Exam 3
Which of the following costs would not be considered part of the manufacturing overhead of a furniture manufacturer? a. The cost of compliance with federal factory safety regulations. b. Depreciation expense on factory equipment. c. The cost of grease used to lubricate factory equipment. d. The cost of wood used in furniture construction.
d. The cost of wood used in furniture construction.
Which of the following is not a product cost? a. Depreciation on a warehouse where raw materials are stored. b. An employee working directly on assembling a car. c. The leather seats of a motorcycle. d. The real estate tax of the showroom.
d. The real estate tax of the showroom.
When direct materials are used: a. Manufacturing Overhead is debited. b. Raw Materials Inventory is debited. c. Cost of Goods Sold is debited. d. Work in Process Inventory is debited.
d. Work in Process Inventory is debited.
Within the relevant range, fixed costs: a. fall as sales volume falls. b. rise as sales volume rises. c. rise as sales volume falls. d. remain steady when sales volume changes.
d. remain steady when sales volume changes.
When volume increases, fixed cost per unit: a. increases. b. decreases. c. stays the same. d. increases or decreases, depending upon the situation.
b. decreases.
If a product sells for $40, variable costs are $32 and fixed costs are $460,000, what would total sales have to be in order to break-even?
$2,300,000 $460,000 ÷ ($40 − $32) = 57,500 × $40 = $2,300,000
John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials$ 31 Direct labor$ 23 Variable manufacturing overhead$ 36 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $20,000. Joan Reid, Incorporated has offered to purchase 130 motors from John Boyd per month to be used in its own outboard motors. If Joan Reid's order is rejected, what will be John Boyd 's average unit cost of manufacturing each motor?
$110 per unit $31 + $23 + $36 + ($20,000 ÷ 1,000) = $110
John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials$ 31 Direct labor$ 23 Variable manufacturing overhead$ 36 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $20,000. Joan Reid, Incorporated has offered to purchase 130 motors from John Boyd per month to be used in its own outboard motors. Assuming John Boyd wants to earn a pretax profit of $5,590 on this special order, what price must it charge Joan Reid?
$133 per unit $90 + ($5,590 ÷ 130) = $133
Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $86,000; Direct labor $53,000; Electricity used in the Factory $23,000; Factory foreperson salary $3,400; and Maintenance of factory machinery $2,100. Alton Company's total product costs:
$167,500. $86,000 + $53,000 + $23,000 + $3,400 + $2,100 = $167,500
The monthly high and low levels of direct labor hours and of total manufacturing overhead for Onyx Company are as shown: Direct Labor Hours. Manufacturing Overhead Highest observed level8,000. $ 34,000 Lowest observed level4,000 $ 26,000 On the basis of the above data, the cost formula for Onyx's monthly manufacturing overhead can be expressed as:
$18,000 fixed cost plus $2.00 per direct labor hour. ($34,000 − $26,000) ÷ (8,000 − 4,000) = $2 variable cost; $34,000 − ($2 × 8,000) = $18,000 fixed cost
The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. Machine Hours. Manufacturing Overhead April 92,000$ 187,000 May50,000. $ 170,000 June116,000$ 315,200 July112,000$ 198,000 Using the high-low method, compute the variable element of manufacturing overhead cost per machine hour.
$2.20 per machine hour ($315,200 − $170,000) ÷ (116,000 − 50,000) = $2.20
The Abrams Corporation incurred the following quality costs during the year: Inspections$ 35,000 Training$ 16,500 Quality planning$ 7,000 Maintenance$ 10,200 Rework$ 3,750 Warranty$ 8,550 Testing of equipment$ 7,800 Scrap$ 8,000 Lost sales$ 19,900 Downtime$ 10,200 Repairs$ 7,000 What are the total internal failure costs for the Abrams Corporation?
$21,950 $3,750 + $8,000 + $10,200 = $21,950
A company with monthly fixed costs of $310,000 expects to earn monthly operating income of $27,500 by selling 13,500 units per month. What is the company's expected unit contribution margin?
