Tingnan ang lahat ng mga set ng pag-aaral

Exam 1 Part 2

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Jenco, Inc., manufactures a combination fertilizer and weedkiller under the name Fertikil. This is the only product Jenco produces. Fertikil is sold nationwide through normal marketing channels to retail nurseries and garden stores. Taylor Nursery plans to sell a similar fertilizer and weedkiller compound through its regional nursery chain under its own private label. Taylor has asked Jenco to submit a bid for a 25,000-pound order of the private brand compound. Although the chemical composition of the Taylor compound differs from Fertikil, the manufacturing process is very similar. What is the total overhead costs for recurring 25-lot orders?

$9,000

A company services office equipment. Some customers bring their equipment to the company's service shop; other customers prefer to have the company's service personnel come to their offices to repair their equipment. The most appropriate costing method for the company is

A job costing system.

When only differential manufacturing costs are taken into account for special-order pricing, an essential assumption is that

Acceptance of the order will not affect regular sales.

In an insourcing vs. outsourcing decision, the decision process favors the use of total costs rather than unit costs. The reason is that

All of the answers are correct.

In an insourcing vs. outsourcing situation, which of the following qualitative factors is usually considered?

All of the answers are correct.

Geary Manufacturing has assembled the data appearing in the next column pertaining to two products. Past experience has shown that the unavoidable fixed manufacturing overhead included in the cost per machine hour averages $10. Geary has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Total machine capacity is 50,000 hours .Electric Blender Mixe rDirect materials $ 6 $11 Direct labor 49 Manufacturing overhead at $16 per hour1632Cost if purchased from an outside supplier 2038 Annual demand (units) 20,000 28,000 If 50,000 machine hours are available and Geary Manufacturing desires to follow an optimal strategy, it should

Produce 20,000 blenders and 15,000 electric mixers, and purchase all other units as needed

Geary Manufacturing has assembled the data appearing in the next column pertaining to two products. Past experience has shown that the unavoidable fixed manufacturing overhead included in the cost per machine hour averages $10. Geary has a policy of filling all sales orders, even if it means purchasing units from outside suppliers. Total machine capacity is 50,000 hours. With all other things constant, if Geary Manufacturing is able to reduce the direct materials for an electric mixer to $6 per unit, the company should

Produce 25,000 electric mixers and purchase all other units as needed.

Data regarding four different products manufactured by an organization are presented as follows. Direct material and direct labor are readily available from the respective resource markets. However, the manufacturer is limited to a maximum of 3,000 machine hours per month. Products A B C D Unit price $15 $18 $20 $25 Variable cost 7 11 10 16 Units Produced per Machine Hour: A: 3 B: 4 C: 2 D: 3 The product that is the most profitable for the manufacturer in this situation is

Product B.

Management accountants are frequently asked to analyze various decision situations including the following: I. The cost of a special device that is necessary if a special order is accepted II. The cost proposed annually for the plant service for the grounds at corporate headquarters III. Joint production costs incurred, to be considered in a sell-at-split versus a process-further decision IV. The costs of alternative uses of plant space, to be considered in a make-or-buy decision V. The cost of obsolete inventory acquired several years ago, to be considered in a keep-versus-disposal decision The costs described in situations I and IV are

Relevant costs.

A company has 7,000 obsolete toys carried in inventory at a manufacturing cost of $6 per unit. If the toys are reworked for $2 per unit, they could be sold for $3 per unit. If the toys are scrapped, they could be sold for $1.85 per unit. Which alternative is more desirable (rework or scrap), and what is the total dollar amount of the advantage of that alternative?

Scrap, $5,950.

What is the journal entry for the purchase of $500 of direct materials and $250 of supplies for cash?

Stores control $750 Cash $750

How does a job costing accounting system differ from a process cost accounting system?

Subsidiary ledgers for the work-in-process and finished goods inventories are necessary in job costing.

The term that refers to costs incurred in the past that are not relevant to a future decision is

Sunk cost.

