the breakeven point is

Joe's Mart policy is to have 20% of the next month's sales on hand at the end of the current month. Projected sales for August, September, and October are 25,000 units, 20,000 units, and 30,000 units, respectively. How many units must be purchased in September?

22,000

tylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below. Sales price $ 75.00 Per-unit variable costs: Invoice cost 41.70 Sales commissions 18.30 Total per-unit variable costs $ 60.00 Total annual fixed costs: Advertising $ 56,000 Rent 78,000 Salaries 226,000 Total annual fixed costs $ 360,000 The annual breakeven point, in unit sales, is

24,000 units

throughput margin is defined as sales less:

direct material cost

a cost is not relevant if it:

does mot differ for each option available to the decision maker

variable costs will generally be relevant for decision making because they:

have not been committed and differ between options

the major problem with relevant cost determination is that it fails to recognize the:

long-term nature of most product-related decisions

many firms are finding it is difficult to compete successfully on cost leadership or differentiation alone, and they must, in fact compete on bothL

price & functionality

reduced time-to-market, reduced expected service cost, and ease-of-manufacture are critical success factors at which stage of the cost life cycle?

product design

Depreciation is a relevant cost in a decision only in the context of:

reducing tax liability

all of the following are characteristic of relevant costs except:

they are inventory costs

fixed costs will often be irrelevant because they:

typically do not differ between options

a specially order is

typically expected

A measure of operating performance defined as the elapsed time between the time the customer places an order and the time the customer receives the order is called Jit manufacturing.

False

For each material, the difference between the actual and the standard cost per unit of the material multiplied by the actual quantity of direct materials used (or purchased) during the period is called the direct materials flexible-budget variance.

False

The excess wage rate per hour over the standard hourly wage rate is the standard cost for direct labor.

False

An example of an industry with relativity high downstream costs is:

Fashion apparel manufacturing

committed, or "sunk" costs are generally

Occurred in the past

The theory of constraints (TOC) emphasizes the improvement of throughput by removing or reducing bottlenecks that slow the rate of:

Output

An accounting statement that presents predicted amounts of the company's assets, liabilities, and stockholders' equity as of the end of the budget period is called a(n):

Pro forma balance sheet

Generally a firm competing on differentiation will set a relativity high price at which stage of the products sales life cycle?

Product introduction

Which one of the following is a downstream cost?

Warranty repair

The contribution margin per unit multiplied by the number of units sold is the:

Total contribution margin (CM).

A measure of operating performance defined as the elapsed time between the time the customer places an order and the time the customer receives the order is called the customer response time.

True

A process in which production at any stage of the process does not take place until an order is received is call Just-in-time (JIT) manufacturing

True

A standard that reflects perfect implementation and maximum efficiency in every aspect of the operation a ideal standard

True

Differences between budgeted and actual amounts, for either financial or non-financial measures are variances

True

For each material, the difference between the actual and the standard cost per unit of the material multiplied by the actual quantity of direct materials used (or purchased) during the period is called the direct materials price variance.

True

For each material, the difference between the total direct materials cost incurred and the flexible-budget amount for this period's output is the direct materials flexible budget variance.

True

The comparison between actual and budgeted results is financial control

True

The cost a firm should incur for a process or activity is a standard cost.

True

The difference between the actual and standard hourly wage rate multiplied by the actual direct labor hours worked during the period is the direct labor rate variance.

True

The excess wage rate per hour over the standard hourly wage rate is the overtime premium.

True

The set of problems, tools and systems that organizations use to reach their goals is control.

True

"Special sales orders," as this term is used in Chapter 11

Typically come directly from the customer rather than through normal sales or distribution channels

Fixed costs will often be irrelevant for short-term decision making because they:

Typically do not differ between decision alternatives being considered.

____________is used in target costing to reduce product cost by analyzing the trade-offs between different types of product functionality and total product costs

Value engineering

Suppose a firm has the following unit costs (using ABC costing): Manufacturing Costs Materials $160 Labor 200 Batch level 80 Other plant OH 160 Total manufacturing $600 Total selling & Admin $100 What is the selling price assuming that the company is using full manufacturing costs and wants a desired gross margin of 40 percent of sales?

