BEC - B3 MC

Should volume-based production be considered in the selection of appropriate cost drivers for an activity based costing system?

No

Would abnormal spoilage be included when calculating a manufactured good's inventoriable cost?

No

Would sales commissions be included when calculating a manufactured good's inventoriable cost?

No

Does ROI rely on financial measures that are capable of being independently verified while other forms of performance measures are subject to manipulation?

No, ROI is no more and no less capable of being independently verified or manipulated than other performance measures

Does residual income measure operational efficiency?

No, it measures profitability in excess of a target rate of return

Does conversion cost pricing place minimal emphasis on the cost of materials used in manufacturing a product?

No, it places no emphasis on the cost of materials

Is it good that ROI motivates managers to delay or avoid investing in new plant, property, and equipment

No, that is an inappropriate business decision

Would a performance report include strategic plans?

No, they are broad-based and long-term in nature

Because of changes that are occurring in the basic operations of many firms, what does not represent s trend in the way indirect costs are allocated?

Preferring plant-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations

Responsibility accounting defines an operating center that is responsible for revenue and costs as a(n):

Profit center

Generally, individual departmental rates rather than a plant-wide rate for applying overhead would be used if:

The manufactured products differ in the resources consumed from the individual departments in the plant

What incentive design will most likely encourage the use of nonfinancial measures by a manager?

Tying incentives to the manager's individual effort

Can conversion cost pricing be used when the customer furnishes the material used in manufacturing a product?

Yes

What kind of cost(s) are direct labor defined as/included in?

both a period and a prime cost

Activity based costing refines product cost information because the cost system:

emphasizes long-term product analysis (when fixed costs become variable costs)

A cost that bears an observable and known relationship to a quantifiable activity base is a(n):

engineered cost

What is a purpose of cost allocation?

measuring income and assets for external reporting

In an activity-based costing system, what should be used to assign a department's manufacturing overhead costs to products produced in varying lot sizes?

multiple cause and effect relationships

The optimal imputed interest rate used in the residual income approach to performance evaluation can best be described as the:

target return on investment set by the company's management

Multiple or determined overhead rates are considered preferable to a single or plant-wide overhead rate when:

various products are manufactured that do not pass through the same departments or use the same manufacturing techniques

Wexford Co has a subunit that reported the following data for Year 1: Asset (investment) turnover = 1.5 times Sales = $750,000 Return on sale = 8% The imputed interest rate is 12%. What is the division residual income for year 1?

$0 Actual income earned = 750 * .08 = 60 Required income = (750/1.5) * .12 = 60 60-60 = 0

In order to increase the profit margin for a certain product, a company is planning to purchase a custom-made machine for $5,000,000. It is anticipated that the introduction of the new machine will reduce the product's variable costs of labor and maintenance by $5.5 per unit and $0.95 per unit, respectively. The product manager estimates that 500,000 units of the product will be manufactured and sold each year with a product life cycle of two years, at which time the machine will be discarded wiht no salvage value. What is the company's total cost savings over the product's life cycle?

$1,450,000

Lankip Company produces two main products and a byproduct out of a joint process. The ratio of output quantities to input quantities of direct material used in the joint process remains consistent from month to month. Lankip has employed the physical-volume method to allocate joint production costs to the two main products. The net realizable value of the byproduct is used to reduce the joint production costs before the joint costs are allocated to the main products. Data regarding Lankip's operations for the current month are presented in the chart below. During the month, Lankip incurred joint production costs of $2,520,000. The main products are not marketable at the split-off point and thus have to be processed further. 1st main product: Monthly output in pounds - 90,000 Selling price per pound - $30 Process costs - $540,000 2nd main product: Monthly output in pounds - 150,000 Selling price per pound - $14 Process costs - $660,000 Byproduct: Monthly output in pounds - 60,000 Selling price per pound - $2 Process costs - 0 The amount of joint production cost that Lankip would allocate to the Second Main Product by using the physical-volume method to allocate joint production costs would be:

$1,500,000

Galax Inc had operating income of $5,000,000 before interest and taxes. Galax's net book value of plant assets at Jan 1 and Dec 31 were $22,000,000 and $18,000,000 respectively. Galax achieved a 25% return on investment for the year, with an investment turnover of 2.5. What were Galax's sales for the year?