Management accountants are frequently asked to analyze various decision situations including the following: I.The cost of a special device that is necessary if a special order is accepted II.The cost proposed annually for the plant service for the grounds at corporate headquarters III.Joint production costs incurred, to be considered in a sell-at-split versus a process-further decision IV.The costs of alternative uses of plant space, to be considered in a make-or-buy decision V.The cost of obsolete inventory acquired several years ago, to be considered in a keep-versus-disposal decision The costs described in situations III and V are

Sunk costs

A company needs special gears. The machinery to make the gears can be rented for $100,000 for 1 year, but the company can buy the gears and avoid the rental cost. Because the demand for the gears may be high (0.6 probability) or low (0.4 probability) and contribution margins vary, the company prepared the following decision tree: Which of the following statements is true?

The expected value of buying is $70,000.

Production of a special order will increase gross profit when the additional revenue from the special order is greater than

The marginal cost of producing the order.

A company manufactures a product that is sold for $37.95. It uses an absorption cost system. Plant capacity is 750,000 units annually, but normal volume is 500,000 units. Costs at normal volume are given below. Unit Cost Total Cost Direct materials $ 9.80 $ 4,900,000 Direct labor 4.50 2,250,000 Manufacturing overhead 12.00 6,000,000 Selling and administrative: Variable 2.50 1,250,000 Fixed 4.20 2,100,000 Total cost $33.00 $16,500,000 Fixed manufacturing overhead is budgeted at $4,500,000. A customer has offered to purchase 100,000 units at $25.00 each to be packaged in large cartons, not the normal individual containers. It will pick up the units in its own trucks. Thus, variable selling and administrative expenses will decrease by 60%. The company should compare the total revenue to be derived from this order with the total relevant costs of

$1,830,000

Framar, Inc., manufactures machinery to customer specifications. It operated at about 75% of practical capacity during the year. The operating results for the most recent fiscal year are presented below. What is the lowest price Framar can charge for this machinery without reducing its net income after taxes?

$113,333

$12,600

Jenco, Inc., manufactures a combination fertilizer and weedkiller under the name Fertikil. This is the only product Jenco produces. Fertikil is sold nationwide through normal marketing channels to retail nurseries and garden stores. Taylor Nursery plans to sell a similar fertilizer and weedkiller compound through its regional nursery chain under its own private label. Taylor has asked Jenco to submit a bid for a 25,000-pound order of the private brand compound. Although the chemical composition of the Taylor compound differs from Fertikil, the manufacturing process is very similar. If Jenco bids this month for the special one-time order of 25,000 pounds, the total direct labor cost is

$12,950

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. What is the effect on WindAir's net income if it acquires the compressors from an outside source and reduces the price by 5%?

$132,000

Jenco, Inc., manufactures a combination fertilizer and weedkiller under the name Fertikil. This is the only product Jenco produces. Fertikil is sold nationwide through normal marketing channels to retail nurseries and garden stores. Taylor Nursery plans to sell a similar fertilizer and weedkiller compound through its regional nursery chain under its own private label. Taylor has asked Jenco to submit a bid for a 25,000-pound order of the private brand compound. Although the chemical composition of the Taylor compound differs from Fertikil, the manufacturing process is very similar. If Jenco bids this month for the special one-time order of 25,000 pounds of the private brand, the special order's total direct materials cost is

$18,425

Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If the plugs are purchased and the facility rented, Regis Company wishes to realize $100,000 in savings annually. To achieve this goal, the minimum annual rent on the facility must be

$190,000

Briar Co. signed a government construction contract providing for a formula price of actual cost plus 10%. In addition, Briar was to receive one-half of any savings resulting from the formula price's being less than the target price of $2.2 million. Briar's actual costs incurred were $1,920,000. How much should Briar receive from the contract?

$2,156,000

Ignore taxes when answering this question. ABC Company produces and sells a single product called Kleen. Annual production capacity is 100,000 machine hours. It takes 1 machine hour to produce a unit of Kleen. Annual demand for Kleen is expected to remain at 80,000 units. The selling price is expected to remain at $10 per unit. Cost data for producing and selling Kleen are presented to the right: ABC Company has 2,000 units of Kleen that were partially damaged in storage. It can sell these units through regular channels at reduced prices. These 2,000 units will be valueless unless sold this way. Sale of these units will not affect regular sales of Kleen. The relevant unit cost for determining the minimum selling price for these units is

$2.00

A company manufactures components for use in producing one of its finished products. When 12,000 units are produced, the full cost per unit is $35, separated as follows: Direct materials $ 5 Direct labor 15 Variable overhead 10 Fixed overhead 5 A supplier has offered to sell 12,000 components to the company for $37 each. If the company accepts the offer, some of the facilities currently being used to manufacture the components can be rented as warehouse space for $40,000. However, $3 of the fixed overhead currently applied to each component would have to be covered by the company's other products. What is the differential cost to the company of purchasing the components from the supplier?