$25 per unit $310,000 + $27,500 = 13,500 × CM; CM = $25
On October 1 of the current year, Molloy Corporation prepared a cash budget for October, November, and December. All of Molloy's sales are made on account. The following information was used in preparing estimated cash collections: August sales (actual)$ 42,000 September sales (actual)$ 52,000 October sales (estimated)$ 22,000 November sales (estimated)$ 72,000 December sales (estimated)$ 62,000 Approximately 70% of all sales are collected in the month of the sale, 25% is collected in the following month, and 5% is collected in the month thereafter.Budgeted collections from customers in October total:
$30,500. (0.70 × $22,000) + (0.25 × $52,000) + (0.05 × $42,000) = $30,500
Burns Industries currently manufactures and sells 14,000 power saws per month, although it has the capacity to produce 29,000 units per month. At the 14,000-unit-per-month level of production, the per-unit cost is $52, consisting of $33 in variable costs and $19 in fixed costs. Burns sells its saws to retail stores for $74 each. Allen Distributors has offered to purchase 4,400 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Using an incremental analysis approach, Burns should consider accepting this special order only if the price per unit offered by Allen is at least:
$33. $33 will cover the variable costs of production.
The following information is available regarding the total manufacturing overhead of Olsen Company for a recent four-month period. Machine Hours Manufacturing Overhead April86,000 $ 184,000 May50,000 $ 167,000 June113,000 $ 286,700 July109,000 $ 195,000 Olsen's projected August operations will require approximately 180,000 machine hours. Using the high-low method, compute total manufacturing overhead estimated for August.
$414,000 $72,000 + ($1.90 × 180,000) = $414,000
On October 1 of the current year, Molloy Corporation prepared a cash budget for October, November, and December. All of Molloy's sales are made on account. The following information was used in preparing estimated cash collections: August sales (actual)$ 32,000 September sales (actual)$ 42,000 October sales (estimated)$ 27,000 November sales (estimated)$ 62,000 December sales (estimated)$ 52,000 Approximately 60% of all sales are collected in the month of the sale, 30% is collected in the following month, and 10% is collected in the month thereafter.Budgeted collections from customers in November total:
$49,500. (0.60 × $62,000) + (0.30 × $27,000) + (0.10 × $42,000) = $49,500
Summit Products, Incorporated is interested in producing and selling an improved widget. Market research indicates that customers would be willing to pay $86 for such a widget and that 46,000 units could be sold each year at this price. The current cost to produce the widget is estimated to be $54. Summit has learned that a competitor plans to introduce a similar widget at a price of $76. In response, Summit may reduce its selling price to $76. If Summit requires a 25% return on sales, what is the target cost for the new widget?
$57.00 $76 − ($76 × 0.25) = $57.00
General Chemical Company (GCC) manufactures two products as part of a joint process: A1 and B1. Joint costs up to the split-off point total $24,500. The joint costs are allocated to A1 and B1 in proportion to their relative sales values. At the split-off point, product A1 can be sold for $33,000, whereas product B1 can be sold for $77,000. Product A1 can be processed further to make product A2, at an incremental cost of $40,500. A2 can be sold for $87,500. Product B1 can be processed further to make product B2, at an incremental cost of $50,500. B2 can be sold for $97,500. Joint costs allocated to product A1 total:
$7,350. $33,000 ÷ $110,000 = 30% 30% × $24,500 = $7,350
Mitchell Corporation manufactures a single product. The selling price is $85 per unit, and variable costs amount to $68 per unit. The fixed costs are $16,500 per month.What will be the monthly margin of safety (in dollars) if 1,800 units are sold each month?
$70,500 (1,800 × $85) − $82,500 = $70,500
John Boyd Corporation manufactures and sells 1,000 tractors each month. The primary component in each tractor is the motor. John Boyd has the monthly capacity to produce 1,300 motors. The variable costs associated with manufacturing each motor are shown below: Direct materials$ 34 Direct labor$ 26 Variable manufacturing overhead$ 39 Fixed manufacturing overhead per month (for up to 1,300 units of production) averages $17,000. Joan Reid, Incorporated has offered to purchase 100 motors from John Boyd per month to be used in its own outboard motors. What is the incremental cost of producing each additional motor?
