Strategic Emphasis and Performances

Activity-based costing (ABC) and the theory of constraints (TOC) are viewed as methods that are Complementary. Substitutions for one another. Parallel. Auxiliary. Responsive.

Complementary.

Which of the following are computer-based databases that include comprehensive information about the firm's cost drivers? Cost driver tables. Excel tables. Cost databases. Cost tables.

Cost tables.

During the sales life cycle, which is an example of what happens during the introduction phase? Sales and price decline, as do the number of competitors. Sales rise slowly as customers become aware of the new product or service. Product variety is limited. Sales increase rapidly along with an increase in product variety. Sales continue to increase but at a decreasing rate. The number of competitors and product variety decline.

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

Normal spoilage is defined as: Scrap. Uncontrollable waste as a result of a special production run. Controllable spoilage. Spoilage that arises under inefficient operations. Spoilage that occurs under efficient operations.

Spoilage that occurs under efficient operations.

The make-or-buy (i.e., sourcing) decision can (most likely) apply to decisions regarding all the following functions or expenditures except: Strategic management. Security. Human resource management. Maintenance and repair. Internal auditing.

Strategic management.

Fixed costs will often be irrelevant for short-term decision making because they: Do not vary on a per-unit-of-output basis. Typically do not differ in total between decision alternatives being considered. Are not committed. Are the same each time period. Cannot be estimated with precision.

Typically do not differ in total between decision alternatives being considered.

Organic Laboratories allocates research and development costs to its three research facilities based on each facility's total annual revenue from new product developments: Kentucky / Arizona / Illinois / Total New product revenue$56,000,000 $100,000,000 $84,000,000 $240,000,000 Research & Development $60,000,000 Using revenue as an allocation base, the amount of costs allocated to the Kentucky research facility is calculated to be:

$14,000,000.

Preston Industries, Inc. currently manufactures part QX100, which is used in several products produced by the company. Monthly production costs for 10,000 units of QX100 are as follows: Direct materials$80,000 Direct labor$20,000 Variable overhead costs$50,000 Fixed overhead costs$40,000 Total manufacturing costs$190,000 Accounting has estimated that 20% of the fixed overhead costs currently assigned to QX100 would not be needed if the company chose to purchase the part from an outside supplier. Preston currently has the option of purchasing the part from an outside supplier at $16.00 per unit. Based solely on a short-run financial analysis, the maximum price that Preston should be willing to pay the outside vendor for each unit of QX100 is: $15.80 $15.00 $16.00 $11.00 $10.00

$15.80

Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm's two products - Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product. Askin / Bskin / Total Sales$4,000,000 $2,600,000 $6,600,000 Cost of goods sold (2,600,000) (2,100,000) (4,700,000) Gross profit$1,400,000 $500,000 $1,900,000 Research and development (1,170,000) Selling expenses (130,000) Profit before taxes $600,000 Seventy-five percent of the research and development and selling expenses were traceable to Askin. Profit before taxes for the Bskin product, per life-cycle income statements, is: $522,500. $332,500. $175,000. $207,500. $425,000.

$175,000 Determine how much R&D and Selling is attributed to Bskin 25%1. ($1,170,000 + 130,000) × .25 = $325,000 Gross profit of Bskin less the R&D and Selling2. $500,000 - $325,000 = $175,000

Sutherland Company listed the following data for 2019: Budgeted factory overhead$2,100,000 Budgeted direct labor hours 89,000 Budgeted machine hours 51,000 Actual factory overhead 2,201,000 Actual direct labor hours 83,700 Actual machine hours 48,900 Assuming Sutherland applied overhead based on machine hours, the company's predetermined overhead rate for 2019 is (round to two significant digits): $38.31 per machine hour. $41.98 per machine hour. $44.00 per machine hour. $35.90 per machine hour. $41.18 per machine hour.

$2,100,000 ÷ 51,000 = $41.18 per machine hour

Zhender Inc. manufactures hair brushes that sell at wholesale for $2.60 per unit. Budgeted production in both 2018 and 2019 was 3,000 units. There was no beginning inventory in 2018. The following data summarized the 2018 and 2019 operations: 2018 / 2019 Units sold 2,500 3,200 Units produced 3,000 3,000 Costs: Variable factory overhead per unit$0.65 $0.65 Fixed factory overhead$1,290 $1,290 Variable marketing per unit$0.80 $0.80 Fixed Selling and Administrative$650 $650 Variable costing operating income for 2018 is calculated to be: $1,352. $1,200. $1,150. $1,395. $935.

$935.

Quality Chairs Inc. (QC) manufactures chairs for industrial use. Laura Winters, the Vice President for Marketing at QC, concluded from market analysis that sales were dwindling for QC's standard three-foot chair due to aggressive pricing by competitors. QC's chairs sold for $550 whereas the competition's comparable chair was selling for $495. Winters determined that a price drop to $495 would be necessary to regain market share and reach a targeted annual sales level of 10,000 chairs.Cost data based on sales of 10,000 chairs: Budgeted Quantity / Actual Quantity / Actual Cost Direct materials (board feet) 88,000 79,500 $1,250,000 Direct labor (hours) 71,350 73,775 875,000 Machine hours (hours) 11,400 11,250 250,000 Finishing and packing (hours) 6,500 6,400 125,000 The current profit per unit is: $400. $450. $250. $300. $475.