$20,000

In a lean accounting environment, a company accepts a special order to make 200 units of a product each month for the next 2 months for $130 per unit. The company normally sells the unit for $170 per unit with variable costs per unit at $80. The company plans to use excess capacity. By what amount would this special order increase profit?

$20,000

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. What is WindAir's current unit contribution margin on air conditioners?

$200

$23,125

Fact Pattern: Jenco, Inc., manufactures a combination fertilizer and weedkiller under the name Fertikil. This is the only product Jenco produces. Fertikil is sold nationwide through normal marketing channels to retail nurseries and garden stores.Taylor Nursery plans to sell a similar fertilizer and weedkiller compound through its regional nursery chain under its own private label. Taylor has asked Jenco to submit a bid for a 25,000-pound order of the private brand compound. Although the chemical composition of the Taylor compound differs from Fertikil, the manufacturing process is very similar. The total variable cost of the special order for this month is

$34,750

A company manufactures jet engines on a cost-plus basis. The cost of a particular jet engine the company manufactures is shown as follows:Direct materials$200,000Direct labor150,000Overhead:Supervisor's salary20,000Fringe benefits on direct labor15,000Depreciation12,000Rent11,000Total cost$408,000 If production of this engine were discontinued, the production capacity would be idle, and the supervisor would be laid off. When asked to bid on the next contract for this engine, the minimum unit price that the company should bid is

$385,000

$40,375

Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: Fixed costs $21,000 Variable costs 33,000 The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead, the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job?

$40,750

$46,500

Birk Co. uses a job-order cost system. The following debits (credit) appeared in Birk's work-in-process account for the month just ended:AprilDescriptionAmount 1Balance$ 4,000 30Direct materials24,000 30Direct labor16,000 30Factory overhead12,800 30To finished goods(48,000)Birk applies overhead to production at a predetermined rate of 80% of direct labor cost. Job No. 5, the only job still in process at month end, has been charged with direct labor of $2,000. What was the amount of direct materials charged to Job No. 5?

$5,200

Kator Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit:Selling price $150Direct materials$ 20Direct labor15Variable manufacturing overhead 12Fixed manufacturing overhead30Shipping and handling3Fixed selling and administrative10Total costs$ 90 Kator Co. has received a special, one-time order for 1,000 KB-96 parts. Assuming Kator has excess capacity, the minimum price that is acceptable for this one-time special order is in excess of

$50

MNO Company offers to make and ship 25,000 units of Kleen directly to ABC Company's customers. If ABC Company accepts this offer, it will continue to produce and ship the remaining 55,000 units. ABC's fixed manufacturing overhead will drop to $90,000. Its fixed selling and administrative expenses will remain unchanged. Variable selling expenses will drop to $0.80 per unit for the 25,000 units produced and shipped by MNO company. What is the maximum amount per unit that ABC Company should pay MNO Company for producing and shipping the 25,000 units?

$6.40

Listed below are a company's monthly unit costs to manufacture and market a particular product. Manufacturing costs: Direct materials $2.00 Direct labor 2.40 Variable indirect 1.60 Fixed indirect 1.00 Marketing costs: Variable 2.50 Fixed 1.50 The company must decide to continue making the product or buy it from an outside supplier. The supplier has offered to make the product at the same level of quality that the company can make it. Fixed marketing costs would be unaffected, but variable marketing costs would be reduced by 30% if the company were to accept the proposal. What is the maximum amount per unit that the company can pay the supplier without decreasing operating income?

