Cost Accounting Final
Which of the following describes appraisal costs?
they are incurred to detect which of the individual units of products do not conform to specifications
Cost-plus contracts negotiated with suppliers of the government usually involves:
the supplier's cost to perform the contact (provide the product or service) plus a fee
Companies must always examine their pricing ________.
through the eyes of their customers and then manage costs to produce a profit
The purchase-order lead time is the ________.
time between placing an order and its delivery
Which of the following is a reason to gather data, associate revenues with each customer and develop a system of allocating costs to each customer?
to assure that highly profitable customers get the appropriate level of care and attention
Which purpose of cost allocation is used to encourage sales representatives to push high-margin products or services?
to motivate managers and other employees
The costs of quality are the costs incurred:
to prevent the production of a low quality product
Which of the following illustrates a purpose for allocating costs to cost objects?
to provide information for cost-control and pricing decisions
Which of the following is an objective of value engineering
to reduce the total cost of the product
The purpose of the equivalent-unit computation is to :
use a common metric to estimate the amount of work done on units in a period
Which of the following are true regarding long-run pricing decisions ?
use prices that include a reasonable return on invested capital
When actual cost-allocations rates are used, which of the following would be true?
user divisions are unaware of the allocated amounts until the end of the budget period
Which of the following is an example of sunk costs?
wages to security staffs
Market-share variance = $380,000 (U); Market-size variance = $250,000 (F); Sales-mix variance = $640,000 (F); calculate the sales-quantity variance.
$130,000 (U)
Dartmouth Building Products Inc. provides the following information. Corporate advertising costs = $850,000 Division A-$5,000,000 Division B- $20,000,000 Number of ads run relevant on Divsion A products 500 Number of ads run relevant to Division B products 3,667 Assume that customers with higher revenues benefited more from corporate advertising costs than customers with lower revenues. What is the allocated corporate costs for Division A?
$170,000
A product cost is composed of the following: Direct Mat. $13.00 Direct labor $4.00 Man. OH $7.00 The product sells for $45.00 and a 5% commission is paid to a salesperson for every unit sold. Management accountants also estimate that storage cost per unit averages $ 3.25 per unit. What is the full cost of the product?
$29.50
Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system utilizes two cost categories, direct materials and conversion costs. Each product must pass through Department A and Department B. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production.What is the unit cost per equivalent unit of beginning inventory in Department A? (Round the final answer to the nearest whole dollar.)
$4,217
Vital Industries manufactured 2,400 units of its product Huge in the month of April. It incurred a total cost of $132,000 during the month. Out of this $132,000, $45,700 comprised of direct materials used in the product and the rest was incurred because of the conversion cost involved in the process. Vital had no opening or closing inventory. What will be the total cost per unit of the product, assuming conversion costs contained $10,000 of indirect labor?
$55
Flexible-budget variance = $260,000 (F); sales-volume variance = $350,000 (U); sales-mix variance = $320,000 (F); calculate the static-budget variance.
$90,000 (U)
The following information applies to Krynton Company, which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation. Annual demand (weekly demand = 1/52 of annual demand)- 53,000 units Orders per year- 20 Lead time in days- 18 days Cost of placing an order- $200 What is the reorder point? (Assume a 365 day year.)
2,614 units
Vision Company sells optical equipment. Blitz Company manufactures special glass lenses. Vision orders 11,700 lenses per year, 260 per week, at $38 per lens. Blitz covers all shipping costs. Vision earns 22% on its cash investments. The purchase-order lead time is 4.0 weeks. Vision sells 315 lenses per week. The following data are available: Relevant ordering costs per purchase order $45.25 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $5.50 What is the economic order quantity for Vision?
276 lenses
The static-budget variance is the difference between ________.
an actual result and the corresponding budgeted amount in the static budget
Which of the following statements is a benefit of measuring environmental and social performance?
It enhances the identification of cause-and-effect relationships to evaluate benefits.
Which of the following is true of ISO 9000?
It helps companies monitor, document, and certify the elements of their production processes that lead to quality.
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. Conversion costs-March $410,000 Direct materials purchased- March $1,130,000 Units produced- March 59,800 Units sold- March 49,800 Which of the following entries properly records the cost of goods sold for the month?