$99 per unit $34 + $26 + $39 = $99
The following data are available for product number CK74, manufactured and sold by Ruby Corporation: Maximum capacity with present facilities9,500units Total fixed cost (per period)$ 924,300 Variable cost per unit$ 119.00 Sales price per unit$ 197.00 The number of units of CK74 that Ruby must sell to break- even is:
11,850. $924,300 ÷ $78.00 = 11,850
If the unit sales price is $22, variable costs are $8 per unit and fixed costs are $17,000, how many units must be sold to earn an income of $220,000?
16,929 units ($17,000 + $220,000) ÷ $14 = 16,929 units
Alton Company produces metal belts. During the current month, the company incurred the following product costs: Raw materials $81,000; Direct labor $50,500; Electricity used in the Factory $20,500; Factory foreperson salary $2,650; and Maintenance of factory machinery $1,850. Alton Company's indirect product costs totaled:
25,000 $20,500 + $2,650 + $1,850 = $25,000
The monthly high and low levels of direct labor hours and of total manufacturing overhead for Onyx Company are as shown: Direct Labor Hours. Manufacturing Overhead Highest observed level8,000. $ 34,000 Lowest observed level4,000 $ 26,000 In a month in which 6,500 direct labor hours are worked, Onyx's manufacturing overhead should be approximately:
31,000 (6,500 × $2) + $18,000 = $31,000
Accents Associates sells only one product, with a current selling price of $80 per unit. Variable costs are 20% of this selling price, and fixed costs are $20,000 per month. Management has decided to reduce the selling price to $75 per unit in an effort to increase sales. Assume that the cost of the product and fixed operating expenses are not changed by this reduction in selling price. At the current selling price of $80 per unit, the contribution margin ratio is:
80%. ($80 − $16) ÷ $80 = 80%
Cycle time includes: a. Processing time, storage and waiting time, movement time, and inspection time. b. Processing time, inspection time, and inventory time. c. Processing time, storage and waiting time, finishing time, and selling time. d. Processing time, storage and waiting time, movement time, and finishing time.
a. Processing time, storage and waiting time, movement time, and inspection time.
T or F: In a master budget, the sales forecast would be dependent upon the budgeted production figures.
FALSE
Burns Industries currently manufactures and sells 24,000 power saws per month, although it has the capacity to produce 39,000 units per month. At the 24,000-unit-per-month level of production, the per-unit cost is $73, consisting of $44 in variable costs and $29 in fixed costs. Burns sells its saws to retail stores for $84 each. Allen Distributors has offered to purchase 5,400 saws per month at a reduced price. Burns can manufacture these additional units with no change in its present level of fixed manufacturing costs. Assume that Allen Distributors offers to purchase the additional 5,400 saws at a price of $51 per unit. If Burns accepts this price, Burns' monthly gross profit on sales of power saws will: Decrease/increase by...
Increase by $37,800. (5,400 × $51) − (5,400 × $44) = $37,800
Aircraft Products, a manufacturer of aircraft landing gear, makes 2,500 units each year of a special valve used in assembling one of its products. The unit cost of producing this valve includes variable costs of $65 and fixed costs of $60. The valves could be purchased from an outside supplier at $72 each. If the valve were purchased from the outside supplier, 40% of the total fixed costs incurred in producing this valve could be eliminated. Buying the valves from the outside supplier instead of making them would cause the company's operating income to: Increase/decrease by?
Increase by $42,500. Costs to Make $65 + $60 = $125 Costs to Buy = $72 + ($60 × 0.6) = $108 (Costs to Make of $125 − Costs to Buy of $108) × 2,500 = $42,500 Increase
Manufacturing companies normally have three types of inventory: a. Raw materials, work in process, and finished goods. b. Work in process, finished goods, and returned merchandise. c. Economy, standard, and deluxe. d. Direct materials, direct labor, and manufacturing overhead.
a. Raw materials, work in process, and finished goods.
Which cost is not relevant in making financial decisions? a. Sunk costs b. Opportunity costs c. Incremental costs d. Out-of-pocket costs
a. Sunk costs
All of the following are components of the value chain except: a. Research and design activities. b. Obtaining raw materials. c. Supporting the product after it is sold. d. Maintaining large inventory levels so that orders can be filled promptly.
d. Maintaining large inventory levels so that orders can be filled promptly.