$6.75

Kator Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit:Selling price $150Direct materials$ 20Direct labor15Variable manufacturing overhead 12Fixed manufacturing overhead30Shipping and handling3Fixed selling and administrative10Total costs$ 90 Kator Co. has received a special, one-time order for 1,000 KB-96 parts. Assume that Kator is operating at full capacity and that the contribution margin of the output that would be displaced by the special order is $10,000. Using the original data, the minimum price that is acceptable for this one-time special order is in excess of

$60

Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows:Direct materials$ 2,000Materials handling (20% of direct materials cost)400Direct labor16,000Manufacturing overhead (150% of direct labor)24,000Total manufacturing cost$42,400Materials handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their cost. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of $30,000. Assume the rental opportunity does not exist and Richardson Motors could use the idle capacity to manufacture another product that would contribute $104,000 per month. If Richardson chooses to manufacture the ten T305 units in order to maintain quality control, Richardson's opportunity cost is

$8,000

Whitehall Corporation produces chemicals used in the cleaning industry. During the previous month, Whitehall incurred $300,000 of joint costs in producing 60,000 units of AM-12 and 40,000 units of BM-36. Whitehall uses the units-of-production method to allocate joint costs. Currently, AM-12 is sold at split-off for $3.50 per unit. Flank Corporation has approached Whitehall to purchase all of the production of AM-12 after further processing. The further processing will cost Whitehall $90,000. Assume that Whitehall Corporation agreed to sell AM-12 to Flank Corporation for $5.50 per unit after further processing. During the first month of production, Whitehall sold 50,000 units with 10,000 units remaining in inventory at the end of the month. With respect to AM-12, which one of the following statements is true?

The operating profit last month was $50,000, and the inventory value is $45,000.

Mason Co. uses a job-order cost system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last year and will be used throughout the current year. Mason had one job, No. 150, in process at the beginning of the month with raw materials costs of $2,000 and direct-labor costs of $3,000. During the month, raw materials and direct labor added to jobs were as follows: No. 150 No. 151 No. 152 Raw materials $ -- $4,000 $1,000 Direct labor 1,500 5,000 2,500 Actual manufacturing overhead for the month was $20,000. During the month, Mason completed Job Nos. 150 and 151. For the month, manufacturing overhead was

Underapplied by $2,000.

Variable overhead, labor, and materials.

Which of the following cost allocation methods is used to determine the lowest price that can be quoted for a special order that will use idle capacity within a production area?

Variable.

Whitehall Corporation produces chemicals used in the cleaning industry. During the previous month, Whitehall incurred $300,000 of joint costs in producing 60,000 units of AM-12 and 40,000 units of BM-36. Whitehall uses the units-of-production method to allocate joint costs. Currently, AM-12 is sold at split-off for $3.50 per unit. Flank Corporation has approached Whitehall to purchase all of the production of AM-12 after further processing. The further processing will cost Whitehall $90,000. Concerning AM-12, which one of the following alternatives is most advantageous?

Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $5.00.

What is the correct journal entry if $5,000 of direct labor and $1,250 of indirect labor were incurred?

Work-in-process $5,000 Overhead control 1,250 Accrued payroll $6,250

In a job-order cost system, the application of manufacturing overhead is usually reflected in the general ledger as an increase in

Work-in-process control.

In a job-order cost system, the use of direct materials previously purchased usually is recorded as an increase in

Work-in-process control.

Framar, Inc., manufactures machinery to customer specifications. It operated at about 75% of practical capacity during the year. The operating results for the most recent fiscal year are presented below. Should Framar manufacture the machinery for a counteroffer of $127,000?

Yes, net income will increase by $7,380.

What is the opportunity cost of making a component part in a factory given no alternative use of the capacity?

Zero

An entity has developed and patented a new laser disc reading device that will be marketed internationally. Which of the following factors should the entity consider in pricing the device? Quality of the new device Life of the new device Customers' relative preference for quality compared with price

I, II, and III.

Condensed monthly operating income data for Korbin, Inc., for May follows:UrbanSuburbanStoreStoreTotalSales$80,000$120,000$200,000Variable costs32,00084,000116,000Contribution margin$48,000$ 36,000$ 84,000Direct fixed costs20,00040,00060,000Store segment margin$28,000$ (4,000)$ 24,000Common fixed cost4,0006,00010,000Operating income$24,000$ (10,000)$ 14,000Additional information regarding Korbin's operations follows:•One-fourth of each store's direct fixed costs would continue if either store is closed.•Korbin allocates common fixed costs to each store on the basis of sales dollars.•Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.•The operating results for May are representative of all months. One-half of the Suburban Store's dollar sales are from items sold at variable cost to attract customers to the store. Korbin is considering the deletion of these items, a move that would reduce the Suburban Store's direct fixed expenses by 15% and result in a 20% loss of Suburban Store's remaining sales volume. This change would not affect the Urban Store. A decision by Korbin to eliminate the items sold at cost would result in a monthly increase (decrease) in Korbin's operating income of