$50,000,000 22+18 = 40/2 = 20 20*2.5 = 50

Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May: Beg WIP May 1 = 16,000 units Started in May = 100,000 units Completed in May = 92,000 units End WIP May 31 = 24,000 units The beginning inventory was 60% complete for materials and 20% complete for conversion costs. The ending inventory was 90% complete for materials and 40% complete for conversion costs. Costs pertaining to the month of May are as follows: -Beg inventory costs are: materials $54,560; direct labor $20,320; and factory overhead $15,240 - Costs incurred during May are: materials $468,000; direct labor $182,880; and factory overhead $391,160 Using the FIFO method, the total cost of units in the ending WIP inventory at May 31 is:

$153,168

Merry Co, has two major categories of factory overhead: material handling and quality control. The costs expected for these categories for the coming year are as follows: Material handling - $120,000 Quality inspection - $200,000 The plant currently applies overhead based on direct labor hours. The estimated direct labor hours are 80,000 per year. The plant manager is asked to submit a bid and assembles the following data on a proposed job: DM = $4,000 DL = $6,000 DL hours = 2,000 What amount is the estimated product cost on the proposed job?

$18,000

A company uses a process costing system to record inventory costs. Data at the end of the month are as follows: WIP - 100 units, 100% DM, 80% Conv FG - 900 units, 100% DM, 100% Conv The company uses the weighted average method to compute the costs. Its total costs for the month are $10,000 for direct materials and $19,600 for conversion costs. What is the total conversion cost per equivalent unit?

$20

Kerner Manufacturing has the following information: WIP Jan 1 - 100 units, $50,000 Started - 500 units Completed - 400 units WIP March 31 - 200 units Costs added - $720,000 Beginning WIP inventory was 50% complete for direct materials. Ending WIP inventory was 75% complete for direct materials. What is the total value of material costs in ending WIP inventory using the weighted average unit cost inventory valuation method?

$210,000

Under Pick Co's job order costing system manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During January Year 1, Pick's transactions included the following: Direct Materials $90 Indirect Materials $8 OH incurred $125 OH applied $113 Direct Labor $107 Pick had neither beginning nor ending work-in-process inventory. What was the cost of jobs completed in January Year 1?

$310

Blank, Inc employs a weighted average method in its processing costing system. Black's work in process inventory on June 30 consists of 40,000 units. These units are 100 percent complete with respect to materials and 60 percent complete with respect to conversion costs. The equivalent unit costs are $5 for materials and $7 for conversion costs. What is the total costs of the June 30 work-in-process inventory?

$368,000

Madtack Company's beginning and ending inventories for the month of November Year 1 are as follows: DM = $67,000 B and $62,000 E WIP = $145,000 B and $171,000 E FG = $85,000 B and $78,000 E Production data for the month of November follows: DL = 200,000 DM purchased = 163,000 Transportation in = 4,000 Purchase returns and allowances = 2,000 Madtack uses one factory OH control account and charges factory OH to production at 70% of DL cost. The companu does not formally recognize over/under applied OH until year-end. Madtack Company's prime cost for November is:

$370,000

New-Rage Cosmetics has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5 percent of direct labor costs. Monthly direct labor cost for Satin Sheen makeup is $27,500. In an attempt to more equitably distribute quality control costs, New-Rage is considering activity-based costing. The monthly data shown in the chart below have been gathered for Satin Sheen makeup. Incoming material --> $11.5 per type, 12 types In-process inspection --> $0.14 per unit, 17,500 units Product certification --> $77 per order, 25 orders The monthly quality control cost assigned to Satin Sheen makeup using activity-based costing is:

$4513 $525.5 higher than the cost using the traditional system

Madtack Company's beginning and ending inventories for the month of November Year 1 are as follows: DM = $67,000 B and $62,000 E WIP = $145,000 B and $171,000 E FG = $85,000 B and $78,000 E Production data for the month of November follows: DL = 200,000 DM purchased = 163,000 Transportation in = 4,000 Purchase returns and allowances = 2,000 Madtack uses one factory OH control account and charges factory OH to production at 70% of DL cost. The company does not formally recognize over/under applied OH until year-end. Madtack Company's total manufacturing cost for November is:

$510,000 $170 DM + $200 DL + $140 OH = $510 OH = DL * .7 = 200 * .7 = $140

As part of a benchmarking process, a company's costs of quality for the current month have been identified as follows: Employee training 20 Product recalls 8 Scrap 4.5 Quality inspectors 48 Preventative maintenance 19.5 Supplier education expense 17.5 Materials 60 Processing product returns 2.5 What amount is the company's prevention cost for the current month?