A budget that can be easily adjusted to show budgeted revenues, costs, and cash flows at different levels of activity is known as: a. A flexible budget. b. A master budget. c. A production budget. d. A multi-level budget.
a. A flexible budget.
Until the related goods are sold, product costs are viewed as: a. Assets. b. Liabilities. c. Operating expenses. d. Manufacturing overhead.
a. Assets.
Products for which sales of one contribute to the sales of another are called: a. Complementary products. b. Competing products. c. Contributory products. d. Codependent products.
a. Complementary products.
The just-in-time manufacturing system: a. Contrasts with the supply push systems. b. Complements the supply push systems. c. Neither complements nor contrasts with the supply push systems. d. Contrasts the demand-pull system.
a. Contrasts with the supply push systems.
The benefits of budgeting include all of the following except: a. Enabling the company to produce more for less cost. b. Assigning responsibility for situations that require corrective action. c. Coordinating activities between departments within the organization. d. Creating standards for evaluating performance.
a. Enabling the company to produce more for less cost.
In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is less likely to: a. Focus upon the entire organization as the accounting entity. b. Focus upon future accounting periods. c. Make use of estimated amounts. d. Be tailored to the specific needs of an individual decision maker.
a. Focus upon the entire organization as the accounting entity.
Sunk costs: a. Have already been incurred as a result of past actions. b. Vary among the alternative courses of action being considered. c. Are benefits that could have been obtained by following another course of action. d. Result from unfavorable cost variances.
a. Have already been incurred as a result of past actions.
The accountant for Eric's Plumbing Equipment Company recently made a journal entry consisting of a debit to Work in Process and a credit to Raw Materials Inventory. This entry recorded: a. The use of raw materials in the production process. b. Payment for raw materials. c. The return of unused materials to inventory. d. The receipt of raw materials from the company's supplier.
a. The use of raw materials in the production process.
The following are all characteristics of target costing except: a. Understanding the pricing process in order to increase selling prices. b. Driving costs down while satisfying customer needs and expectations. c. Emphasizing the product's functional characteristics and their importance to the customer. d. Reducing development time.
a. Understanding the pricing process in order to increase selling prices.
The manufacturing efficiency ratio equals: a. Value-added time divided by cycle time. b. Value-added time multiplied by cycle time. c. Cycle time divided by value-added time. d. The average of cycle time divided by value-added time.
a. Value-added time divided by cycle time.
Costs that rise and fall proportionately with the volume of output are often referred to as: a. Variable costs. b. Flexible costs. c. Idle capacity costs. d. Uncontrollable costs.
a. Variable costs.
The contribution margin ratio is expressed as: a. a percentage of revenue. b. a total dollar amount for the period. c. a contribution margin per unit. d. total contribution margin amount.
a. a percentage of revenue.
In order to calculate break-even sales units, fixed costs are divided by the: a. contribution margin per unit. b. contribution margin percentage. c. target operating income. d. sales volume.
a. contribution margin per unit.
In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to: a. cover the fixed costs of the business and providing operating income. b. fixed expenses and variable expenses. c. variable expenses and interest charges. d. variable expenses when production is at normal capacity.
a. cover the fixed costs of the business and providing operating income.
The contribution margin ratio is computed as: a. sales minus variable costs, divided by sales. b. fixed costs plus variable costs, divided by sales. c. sales minus fixed costs, divided by sales. d. sales divided by variable costs.
a. sales minus variable costs, divided by sales.
Which of the following is not a characteristic of the total quality approach to setting budgetary targets? a. Absolute efficiency b. A perception that the budget is fair c. Budgetary targets that are unattainable d. Budgeted performance expectations that cannot be exceeded
b. A perception that the budget is fair
BT&T Corporation manufactures telephones. Recently, the company produced a batch of 600 defective telephones at a cost of $9,000. BT&T can sell these telephones as scrap for $9 each. It can also rework the entire batch at a cost of $6,500, after which the telephones could be sold for $20 per unit. Which of the following statements is false regarding the defective units? a. BT&T will not recover its costs if it sells the defective units as scrap. b. BT&T will recover total costs incurred if it reworks the defective units. c. BT&T will not recover the total costs incurred if it reworks the defective units. d. BT&T will recover more of its additional costs if it decides to rework the defective units.
b. BT&T will recover total costs incurred if it reworks the defective units.
