Accounting (Part 2) v2

Unit-level activities are ______

proportional to the number of units produced performed for specific customers

Implementing an ABC system ______

provides information for cost management

Indirect costs can be assigned to products or services using ______

the activity proportion method the activity rate method

Indirect costs can be assigned to products or services using ______.

the activity rate method the activity proportion method

When a firm has limited direct labor hours, it should prioritize the product with

the highest contribution margin per direct labor hour.

A volume-based allocation measure would vary proportionately with:

the number of units produced.

Which of the following is not a source that can be used in preparing the sales budget? A. Prior sales. B. The production budget. C. Industry trends. D. Marketing activities.

the production budget

Using the activity-proportion method results in:

the same cost allocations as the activity rate method.

The activity rate is computed by dividing the ______ by the ______.

total activity cost; total cost driver

An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _______ _______ management

total quality

A management system that focuses on continually improving production processes is called ______

total quality management

Traditional costing systems tend to overcost high-volume products because ______

traditional costing systems don't allow for complex activities required by lower-volume products high-volume products use more labor and machine hours

True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.

true

An activity that is performed for each individual unit is a ___________ level activity.

unit

Installing parts on an automobile is a(n) ______ -level activity.

unit

Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to outsource to another country, in addition to considering the cost of that decision, managerial accountants with an emphasis on sustainability should consider the human capital impact as well. This represents sustainability within a:

make-or-buy decision.

To calculate manufacturing overhead cost per unit using ABC, divide the total ______

manufacturing overhead cost by the number of units produced

The transfer pricing method that uses the price the company would charge external customers is the:

market price method. The market price is the price that a company would charge to external customers; using that price for internal sales is the market price method of transfer pricing

A ______ cost driver is not strictly related to the number of units produced or customers served

non-volume based

A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)?

$680 $850 - ($850 × 20%) = $680.

Linden, Inc. uses a 8,150 square foot factory space that it rents for $3,900 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 4,500 square feet of the factory are used for machining, while 1,450 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 750 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

$694 Divide the amount of square feet used by Preparation and Setup by the factory's total square feet, and multiply the result by the total cost of all manufacturing activities. (1,450 / 8,150) × $3,900 = $694

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT Rationale: 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ________ % of the total setup cost.

30 %

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 7,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30%

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $______ per setup

500

Which of the following is an example of how a service firm might turn unused capacity into revenue using incremental analysis?

An instructor agrees to add an additional student to a class.

An important part of TQM is a(n) ______ report that summarizes the costs incurred to prevent, deduct, and correct problems.

cost of quality

A group of similar activities that have been combined together is an activity ______.

cost pool

A group of similar activities that have been combined together is called an activity

cost pool

The transfer pricing method that uses either the variable cost or the full cost as the basis for setting the transfer price is the:

cost-based method.

What are the decision alternatives in a special-order decision?

To accept or reject the offer. Special-order decisions involve an offer outside the scope of normal sales; managers must decide whether to accept or reject the offer.

Costs at the batch level depend on the number of ______

batches processed

Comparing the performance within an organization to that of other similar organizations is called _____

benchmarking

ABC can be used in _______

both service and manufacturing companies

Activity-based costing systems typically include ______ cost drivers.

both volume- and non-volume-based

Which of the following is not a component of the cash budget? A. Budgeted cash collections B. Budgeted cash payments C. Depreciation expense D. Cash borrowed or repaid

depreciation expense

A local tour company offers charter buses to corporations who have conventions or meetings in the city. Under activity-based costing, renting a bus to a corporation is a(n)________ -level activity.

group

A top-down approach to budgeting is one that is A. participative. B. motivational. C. imposed. D. tight.

imposed

The responsibility center in which the manager has responsibility and authority over revenues, costs and assets is the:

investment center.

A just-in-time (JIT) system ______

is a demand-pull system is used to help reduce costs

Which of the following is not a benefit of budgeting? A. It forces managers to look to the future B. It plays an important role in communication within the organization C. It serves an important role in motivating and rewarding employees D. It builds organizational slack

it builds organizational slack

The foregone benefit of choosing one alternative over another is measured by:

opportunity costs. An opportunity cost is the foregone benefit of choosing one alternative over another.

Indirect costs are also referred to as ___ costs

overhead

Total manufacturing overhead under activity-based costing consists of all ______

overhead assigned during Stage 2 allocations

Total manufacturing overhead under activity-based costing consists of all ______.

overhead assigned during Stage 2 allocations

The activity proportion method uses ______ to assign overhead costs to products.

percentages, %, or proportions

Comparing ______ is the basis of benchmarking

performance within the same industry

To keep quality problems from happening, companies incur _____ costs

prevention

Activities performed to design a new type of service to be offered are ______-level activities.

product

Research and development is a(n) ________ -level activity

product

Managerial decision makers must often consider non-economic factors as well. For example, when considering whether to eliminate a product line, managerial accountants with an emphasis on sustainability should consider the employee job loss implications as well. This represents sustainability within a:

keep-or-drop decision.

All of the following are non-volume-based cost drivers except number of ______

machine hours

If a company is planning to build inventory, A. production should exceed sales. B. sales should exceed production. C. production should equal sales. D. production should equal inventory.

production should exceed sales

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______

$200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

$171,000

Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Machining?

$187.50 per machine hour

An activity that is performed to support a specific product line is a(n):

product-level activity.

Which of the following budgets shows how many units will be produced each period? A. Direct materials budget B. Direct labor budget C. Sales budget D. Production budget

production budget

Which of the following budgets would not exist for a merchandising firm? A. Sales budget B. Purchases budget C. Production budget D. Selling and administrative expense budget

production budget

The responsibility center in which the manager has responsibility and authority over revenues and costs, but not assets, is the:

profit center. A profit center manager has responsibility only for revenues and costs. Investment center managers have responsibility for revenues, costs, and the investment of assets.

Implementing an ABC system ______.

provides information for cost management

Investment turnover can be calculated as:

sales revenue/average invested assets.

The most common method of evaluating a profit center manager is the:

segmented income statement.

Which of the following budgets do not provide information needed for the budgeted balance sheet? A. Materials purchases budget B. Production budget C. Selling and administrative expense budget D. Cash budget

selling and administrative expense budget

A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a ______-level activity

service

Under activity-based costing, a degree program at a university is considered a(n)_______ -level activity.

service

Which of the following is not a component of the master budget? A. Operating budget B. Budgeted income statement C. Budgeted balance sheet D. Statement of return on investment

statement of return on investment

What is the vision of what management wants the organization to achieve over the long term. A. Strategic plan B. Long-term objective C. Short-term objective D. Tactic

strategic plan

A network of organizations and activities that move goods and services from suppliers to customers is a(n) ______

supply chain

The network of organizations and activities needed to move goods and services from suppliers to customers is called a(n) _____

supply chain

What are the specific actions managers use to achieve their objectives. A. Strategic plans B. Long-term objectives C. Short-term objectives D. Tactics

tactics

A proactive approach managers use to determine what costs should be is called ______

target costing

The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called ______ _______ or cost planning

target costing

A volume-based cost system is likely to assign more manufacturing overhead costs to products:

that sell more units than others.

When a traditional, volume-based costing system is used, which of the following products is most likely to suffer from cost distortion?

A low-volume, high-complexity product

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? A. 13,300 B. 15,900 C. 12,700 D. 13,000

A. 13,300

Activity-based costing systems typically include ______ cost drivers

both volume- and non-volume-based

Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? A. 750 square meters B. 1,050 square meters C. 1,825 square meters D. 300 square meters

A. 750 square meters

Costs that change across decision alternatives are:

differential costs. Differential costs is another term for relevant costs, which change depending on the alternative selected by the manager.

A ______________ is one that can be attributed to a specific segment of the business.

direct fixed cost

Total quality management aims to improve quality by doing all of the following except:

eliminating non-value-added costs.