$57

During May, Mercer Company completed 50,000 units costing $600,000, exclusive of spoilage allocation. Of these completed units, 25,000 were sold during the month. An additional 10,000 units, costing $80,000, were 50% complete at May 31. All units are inspected between the completion of manufacturing and transfer to finished goods inventory. Normal spoilage for the month was $20,000, and abnormal spoilage of $50,000 was also incurred during the month. The portion of total spoilage that should be charged against revenue in May is:

$60,000 Normal spoilage: Spoilage * percent sold $20,000 * 50% = $10,000 Abnormal spoilage is 100% charged 50,000 + 10,000 = 60,000

Zig Corp provides the following information: Pretax op. profit = $300,000,000 Tax rate = 40% Capital used = 1,200,000,000 Amount debt and equity: 50%, 50% Cost of equity = 15% Cost of debt (after tax) = 5% Which of the following represents Zig's year-end economic value added amount?

$60,000,000 WACC = (5x0.5) + (15x0.5) = 10 NOPAT = 300,000,000x.6 = 180,000,000 180,000,000 - (1,200,000,000x.1) = 60,000,000

Based on the following data, what is the gross profit for the company? Sales 1,000,000 Net purchase of raw materials 600,000 Cost of goods manufactured 800,000 Marketing and administrative expenses 250,000 Indirect manufacturing costs 500,000 WIP - 500,000 B and 400,000 E FG - 100,000 B and 500,000 E

$600,000

Sonimad Sawmill manufactures two lumber products from a joint milling process. The two products developed are MSB and CBL. A standard production run incurs joint costs of $300,000 and results in 60,000 units of MSB and 90,000 units of CBL. Each MSB sells for $2 per unit, each CBL sells for $4 per unit. If there are no further processing costs incurred after the split-off point, the amount of joint cost allocated to the MSB on a relative sales value basis would be:

$75,000

What is true regarding inventoriable costs?

Inventoriable costs are regarded as assets before the products are sold

Although there is no single format for the balanced scorecard, the report generally includes a variety of measurements associated with objectives classified by critical success factors. Critical success factors often include:

-Financial -Internal business process -Customer -Human resource considerations

In a quality control program, which of the following is (are) categorized as internal failure costs? 1) Rework 2) Responding to customer complaints 3) Statistical quality control procedures

1 only

Select Co had the following current-year financial statement relationships: Asset turnover = 5 Profit margin on sale = 0.02 What was Select's current-year percentage return on assets?

10% 5*0.02 = .1 = 10%

Spear Corp had sales of $2,000,000, a profit margin of 11%, and assets of $2,500,000. Spear decided to reduce its debt ratio to 0.4 from 0.6 by selling new common stock and using the proceeds to repay principal on some outstanding long-term debt. After the refinancing, what is Spear's return on equity?

14.7% NI = 2,000,000*.11 = 220,000 Equity = 2,500,000*.6 = 1,500,000 220,000 / 1,500,000 = 14.7%

Fabro Inc produced 1,500 units of Product RX-6 last week. The inputs to the production process for Product RX-6 were as follows. -450 pounds of Material A at a cost of $1.5 per pound -300 pounds of Material Z at a cost of $2.75 per pound -300 labor hours at a cost of $15 per hour What is the best productivity measure for the first-line supervisor in Fabro Inc's production plant?

5.00 units per labor hour it measures the efficiency and productivity of plant labor, which is within the supervisor's control

A company has the following financial information: Sales 200,000 Net Income 100,000 Depreciation 20,000 Interest 10,000 Taxes 5,000 What is the company's operating profit margin?

57.5% Operating profit / Sales

A cost driver is defined as:

A casual factor that increase the total cost of a cost objective

Quality programs that demand compliance with the most rigorous standards apply the concept of:

Absolute conformance

Strategic Business Units (SBUs) are classified into different types based on the responsibility levels assigned to their managers. Which SBU has the least amount of responsibility?

Cost SBU

Discount Super Stores has adopted a strategy of becoming the low cost leader for consumer products in the northwest. The company defines its value in the marketplace through low prices and consistently measures its prices against those of its competitors. The location of these measurements would most likely be classified and summarized in which section of Discount's balanced scorecard?

Customer

What are four sections on a balanced scorecard?

Customer Financial Learning and innovation Internal business processes

What are some of the types of preventions costs?

Employee training Preventative maintenance Supplier education expense

In a traditional job order cost system, the issue of indirect materials to a production department increases:

Factory overhead control aka over/under applied overhead

Managerial performance can be measured in many different ways including return on investment (ROI) and residual income (RI). A good reason for using RI instead of ROI is that:

Goal congruence is more likely to be promoted by using RI

Kode Co manufactures a major product that gives rise to a by-product called May. May's only separable cost is a $1 selling cost when a unit is sold for $4. Kode accounts for May's sales by deducting the $3 net amount from the cost of goods sold of the major product. There are no inventories. If Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode's overall gross margin?

Gross margin increases by $1 for each unit of May sold

What is one of the four perspectives of a balanced scorecard?

Innovation