$300.

Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below. Direct materials Jan 1 $77,000 / Dec 31 $40,000 Work in process Jan 1 66,000 / Dec 31 42,000 Finished goods Jan 115,000 / Dec 100,000 Direct materials purchases $324,000 Cost of goods available for sale 950,000 Actual factory overhead costs 260,000 The cost of goods sold (before adjustment for under or overapplied overhead) is: $348,000. $850,000. $835,000. $867,000. $811,000.

$950,000 - $100,000 = $850,000

ABC Company listed the following data for the current year: Budgeted factory overhead$1,044,000 Budgeted direct labor hours 69,600 Budgeted machine hours 24,000 Actual factory overhead 1,037,400 Actual labor hours 72,600 Actual machine hours 23,600 If overhead is applied based on direct labor hours, the overapplied/underapplied overhead is: $15,300 overapplied. $15,300 underapplied. $51,600 overapplied. $51,600 underapplied. $0

($15 × 72,600) - 1,037,400 = $51,600 overapplied.

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? $190.00. $184.25. $168.50. $176.00.

176.00 Competitors Price * (1-20%)220*(1-20% = 176.00

The five tasks that follow take place with the concept known as target costing: Use value engineering to identify ways to reduce product cost. Determine the market price. Determine the desired profit. Use kaizen costing and operational control to reduce costs. Calculate the target cost at market price less desired profit. Which of the following choices depicts the correct sequence of these tasks? 2, 3, 5, 1, 4 5, 3, 2, 4, 1 1, 2, 3, 4, 5 3, 2, 5, 4, 1 3, 2, 5, 1, 4

2, 3, 5, 1, 4

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: 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: 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

Which of the following can produce unit product costs that fluctuate significantly? Actual costing system. Standard costing system. Industry costing system. Normal costing system.

Actual costing system.

A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. This boat can either be disposed for $11,000 cash and be replaced with a similar boat costing $110,000, or rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned. A relevant cost analysis of the decision to replace the boat shows: A $21,000 cost advantage associated with the decision to fix the old boat. An $11,000 net advantage associated with the decision to fix the old boat. A $1,000 cost advantage associated with the decision to fix the old boat. A $2,000 cost advantage associated with the decision to purchase a new boat. A cost equivalence between the two decision options.

A $1,000 cost advantage associated with the decision to fix the old boat.

Which type of firm is most likely to require a very accurate costing system? A firm in a professional services industry. A firm in a competitive environment. A firm in a process industry. A global firm.

A firm in a competitive environment.

The balanced scorecard measures the SBU's performance in all of the following areas except: Managerial performance. Customer satisfaction. Learning and growth. Internal business processes. Accounting and tax compliance.

Accounting and tax compliance.

In a sell-or-process-further decision, joint production costs: Cannot be allocated to products for financial reporting purposes. Should be allocated to outputs based on relative sales dollars. Usually are traceable to individual products/outputs. Should be allocated to outputs based on relative physical units. Are irrelevant to the decision.

Are irrelevant to the decision.

For production and support departments, a method of implementing cost centers that is input-oriented is the: Outsourcing method. Engineered-cost method. Budget slack method. Discretionary-cost method. Cost shifting method.

Discretionary-cost method.

Which of the following can be inferred as an argument against the use of variable costing? Full costing overstates the balance sheet value of inventories. Fixed factory overhead is difficult to allocate properly. Fixed factory overhead is necessary for the production of a product. Variable factory overhead is a period cost.

Fixed factory overhead is necessary for the production of a product.

Diamond Company has three product lines, A, B, and C. The following financial information is available: Product Line A / Line B /Line C Sales$30,000 $45,000 $12,000 Variable costs$18,000 $24,000 $7,500 Contribution margin$12,000 $21,000 $4,500 Fixed costs: Avoidable$4,500 $9,000 $3,000 Unavoidable$3,000 $4,500 $2,000 Pre-tax operating income$4,500 $7,500 $(500) If Product Line C is discontinued and the manufacturing space formerly devoted to this line is rented for $6,000 per year, pre-tax operating income for the company will likely: Increase by $4,500. Be unchanged—the two effects cancel each other out. Increase by $3,300. Increase by some other amount. Increase by $7,200.

Increase by $4,500.

An employment contract is an agreement between the manager and top management designed to provide incentives for the manager to act: Independently to achieve the customer's objectives. Independently to achieve the manager's objectives. Consistently with that of other managers. Independently to achieve top management's objectives.

Independently to achieve top management's objectives.