Which component of the cash budget is shown as a line item on the budgeted balance sheet? A. Budgeted cash collections B. Budgeted cash payments C. Cash repaid D. Ending cash balance

ending cash balance

The worst type of quality costs for a firm are ______ costs.

external failure

Warranty and recall costs and product replacement are ______ costs.

external failure

Activities that occur regardless of how many products are produced or how many batches are run or units made are ___ - ___ activities

facility Level

Activities that occur regardless of how many products are produced or how many batches are run or units made are_____ - ______ activities

facility level

An activity that is performed to benefit the organization as a whole is a(n):

facility-level activity.

When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.

high; low

When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.

high;low

The first step in the managerial decision making process is to:

identify the decision problem.

Activity-based management focuses on ______.

improving operations increasing efficiency

In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______

life cycle costs

What are the specific goals that managers want to achieve over a 5 to 10 year horizon. A. Strategic plans B. Long-term objectives C. Short-term objectives D. Tactics

long-term objectives

Which of the following is NOT a volume-based cost driver?

machine setups

Under activity based management, cost management is achieved by:

managing the underlying activities.

To compute the per-unit manufacturing cost, add ___ ___to direct materials and direct labor.

manufacturing overhead

To calculate manufacturing overhead cost per unit using ABC, divide the total ______.

manufacturing overhead cost by the number of units produced

Once Stage 2 allocation has been completed it is possible to compute total ______.

manufacturing overhead per product

When negotiating a transfer price, the highest price the buyer will be willing to pay is the _____________, while the lowest price the seller will be willing to accept is the _______________.

market price; variable cost

Which of the following is not another term for relevant costs?

opportunity costs Opportunity costs may be relevant, but the two are not synonymous. Differential, incremental, and avoidable costs are all synonymous to relevant costs.

Research and development is a(n)

product-level activity

Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? A. $588,000 B. $686,000 C. $294,000 D. $252,000

294000

Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $267,000 B. $296,000 C. $161,250 D. $241,500

296000

If a company is planning to build inventory, A. production should exceed sales. B. sales should exceed production. C. production should equal sales. D. production should equal inventory.

A. production should exceed sales

How is activity-based management related to activity-based costing?

Activity based management bases improvements to operations and reductions in costs on activity based costing data.

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? A. $24,500 B. $39,500 C. $35,000 D. $30,500

35000

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product 5?

75%

Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be? A. 750 square meters B. 1,050 square meters C. 1,825 square meters D. 300 square meters

750

Which of the following is NOT a value-added activity?

storing inventory

One side benefit of JIT is that:

the accounting system is simplified.

Investment turnover is defined as:

the ratio of sales revenue to average invested assets.

An activity that is performed for a specific customer is a(n):

unit-level activity.

Analyzing products to determine which functions add value and finding ways to deliver those functions while meeting the target cost is called ____

value engineering

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $270,000, while the cost of Inspection is $38,000. Product 5 uses 35% of total machine hours and 50% of total batches. What is the total Machining cost assigned to Product Z?

$175,500 Multiply the percentage of total machine hours used by Product Z by the total cost of machining: 65% × $270,000 = $175,500. (If product 5 uses 35% of the machine hours, then the remaining 65% of the hours must have been used on Product Z.)

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. TO CALCULATE: 625000/(8000x4)

$19.53

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

$19.53 Rationale: $625,000/(8,000 × 4) = $19.53

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $___ TO CALCULATE: 500000/250000

$2

Yuma, Inc. manufactures teddy bears and dolls. Currently, Yuma makes 2,000 teddy bears each month. Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor. Yuma uses two activities in manufacturing the teddy bears: Sewing and Processing. The cost associated with Sewing is $15,000 a month, allocated on the basis of direct labor hours. The cost associated with Processing is $10,000 a month, allocated on the basis of batches. Teddy bears use 1/2 of the direct labor hours, and 35% of total batches. What is the total manufacturing cost for one teddy bear?

$2.00 + $0.50 + [($15,000 × 1/2)/2,000] + [($10,000 × 35%)/2,000] = $8.00.

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ______

$2.10 $2,100,000/1,000,000 = $2.10 per machine hour

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?

$270,000

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Machining is $67.50 per machine hour. What is the total cost of Machining?

$270,000

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? TO CALCULATE: 1.35000/5000=Per direct labor hour 2. PDLH*40

$280

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: Product V3 Product G8 Total Machine hours 1,000 3,000 4,000 Number of batches 45 15 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?

$45,000

Culver, Inc. produces two different products (Product V3 and Product G8) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows: product v3 . product g8 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 15 . 60 The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?

$45,000

Manufacturing overhead was estimated to be $477,000 for the year along with 26,500 direct labor hours. Actual manufacturing overhead was $364,375, actual labor hours were 29,100. The amount of manufacturing overhead applied to production would be:

$523,800 Calculate the predetermined overhead rate of $18.00 by dividing total estimated manufacturing overhead by the estimated total cost driver for the year. ($477,000 / 26,500 = $18.00) Multiply the predetermined manufacturing overhead rate ($18.00) to the actual number of direct labor hours (29,100) to calculate applied manufacturing overhead. ($18.00 × 29,100 = $523,800).

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product Z?

$7,500

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. Usage of the activity drivers are as follows: What is the amount of Machining cost assigned to Product A?

1,000 × $125 = $125,000.

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Usage of the activity drivers are as follows: What proportion of Machining activity is used by Product 5?

1,200/6,000 = 20%.

Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? A. 9,900 B. 10,000 C. 10,100 D. 12,700

10100

Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? A. $196,000 B. $117,600 C. $112,000 D. $168,000

112000

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $______ in total overhead

1200

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $_______ in total overhead

1200

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? A. 12,380 B. 13,000 C. 13,570 D. 13,620

13000

Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are on made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in March? A. $131,000 B. $135,000 C. $94,500 D. $91,700

131000

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in April? A. 13,300 B. 15,900 C. 12,700 D. 13,000

13300

Washington, Inc. produces two different products (Product C and Product 2) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows: product c . product 2 . total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the activity rate for Inspection?

$1,500 per batch

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ___. TO CALCULATE: 2100000/1000000

$2.10

Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?

$32

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $___ per setup.

$500

A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)? TO CALCULATE 850-(850*20%)

$680

The activity proportion method uses ___ to assign overhead costs to products

%

Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? A. $32,000 B. $96,000 C. $115,200 D. $116,480

116480

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $ ___ per setup.

500

Which of the following is not included in the operating budget? A. Budgeted balance sheet B. Sales budget C. Selling and administrative budget D. Raw materials purchases budget

A. Budgeted balance sheet

The formula to apply overhead to products is

Activity Rate x Activity

Which of the following statements are true?

Appraisal costs identify defective products before they get to the customer. Appraisal costs are also known as inspection costs.

A detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a A. Strategic plan B. Budget C. Tactic D. Long-term objective 4. Which of the following is

B. Budget

Which of the following budgets do not provide information needed for the budgeted balance sheet? A. Materials purchases budget B. Production budget C. Selling and administrative expense budget D. Cash budget

C. Selling and administrative expense budget

are the specific actions managers use to achieve their objectives. A. Strategic plans B. Long-term objectives C. Short-term objectives D. Tactics

D. Tactics

Which of the following balanced scorecard perspectives measures an organization's ability to change?

Learning and growth

The approach to cost management that calls for setting cost reduction goals across numerous stages such as product introduction, growth, maturity, and decline is:

Life cycle cost management.

Which of the following is not true of activity cost drivers?

They are strictly volume-based allocation measures.

The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold.

True The most common method for disposing of the balance in Manufacturing Overhead is to make a direct adjustment to Cost of Goods Sold. Doing so makes sense as long as most of the jobs worked on during the period were completed and sold.

Volume-based cost systems tend to:

Under-cost low-volume products and over-cost high-volume products.

The first step in implementing an ABC system is to identify the organization's major ___

activities

Grover has forecast sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What are budgeted cash receipts in April? A. $105,000 B. $141,000 C. $150,000 D. $144,000

144000

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? A.13,800 B.15,300 C.16,200 D.16,300

15300

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is

170

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $

2

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_________

2

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product 5?