$1,000.00

Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below. Sales price $ 75.00 Per-unit variable costs: Invoice cost 41.70 Sales commissions 18.30 Total per-unit variable costs $ 60.00 Total annual fixed costs: Advertising $ 56,000 Rent 78,000 Salaries 226,000 Total annual fixed costs $ 360,000 The annual breakeven point, in dollar sales, is

$1,800,000

Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople. Sales price $ 36.00 Per-unit variable costs: Invoice cost 18.60 Sales commissions 5.40 Total per-unit variable costs $ 24.00 Total annual fixed costs: Advertising $ 24,000 Rent 30,000 Salaries 126,000 Total fixed costs $ 180,000 If 24,000 hats were sold, Grant's operating income (πB) would be

$108,000

In addition to the above costs, if Valters produces part PQ107, he would also have a retooling and design cost of $9,800. The relevant costs of producing 2,400 units of product PQ107 are:

$149,000

Quirch inc. manufactures machine parts for aircraft engines. the CEO, chucky valters, was considering an offer from a subcontractor who would provide 2,400 units of product PQ107 for valters for a price of $150,000. if Quirch does not purchase these parts from the subcontractor it must produce them in-house with the following costs DM = 31 DL = 19 Variable OH = 8

$149,000

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales (current and past)?

$31,000

Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits. Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for the following month. What dollar amount of suits should be purchased in November? $33,000. $27,000. $26,000. $60,000.

$33,000

Blake Company has $15,000 cash at the beginning of June and anticipates $50,000 in cash receipts and $34,500 in cash disbursements. The company requires a minimum cash balance of $20,000. Any excess cash over the minimum desired balance is used to pay down debts. Blake has an agreement with its bank to borrow as needed or to repay loans as funds become available. As of May 31, the company owes $15,000 to the bank. The balance of the loan on June 30 will be: A. $4,500. B. $9,500. C. $15,000. D. $19,500. E. $25,500.

$4,500

The Sand Cruiser is a takeout food store at a popular beachside resort. Teresa Texton, owner of the Sand Cruiser, was deciding how much refrigerator space to devote to four different beverages. Appropriate data on the four beverages follow: The contribution margin per case for Lemonade is:

$4.80

The Johann's Professional Service Company expects 70% of sales for cash and 30% on credit. The company collects 80% of its credit sales in the month following sale, 15% in the second month following sale, and 5% are not collected (that is, they are "bad debts"). Expected sales for June, July, and August are $48,000, $54,000, and $44,000, respectively. What are the company's expected total cash receipts in August?

$45,920

Kingston Company, which needs 10,000 units of a certain part to be used in its production cycle, can make or buy the part. If Kingston buys the part from Utica Company, Kingston could not use the released facilities in another manufacturing activity within the coming year. 60% of the fixed overhead applied will continue regardless of which decision is made. The following information is available: Per-unit cost to Kingston to make the part: Direct materials $6 Direct labor 24 Variable overhead 12 Fixed overhead applied 15 $57 Cost to buy the part from Utica Company $53 In deciding whether to make or buy the part, Kingston's total relevant cost to make the part would be:

$480,000.

Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople. Sales price $ 36.00 Per-unit variable costs: Invoice cost 18.60 Sales commissions 5.40 Total per-unit variable costs $ 24.00 Total annual fixed costs: Advertising $ 24,000 Rent 30,000 Salaries 126,000 Total fixed costs $ 180,000 The annual breakeven point in dollar sales is calculated to be

$540,000

Suppose a firm has the following unit costs (using ABC costing): Manufacturing Costs Materials $160 Labor 200 Batch level 80 Other plant OH 160 Total manufacturing $600 Total selling & Admin $100 What is the selling price assuming that the company is using lifecycle costs plus a 25 percent markup based on life-cycle costs?

$875.00

Lyman Company has the opportunity to increase annual credit sales $100,000 by selling to a new, riskier group of customers. The expenses of collecting credit sales are expected to be 15 percent of credit sales. The company's manufacturing and selling expenses are projected at 70% of sales, and its effective tax rate is 40%. If Lyman accepts this opportunity, its after-tax profits would increase by an estimated:

$9,000

a boat, costing $108,000 and uninsured, was wrecked the very first day it was used. it can either be disposed of 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. the total relevant cost of replacing the boat is:

110,000 - 11,000 = $99,000

Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July: April 120,000 May 140,000 June 150,000 July 120,000 At the end of each month the company desires its ending finished goods inventory to be 20% of the next month's projected sales (in units). The budgeted production (in units) for Gorberchev Food Processing for April should be: A. 112,000. B. 120,000. C. 127,200. D. 128,000. E. 142,000.