Manders Manufacturing Corporation uses the following model to determine an optimal short-term product mix for its two products, metal (M) and scrap metal (S): Max Z = $30M + $70S Where: 3M + 2S ≤ 15 2M + 4S ≤ 18 The above mathematical functions together constitute a(n): Linear programming model. Economic order quantity model. Simulation model. Nonlinear optimization model. Multivariate regression model.

Linear programming model.

As a strategic issue, "budget slack" could represent a: Problem only in a decentralized management environment. Significant increase in the relative risk aversion of managers. Lower overall level of expected performance than is achievable. Self-correcting problem over several operating periods. Very minor issue in most firms.

Lower overall level of expected performance than is achievable.

When a firm has surplus capacity (that is, no resource constraints), relevant costs for decision-making (for example, determining short-term product mix) will, relative to the situation where the firm faces one or more resource constraints, be: Greater. The same. It varies—that is, it is impossible to tell without further information. Lower.

Lower.

The evaluation of operating level employees by mid-level managers is: Operational control. Principal-agent model. Management control. Goal congruence. Performance evaluation.

Operational control.

In deciding whether to accept or reject a "special sales order," managers need critical information about all the following except: Alternative uses of existing capacity. Relevant costs. The strategic, competitive environment of the firm. Prior period operating costs. Any opportunity costs associated with accepting the order.

Prior period operating costs.

Operating income reported under full costing will exceed operating income reported under variable costing for a given period if: Production exceeds sales for that period. Production equals sales for that period. The variable overhead exceeds the fixed overhead. Sales exceed production for that period.

Production exceeds sales for that period.

What is an appropriate performance evaluation measure for the mature stage of a product's life cycle? Profitability. Market penetration. Revenue. Asset management.

Profitability.

A decision bias is an inherent tendency that leads to incorrect decisions. An example of a decision bias is failure to: Consider all relevant costs. Consider opportunity costs. Consider legal constraints associated with the pricing decision. Adjust for the time value of money. Properly identify sunk costs as irrelevant.

Properly identify sunk costs as irrelevant.

From a strategic standpoint, profit centers tend to: Provide incentive for coordination among managers of different functional units. All of these answer choices are correct. Free the center manager from concerns about markets. Focus managers on cost control rather than revenue generation. Place more cost emphasis on rush orders.

Provide incentive for coordination among managers of different functional units.

Which of the following methods accurately represents the process below? A customer orders twenty cases of nails, and the firm then produces the nails: Pull method. Push method. Overhead assignment method. Order method.

Pull method.

Triad Children's Center (TCC), a non-profit organization, uses relevant cost analysis to determine whether new services are desirable. TCC is looking at adding a new educational program for grade school children who are having difficulty with their reading and math skills. The following relevant costs are expected if the program is accepted: Costs (per year) Program Director salary$39,000 Part-time Assistants$28,000 Variable cost per child$900 TCC estimates that a maximum of 40 children will participate in this program in the first year. If TCC decides to implement this program, funding will be received from the City Chamber of Commerce ($50,000) and a local Private University Endowment Fund ($35,000). In deciding between alternative choices for a given situation (such as the above new-program evaluation), TCC may employ a five-step decision process. Which of the following is not a recommended step in this decision-making process? Select and implement the best course of action. Review the completed financial audit report. Perform relevant and strategic cost analysis. Specify the criteria and identify the alternative actions. Evaluate performance.

Review the completed financial audit report.

During the sales life cycle, which is an example of what happens during the maturity phase Sales rise slowly as customers become aware of the new product or service. Product variety is limited. Sales and price decline, as do the number of competitors. Sales increase rapidly along with an increase in product variety. Sales continue to increase but at a decreasing rate. The number of competitors and product variety decline.

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

Departmental overhead rates are preferred over plantwide rates when: There are a number of different products in the plant which go through the same processes. The products use different amounts of different processes in different departments. The plant has a complex production process for a small number of products that go through the same production processes. The plant makes a single product.

The products use different amounts of different processes in different departments.

Under job costing, factory overhead costs are assigned to products or services using labor or machine hours which are: Activity-based cost drivers. Volume-based cost drivers. Non-volume-based cost drivers only. Multiple cost pools. A homogeneous cost pool.

Volume-based cost drivers.

According to the study guide, all strategy is essential for the success of a company.

false

Since estimates are not actual amounts and are used to approximate, there is not a need for the estimate to be fairly accurate.

false

Target costing is only utilized to determine the breakeven amount.

false

The Bible does not speak directly to financial decisions.

false

According to the study guide, one of the goals of managers should be to find a way to turn cost centers into profit centers.

true

According to the study guide, strategic planning should follow the advice found in Proverbs 3:7.

true

Luke 10:30-37 provides business managers with a guideline as to how they should conduct both their personal life, as well as their business life.

true

Opportunity costs are an important consideration for managers when deciding whether to accept special orders.

true

The applied overhead is compared to the actual overhead, with any discrepancy going into one of the following three accounts: goods in process inventory, finished goods inventory, or cost of goods sold.

true

When choosing whether to make, lease, or buy, a manager must consider the profits to be made under each consideration.

true