20%

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? A. 1,000 B. 1,300 C. 1,600 D. 2,100

2100

Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? A. $155,000 B. $213,000 C. $127,800 D. $186,000

213000

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150000 in Machining cost, and $22500 in Inspection cost. What proportion of Inspection activity is used by Luxury?

25%

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Inspection activity is used by Product Z?

25%

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $20,367 B. $21,200 C. $25,440 D. $35,040

25440

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? A. 2,300 square meters B. 2,550 square meters C. 2,700 square meters D. 3,575 square meters

2550

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? A. 10,000 B. 9,900 C. 13,000 D. 10,100

9900

The budgeted income statement is a combination of A. All the operating budgets. B. All the operating budgets plus the budgeted balance sheet. C. The direct materials budget, the direct labor budget, and the manufacturing overhead budget. D. The production budget, the cost of goods sold budget, and the selling and administrative expense budget. CHOOSE A, B, C, OR D

A

Which of the following sequences is correct? A. Sales budget - production budget - direct materials budget - budgeted income statement B. Budgeted income statement - direct materials budget - production budget - sales budget C. Cash receipts budget - sales budget - production budget - budgeted income statement D. Inventory budget - production budget - sales budget - selling and administrative budget CHOOSE A, B, C, OR D

A

The final step in ABC is ___. -Assigning indirect costs to products or services -Selecting cost drivers for each activity cost pool -Identifying and classifying activities -Assigning indirect costs to each activity pool

Assigning indirect costs to products or services

A primary financial budget is the A. Production budget. B. Cash budget. C. Inventory budget. D. Selling and administrative budget.

B. Cash budget.

Which of the following statements are true?

Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.

How is the cost of a batch-level activity similar to the cost of a unit-level activity?

Both increase as production volume increases.

Grover has forecast sales to be of sale, and 40% the month following. What are budgeted cash receipts in April? A. $105,000 B. $141,000 C. $150,000 D. $144,000

D. $144,000

Which of the following is not a type of quality cost?

Development costs

Each individual indirect cost should be assigned to one activity when forming activity cost pools.

False Some costs will need to be allocated among several activities (not one activity).

The total amount of cost assigned to jobs that were completed during the year is the cost of goods sold.

False The total amount of cost assigned to jobs that were completed during the year is the cost of goods manufactured, not the cost of goods sold.

Firms that use JIT often rely on:

Fewer suppliers that must adhere to very strict quality standards.

Which of the following is the best example of a facility-level activity?

Human resources

Which of the following is NOT a volume-based cost driver?

Machine setups

Which of the following is not a perspective used by the balanced scorecard?

Short-term

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity based

In a traditional volume-based cost system, total manufacturing costs are calculated by:

adding manufacturing overhead cost, direct materials cost, and direct labor cost.

External failure costs occur _________ a defective product makes its way to the customer, while internal failure costs occur ______ a defective product makes its way to the customer.

after, before

Costs incurred to identify defective products before they get to the customer are called ______ costs.

appraisal

A group-level activity for a service company is the same as a(n)______ -level activity for a manufacturing company.

batch

A primary financial budget is the A. Production budget. B. Cash budget. C. Inventory budget. D. Selling and administrative budget

cash budget

Inspection costs ______.

may lead to internal failure costs

Non-value-added activities ______.

should be eliminated whenever possible do not enhance the product or service

An activity that is performed for each individual unit is a ________ level activity.

unit

Which of the following statements best represents the controllability principle?

A profit center manager should be evaluated based on segment margin, not profit margin.

Which of the following is not a source that can be used in preparing the sales budget? A. Prior sales. B. The production budget. C. Industry trends. D. Marketing activities.

B. The production budget.

Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $14,560 B. $24,960 C. $27,560 D. $37,960

C. $27,560

Which of the following types of decisions involves deciding whether to eliminate a particular division or segment of the business?

Continue-or-discontinue

Participative budgeting is an approach to budgeting that A. is top-down in nature. B. allows top management to set the budget. C. discourages budget slack. D. is more likely to motivate people to work towards the organization's goals than a top-down approach. CHOOSE A, B, C, OR D

D

Which of the following is the backward-looking phase of the planning and control cycle? A. Planning B. Directing/Leading C. Organizing D. Control

D. Control

An activity that is performed to benefit the organization as a whole is a(n)

Facility or companywide activities are performed to benefit the organization as a whole.

What level of activity is performed each time a single item is produced?

Unit

The activity-rate method involves:

calculating an activity rate that is similar to the predetermined overhead rate.

One of the most important concepts in responsibility accounting is the:

controllability principle. The controllability principle forms the basis of responsibility accounting, holding that managers should only be held responsible for what they control.

The formula to apply overhead to products is ______.

activity rate times activity

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity-based

Improving operations and reducing costs is the focus of ________ - _______ management

activity-based

Which of the following is not a step in the managerial decision-making process?

Identify the activity cost drivers.

Which of the following should a manager using activity-based management attempt to reduce or eliminate?

Insurance division to process liability insurance payments

The cost of scrap and rework is an example of what type of quality cost?

Internal failure costs

The balanced scorecard includes both leading and lagging indicators. Which of the following correctly places each indicator on the spectrum of most leading to most lagging?

Learning and growth → Internal business process → Customer → Financial

Which of the following is considered a disadvantage of decentralization?

Lower-level managers may have an opportunity to make decisions in their own best interest without considering the overall health of the company.

The decision-making approach that focuses on factors that will change between alternatives is sometimes called all of the following except:

actual costing.

Portland, Inc. has formed four activity cost pools: Product Design, Machining and Production, Machine Setup, and Inspection. Gina Taylor, Production Manager at Portland, oversees processes that are considered part of Machining and Production, Machine Setup, and Inspection. Taylor's salary should be:

allocated among Machining and Production, Machine Setup, and Inspection.

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

activity rate

Activities incurred for each product produced and not dependent on the number of units or batches are ________ -level activities.

product

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.

$6,000 Rationale: $2 × 3,000 = $6,000

Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are use for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

$1,000

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product 5?

$100,000

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product A?

$125,000

Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1,000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?

$15 + $5 + [($4 × 1,000)/400] + [($20 × 40)/400] = $32.

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is $___ TO CALCULATE: 200-(200*15%)

$170

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Inspection cost assigned to Product 5?

$22,500

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product A?

$22,500

Manufacturing overhead was estimated to be $489,600 for the year along with 20,400 direct labor hours. Actual manufacturing overhead was $470,220, actual labor hours were 21,800. The predetermined manufacturing overhead rate per direct labor hour would be:

$24.00 $489,600 / 20,400 = $24.00

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______

$6,000 $2 × 3,000 = $6,000

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______.

$8 per customer call and $15 per development hour Rationale: $200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour.

Largo, Inc., which uses a volume-based cost system, produces cat condos, and has a gross profit margin of 50%. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. How much does each cat condo sell for?

$90

Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are used for machining, while 2,000 square feet (each) are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

(2,000/5,000) × $2,500 = $1,000.

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

(30% × $500,000) + (70% × $30,000) = $171,000.

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? A. 1,030 B. 1,300 C. 1,330 D. 1,6501300

1300

Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? A. 7,500 B. 9,750 C. 16,500 D. 26,250

26250

Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $14,560 B. $24,960 C. $27,560 D. $37,960

27560

Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be A. $113,400 B. $204,750 C. $261,450 D. $285,750

285750

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30

Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $16,800 B. $24,300 C. $31,800 D. $43,800

31800

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $53,000 D. $38,600

56600

Which of the following statement is correct about the functions that fall within various responsibility centers?

A revenue center manager is responsible for fewer functions than a profit center manager is.