The most widely used budgeting philosophy is the: a. Operational approach. b. Behavioral approach. c. Strategic approach. d. Tactical approach.
b. Behavioral approach.
Preparation of a budgeted income statement does not require: a. Estimates of cost of goods sold. b. Estimates of the timing of cash receipts and payments. c. Preparation of sales forecast. d. Anticipation of operating expenses.
b. Estimates of the timing of cash receipts and payments.
Four categories of costs associated with product quality are: a. External failure, internal failure, prevention, and carrying. b. External failure, internal failure, prevention, and appraisal. c. External failure, internal failure, training, and appraisal. d. Warranty, product liability, prevention, and training.
b. External failure, internal failure, prevention, and appraisal.
The principal difference between managerial accounting and financial accounting is that managerial accounting information is: a. Prepared by managers. b. Intended primarily for use by decision makers inside the business organization. c. Prepared in accordance with a set of accounting principles developed by the Institute of Certified Managerial Accountants. d. Oriented toward measuring solvency rather than profitability.
b. Intended primarily for use by decision makers inside the business organization.
Products that emerge from a shared manufacturing process are referred to as: a. Complementary products. b. Joint products. c. Contributory products. d. Codependent products.
b. Joint products.
Costs that have not yet been incurred and that may vary among different courses of action are called: a. Opportunity costs. b. Out-of-pocket costs. c. Joint costs. d. Sunk costs.
b. Out-of-pocket costs.
The costs of purchasing or manufacturing inventory are called: a. Period costs. b. Product costs. c. Overhead costs. d. Job costs.
b. Product costs.
The placing of direct materials into the production process is recorded by an entry crediting: a. Materials Expense. b. Raw Materials Inventory. c. Work in Process Inventory. d. Finished Goods Inventory.
b. Raw Materials Inventory.
The suppliers and production component of the value chain would include all of the following costs except: a. Production set-up. b. Salaries for sales personnel. c. Receipt of direct materials from suppliers. d. Direct production labor.
b. Salaries for sales personnel.
External failure costs include: a. Inspections of materials. b. Training. c. Rework. d. Repairs.
d. Repairs.
Capital expenditures budgets are typically prepared for a period of: a. 3 months. b. 6 months. c. One year. d. Several years.
d. Several years.
A cost that has already been incurred and cannot be changed is called a(n): a. Opportunity cost. b. Out-of-pocket cost. c. Joint cost. d. Sunk cost.
d. Sunk cost.
Fancy Furniture produced a batch of 2,000 coffee tables at a cost of $355,000. It was discovered that the entire batch was finished improperly. Fancy can sell the tables as seconds for $305,000 or spend an additional $315,000 to refinish them and sell them for $605,000. Which of the following is not relevant to management's decision regarding refinishing the tables or selling them as is? a. The additional $300,000 revenue that can be generated if the tables are refinished. b. The $355,000 manufacturing cost of the tables already incurred. c. The additional $315,000 cost to refinish the tables. d. The effect of selling "seconds" on Fancy's reputation as a fine-furniture manufacturer.
b. The $355,000 manufacturing cost of the tables already incurred.
Incremental costs can be defined as: a. Costs that are expected to increase regardless of the course of action chosen. b. The differences between costs incurred under alternative courses of action. c. Costs incurred in the past. d. Costs that are irrelevant in decision making.
b. The differences between costs incurred under alternative courses of action.
Which philosophy in setting budgeted amounts assumes both the complete elimination of inefficiencies and a level of absolute efficiency? a. The behavioral approach. b. The total quality management approach. c. The strategic approach. d. The master budget approach.
b. The total quality management approach.
The set of linked activities and resources needed to create and deliver a product or service to the customer is referred to as: a. The budget. b. The value chain. c. The operating cycle. d. The production process.
b. The value chain.
