Account Final

It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the special order is accepted, what will be the effect on net income

$6,000 increase

Equivalent units of production are a measure of

the work done in a period expressed in fully completed units.

In a process cost system, units to be accounted for in a department are equal to the

units in the beginning inventory plus the units started or transferred into the department

In a process cost system, a production cost report is prepared

for each processing department.

Materials requisitions are

generally used less frequently in process costing than job order costing

The process of evaluating financial data that change under alternative courses of action is called

incremental analysis

A revenue that differs between alternatives and makes a difference in decision-making is called a

incremental revenue

An opportunity cost

is the potential benefit that may be obtained by following an alternative course of action.

If a project's profitability index is less than 1, then

it should be rejected.

The primary capital budgeting method that uses discounted cash flow techniques is the

net present value method.

Capital budgeting is the process

of making capital expenditure decisions

In the production cost report, the total

physical units accounted for equals the units to be accounted for

The profitability index is computed by dividing the

present value of cash flows by the initial investment.

A negative net present value indicates that the

present value of the cash inflows was less than the present value of the cash out flows.

If a company's required rate of return is 10% and, in using the net present value method, a project's net present value is zero, this indicates that the

project earns a rate of return of 10%.

The potential effects of the decision to eliminate a line of business on existing employees and the community are

qualitative factors

Costs that will differ between alternatives and influence the outcome of a decision are

relevant costs

The first step in the capital budgeting evaluation process is to

request proposals for projects.

When a capital budgeting project generates a positive net present value, this means that the project earns a return higher than the

required rate of return.

Intangible benefits in capital budgeting would include all of the following except increased

salvage value.

Which of the following is not a capital budgeting decision? Remodeling an office building Constructing new studios Replacing old equipment Scrapping obsolete inventory

scrapping obsolete inventory

In an equipment replacement decision, the cost of the old equipment is a

sunk cost

Which of the following is an irrelevant cost? Opportunity Cost, Avoidable Cost or Sunk Cost

sunk cost

If 180,000 units are transferred out of a department, there was no beginning work in process, and there are 30,000 units still in process at the end of a period, the number of units that were started into production during the period is

210,000

A process with no beginning work in process, completed and transferred out 85,000 units during a period and had 50,000 units in the ending work in process inventory that were 30% complete. The equivalent units of production for the period were

100,000 equivalent units.

In the month of June, a department had 20,000 units in beginning work in process that were 70% complete. During June, 90,000 units were transferred into production from another department. At the end of June there were 10,000 units in ending work in process that were 40% complete. Materials are added at the beginning of the process, while conversion costs are incurred uniformly throughout the process. How many units were transferred out of the process in June?

100,000 units

Conversion cost per unit equals $6. Total materials cost equal $90,000. Equivalent units for materials are 10,000. How much is the total manufacturing cost per unit?

15

In Saint-Simon, Inc., the Assembly Department started 60,000 units and completed 70,000 units. If beginning work in process was 30,000 units, how many units are in ending work in process?

20,000

The Molding Department of Kennett Company has the following production data: beginning work in process 25,000 units (60% complete), started into production 475,000 units, completed and transferred out 450,000 units, and ending work in process 50,000 units (40% complete). Assuming conversion costs are incurred uniformly during the process, the equivalent units for conversion costs are

470,000

If an asset costs $240,000 and is expected to have a $40,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $40,000 each year, the cash payback period is

6 years.

Which of the following ignores the time value of money?

Cash payback

Mixed Costs

Costs that contain both a variable- and a fixed-cost element and change in total but not proportionately with changes in the activity level.

What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment

It is relevant since it reduces the cost of the new equipment.

Which decision will involve no incremental revenues? Make or Buy Decision, Accept a Special order, OR Drop a Product Line

Make or Buy Decision

A process cost system would be used for all of the following products except - Soft drinks, motion pictures, or computer chips

Motion Pictures

Using the profitability index method, the present value of cash inflows for Project Flower is $88,000 and the present value of cash inflows of Project Plant is $48,000. If Project Flower and Project Plant require initial investments of $90,000 and $40,000, respectively, and have the same useful life, the project that should be accepted is

Project Plant

A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action?

Sell now, the company will be better off by $16,000

Which of the following would generally not affect a make-or-buy decision?

Selling expenses

A process cost accounting system is most appropriate when

Similar products are mass-produced

Relevant Range

The range of activity within which assumptions about variable and fixed cost behavior are valid.

Miley, Inc. has excess capacity. Under what situations should the company accept a special order for less than the current selling price?

When incremental revenues exceed incremental costs

A product requires processing in two departments, the Baking Department and then the Packaging Department, before it is completed. Costs transferred out of the Baking Department will be transferred to

Work in Process—Packaging Department

In a make-or-buy decision, opportunity costs are

added to the make total cost.

Net annual cash flow can be estimated by

adding depreciation expense to net income.

If a company must expand capacity to accept a special order, it is likely that there will be

an increase in fixed costs

A company's discount rate is based on the

cost of capital and the risk element.

The total costs accounted for in a production cost report equal the

cost of units completed and transferred out plus the cost of ending work in process

fixed costs

costs that remain constant as output changes (property taxes, Insurance, Rent, Depreciation)

variable costs

costs that vary directly with the level of production, remain the same per unit at every level of production