Cost of Goods Sold 1,282,475 Finished Goods 1,282,475
When a Bakery transfers goods from the Mixing Department to the Baking Department, the accounting entry would be:
Debit: Work in Process-Baking Department Credit: Work in Process-Mixing Department
In lean accounting environments, it is critical that work-in-process and finished goods accounting be accurate for accurate financial accounting and pricing decisions.
False
Lean accounting takes in to consideration all costs associated with inventories.
False
________ are the subdivisions of income that management accountants use for the strategic analysis of operating income.
Growth, price-recovery and productivity components
Which of the following statements best relates to the balanced scorecard's learning and growth perspective?
How will we empower our employees?
Which of the following statements is true of just-in-time (JIT) purchasing?
In JIT purchasing, raw materials (or goods) are purchased so that products are delivered just as needed for production or sales.
Which of the following is true of corporate-sustaining costs?
are common to all individual customers
Games R Us manufactures various games. For March, there were no beginning inventories of direct materials and no beginning or ending work in process. Conversion costs is the only indirect manufacturing cost category currently used. Journal entries are recorded when materials are purchased and when conversion costs are allocated under backflush costing. Conversion costs-March $470,000 Direct materials purchased-March $1,090,000 Units produced- March 61,800 Units sold-March 44,800 Which of the following journal entries properly records the purchase of direct materials?
Inventory: Materials and In-Process Control 1,090,000 Accounts Payable Control 1,090,000
It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.
Which of the following statements best define strategy?
It describes how an organization can create value for its customers while differentiating itself from its competitors.
Which of the following statements is true of lean accounting?
It does not always compute costs for individual products but does emphasize product costs by value stream.
Which of the following statements best define a product differentiation strategy?
It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.
For inventory carrying costs, which of the following statements is true of the relevant opportunity cost of capital of inventory?
It is calculated as the required rate of return multiplied by the per-unit costs of acquiring inventory including the purchase price, incoming freight, and incoming inspection.
Which of the following is true of value engineering?
It is the process by which a systematic evaluation of all aspects of the value chain, with the objective of reducing costs and achieving a predetermined quality level.
Which of the following is a disadvantage of single-rate method?
It may lead operating department managers to make sub-optimal decisions that are in their own best interest.
Which of the following is true of a bottleneck?
It occurs in an operation when the work to be performed approaches or exceeds the capacity available to do it.
A system that emphasizes lean production techniques, low quantities of inventory, and close coordination among production workstations is called:
Just-in-time production
Which of the following methods focuses on reducing costs during the manufacturing stage?
Kaizen costing
Which of the following statements is true about the factors that affect pricing decisions?
Managers must always be aware of the competition when pricing their products
________ is a measure of the balanced scorecard's internal-business-process perspective.
Manufacturing downtime
Which of the following is a measure of the balanced scorecard's customer perspective?
Number of client complaints
Which of the following statements best defines a just-in-time production system?
a demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line
Which of the following could be a measure of the balanced scorecard's financial perspective?
Operating income
Which of the following statements is true of costs associated with goods for sale?
Opportunity costs are not recorded in the accounting system.
Which of the following is a chart which indicates how frequently each type of defect occurs?
Pareto diagram
Which of the following statements is true of costs associated with goods for sale?
Purchasing costs include incoming freight costs and are reduced by discounts.
Which of then following identifies an estimated price customers are willing to pay and then computes the cost to be achieved to earn the desired profit.
Target costing
Which of the following is a measure of the balanced scorecard's internal process perspective?
Service response time
Which of the following is not a step of value-engineering?
Set a price using the market approach
Which of the following is a disadvantage of an enterprise resource planning (ERP) system?
The ERP systems must often be customized to fit the strategic needs of the user.
Which of the following statements is true of a balanced scorecard?
The balanced scorecard reduces managers' emphasis on short-run financial performance.
Which of the following statements is true of the the economic order quantity decision model?
The larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs.
Which of the following costs is a relevant inventory stockout cost?
The lost contribution margin on sales forgone as a result of customer dissatisfaction due to unavailability of goods.
Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice. Which of the following statements is correct about relevant costs and relevant revenues.
The only relevant item are the costs as they differ between alternatives
Snapper Tool Company has plenty of excess capacity to accept a special order. Shown below is an "what-if" analysis of the special order. Which of the following is the correct decision and reason? SQ Spec Order Sales $128,000 $133,000 Variable costs: Man. 51,200 54,400 Sell/ad 25,600 26,600 CM $51,200 $52,000 FC 19,200 19,200 Profit $32,000 $32,800
Yes, since operating profits will most likely increase
As per control charts, random variations would most likely occur when:
chance fluctuations in the speed of the equipment cause defective products to be produced
Which of the following is not true with regards to relevant costs and relevant revenues?