The primary objective of activity-based management is: a. To develop more accurate product costs. b. To reduce and eliminate non-value-added activities. c. To increase product quality. d. To identify instances of internal failure.
b. To reduce and eliminate non-value-added activities.
Which of the following is not a prevention cost? a. Training costs b. Warranty costs c. Maintenance costs d. Quality planning costs
b. Warranty costs
A semivariable cost: a. increases and decreases directly and proportionately with changes in volume. b. changes in response to a change in volume, but not proportionately. c. increases if volume increases, but remains constant if volume decreases. d. changes inversely in response to a change in volume.
b. changes in response to a change in volume, but not proportionately.
Which of the following is a major component of a master budget? a. A production throughput schedule b. A machinery maintenance schedule c. A cash budget d. An employee training budget
c. A cash budget
A master budget usually includes all of the following except: a. A sales forecast. b. A cash budget. c. A projected tax return. d. Projected financial statements.
c. A projected tax return.
The Abrams Corporation incurred the following quality costs during the year: Inspections$ 32,000 Training$ 15,000 Quality planning$ 7,000 Maintenance$ 12,500 Rework$ 3,000 Warranty$ 7,500 Testing of equipment$ 6,300 Scrap$ 8,000 Lost sales$ 22,250 Downtime$ 8,700 Repairs$ 5,500 As a percentage of total costs, which quality cost category is the highest? a. Prevention b. Internal failure c. Appraisal d. External failure
c. Appraisal Appraisal$ 38,300 30% Prevention$ 34,500 27% Internal failure costs$ 19,700 15% External failure costs$ 35,250 28% Total Costs$ 127,750 100%
Which of the following is not considered an operating budget? a. Manufacturing cost budget b. Production schedule c. Capital expenditures budget d. Sales forecast
c. Capital expenditures budget
Which of the following is not one of the basic procedures related to activity-based costing? a. Identify the activities that drive overhead costs b. Create activity cost pools associated with these cost driver activities c. Compute internal failure costs d. Determine the cost per unit of each activity
c. Compute internal failure costs
A flexible budget is one that: a. Is revised monthly in the light of changing business conditions. b. Is a compromise plan reflecting diverse views of various supervisors. c. Contains estimated cost data for several different levels of activity. d. Separates factory overhead between the variable and fixed portions.
c. Contains estimated cost data for several different levels of activity.
Flexible budgeting may be viewed as combining the concepts of budgeting and: a. Incremental analysis. b. Product costing. c. Cost-volume-profit analysis. d. Financial statement analysis.
c. Cost-volume-profit analysis.
Which of the following is a period cost? a. Depreciation on a factory building. b. The cost of direct materials used. c. Depreciation on a sales showroom. d. The cost of disposing of hazardous waste materials from factory operations.
c. Depreciation on a sales showroom.
The completion of a computer by First Wireless, Incorporated would require a debit to which of the following accounts? a. Cost of Goods Sold. b. Work in Process Inventory. c. Finished Goods Inventory. d. Materials Inventory.
c. Finished Goods Inventory.
Which of the following types of cost are always relevant to a decision? a. Sunk costs b. Average costs c. Incremental costs d. Fixed costs
c. Incremental costs
Which of the following is not a characteristic of managerial accounting? a. Reports are used primarily by insiders rather than by persons outside of the business entity. b. Its purpose is to assist managers in planning and controlling business operations. c. Information must be developed in conformity with generally accepted accounting principles or with income tax regulations. d. Information may be tailored to assist in specific managerial decisions.
c. Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.
JCN Industries normally produces and sells 5,000 keyboards for personal computers each month. Variable manufacturing costs amount to $25 per unit, and fixed costs are $146,000 per month. The regular sales price of the keyboards is $86 per unit. JCN has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect JCN 's regular sales volume or fixed manufacturing costs. On the basis of the above information only, which of the following is not true? a. At the 5,000-unit level of production, JCN's average cost per unit is $54.20. b. At the 6,000-unit level of production, JCN's average cost per unit is $49.33. c. It would not be profitable for JCN to consider the special order at a price less than $49 per unit. d. The fixed manufacturing costs of $146,000 are not relevant to this decision regarding the special order.
c. It would not be profitable for JCN to consider the special order at a price less than $49 per unit.