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $303,800 B. $231,000 C. $121,500 D. $161,000

A. $303,800

Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? A. $528,000 B. $577,500 C. $388,500 D. $189,000

A. $528,000

Budgeted cost of goods sold should include which of the following? A. Raw materials and direct labor. B. Raw materials, direct labor, and manufacturing overhead. C. Raw materials, direct labor, manufacturing overhead, and selling expenses. D. Raw materials, direct labor, manufacturing overhead, selling expenses, and administrative expenses. CHOOSE A, B, C, OR D

B

are the specific goals that managers want to achieve over a 5 to 10 year horizon. A. Strategic plans B. Long-term objectives C. Short-term objectives D. Tactics

B. Long-term objectives

Creating a budget is an important part of which phase of the planning and control process? A. Planning B. Organizing C. Directing/Leading D. Control

B. Organizing

Which of the following is not a component of the cash budget? A. Budgeted cash collections B. Budgeted cash payments C. Depreciation expense D. Cash borrowed or repaid

C. Depreciation expense

Which component of the cash budget is shown as a line item on the budgeted balance sheet? A. Budgeted cash collections B. Budgeted cash payments C. Cash repaid D. Ending cash balance

D. Ending cash balance

You wish to take an Excel course. (Step 1 of the decision-making process.) You may enroll at one within your school or you may take a community class at the local library. (Step 2 of the decision-making process.) You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration This information illustrates which step in the decision-making process?

Evaluate the costs and benefits of the alternatives.

Which type of quality cost would a firm most want to eliminate or reduce as much as possible?

External failure costs

What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced?

Facility-level

True or false: When a manufacturing overhead cost relates to multiple activities, the cost should be allocated to the activity that has the highest total overhead cost.

False

A job cost sheet will record the direct materials and direct labor used by the job but not the manufacturing overhead applied.

False A job cost sheet summarizes all of the costs incurred on a specific job, not just direct materials and direct labor.

Activity Based Costing divides activities into two categories: unit-level activities and facility level activities.

False Activity Based Costing divides activities into four categories: facility-level, product-level, batch-level, and unit-level activities.

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.

False Although service providers do not have manufacturing overhead, they incur many indirect costs, such as rent, supplies, supervision, advertising, and administrative expenses. ABC can be used to assign these costs to different services and customers.

Which of the following balanced scorecard perspectives measures how an organization satisfies its stakeholders?

Financial

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?

P × $500,000 = $150,000; P = 30%.

Which of the following is the best example of a unit-level activity?

Painting a final product

Which of the following are facility-level activities?

Paying factory insurance Human resource hiring fairs

Which of the following is a disadvantage of decentralization?

Potential duplication of resources

Which of the following is not an advantage of decentralization?

Potential duplication of resources

The cost of quality training is an example of what type of quality cost?

Prevention costs

Which of the following is not a limitation of return on investment?

ROI is a commonly used measure for financial performance.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Consider the transportation cost. At what point would you be indifferent between alternatives?

Transportation cost of $250 per class for the community course Solve for the transportation cost per class to determine the point of indifference. Subtract the cost of the community course ($1,000) from the college course ($3,000). Divide that result ($2,000) by the number of classes (8) to get the transportation cost per class that would make you indifferent between alternatives ($250). ($3,000 - $1,000 = $2,000/8 = $250)

A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.

True A predetermined overhead rate is calculated by dividing estimated total manufacturing overhead cost by estimated total cost driver.

Activity-based costing systems include non-volume-based cost drivers.

True ABC systems include both volume-based and non-volume-based measures that capture factors other than volume.

The cost measurement system can impact how indirect costs are spread among product lines, which may affect decisions managers make.

True The cost measurement system can impact how indirect costs are spread among product lines and thus the information that managers have about the profitability of those products.

The total manufacturing cost for a job is based on the amount of applied overhead using the predetermined overhead rate.

True The total manufacturing cost is based on the amount of overhead applied using the predetermined overhead rate.

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Value engineering

Appraisal or inspection costs are costs that:

are incurred to identify defective products before products are shipped to the custome

Prevention costs are costs that:

are incurred to prevent quality problems from occurring in the first place.

Life cycle cost management takes into consideration the fact that costs and revenues:

are not constant across different stages of the product's life cycle.

Indirect costs ______.

are not easily traced to products or services

indirect costs _______

are not easily traced to products or services

Non-volume-based cost drivers ______.

are used in ABC systems allow more indirect costs to be allocated to products

The purpose of Stage 1 allocations is to:

assign indirect manufacturing costs to activity cost pools.

Using non-volume-based activity drivers allows activity-based costing to:

assign more indirect costs to products whose complexity is higher.

The final step in activity-based costing is ______

assigning indirect costs to products or services

The final step in activity-based costing is ______.

assigning indirect costs to products or services

At a minimum, an ABC system should have ______

at least one non-unit-level activity cost pool

At a minimum, an ABC system should have ______.

at least one non-unit-level activity cost pool

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ___-level activities.

batch

What types of activities are performed each time a group of units is processed, regardless of how many units are in the group?

batch

An activity that is performed for a group of units all at once is a(n):

batch-level activity.

True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information.

false

True or false: Activity-based costing is appropriate for every company.

false

True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.

false

When target costing is used, the target cost is determined by:

finding the difference between the market price and the amount of profit needed to satisfy stakeholders.

Be cautious of __________ expressed on a per-unit basis when weighing make-or-buy decisions. The total value (instead of the per unit value) is relevant to the decision.

fixed costs Total fixed costs (and whether or not they change based on the decision) are relevant, not necessarily fixed costs per unit.

All of the following are non-value-added activities except ______, which is a value-added activity.

free delivery service to customers

Non-volume-based cost drivers may be more appropriate for activities ______

related to the entire facility that are performed for each batch related to individual products

The part of the organization for which managers are responsible is called a:

responsibility center.

internal failure costs

result from defects discovered during inspection are preferred over external failures

Internal failure costs are costs that:

result from defects that are caught before the product is shipped to the customer.

The responsibility center in which the manager does not have responsibility and authority over costs is the:

revenue center.

The final step in the decision making process is to:

review the results of the decision.

Gross profit margin calculates gross margin as a percentage of

sales

Gross profit margin calculates gross margin as a percentage of ______

sales

The starting point for preparing the master budget is the A. inventory policy. B. sales budget. C. production budget. D. budgeted balance sheet.

sales budget

The perceived value of a product or service to the customer is enhanced by ______ - ______ activities

value added

The concept of the _____ _______ begins with the customer and works backward to ensure that activities deliver what matters to customers.

value chain

The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _________ ____________

value chain

Direct labor hours and machine hours are both examples of ___ -based cost drivers.

volume

Direct labor hours and machine hours are both examples of _____-based cost drivers.

volume

Activities incurred for each product produced and not dependent on the number of units or batches are

product level activities

The duration of a product from its infancy through its eventual decline is represented by the _____ _______ ________

product life cycle

Residual income can be calculated as:

Operating income - (hurdle rate × average invested assets) The formula for residual income is operating income minus the result of the hurdle rate multiplied by average invested assets.

Which of the following is true of a firm that has reached the limit on its resources?

Opportunity costs are now relevant. A firm that has reached the limit on its resources must give up regular production to fill special orders, and therefore opportunity costs become relevant.

Which of the following is not a true statement about capacity?

Opportunity costs are relevant when capacity of a critical resource is unlimited.

Total manufacturing overhead under activity-based costing consists of all ___

Overhead assigned during Stage 2 allocations

Budgeted cost of goods sold should include which of the following? A. Raw materials and direct labor. B. Raw materials, direct labor, and manufacturing overhead. C. Raw materials, direct labor, manufacturing overhead, and selling expenses. D. Raw materials, direct labor, manufacturing overhead, selling expenses, and administrative expenses.