$(1,200)

Condensed monthly operating income data for Korbin, Inc., for May follows:UrbanSuburbanStoreStoreTotalSales$80,000$120,000$200,000Variable costs32,00084,000116,000Contribution margin$48,000$ 36,000$ 84,000Direct fixed costs20,00040,00060,000Store segment margin$28,000$ (4,000)$ 24,000Common fixed cost4,0006,00010,000Operating income$24,000$ (10,000)$ 14,000Additional information regarding Korbin's operations follows:•One-fourth of each store's direct fixed costs would continue if either store is closed.•Korbin allocates common fixed costs to each store on the basis of sales dollars.•Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.•The operating results for May are representative of all months. Korbin is considering a promotional campaign at the Suburban Store that would not affect the Urban Store. Increasing annual promotional expense at the Suburban Store by $60,000 in order to increase this store's sales by 10% would result in a monthly increase (decrease) in Korbin's operating income during the year (rounded) of

$(1,400)

Condensed monthly operating income data for Korbin, Inc., for May follows:UrbanSuburbanStoreStoreTotalSales$80,000$120,000$200,000Variable costs32,00084,000116,000Contribution margin$48,000$ 36,000$ 84,000Direct fixed costs20,00040,00060,000Store segment margin$28,000$ (4,000)$ 24,000Common fixed cost4,0006,00010,000Operating income$24,000$ (10,000)$ 14,000Additional information regarding Korbin's operations follows:•One-fourth of each store's direct fixed costs would continue if either store is closed.•Korbin allocates common fixed costs to each store on the basis of sales dollars.•Management estimates that closing the Suburban Store would result in a 10% decrease in the Urban Store's sales, while closing the Urban Store would not affect the Suburban Store's sales.•The operating results for May are representative of all months. A decision by Korbin to close the Suburban Store would result in a monthly increase (decrease) in Korbin's operating income of

$(10,800)

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review because The materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1.A 3-year labor contract had been signed in July, Year 1.There have been no significant variations from standard costs for the past three quarters. Assume that the first quarter factory costs incurred reflect the anticipated costs for the ACTION special purchase. What is the expected variable overhead cost per unit?

$.66

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review because The materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1. A 3-year labor contract had been signed in July, Year 1. There have been no significant variations from standard costs for the past three quarters. Assume that the manufacturing costs incurred in the first quarter reflect the anticipated costs for the ACTION special purchase. What is the expected materials cost per unit?

$.83

Kator Co. is a manufacturer of industrial components. One of their products that is used as a subcomponent in auto manufacturing is KB-96. This product has the following financial structure per unit:Selling price $150Direct materials$ 20Direct labor15Variable manufacturing overhead 12Fixed manufacturing overhead30Shipping and handling3Fixed selling and administrative10Total costs$ 90 During the next year, KB-96 sales are expected to be 10,000 units. All of the costs will remain the same except that fixed manufacturing overhead will increase by 20% and direct materials will increase by 10%. The selling price per unit for next year will be $160. Based on this data, the contribution margin from KB-96 for next year will be

$1,080,000

A tailor estimates that 60,000 special zippers will be used in the manufacture of men's jackets during the next year. A zipper supplier has quoted a price of $.60 per zipper. The tailor would prefer to purchase 5,000 units per month, but the supplier is unable to guarantee this delivery schedule. To ensure availability of these zippers, the tailor is considering the purchase of all 60,000 units at the beginning of the year. Assuming the tailor can invest cash at 8%, the tailor's opportunity cost of purchasing the 60,000 units at the beginning of the year is

$1,320

The T-accounts below provide selected data about a company's financial results for the year. The amount of over- (under-) applied overhead is

$1,500

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review becauseThe materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1.A 3-year labor contract had been signed in July, Year 1.There have been no significant variations from standard costs for the past three quarters. Assume that the actual cost relationships in the quarter ended March 31, Year 3, relevant to this decision about the sales proposal of ACTION Hardware are valid. What is the manufacturing contribution margin?