They are sunk costs and historical revenues
Which of the following is true of historical costs?
They are useful for making future predictions.
Which of the following statements best defines manufacturing cells?
They are work areas with different types of equipment grouped together to make related products and to minimize handling costs
Which of the following is an advantage of nonfinancial measures of quality?
They detect and provide immediate short-run feedback on whether quality-improvement efforts are succeeding.
Which of the following is an advantage of COQ measures?
They help managers aggregate costs to evaluate the tradeoffs of incurring prevention costs and appraisal costs to eliminate internal and external failure costs.
At what point are direct material costs per unit "locked in" ?
designed
Stefan Ceramics is in the business of selling ceramic vases. It has two departments, molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4,200 vases and completed and transferred 3,800 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of $1,500 and other manufacturing costs of $1,300, which included electricity costs of $300. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 50% complete in respect of conversion costs. Which of the following journal entry would record the tungsten carbide purchased and used in production during July?
Work in Process-Molding $201,600 Accounts Payable Control $201,600
Relevant costs for target pricing are ________.
all future costs, both variable and fixed
Which of the following reduces manufacturing cycle times and delays?
increasing the capacity of a bottleneck resource
One-time-only special orders should only be accepted if ________.
incremental revenues exceed incremental costs
Which of the following focuses on these five factors: competitors, potential entrants to the market, equivalent products, bargaining power of customers, and bargaining power of suppliers?
industry analysis
Spoilage, rework, scrap, and machine repairs are all examples of:
internal failure costs
When manufacturing cycle increases, ________.
inventory carrying costs will increase
To guide cost allocation decisions, the cause-and-effect criterion:
is the primary criterion used in activity-based costing
Which of the following best describes conformance quality?
it is the performance of a product or service according to design and product specifications
Customers making large contributions to the profitability of the company should ________.
receive a higher level of attention from the company than less profitable customers
The costs that result from theft of inventory are ________.
shrinkage costs
When the purpose of cost allocation is to provide information for economic decisions or to motivate managers and employees, which of the following would be the best criteria?
the cause-and-effect and the benefits-received criteria
Trusted Products Company makes a household appliance with model number L800. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of L800 units that can be produced. The industry market size for appliances increased 10% from 2017 to 2018. The following additional data are available for 2017 and 2018: What is the cost effect of the growth component for direct materials?
$291,400 U
Place the following steps from the five-step decision process in order: A = Obtain information including historical costs B = Evaluate performance to provide feedback C = Make decisions choosing among alternatives D = Make predictions about the future E = Identify the problem and uncertainties
E, A, D, C, B
Which of the following companies is most likely to use an operation-costing system?
a company that makes suits for which the basic design is same, but depending on specifications, each batch of suits varies somewhat from other batches
Which of the following statements best defines lean accounting?
a costing method that supports creating value for the customer by costing the entire value stream thereby eliminating waste in the accounting process
Transferred-in costs are treated as if they are:
a separate direct material added at the beginning of the process
John's 8 year old Chevrolet Trail Blazer requires repairs estimated at $10,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5 year old used Jeep Grand Cherokee instead for $10,000 cash. Sherry estimated the following costs for the two cars: Trail Grand Acquisition:$26,000$10,000 Repairs: $10,000 Annual operating costs (Gas, maintenance,insurance): $2,580 $ 1,800 The cost NOT relevant for this decision is the ________.
acquisition cost of the Trail Blazer
Sharing sales information throughout the supply chain leads to which of the following?
fewer manufacturing orders that had to be expedited
Managers find operation costing useful in cost management because it:
focuses on control of physical processes of a given production system
Which of the following would be considered the biggest advantage of using practical capacity to allocate costs?
focuses management's attention on unused capacity
A decision model involves a(n) ________.
formal method of making a choice that often involves both quantitative and qualitative analyses
The reciprocal allocation method:
fully incorporates interdepartmental relationships into the support-department cost allocations
A relevant revenue is revenue that is a(n) ________.
future revenue and differs among alternative courses of action
Managers identify the relevant costs and benefits for each solution by focusing on ________.