B. Raw materials, direct labor, and manufacturing overhead.

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $41,000 C. $46,400 D. $17,000

46400

Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for July? A. $32,000 B. $41,000 C. $46,400 D. $17,000

46400

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $47,000 C. $46,400 D. $17,000

46400

Which of the following is not a benefit of budgeting? A. It forces managers to look to the future B. It plays an important role in communication within the organization C. It serves an important role in motivating and rewarding employees D. It builds organizational slack

D. It builds organizational slack

Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? A. $441,000 B. $469,000 C. $343,000 D. $294,000

469000

Lincoln, Inc., which uses a volume-based cost system, produces cat condos that sell for $90 each. Direct materials cost $15 per unit, and direct labor costs $10 per unit. Manufacturing overhead is applied at a rate of 200% of direct labor cost. Nonmanufacturing costs are $27 per unit. What is the gross profit margin for the cat condos?

50.0%

Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?

An ABC system will assign more manufacturing overhead costs to the product than a volume-based system.

Which of the following best defines a batch-level activity?

An activity that is performed for a group of units all at once

Which of the following best defines a product-level activity?

An activity that is performed to support a specific product line

Which of the following best defines a facility-level activity?

An activity that is performed to support the entire company

Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? A. $389,500 B. $267,000 C. $457,000 D. $415,000

457000

Which of the following statements is true?

An existing ABC system can report sustainability-related information.

Which of the following budgets shows how many units will be produced each period? A. Direct materials budget B. Direct labor budget C. Sales budget D. Production budget

D. Production budget

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. What is budgeted cost of goods sold for March? A. $30,551 B. $31,800 C. $36,660 D. $38,160

38160

Which of the following is not a component of the master budget? A. Operating budget B. Budgeted income statement C. Budgeted balance sheet D. Statement of return on investment

D. Statement of return on investment

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280 Rationale: Predetermined overhead rate = $35,000/5,000 or $7 per direct labor hour × 40 hours = $280.

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280 = 35,000/5000 or 7$ per direct labor hours x 40 hours

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses the number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?

$359,000

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Machining cost assigned to Product X?

$375,000

Jackson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Product 5 uses 20% of total machine hours and 75% of total batches. What is the total Machining cost assigned to Product Z?

$400,000

Hadley, Inc. manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $12. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $25. What is the total manufacturing cost per unit for Hadley under the ABC system?

$45

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $190 per machine hour, and the activity rate for Inspection is $530 per batch. The activity drivers are used as follows: Product A Product X Total Machine hours 1,300 3,100 4,400 Number of batches 55 24 79 What is the amount of Machining cost assigned to Product X?

$589,000 Multiply the number of machine hours for Product X by the activity rate per machine hour: 3,100 × $190 = $589,000

Lynwood, Inc. produces two different products (Product A and Product X) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows: Product A . Product X total machine hours . 1000 . 3000 . 4000 number of batches . 45 . 15 . 60 What is the amount of Inspection cost assigned to Product X?

$7,500

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. TO CALCULATE: 1. 620/1000=x & 380/1000=y 2. x*118000 & y*118000

$73160 to Model XLT & $44840 to Model TXT

Sherman, Inc. manufactures chainsaws that sell for $200. Each chainsaw uses $19 in direct materials and $5 in direct labor per unit. Sherman has two activities: Machining, which is applied at the rate of $5 per machine hour, and Finishing, which is applied at the rate of $28 per batch. This month, Sherman made 200 chainsaws, using 1,868 machine hours in 45 batches. What is the total manufacturing cost for one chainsaw?

$77 Total manufacturing costs include direct materials, direct labor, and overhead: $19 + $5 + [($5 × 1,868) / 200] + [($28 × 45) / 200] = $77.

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Luxury?

(70% × $500,000) + (30% × $30,000) = $359,000.

Non-Volume based cost drivers ___ -are used in traditional costing systems -are related to the number of units products or customers served -are used in ABC systems -allow more indirect costs to be allocated to products

-are used in ABC systems -allow more indirect costs to be allocated to products

Non-volume-based cost drivers may be more appropriate for activities ___ -that are performed for each unit -that are performed for each batch -related to individual products -related to the entire facility

-that are performed for each batch -related to individual products

Indirect costs can be assigned to products or services using ______. -activity-based management -total quality management -the activity rate method -the activity proportion method -target costing

-the activity rate method -the activity proportion method

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $ ___ in total overhead.

1200

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Machining activity is used by Standard?

30%

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $303,800 B. $231,000 C. $121,500 D. $161,000

303800

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $24,675 B. $225,680 C. $303,800 D. $305,970

305970

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? A. 7,150 square meters B. 3,575 square meters C. 7,075 square meters D. 3,425 square meters

3575

Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,500 square meters C. 3,575 square meters D. 4,625 square meters

3575

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,450 square meters C. 3,508 square meters D. 3,600 square meters

3600

Which of the following would not be an example of a cost to include in a selling and administrative expense budget? A. Legal expenses B. Accounting services C. Fixed manufacturing overhead D. Franchise fees

fixed manufacturing overhead

If the ROI of a project is greater than the hurdle rate, the residual income will be:

greater than zero.

Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August? A. $50,000 B. $47,000 C. $33,000 D. $32,000

50000

Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. What is budgeted cost of goods sold for March? A. $40,734 B. $42,400 C. $48,880 D. $50,880

50880

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? A. $30,000 B. $67,500 C. $32,500 D. $52,500

52500

Dane Inc has forecast purchases on account to be $465,000 in March, 555,000 in April, $630,000 in May, and $735,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for April? A. $528,000 B. $577,500 C. $388,500 D. $189,000

528000

Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? A. $230,000 B. $334,000 C. $459,000 D. $551,000

551000

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $39,600 D. $62,000

56600

Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $592,000 B. $620,000 C. 310,000 D. $483,334

592000

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

625,000/ (8,000x4) = 19.53

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? A. $742,500 B. $643,500 C. $4,387,500 D. $292,500

643500

Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? A. 6,600 units B. 10,400 units C. 5,400 units D. 600 units

6600 units

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses P × $500,000 = $150,000; P = 30%. a number of batches as an activity driver. The cost of Machining is $500000, while the cost of Inspection is $30000. Standard is assigned $150,000 in Machining cost and $22,500 in Inspection cost. What proportion of Machining activity is used by Luxury?

70%

Calverton, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Inspection activity is used by Standard?

75%

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: product 5 . product z total machine hours . 1200 . 4800 6000 number of batches 60 20 . 80 What proportion of Machining activity is used by Product Z?

80%

Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? A. $58,500 B. $142,500 C. $81,000 D. $85,500

85500

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? A. $69,300 B. $327,670 C. $846,300 D. $859,320

859320

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? A. 7,000 B. 9,100 C. 15,400 D. 24,500

9100

Sales price per unit - manufacturing cost per unit = ______ per unit.

gross profit per unit

When is a volume-based cost system appropriate for a service company?

A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources.

Grover has forecast sales to be $and 40% the month following. What are budgeted cash receipts in March? A. $131,000 B. $135,000 C. $94,500 D. $91,700

A. $131,000

50. Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August? A. $50,000 B. $47,000 C. $33,000 D. $32,000

A. $50,000

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $53,000 D. $38,600

A. $56,600

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for August? A. $56,600 B. $17,000 C. $39,600 D. $62,000

A. $56,600

Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $592,000 B. $620,000 C. 310,000 D. $483,334

A. $592,000

Clare purchases a single product for $15 and sells it for $30. Forecasted sales for the next three months are July 4,000 units, August 6,000 units, September 7,500 units. Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. What are budgeted purchases in units for August? A. 6,600 units B. 10,400 units C. 5,400 units D. 600 units

A. 6,600 units

The budgeted income statement is a combination of A. All the operating budgets. B. All the operating budgets plus the budgeted balance sheet. C. The direct materials budget, the direct labor budget, and the manufacturing overhead budget. D. The production budget, the cost of goods sold budget, and the selling and administrative expense budget.

A. All the operating budgets

Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting? A. Create budget slack. B. Use different budgets for planning and for performance evaluation. C. Use a continuous or rolling budget approach. D. Use a zero-based budgeting approach.