$240,000

Laurel Corporation has its own cafeteria with the following annual costs: Food $100,000 Labor 75,000 Overhead 110,000 Total $285,000 The overhead is 40% fixed. Of the fixed overhead, $25,000 is the salary of the cafeteria supervisor. The remainder of the fixed overhead has been allocated from total company overhead. Assuming the cafeteria supervisor will remain and the corporation will continue to pay his or her salary, the maximum cost the corporation will be willing to pay an outside firm to service the cafeteria is

$241,000

A company produces and sells three products: C J P Sales $200,000 $150,000 $125,000 Separable (product) fixed costs 60,000 35,000 40,000 Allocated fixed costs 35,000 40,000 25,000 Variable costs 95,000 75,000 50,000 The company lost its lease and must move to a smaller facility. As a result, total allocated fixed costs will be reduced by 40%. However, one product must be discontinued. The expected net income after the appropriate product has been discontinued is

$25,000

Framar, Inc., manufactures machinery to customer specifications. It operated at about 75% of practical capacity during the year. The operating results for the most recent fiscal year are presented below. If the bid is accepted, what is the increase in net income?

$27,900

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review because The materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1.A 3-year labor contract had been signed in July, Year 1. There have been no significant variations from standard costs for the past three quarters. Assume that the manufacturing costs incurred in the first quarter reflect the anticipated costs for the ACTION special purchase. What is the total expected direct labor cost of this purchase?

$282,000

Fact Pattern: Ignore taxes when answering this question. ABC Company produces and sells a single product called Kleen. Annual production capacity is 100,000 machine hours. It takes 1 machine hour to produce a unit of Kleen. Annual demand for Kleen is expected to remain at 80,000 units. The selling price is expected to remain at $10 per unit. Cost data for producing and selling Kleen are presented to the right: Variable costs (per unit): Direct materials $1.50 Direct labor 2.50 Variable overhead 0.80 Variable selling 2.00 Fixed costs (per year): Fixed overhead $100,000.00 Fixed selling and administrative 50,000.00 ABC Company receives a one-time special order for 5,000 units of Kleen. Acceptance of this order will not affect the regular sales of 80,000 units. Variable selling costs for each of these 5,000 units will be $1.00. What is the differential cost to ABC Company of accepting this special order?

$29,000

Jenco, Inc., manufactures a combination fertilizer and weedkiller under the name Fertikil. This is the only product Jenco produces. Fertikil is sold nationwide through normal marketing channels to retail nurseries and garden stores. Taylor Nursery plans to sell a similar fertilizer and weedkiller compound through its regional nursery chain under its own private label. Taylor has asked Jenco to submit a bid for a 25,000-pound order of the private brand compound. Although the chemical composition of the Taylor compound differs from Fertikil, the manufacturing process is very similar. The Taylor compound will be produced in 1,000-pound lots. Each lot will require 60 direct labor hours and the following chemicals: If Jenco bids this month for the special one-time order of 25,000 pounds, the total overhead cost used for this decision is

$3,375

A business needs a computer application that can be either developed internally or purchased. Suitable software from a vendor costs $29,000. Minor modifications and testing can be conducted by the systems staff as part of their regular workload. If the software is developed internally, a systems analyst would be assigned full time, and a contractor would assume the analyst's responsibilities. The hourly rate for the regular analyst is $25. The hourly rate for the contractor is $22. The contractor would occupy an empty office. The office has 100 square feet, and occupancy cost is $45 per square foot. Based solely on the cost figures presented, the cost of developing the computer application will be

$3,500 less than acquiring the purchased software package.

During the current accounting period, a manufacturing company purchased $70,000 of raw materials, of which $50,000 of direct materials and $5,000 of indirect materials were used in production. The company also incurred $45,000 of total labor costs and $20,000 of other manufacturing overhead costs. An analysis of the work-in-process control account revealed $40,000 of direct labor costs. Based upon the above information, what is the total amount accumulated in the overhead control account?

$30,000

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. If National Industries requires the Compressor Division to sell 17,400 compressors to WindAir, how much is the effect on the corporation's pretax earnings?

$312,500

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review becauseThe materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1.A 3-year labor contract had been signed in July, Year 1.There have been no significant variations from standard costs for the past three quarters. A determination should be made regarding fixed manufacturing costs. This determination involves

Anticipation of an increase because of the increased volume incurred as a result of the special order.