how total costs and total revenues will change under each alternative solution
Cause-and-effect diagrams are used in quality management systems to:
identify and respond to potential reasons of failure
Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75 cent price increase, demand is expected to fall by 7,000 units. Current Projected Demand: 78,000 71,000 Selling price:$ 9.25 $ 10.00 Incremental cost per unit: $ 5.80 $ 5.80 If the price increase is implemented, operating profit is projected to ________.
increase by $ 29,100
What is it that a statistical quality control chart does?
it plots each observation relative to specified ranges that represent the expected distribution
The percentage of processes with real-time feedback would be a measure of which perspective?
learning and growth
Which of the following is an opportunity cost?
lost sales
Which of the following is not a reason why a company would adopt JIT purchasing practices?
low carrying costs of inventory
The management accountant aids in MRP by ________.
maintaining accurate records of inventory and its costs
An order is received by a company and then spends 1 day in assembly and 3 days in finishing before being stored in the warehouse. On average, the units are stored for 3 days before being shipped to a customer. Which of the following measures would be true?
manufacturing cycle time of 4 days
The amount of time from when an order is ready to start on the production line to when it becomes a finished good is referred to as:
manufacturing time
The time from which a machine setup begins for an order until the product is delivered to the customer is the:
manufacturing time plus the delivery time
The sales-quantity variance can be decomposed into ________.
market-share variance and market-size variance
Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials $ 550 Direct labor 370 Var Man support 56 Fixed Man support 120 Total Man costs 1,096 Markup (50%) 548 Targeted sell price $1,644 Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $ 60 per unit. The average marketing cost of Kitchens Sales product is $ 173 per order. Which of the following costs is NOT considered to calculate the minimum acceptable price of a one-time-only special order?
marketing costs
A push-through system that manufactures finished goods for inventory on the basis of demand forecasts and produces a master schedule for quantity and timing of units to be produced.
materials requirements planning
To guide cost allocation decisions, the benefits-received criterion ________.
may use an allocation base of division revenues to allocate advertising costs
Homogeneous cost pool leads to which of the following?
more accurate costs of a given cost object
Allocation of corporate-sustaining costs is useful for which of the following?
motivating division managers to examine how corporate costs are planned and controlled
An example of a nonfinancial measure for customer satisfaction is ________.
number of defective units shipped as a percentage of total units shipped
Terbium Corporation manufactures water toys. It plans to grow by producing high-quality water toys that are delivered in a timely manner. There are a number of other manufacturers who produce similar water toys. Terbium believes that continuously improving its manufacturing processes and reengineering processes to downsize and eliminate excess capacity are critical to implementing its strategy. To further company strategy, measures on the balanced scorecard would most likely include ________.
number of process improvements
Which of the following is an example of a nonfinancial measure for customer satisfaction?
on time delivery rates
Segmenting customers as a result of customer profitability analysis would be done by which of the following groupings?
operating income
Which of the following is a financial measure of quality?
operating income growth
Inventory carrying costs equal the ________.
opportunity costs of the investment tied up in inventory and the relevant costs of storage
Among different types of costs associated with inventory, the costs of obtaining purchase approvals are ________.
ordering costs
The first step to successful balanced scorecard implementation is clarifying the ________.
organization's vision and strategy
Which of the following is the best definition of inventory management?
planning, coordinating, and controlling activities related to the flow of inventory into, through, and out of an organization
The costs of unused capacity are highlighted when ________.
practical capacity-based allocations are used
Among different types of costs associated with inventory, four categories of quality costs are ________.
prevention costs, appraisal costs, internal failure costs, and external failure costs
Which of the following is the costing system used for mass produced like or similar units of products?
process-costing systems
Among different types of costs associated with inventory, the incoming freight charges of inventories are ________.
purchasing costs
Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials $ 546 Direct labor 366 Var Man support 60 Fixed Man support 128 Total Man costs 1,100 Markup (50%) 550 Targeted sell price $1,650 Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $ 65 per unit. The average marketing cost of Kitchens Sales product is $ 173 per order. Other than price, what other items should Kitchens Sales consider before accepting this one-time-only special order?
reaction of existing customers to the lower price offered to Mr. Louis Cifer
To guide cost allocation decisions, the ability to bear criterion:
results in subsidizing products that are not profitable
The sales-volume variance is subdivided into ________.