A. Create budget slack.

Which of the following is the forward-looking phase of the planning and control cycle? A. Planning B. Directing/Leading C. Organizing D. Control

A. Planning

Which of the following sequences is correct? A. Sales budget - production budget - direct materials budget - budgeted income statement B. Budgeted income statement - direct materials budget - production budget - sales budget C. Cash receipts budget - sales budget - production budget - budgeted income statement D. Inventory budget - production budget - sales budget - selling and administrative budget

A. Sales budget - production budget - direct materials budget - budgeted income statement

A is the vision of what management wants the organization to achieve over the long term. A. Strategic plan B. Long-term objective C. Short-term objective D. Tactic

A. Strategic plan

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Which of the following is not relevant to the decision?

Apartment rent Your lodging will not change based on which Excel course you choose. Thus, the amount you pay in apartment rent is irrelevant to the decision.

The basic form of the cash budget is: A. Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance B. Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance C. Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance D. Beginning cash balance + Budgeted cash collections - Budgeted cash payments = Cash borrowed or repaid CHOOSE A, B, C, OR D

B

Audrey has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What is the budgeted Accounts Receivable balance on May 31? A. $155,000 B. $213,000 C. $127,800 D. $186,000

B. $213,000

Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May? A. $267,000 B. $296,000 C. $161,250 D. $241,500

B. $296,000

Ivory Inc has forecast purchases on account to be $310,000 in March, $370,000 in April, $420,000 in May, and $490,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What are budgeted cash payments for June? A. $441,000 B. $469,000 C. $343,000 D. $294,000

B. $469,000

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September? A. $742,500 B. $643,500 C. $4,387,500 D. $292,500

B. $643,500

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Marlow plans to sell 16,000 units in May. What is budgeted ending inventory for March? A. 1,030 B. 1,300 C. 1,330 D. 1,650

B. 1,300

Marlow Company produces hand tools. A production budget for the next four months is as follows: March 10,300 units, April 13,300, May 16,500, and June 21,800. Marlow Company's ending finished goods inventory policy is 10% of the following month's sales. Meadow plans to sell 16,000 units in May. How many units will be sold in April? A. 12,380 B. 13,000 C. 13,570 D. 13,620

B. 13,000

34. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in July? A. 2,300 square meters B. 2,550 square meters C. 2,700 square meters D. 3,575 square meters

B. 2,550 square meters

33. Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc's leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. What will leather purchases be in August? A. 7,150 square meters B. 3,575 square meters C. 7,075 square meters D. 3,425 square meters

B. 3,575 square meters

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many unskilled labor hours will be budgeted for August? A. 7,000 B. 9,100 C. 15,400 D. 24,500

B. 9,100

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 inventory is projected to be 1,400 units. How many units will be produced in March? A. 10,000 B. 9,900 C. 13,000 D. 10,100

B. 9,900

The basic form of the cash budget is: A. Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance B. Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance C.Beginning cash balance - Budgeted cash collections + Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance D. Beginning cash balance + Budgeted cash collections - Budgeted cash payments = Cash borrowed or repaid

B. Beginning cash balance + Budgeted cash collections - Budgeted cash payments +/- Cash borrowed or repaid = Ending cash balance

Participative budgeting is an approach to budgeting that A. is top-down in nature. B. allows top management to set the budget. C. discourages budget slack. D. is more likely to motivate people to work towards the organization's goals than a top-down approach.

D. is more likely to motivate people to work towards the organization's goals than a top-down approach.

The starting point for preparing the master budget is the A. inventory policy. B. sales budget. C. production budget. D. budgeted balance sheet.

B. sales budget.

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July? A.13,800 B.15,300 C.16,200 D.16,300

B.15,300

Which of the following is the primary tool used by cost centers to manage costs?

Budgetary control system The budget is a primary tool used by cost centers to manage costs.

Budgeted direct labor hours are calculated as A. Budgeted production units × Direct labor requirements per unit + Ending inventory - Beginning inventory. B. Budgeted production units × Direct labor requirements per unit + Beginning inventory - Ending inventory. C. Budgeted production units × Direct labor requirements per unit. D. Budgeted sales units × Direct labor requirements per unit. CHOOSE A, B, C, OR D

C

Budgeted production is calculated by A adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted . ending finished goods inventory. B adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted . ending work in process inventory. C adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory. D adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted beginning work in process inventory. CHOOSE A, B, C, OR D

C

The formula for budgeted raw materials purchases is A. Budgeted production units + Ending raw materials inventory - Beginning raw materials inventory. B. Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory. C. Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory. D. Materials needed for production + Beginning raw materials inventory - Ending raw materials inventory. CHOOSE A, B, C, OR D

C

The purpose of the cash budget is to A. be used as a basis for the operating budgets. B. provide external users with an estimate of future cash flows. C. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. D. summarize the cash flowing into and out of the business during the past period. CHOOSE A, B, C, OR D

C

Which of the following statements about employee motivation is true? A.A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable. B.A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable. C. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve. D. Budgets are difficult to use for motivation. CHOOSE A, B, C, OR D

C

Orchard has forecast sales to be $250,000 in February, $270,000 in March, $300,000 in April, and $280,000 in May. The average cost of goods sold is 70% of sales. All sales are made on credit and sales are collected 60% in the month of sale, and 40% the month following. What is the budgeted Accounts Receivable balance on May 31? A. $196,000 B. $117,600 C. $112,000 D. $168,000

C. $112,000

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $20,367 B. $21,200 C. $25,440 D. $35,040

C. $25,440

Boxwood Inc has forecast purchases on account to be $620,000 in March, $740,000 in April, $840,000 in May, and $980,000 in June. Seventy percent of purchases are paid for in the month of purchase, the remaining 30% are paid in the following month. What is the budgeted Accounts Payable balance for June 30? A. $588,000 B. $686,000 C. $294,000 D. $252,000

C. $294,000

Atlantic, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales of 1,000 units, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March? A. $16,800 B. $24,300 C. $31,800 D. $43,800

C. $31,800

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July? A. $24,500 B. $39,500 C. $35,000 D. $30,500

C. $35,000

Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July? A. $389,500 B. $267,000 C. $457,000 D. $415,000

C. $457,000

49. Skybird has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for July? A. $32,000 B. $41,000 C. $46,400 D. $17,000

C. $46,400

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $41,000 C. $46,400 D. $17,000

C. $46,400

Skylark has forecast production for the next three months as follows: July 4,900 units, August 6,600 units, September 7,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July? A. $29,400 B. $47,000 C. $46,400 D. $17,000

C. $46,400

Lea Company produces hand tools. Budgeted sales for March are 10,000 units. Beginning finished goods inventory in March is budgeted to be 1,300 units, and ending finished goods inventory is budgeted to be 1,400 units. How many units will be produced in March? A. 9,900 B. 10,000 C. 10,100 D. 12,700

C. 10,100

Johnson Inc. produces leather handbags. Johnson Inc. estimates it will use 3,500 square meters of leather in production in August, and 3,750 square meters of leather in production in September. Johnson Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,500 square meters C. 3,575 square meters D. 4,625 square meters

C. 3,575 square meters

Which of the following statements about employee motivation is true? A.A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable. B.A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable. C. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.

C. A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.

Budgeted direct labor hours are calculated as A. Budgeted production units × Direct labor requirements per unit + Ending inventory - Beginning inventory. B. Budgeted production units × Direct labor requirements per unit + Beginning inventory - Ending inventory. C. Budgeted production units × Direct labor requirements per unit. D. Budgeted sales units × Direct labor requirements per unit.

C. Budgeted production units × Direct labor requirements per unit.

Which of the following would not be an example of a cost to include in a selling and administrative expense budget? A. Legal expenses B. Accounting services C. Fixed manufacturing overhead D. Franchise fees

C. Fixed manufacturing overhead

The formula for budgeted raw materials purchases is A. Budgeted production units + Ending raw materials inventory - Beginning raw materials inventory. B. Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory. C. Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory. D. Materials needed for production + Beginning raw materials inventory - Ending raw materials inventory.

C. Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory.