ABD Realty manages five apartment complexes in a three-state area. Shown below are summary income statements for each apartment complex. ABD Realty Summary Income Statements (in thousands) One Two Three Four Five Rental income $1,000 $1,210 $2,347 $1,878 $1,065 Expenses 800 1,300 2,600 2,400 1,300 Profit $ 200 $ (90) $ (253) $ (522) $ (235) Included in the expenses is $1,200,000 of corporate overhead allocated to the apartment complexes based on rental income. The apartment complex(es) that ABD should consider selling is(are)

Apartment complexes Four and Five.

Costs relevant to an insourcing vs. outsourcing decision include variable manufacturing costs as well as

Avoidable fixed costs.

An oil well has been drilled. The cost of site preparation was $10,000. Drilling costs were $90,000. Once drilled, the well may or may not be completed. If completed, the costs are $40,000 to fracture the underground formation (enabling the oil to flow freely) and $30,000 for production casing pipe and other costs to put the well into production. If the well is completed, the present value of recoverable oil is $130,000. The well should be

Completed because the net benefit is $60,000.

Relevant or differential cost analysis

Considers all variable and fixed costs as they change with each decision alternative.

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. What is the effect of decreasing the sales price 10% to increase sales by 4,500 units?

Contribution Margin $120,000 Net Income Before Taxes $120,000

When a multiproduct plant operates at full capacity, quite often decisions must be made as to which products to emphasize. These decisions are frequently made with a short-run focus. In making such decisions, managers should select products with the highest

Contribution margin per unit of the constraining resource.

The following information is available on Tackler Co.'s two product lines: Chairs Tables Sales $180,000 $48,000 Variable costs (96,000) (30,000) Contribution margin 84,000 18,000 Fixed costs: Avoidable (36,000) (12,000) Unavoidable (18,000) (10,800) Operating income (loss) $30,000 $(4,800) Assuming Tackler discontinues the tables line and does not replace it, the company's operating income will

Decrease by $6,000.

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. What is the effect on the Compressor Division's net income of the sale to WindAir of 17,400 compressors if some external sales must be lost?

Decrease net income $35,500.

The Ashley Co. manufactures and sells a household product marketed through direct mail and advertisements in home improvement and gardening magazines. Although similar products are available in hardware and department stores, none are as effective as Ashley's model. The company uses a standard cost system in its manufacturing accounting. The standards have not undergone a thorough review in the past 18 months. The general manager has seen no need for such a review because The materials quality and unit costs were fixed by a 3-year purchase commitment signed in July, Year 1.A 3-year labor contract had been signed in July, Year 1.There have been no significant variations from standard costs for the past three quarters. The financial analysis prepared by the general manager's assistant is

Deficient in that the contribution margin is not calculated.

In a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?

Depreciation

When considering a special order that will enable a company to make use of currently idle capacity, which of the following costs is irrelevant?

Depreciation.

The term relevant cost applies to all the following decision situations except the

Determination of a product price.

In a labor-intensive industry in which more overhead (service, support, more expensive equipment, etc.) is incurred by the more highly skilled and paid employees, what denominator measure is most likely to be appropriate for applying overhead?

Direct labor cost.

Which one of the following is most relevant to a manufacturing equipment replacement decision?

Disposal price of the old equipment.

The T-accounts below provide selected data about a company's financial results for the year. The ending balance in work-in-process consists of jobs started this period. Overhead is 125% of direct labor, and the direct labor cost component of EWIP is $10,000. How much are EWIP, the direct materials cost component, and the manufacturing overhead component?

Ending WIP $45,000 Materials $22,500 Overhead $12,500

The completion of Job #21, with total costs of $4,900, results in which of the following entries?

Finished goods $4,900 Work-in-process $4,900

When applying the cost-benefit approach to a decision, the primary criterion is how well management goals will be achieved in relation to costs. Costs include all expected

Future costs that differ among the alternative courses of action plus all qualitative factors that cannot be measured in numerical terms.

Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows:Direct materials$ 2,000Materials handling (20% of direct materials cost)400Direct labor16,000Manufacturing overhead (150% of direct labor)24,000Total manufacturing cost$42,400Materials handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their cost. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of $30,000. Assume Richardson Motors is able to rent all idle capacity for $50,000 per month. If Richardson decides to purchase the 10 units from Simpson Castings, Richardson's monthly cost for T305 would

Increase $46,000.

