Packaging time 0.90 0.50 Setups 3 2 If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)? B-13 F-32A)$80 $120 B)$1,378 $125 C)$318 $856 D)$1,378 $856 E)$318 $422

Option D B-13 $1,378 F-32 $856 $1,695 − ($1,775 − $1,457.82) = $1,378; $1,095 − ($1,220 − $980.91) = $856

Which one of the following methods of allocating joint costs uses a measure of weight, size or number of units to allocate joint costs to joint products?

Physical measure method.

Which one of the following methods uses units of output to allocate joint costs to joint products?

Physical measures method.

Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products: XYZDemand in units 160 150 140 Selling price per unit$130 $160 $150 Raw materials costs per unit$65 $80 $90 Labor time in minutes per unit 10 20 10 Which is the most profitable product if there is a constraint on labor time, so that total demand for all products cannot be met?

Product X. X has the highest throughput margin per minute of labor time XYZDemand in units 160 150 140 Selling price per unit$130 $160 $150 Raw materials costs per unit$65 $80 $90 Throughput Margin$65 $80 $60 Labor time in minutes per unit 10 20 10 Throughput Margin per minute$6.50 $4.00 $6.00

Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products: XYZDemand in units 160 150 140 Selling price per unit$130 $160 $150 Raw materials costs per unit$65 $80 $90 Labor time in minutes per unit 10 20 10 Which is the most profitable product if there is no constraint on labor time?

Product Y. Y has the highest throughput margin per unit XYZDemand in units 160 150 140 Selling price per unit$130 $160 $150 Raw materials costs per unit$65 $80 $90 Labor time in minutes per unit 10 20 10 Throughput Margin per unit$65 $80 $60 Throughput Margin per minute$6.50 $4.00 $6.00

The direct method of departmental cost allocation is the simplest of methods because it ignores:

Reciprocal flows.

Which of the following provides the most accurate cost estimation?

Regression analysis with R squared of 0.89.

Which one of the following cost estimation methods is the most accurate?

Regression analysis.

During the sales life cycle, which is an example of what happens during the maturity phase?

Sales continue to increase but at a decreasing rate. The number of competitors and product variety decline.

During the sales life cycle, which is an example of what happens during the growth phase?

Sales increase rapidly along with an increase in product variety.

The sequence of phases in the product or service's life in the market - from the introduction of the product or service to the growth in sales and finally maturity, decline, and withdrawal from the market is the:

Sales life cycle.

During the sales life cycle, which is an example of what happens during the introduction phase?

Sales rise slowly as customers become aware of the new product or service. Product variety is limited.

The concepts of cost allocation that are used in manufacturing can also apply in:

Service and not-for-profit industries.

The mathematical technique that underlies the reciprocal cost allocation method is:

Simultaneous equations.

The point in a joint production process at which individual products can be identified for the first time is called the:

Split-off point.

When comparing Activity-based costing (ABC) and the Theory of Constraints (TOC), the approach each method takes toward profitability analysis is:

TOC takes a short-term approach and ABC takes a long-term approach.

Which of the following is the speed at which units must be manufactured to meet customer demand?

Takt time.

When a firm determines the desired cost for a product or service, given a competitive market price, in order to earn a desired profit, the firm is exercising:

Target costing.

The independent variable in regression analysis is:

The cost driver used to estimate the value of the dependent variable.

A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed: Y = 10 + 0.51X1 + 0.45X2 The coefficient of determination is 0.96 Determine which of the following conclusions is valid regarding the coefficient of determination:

The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.

The p-value measures:

The risk that a particular independent variable has only a chance relationship to the dependent variable.

Cost allocation is an important strategic issue for U.S. manufacturing firms with foreign subsidiaries because of:

The tax implications.

Which of the following is required for multiple regression?

The use of more than one cost driver.

Which one the following is a variable that takes on values of 1, 2, 3, ... for each period in sequence?

Trend variable.

Net Realizable Value (NRV) of a product is:

Ultimate sales value - additional processing and selling cost.

Which of these job characteristics would result in the learning curve having less of an effect?

Use of robotics and computer-aided manufacturing.

The use of a relationship of total factory overhead to direct labor hours is said to be valid only within the relevant range, which means:

Within the range of observations of the cost driver.