Which of the following budgets would not exist for a merchandising firm? A. Sales budget B. Purchases budget C. Production budget D. Selling and administrative expense budget

C. Production budget

Which of the following types of decisions involves deciding whether to perform a particular activity in-house or purchase it from an outside supplier?

Make-or-buy

Budgeted production is calculated by A adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted . ending finished goods inventory. B adding budgeted unit sales to budgeted beginning work in process inventory, and subtracting budgeted . ending work in process inventory. C adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory. D adding budgeted unit sales to budgeted ending work in process inventory, and subtracting budgeted . beginning work in process inventory.

C. adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory.

When calculating raw materials purchases, the starting point should be A. actual materials purchases from the previous year. B. budgeted sales. C. budgeted production. D. budgeted cost of raw materials.

C. budgeted production.

When calculating the direct labor budget, the starting point should be A. actual direct labor hours from the previous year. B. budgeted sales. C. budgeted production. D. budgeted cost of direct labor.

C. budgeted production.

The purpose of the cash budget is to A. be used as a basis for the operating budgets. B. provide external users with an estimate of future cash flows. C. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs. D. summarize the cash flowing into and out of the business during the past period.

C. help managers plan ahead to make certain they will have enough cash on hand to meet their operating needs.

A top-down approach to budgeting is one that is A. participative. B. motivational. C. imposed. D. tight

C. imposed.

Which of the following is not a step in the managerial decision-making process?

Calculate the payback period.

Which of the following is not a step in the managerial decision-making process?

Choose the appropriate hurdle rate.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you earn a scholarship that covers 95% of your tuition costs at the college (but cannot be applied to other learning opportunities), which option would you choose (based on net enrollment cost)?

College course The net cost of the college course is $150 [$3,000 × (1 - 0.95) = $150], making it considerably less expensive than the community course.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration If you enroll in the community class, you will be unable to work at your regular job on weekends for the eight weekend days when the class meets. If you typically earn $500 per weekend shift, which option would you choose (considering enrollment cost and opportunity cost)?

College course The opportunity cost (lost wages) is $4,000 ($500 × 8). The sum of opportunity cost and actual cost is $5,000 ($4,000 + $1,000), making the community course more expensive than the college course. The college course is the preferred alternative based on cost.

Which of the following is irrelevant to the decision to eliminate an unprofitable segment?

Common fixed costs Common fixed costs will be incurred even if a segment is eliminated, therefore they are irrelevant to the decision.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Considering solely the enrollment cost of each alternative, which would you choose?

Community course If you consider only the cost of the two alternatives, you would choose the less expensive option. In this case, it is the community college.

You wish to take an Excel course. You may enroll at one within your school or you may take a community class at the local library. You've gathered the following information to aid in your decision-making process. Costs/Benefits College Course Community Course Cost $3,000 $1,000 Distance to course 0.25 miles (walking distance) 15 miles (driving distance) Timing of course Weekday Weekend Number of meetings 16 8 Qualitative considerations Convenience, quality of instruction Flexibility, brief duration Pretend transportation (gas, mileage, and parking) cost $200 per class session at the library. If you consider solely the cost - including transportation - of each alternative, which would you choose?

Community course The cost of the community course including transportation is $2,600, the sum of the tuition ($1,000) and the per-class transportation cost ($200 × 8 = $1,600). $2,600 is still less than the cost of the college course, making it the preferred alternative based solely on cost.

Which of the following statements is correct about the connection between cost centers and revenue?

Cost centers do not directly generate revenue from customers, but they may have an impact on revenue through customer satisfaction and overall quality.

Which of the following statements are true?

Managing and reducing costs is the true benefit of ABC. Implementing an ABC system is not a trivial task.

Which of the following sets just-in-time systems apart from traditional manufacturing systems?

Materials are purchased only as they are needed to manufacture goods.

Manufacturing overhead was estimated to be $397,100 for the year along with 20,900 direct labor hours. Actual manufacturing overhead was $418,600, and actual labor hours were 23,000. To dispose of the balance in the Manufacturing Overhead account, which of the following would be correct?

Cost of Goods Sold would be credited for $18,400 Calculate the predetermined overhead rate by dividing total estimated manufacturing overhead by total estimated direct labor hours. ($397,100 / 20,900 = $19.00). Apply manufacturing overhead by multiplying the predetermined overhead rate by the actual number of direct labor hours. ($19.00 × 23,000 = $437,000). The amount of overhead applied ($437,000) on the credit side of the manufacturing overhead account exceeded the actual overhead costs ($418,600) on the debit side of the manufacturing overhead account, so the overhead was overapplied with a credit balance of $18,400. ($437,000 - $$418,600 = $18,400) The most common way of correcting this is with a direct charge, in this case a debit to the manufacturing overhead account to close it out and an offsetting credit to cost of goods sold.

Parker Corp expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter? A. $32,000 B. $96,000 C. $115,200 D. $116,480

D. $116,480

Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be A. $113,400. B. $204,750. C. $261,450. D. $285,750.

D. $285,750.

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August? A. $24,675 B. $225,680 C. $303,800 D. $305,970

D. $305,970

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. What is budgeted cost of goods sold for March? A. $30,551 B. $31,800 C. $36,660 D. $38,160

D. $38,160

Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. What is budgeted cost of goods sold for March? A. $40,734 B. $42,400 C. $48,880 D. $50,880

D. $50,880

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September? A. $30,000 B. $67,500 C. $32,500 D. $52,500

D. $52,500

Arbor Co. has forecast sales to be $400,000 in May, $475,000 in June, $575,000 in July and $700,000 in August. Forty percent of sales are cash, the remainder is on credit. Credit sales are collected 60% in the month of sale, the remaining the following month. What are budgeted cash collections for July? A. $230,000 B. $334,000 C. $459,000 D. $551,000

D. $551,000

Parsley Inc, a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be? A. $58,500 B. $142,500 C. $81,000 D. $85,500

D. $85,500

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much is total labor cost during the three months July through September? A. $69,300 B. $327,670 C. $846,300 D. $859,320

D. $859,320

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted ending finished goods inventory for May? A. 1,000 B. 1,300 C. 1,600 D. 2,100

D. 2,100

40. Jillian Inc produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September? A. 7,500 B. 9,750 C. 16,500 D. 26,250

D. 26,250

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August? A. 3,425 square meters B. 3,450 square meters C. 3,508 square meters D. 3,600 square meters

D. 3,600 square meters

Which of the following statements are true?

Most experts believe that incurring prevention costs is the most effective way to manage quality costs. Quality training is an example of a prevention cost.

If the total activity cost were unknown, it could be calculated by:

Multiplying the total activity driver by the activity rate.

Which of the following would be considered a non-volume-based cost driver?

Number of batches

In what type of organization is decision-making authority spread throughout the organization?

Decentralized organization In a decentralized organization, decision-making authority is spread throughout the organization, and managers are given a great deal of autonomy to decide how to manage their individual units.

Total manufacturing costs includes

Direct materials and direct labor

Which of the following is the correct formula to compute an activity rate?

Divide the total activity cost by the total activity driver

Which of the following steps in the managerial decision-making process involves differential analysis?

Evaluate the costs and benefits of the alternatives.

When manufacturing overhead is applied to a job, a credit is made to the Work in Process account.

False Applied manufacturing overhead is debited (not credited) to Work in Process inventory. The credit is to the Manufacturing Overhead account.

To eliminate underapplied overhead at the end of the year, Manufacturing Overhead would be debited and Cost of Goods Sold would be credited.

False If manufacturing overhead is underapplied during the year, Manufacturing Overhead will need to be credited to bring the account balance to zero, while Cost of Goods Sold would be debited.

To assign activity costs using the activity proportion method, multiply the activity rate by the activity requirements of each individual product.

False To assign activity costs using the activity proportion method, multiply the total activity cost by the activity proportion for each product.

Which of the following costs is not relevant in a special-order decision?