Richardson Motors uses 10 units of Part No. T305 each month in the production of large diesel engines. The cost to manufacture one unit of T305 is presented as follows:Direct materials$ 2,000Materials handling (20% of direct materials cost)400Direct labor16,000Manufacturing overhead (150% of direct labor)24,000Total manufacturing cost$42,400Materials handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their cost. Richardson's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Simpson Castings, one of Richardson's reliable vendors, has offered to supply T305 at a unit price of $30,000. If Richardson Motors purchases the ten T305 units from Simpson Castings, the capacity Richardson used to manufacture these parts would be idle. Should Richardson decide to purchase the parts from Simpson, the out-of-pocket cost per unit of T305 would

Increase $9,600.

A company's approach to an insourcing vs. outsourcing decision

Involves an analysis of avoidable costs.

Total unit costs are

Irrelevant in marginal analysis.

Accounting for manufacturing overhead costs involves averaging in

Job Costing: Yes Process Costing: Yes

Regis Company manufactures plugs used in its manufacturing cycle at a cost of $36 per unit that includes $8 of fixed overhead. Regis needs 30,000 of these plugs annually, and Orlan Company has offered to sell these units to Regis at $33 per unit. If Regis decides to purchase the plugs, $60,000 of the annual fixed overhead applied will be eliminated, and the company may be able to rent the facility previously used for manufacturing the plugs. If Regis Company purchases the plugs but does not rent the unused facility, the company would

Lose $3.00 per unit.

Which of the following qualitative factors favors the buy choice in an insourcing vs. outsourcing decision?

Maintaining a long-run relationship with suppliers is desirable.

In a manufacturing environment, the best short-term profit-maximizing approach is to

Maximize contribution per unit times the number of units sold.

National Industries is a diversified corporation with separate and distinct operating divisions. Each division's performance is evaluated on the basis of total dollar profits and return on divisional investment. The WindAir Division manufactures and sells air-conditioning units. The coming year's budgeted income statement, based upon a sales volume of 15,000 units, appears below. As a result of decreasing selling price from $400 to $380, sales increase by 2,400 units at a unit contribution margin of $180. This increase in contribution margin attributable to greater sales

Must be adjusted for the loss of the $20 unit contribution margin for 15,000 units previously budgeted.

One of the items served at a restaurant is pizza that is prepared and baked in the restaurant's kitchen. Each pizza requires $3 of ingredients, $2 of labor to prepare the ingredients, $1 of labor to bake the pizza, and $4 of allocated occupancy costs. The restaurant's supplier has offered to sell the restaurant pre-made pizzas, ready for baking, for $8 each. If the restaurant accepts the supplier's offer, the existing pizza preparation space will be converted into two additional dining tables that will increase profits by $42,000 per year by selling drinks, side dishes, and desserts. The restaurant expects to sell 15,000 pizzas annually with or without the additional dining tables. Should the restaurant accept the supplier's offer?

No, because the restaurant's profits will decrease by $3,000.

A decision-making concept, described as "the contribution to income that is forgone by not using a limited resource for its best alternative use," is called

Opportunity cost.

The relevance of a particular cost to a decision is determined by the

Potential effect on the decision

If a U.S. manufacturer's price in the U.S. market is below an appropriate measure of costs and the seller has a reasonable prospect of recovering the resulting loss in the future through higher prices or a greater market share, the seller has engaged in

Exam 1 Part 2

Kaugnay na mga set ng pag-aaral

Econ 110: chpt 18, 19, 20

Chapter 18 Matching

Macro exam 1 & 2

EnP Board Exams Questions

In the News Quiz #5

Chapter 10

210 Unit 6

Chapter 1: Basic Concepts

Health Insurance Tricky Questions Review

Fear Avoidance Beliefs

Medical Terminology Exam 2 review

Community Chap 7

CIS22A CH1

Chapter 54 Drugs Acting on the Upper Respiratory Tract PrepU

Singh Answers

Diabetic Retinopathy

NYU CIT Exam Study

Perfect Squares and Square Roots: 1-20

Medsurg CAQ #1

ict2 unit 1