Managerial Accounting Test 3

Most manufacturing plants are considered COST CENTERS because they have control over?

cost only

Alex Corporation had $650,000 in invested assets, sales of $700,000, operating income amounting to $99,000, and a desired minimun return on investment of io The profit margin for Alex Corporation is

14.1%

Cow Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four mons are:4an1arV. 200.000 units: Februarv. 180.000 units: March. 210.000 units: and April, 230,000 units. Cow Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales The budgeted units ot production tor February would be

181,000 units

When using the product cost method of applying the cost plus approach to product pricing, which of the following in included in the markup?

Desired profit

Which of the following is not involved in the budgeting process? Reporting actual results Directing operations Evaluating performance Establishing plans

Evaluating performance

Budgetary slack can be avoided if lower and mid-level managers are required to support all of their spending requirements for special operational plans

False

If Jackson and Company expects to sell 200.000 units in the current year, desires ending inventory of 24.000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 198,000 units

False

Which of the following is not a method commonly used in applying the cost-plus approach to product pricing?

Fixed cost method

A series of budgets for varying levels of activity is termed a(n) _____budget.

Flexible

Cost-plus methods determine the normal selling price by estimating a cost amount per unit and adding a markup.

True

Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared with alternative

True

Flexible budgeting builds the effect of changes in level of activity into the budget system.

True

Make-Or-buy options often arise when a manutacturer has excess productive capacity in the form of unused equipment, space, and labor

True

Most companies prepare a master budget on a yearly basis

True

T/F Developing and retaining quality managers are advantages of decentralization.

True

T/F In return on investment analysis, the investment turnover component focuses on efficiency in the use of assets and indicates the ratio in which sales are being generated for each dollar of invested assets

True

T/F The profit margin component of return on investment analysis focuses on profitability by indicating the rate of profit earned on each sales dollar

True

The capital expenditures budget summarizes plans for acquiring fixed assets.

True

The product cost method includes all manufacturing costs in the cost amount to which the markun is added to determine product price

True

Discontinuing a product or segment is a huge decision that must be carefully analyzed. Which of the following would be a valid reason not to discontinue an operation? Assume fixed costs will not he affected

Variable costs are less than revenues

Telecom Companv manufactures Phone X and Phone Y. Pevton can sell all it can make of either phone. Based on the following data and assuming the number of hours is a constraint, which of the following statements 1S Sales DrICe $48 38 y $44 28 Variable cos Time needed to process 5 hours & hours

X and Y are equally profitable.

The budgeting process does not involve which of the following activities?

increased marketing efforts to boost sales

Managers of what type of decentralized units have authority and responsibility for revenues, costs, and assets invested in the unit?

investment center

Simply Secure 1s currently buying 50,000 motherboards from Computer Manufacturing, Inc., at a price of $65 per board. Simply Secure is considering making its own boards. The costs to make the board are as follows: direct materials. $32 per unit; direct labor, $10 per unit; and variable factory overhead, $16 per unit. Fixed costs for the plant would increase by $75,000. Which option should be selected and why?

make, $275,000 increase in profits

All of the following should be considered in a make-or-buy decision except

whether the supplier will make a profit that would no longer belong to the business

Assume that the Bike Division has achieved a yearly operating income of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable return on investment of 11%o, the residual Income 15

$11,000

Which of the following is a disadvantage of decentralization?

Decisions made by one manager may negatively affect the profitability of the entire company.

Some organizations use internal support departments to provide like services to several divisions or departments withir Which of the following would probably not lend itself as a support department?

Inventory Control Department

The first budget to be prepared is usually the production budget.

False

A previous cost that will not be affected by later decisions is a sunk cost.

True

A variant of fiscal-year budgeting whereby a 12-month projection into the future is maintained at all times is termed _____ budgeting.

continuous

Trot Company uses the variable cost method of product pricing. Below is cost information for the production and its sole product. Trot desires a profit equal to an 11.2% return on invested assets of $350,000. Fixed Factory overhead cost - $105,000 Fixed selling and administrative costs - 35,000 Variable direct materials cost per unit - 4.34 Variable direct labor cost per unit - 0.98 Variable selling and administrative cost per unit - 0.70 The VARIABLE COST PER UNIT for the production and sale of Trot's product is

$11.20

Trot Company uses the variable cost method of product pricing. Below is cost information for the production an its sole product. Trot desires a profit equal to an 11.2% return on invested assets of $350,000. Fixed factory overhead cost Fixed selling and administrative costs Variable direct materials cost per unit $105.000 Variable direct labor cost per unit Variable factory overhead cost per unit Variable selling and administrative cost per unit 35.000 4.34 5.18 0.98 0.70 The variable cost per unit for the production and sale of Trot's product is