Fixed Overhead Fixed overhead costs will be incurred whether or not the order is accepted so they are not relevant to the special-order decision.

___________ is/are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.

Fixed overhead costs Fixed overhead costs are excluded from the incremental analysis because they will be incurred regardless of whether or not the company accepts the special order.

Which of the following is not a step in the managerial decision-making process?

Forecast the potential sales.

A large company that uses activity based costing would do which of the following?

Group activities together to simplify the number of activities.

Managers who use activity-based management should begin by asking all of the following questions except:

How am I evaluated annually based on these activities?"

Which of the following are facility-level activities?

Human resource hiring fairs Paying factory insurance

All of the following are non-volume-based cost drivers except number of ___. -inspections -machine hours -design changes -setups

Machine Hours

Which of the following is NOT a volume-based cost driver? -Machine setups -Sales Revenue -Direct Material Costs -Direct Labor Dollars

Machine Setups

Which of the following is an ABC cost driver? -Direct Material Costs -Sales Revenue -Direct Labor Dollars -Machine Setups

Machine Setups

Manufacturing overhead was estimated to be $406,000 for the year along with 20,300 direct labor hours. Actual manufacturing overhead was $423,400, and actual labor hours were 21,500. Which of the following would be correct?

Overhead is overapplied by $6,600 Calculate the predetermined overhead rate by dividing the estimated total manufacturing overhead by the estimated total direct labor hours. ($406,000 / 20,300 = $20.00). Apply manufacturing overhead by multiplying the predetermined rate by the actual total direct labor hours. ($20.00 × 21,500 = $430,000). Since the applied overhead ($430,000) on the credit side of the manufacturing overhead account is greater than the actual overhead ($423,400) on the debit side of the manufacturing overhead account, the $6,600 credit balance represents overapplied overhead.

Which of the following statements contrasting residual income with return on investment is correct?

ROI may lead to goal incongruence while residual income does not.

Which of the following is NOT part of the manufacturing cost per unit?

Sales commission

Which of the following types of decisions involves deciding whether to sell a product as is or continue to refine it so that it can be sold at a higher price?

Sell-or-process further

Which of the following types of decisions involves deciding whether to accept or reject an order that is outside the scope of normal sales?

Special-order

Which of the following is not something that should be compiled for each dimension of the balanced scorecard?

Strategic vision

What is the term for the most constrained resource?

The Bottleneck

Which of the following is not a method used to determine transfer prices?

The balanced scorecard method There are three different ways to determine transfer prices: the market price method, the cost-based method, and negotiation.

Which of the following statements is not correct about using the balanced scorecard for sustainability accounting?

The company could focus exclusively on short-term metrics, creating sustainability in its operations.

Which of the following is not relevant to a sell-or-process further decision?

The cost of processing the product "as is."

Which of the following would not be directly related to a volume-based allocation measure?

The number of activities.

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

The only difference is how the methods assign indirect costs to products.

Which of the following responsibility centers will use a segmented income statement as an evaluation tool?

The profit center

The manager of Hampton, Inc. is trying to decide whether to make or buy a component of the product it sells. Which of the following costs and benefits is not relevant to the decision?

The selling price of the product The price Hampton charges for the product will not change across decision alternatives, so it is not relevant.

Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?

The system can only capture and report cost information, so it only affects the "profit" part of the triple bottom line.

Which of the following statements is false?

To be relevant, a cost must be an opportunity cost. It is not true that to be relevant a cost must be an opportunity cost. Cash costs can also be relevant.

Which costing system assigns overhead using volume-based cost drivers?

Traditional

When an activity must be performed for each individual unit, an appropriate cost driver is ___

Volume-Based

The responsibility center in which the manager does not have responsibility and authority over revenues is:

a cost center.

A relevant cost is:

a cost that differs across decision alternatives. A relevant cost is one that will change depending on which alternative a manager selects.

An activity cost driver is:

a measure of the underlying activity that occurs in each activity cost pool.

A technique that attempts to assign overhead costs to products based on the actions they require is called

activity based costing

A predetermined overhead rate in an activity-based costing system is called a(n)

activity rate

A predetermined overhead rate in an activity-based costing system is called a(n) ______ _______

activity rate

The formula to apply overhead to products is ______

activity rate times activity

Non-volume-based cost drivers ______

allow more indirect costs to be allocated to products are used in ABC systems

A predetermined overhead rate in an activity-based costing system is called ______.

an activity rate

A make-or-buy decision is the same as:

an outsourcing decision Both terms—make-or-buy and outsourcing—are used to describe decisions about whether to perform an activity in-house or purchase it from an outside supplier.

If the total activity cost were unknown, it could be calculated by:

multiplying the total activity driver by the activity rate.

Residual income is the difference between:

net operating income and the minimum acceptable profit.

The gross margin does not take into account:

non-manufacturing cost.

The gross margin does not take into account:

nonmanufacturing cost.

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

batch-level activity.

Costs at the batch level depend on the number of ______.

batches processed

In target costing, the target cost should be determined:

before manufacturing ever starts.

Activity-based costing systems typically include ___ cost drivers

both volume and non-volume based

A detailed plan that translates the company's objectives into financial terms, identifying the resources and expenditures that will be required over the planning horizon is a A. Strategic plan B. Budget C. Tactic D. Long-term objective

budget

hich of the following is not included in the operating budget? A. Budgeted balance sheet B. Sales budget C. Selling and administrative budget D. Raw materials purchases budget

budgeted balance sheet

When calculating raw materials purchases, the starting point should be A. actual materials purchases from the previous year. B. budgeted sales. C. budgeted production. D. budgeted cost of raw materials

budgeted production

When calculating the direct labor budget, the starting point should be A. actual direct labor hours from the previous year. B. budgeted sales. C. budgeted production. D. budgeted cost of direct labor.

budgeted production

Which of the following is the backward-looking phase of the planning and control cycle? A. Planning B. Directing/Leading C. Organizing D. Control

control

The formula to compute activity proportion is ______

cost driver for product / cost driver for all products

The formula to compute activity proportion is ______.

cost driver for product / cost driver for all products

Target costing is in stark contrast to _______-______ pricing, in which the company adds a markup to expenses required to produce the product.

cost plus

A group of similar activities that have been combined together is an activity ______

cost pool

Determining what a product costs and adding a markup is called ______

cost-plus pricing

Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting? A. Create budget slack. B. Use different budgets for planning and for performance evaluation. C. Use a continuous or rolling budget approach. D. Use a zero-based budgeting approach.

create budget slack

A unit-level activity to a manufacturer is the same as a(n) _______ -level activity to a service company.

customer

Making a single sale at a department store is an example of a ______-level activity.

customer

A system that pulls materials and products through the manufacturing system based on customer demand is called _____

just-in-time

To compute the per-unit manufacturing cost, add ______ _______ to direct materials and direct labor.

manufacturing overhead

External failure costs are costs that:

occur when a defective product makes its way into the hands of the customer.

Activity-based costing ______

offers some advantages over costing systems

Return on investment can be calculated as:

operating income/average invested assets.

Profit margin can be calculated as:

operating income/sales revenue.

Creating a budget is an important part of which phase of the planning and control process? A. Planning B. Organizing C. Directing/Leading D. Control

organizing

Which of the following is the forward-looking phase of the planning and control cycle? A. Planning B. Directing/Leading C. Organizing D. Control

planning

Investment turnover is defined as:

the ratio of sales revenue to average invested assets. he formula for investment turnover is sales revenue divided by average invested assets. Net operating income divided by average invested assets is return on investment; net operating income divided by sales revenue is profit margin; and profit margin divided by return on investment is the inverse of investment turnover.

The first step in ABC is:

to identify and classify activities.

A ________________ is the amount that one division charges when it sells goods or services to another division within the same company.

transfer price The definition of a transfer price is the price one division charges when it sells goods or services to another division within the same company.

When an activity must be performed for each individual unit, an appropriate cost driver is ______

volume-based

ABC works best in service industries ______.

when different customers require different levels of services