128,000

Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July: April 120,000 May 130,000 June 140,000 July 120,000 At the end of each month the company desires its ending finished goods inventory to be 20% of the next month's projected sales (in units). The budgeted production (in units) for Gorberchev Food Processing for May should be: A. 104,000. B. 128,000. C. 130,000. D. 132,000. E. 138,000.

132,000

Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople. Sales price $ 36.00 Per-unit variable costs: Invoice cost 18.60 Sales commissions 5.40 Total per-unit variable costs $ 24.00 Total annual fixed costs: Advertising $ 24,000 Rent 30,000 Salaries 126,000 Total fixed costs $ 180,000 The annual breakeven point in unit sales is calculated to be:

15,000 units

Cripe Corporation maintains ending inventory for each month at 5% of the following month's sales. It predicted the following sales (in units) for the first four months of the coming year: January 2,000 February 2,400 March 3,000 April 2,800 How many units should be produced in March?

2,990

A Budget that adjusts revenues and costs to reflect varying levels of output activity is a static budget,

False

Doanne Food Processing expects to have 36,000 pounds of raw materials inventory on hand on March 31, the end of the current year. The company budgets the following production (in units) for April through July, inclusive: April 120,000 May 130,000 June 140,000 July 120,000 At the end of each month the firm desires its ending raw material inventory to be 10% of the next month's production needs. Each finished unit requires three pounds of raw materials. Doanne's budgeted purchases for raw materials (in pounds) during April should be: A. 224,000. B. 360,000. C. 363,000. D. 399,000. E. 435,000.

363,000

ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March? 5,000 7,500 5,500 3,500

5,500

A "special sales order" within the context of Chapter 11 is:

A one-time opportunity to sell a specified quantity of a product or service.

In deciding whether to accept or a reject a "special sales order," which of the following costs are likely relevant to the decision?

A portion of batch-level costs

The amount of time between receipt of a customer order and the delivery of the product to the customer is called:

Manufacturing cycle time

_____________________is equal to processing time divided by total cycle time.

Manufacturing cycle time.

Which of the following budgets must be completed before preparing a cash budget?

Cash receipts budget

The difference between sales price per unit and variable cost per unit is the:

Contribution margin per unit (cm).

A master budget is typically prepared for:

Coordinating activities among subunits of an organization

Which one of the following is defined, at any given sales volume, as the ratio of the total contribution margin to operating profit at that sales volume?

Degree of operating leverage (DOL).

Fill in the blank Target cost = Competitive cost - _________

Desired profit

A cost is not relevant for decision making if it:

Does not differ for each option available to the decision maker

__________________________is a method in which each element of an existing product is examined for its cost and value adding features.

Functional analysis

Variable costs will generally be relevant for decision making because they:

Have not been committed and are likely to differ between decision options.

Calculating the margin of safety (MOS) measure will help a firm answer which of the following questions?

How much revenue can we lose before we drop below the breakeven point?

Which stage of the product life cycle is characterized by little competition and slow increasing sales?

Introduction

The master budget for a given accounting period has all of the following except:

It is based on the actual level of sales activity for the period

Which of the following is not a potential benefit of having a sound budgeting process?

Lower acceptance rate for capital budgeting projects

Which one of the following is an upstream cost?

R & D

Management accountants are frequently asked to analyze various decision situations including the following:(1) Alternative uses of plant space, to be considered in a make/buy decision.(2) Joint production costs incurred, to be considered in a sell-at-split-off versus a process-further decision.(3) Research and development costs incurred in prior months, to be considered in a product-introduction decision.(4) The cost of a special device that is necessary if a special order is accepted.(5) The cost of obsolete inventory to be considered in a keep-versus-disposal decision.The costs described in situations 1 and 4 above are:

Relevant costs.

The practice of maintaining budgets for the same number of future periods, revising those budgets as each period is completed and adding a new budget each period, is called:

Rolling budgets (or, rolling financial forecasts).

A plan showing the units of goods expected to be sold and the expected revenue from sales is called the:

Sales budget

Which of the following budgets is not a financial budget?

Sales budget

Which of the following is true concerning TOC?

Short-term focus = YES Uses Cost Drivers = NO

________ us an important first step in value engineering because it identifies critical consumer preferences that will define the products's desired functionality

consumer analysis

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