$11.20

Finch Corporation uses the total cost method of product pricing. Below is cost information for the production and: its sole product. Finch desires a profit equal to a 25% return on invested assets of $700,000. Fixed factory overhead cost Fixed selling and administrative costs Variable direct materials cost per unit Variable direct labor cost per unit Variable factory overhead cost per unit Variable selling and administrative cost per unit $38.700 7,500 4.60 1.88 1.13 4.50 The cost per unit for the production and sale of Finch's product is

$12.88

As of Januarv1 of the current vear. Crisov Foods had accounts receivable of $50.000. The sales for Januarv. Februarv. and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. The total cash collected (both from accoun receivable and cash sales win the month of March is

$146,800

Agricultural Seed Company is considering replacing equipment that originally cost $600,000 and has accumulated depreciation of $420.000 to date A new machine will cost $790.000 and the old equipment can be sold for $8.000. The sunk cost in this situation is

$290,000

Timber Pole Manufacturing can further process Product B to produce Product C. Product B is currently selling for $60 per pound and costs $38 per pound to produce. Product C would sell for $95 per pound and would require an additional cost of $13 per pound to produce. The differential REVENUE of producing and selling Product C is

$35 per pound

Next year's sales forecast shows that 20.000 units of Product A and 22.000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B Is 2,500 units. The desired ending inventory of Product B is 3.000 units Total budgeted sales of both products for the year would Be

$464,000

The budgeted information is as follows: Materials to be used total $64.750 Direct labor totals $198.400 Factory overhead totals $394,800 Work in process inventory on January 1 is $189,100 Work in progress inventory on December 31 is $197,600. The budgeted cost of goods manufactured for the year is

$649,450

Restaurant Supply manufactures three products: Plates, Bowls, and Cups. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20. $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Plates take 5 hours to process: Bowls 7 hours: and Cups 1 hour The contribution margin per machine hour for Bowls iS

$7

Nurse Corporation sells a single product. Budgeted sales for the year are anticipated to be 640.000 units, estimated beginning in ventory is 98.000 units, and desired ending inventory iS 80,000 units. Budgeted production for the year is anticipated to be 622,000 units. he quantities of direct materials expected to be used tor each unit of finished product are given below Material A: 0.5 lb. per unit @ $0.60 per pound Material B: 1.O lb. Der unit @ $1.70 per pound Material C: 1.2 lbs. per unit @ $1.00 per pound The dollar amount of Material C used in production during the year iS

$746,400

An October sales forecast projects 7,000 units are going to be sold at a price of $11.50 per unit. The desired ending inventory in un 15% higher than the beginning inventory of 1,000 units. Total October sales are anticipated to be

$80,500

Vacuum Imports & Exports received an offer from an exporter for 15,000 units of product at $17.50 per unit. The acceptance of the offer will not affect normal production or domestic sales prices. The following data are available Domestie unit sales price 1U nit manufacturing costs. Variable $20 Fixed The amount of profit or loss from acceptance of the offer 1S a

$97,500 profit

Magpie Company began its operations on March 31 of the current year. Magpie has the following projected Costs: April Manufacturing costs* Insurance expense** depreciation expense Property Tax Expense*** May $156.800* 1,000** 2 000 500*** June $195,200* 1,000** 2,000 500*** *Of the manufacturing costs, three-fourths is paid for In the month they are incurred: one-fourth is paid in the following month. **Insurance expense is $1.000 a month; however, the insurance is paid four times yearly in the first month of the quarter (i.e., January, April, July, and October). ***Property tax is paid once a year in November. The cash payments for Magpie Company expected in the month of June are

212,000

Skiff Corporation has operating income of $80,000, invested assets of $500,000, and sales of $1,525,000. The investment turnover for Skiff Corporation is

3.05

If the profit margin for a division is 8% and the investment turnover is 1.2, the return on investment is

9.6%

A responsibility center in which the department managcr has responsibility for and authority over costs and revenues is called a(n) ___ center

Profit

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following situations will not lead to human behavior problems?

allowing employees the opportunity to be a part of the budget process

Businesses that are separated into two or more manageable units in which managers have authority and responsibility for operations are said to be

decentralized

The operating budgets of a company include the

financial budgets

A franchisor may provide support to the franchisee in which of the following ways?

supplier relationships, advertising, management development

T/F the major advantage of residual income as a performance measure is that it gives consideration to not only a minimum return on investment but also to the total magnitude of operating income earned by each division.

true

Make It Today's static budget at 10,000 units of production includes $40,000 for direct labor and $4000 for electric power. Total fixed costs are $24,000. At 12,000 units of production, a flexible budget would show

variable costs of $52,800 and $24,000 of fixed costs