Which of the following is not commonly used to measure product quality in a just-in-time system? a. Defects per million b. Merchandise returns c. Manufacturing efficiency ratio d. Warranty claims
c. Manufacturing efficiency ratio
Incremental revenues: a. Always increase revenue when one course of action is selected over another. b. Always decrease revenue when one course of action is selected over another. c. May increase or decrease when one course of action is selected over another. d. Cause revenues to remain steady.
c. May increase or decrease when one course of action is selected over another.
By choosing to go into business for himself, Jim Lazar foregoes the possibility of getting a highly paid job with a large company. This is called a(n): a. Sunk cost. b. Out-of-pocket cost. c. Opportunity cost. d. Joint cost.
c. Opportunity cost.
Techniques to manage costs in the value chain include all of the following except: a. Activity based management. b. Target costing. c. Process costing. d. Total quality management.
c. Process costing.
A segment of a master budget relating to that portion of a business under the control of a particular manager is termed a: a. Performance report. b. Production report. c. Responsibility budget. d. Cash budget.
c. Responsibility budget.
A budget that adds a new month when the current month ends is called a: a. Capital budget. b. Master budget. c. Rolling budget. d. Quarterly budget.
c. Rolling budget.
Which of the following costs would not be considered part of the manufacturing overhead of a chemical plant? a. The costs of disposing of toxic waste materials. b. Salaries of factory medical personnel. c. Salaries of employees who operate distilling equipment used in the production process. d. The cost of complying with federal safety regulations concerning plant operations.
c. Salaries of employees who operate distilling equipment used in the production process.
Which of the following is typically a variable cost? a. Insurance expense b. Amortization expense c. Sales commission expense d. Executive salaries expense
c. Sales commission expense
Which of the following is not an example of the cost of quality? a. Prevention costs b. Internal failure costs c. Target costs d. Appraisal costs
c. Target costs
Target costing is directed toward: a. Increasing the activity costs associated with existing products. b. Identifying the amount by which the costs of existing products must be reduced to achieve a target profit margin. c. The creation and design of products that will provide adequate profits. d. The improvement of existing production processes by eliminating non-value adding activities.
c. The creation and design of products that will provide adequate profits.
The dollar amount by which sales can decline before an operating loss is incurred is called the: a. contribution margin. b. contribution margin ratio. c. margin of safety. d. relevant range.
c. margin of safety.
The margin of safety is calculated by: a. dividing fixed costs plus target income by the contribution margin. b. subtracting break-even income from current income. c. subtracting break-even sales from current sales. d. subtracting fixed costs from current contribution margin.
c. subtracting break-even sales from current sales.
The cost of the employee who computes total manufacturing costs would be considered: a. Direct labor. b. Indirect labor. c. Manufacturing overhead. d. Administrative costs.
d. Administrative costs.
Which of the following is a period cost? a. Direct materials used. b. Direct labor costs applicable to production. c. Manufacturing overhead. d. Advertising expense.
d. Advertising expense.
In comparison with a financial statement prepared in conformity with generally accepted accounting principles, a managerial accounting report is more likely to: a. Be used by decision makers outside of the business organization. b. Focus upon the operating results of the most recently completed accounting period. c. View the entire organization as the reporting entity. d. Be tailored to the specific needs of an individual decision maker.
d. Be tailored to the specific needs of an individual decision maker.
Which of the following activities performed by a manufacturer of roller blades is a value-added activity? a. Designs that meet engineering specifications, but not customer expectations b. Poor quality supplier deliveries c. Delayed distribution to a customer d. Clear and truthful marketing
d. Clear and truthful marketing
Just-in-time manufacturing systems are also known as: a. Supply push systems. b. Supply pull systems. c. Demand-push manufacturing. d. Demand-pull manufacturing.
d. Demand-pull manufacturing.
T or F: In preparing a master budget, budgeted levels for production, manufacturing costs, and operating expenses normally are determined after preparing the sales forecast.
true
T or f: A budget provides a comprehensive plan enabling multiple departments to work together in a coordinated manner.
true