sales-mix variance and sales-quantity variance
Traditional normal and standard costing systems usually use 4 trigger points to record the flow of costs through the production system. Such costing is called:
sequential tracking
Which of the following terms is defined as the time required to get equipment, tools, and materials ready to start production?
setup time
The method that allocates costs in each cost pool using the same rate per unit is known as the:
single-rate cost allocation method
Which of the following is not true about one-time-only special orders?
special orders would be accepted if they result in an increase in the contribution margin regardless of capacity and long-term implications
Under which allocation method are one-way reciprocal support services recognized?
step-down method
The costs that result when a company runs out of a particular item for which there is a customer demand are ________.
stockout costs
Which of the following is an example of an allowable cost considered by U.S. government contract?
supervision costs
Special cost-allocation problems arise when ________.
support departments provide reciprocal services to each other and operating departments
Which of the following criteria has the presumption that the more-profitable divisions have a greater ability to absorb corporate administration costs?
the ability to bear criterion
Which of the following customer related costs are NOT economically feasible to trace but are related to a customer?
the allocation of the cost of travel, lodgings, and meals that result from visiting customers at their locations
Which of the following correctly describes customer-response time?
the amount of time from when a customer places an order for a product or requests a service to when the product or service is delivered to the customer
When the cost pools are homogeneous which of the following will be true?
the costs in the cost pool have a similar cause-and-effect or benefits-received relationship with the cost-allocation base
In the formula for calculating the average waiting time, the squared manufacturing time indicates ________.
the disproportionately large impact the manufacturing time has on the waiting time
The weighted-average process-costing method calculates the equivalent units by:
the equivalent units completed during the current period plus the equivalent units in ending inventory
Jack's Back Porch manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $ 260 per table, consisting of 80% variable costs and 20% fixed costs. The company has surplus capacity available. It is Jack's Back Porch's policy to add a 60% markup to full costs. A large hotel chain is currently expanding and has decided to decorate all new hotels using the rustic style. Jack's Back Porch is invited to submit a bid to the hotel chain. What per unit price will Jack's Back Porch most likely bid on this long-term order?
$ 416.00 per unit
Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. The following per unit data apply for sales to regular customers: Direct materials $ 546 Direct labor 364 Var Man support 60 Fixed Man support 126 Total Man costs 1,096 Markup (50%) 548 Targeted sell price $1,644 Kitchens Sales Inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather than oak, so direct material costs will increase by $60 per unit. The average marketing cost of Kitchens Sales product is $ 180 per order. For Kitchens, what is the full cost of the one-time-only special order?
$1,156
Trusted Products Company makes a household appliance with model number L800. The goal for 2018 is to reduce direct materials usage per unit. No defective units are currently produced. Manufacturing conversion costs depend on production capacity defined in terms of L800 units that can be produced. The industry market size for appliances increased 15% from 2017 to 2018. The following additional data are available for 2017 and 2018: What is the revenue effect of the growth component?
$1,782,000 F
Serile Pharma places 800 units in production during the month of January. All 800 units are completed during the month. It had no opening inventory. Direct material costs added during January was $74,000 and conversion costs added during January was $8,400. What is the total cost per unit of the product produced during January?
$103
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $ 320,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $ 190,000 are allocated based on the number of employees. The costs of operating departments A and B are $204,000 and $306,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows:
$108,973
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance Department costs of $350,000 are allocated on the basis of budgeted maintenance-hours. Personnel Department costs of $110,000 are allocated based on the number of employees. The costs of operating departments A and B are $184,000 and $276,000, respectively. Data on budgeted maintenance-hours and number of employees are as follows: Using the step-down method, what amount of Maintenance Department cost will be allocated to Department A if the service department with the highest percentage of interdepartmental support service is allocated first? (Do not round any intermediary calculations.)
$159,444
Premier Corp expects to spend $800,500 in 2017 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,100 in fixed appraisal costs and variable costs of $0.50 per materials units received. The new method involves $140,600 in training costs and an additional $150,000 in annual equipment rental. Internal failure costs average $160 per failed unit of finished goods. During 2016, 4% of all completed items had to be reworked. External failure costs average $430 per failed unit. The company's average external failures are 1% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used. What is the net effect on appraisal costs for 2017, assuming the new receiving method is implemented and that 800,500 material units are received?
$169,750 decrease
Sales-mix variance = $300,000 (F), sales-volume variance = $470,000 (U), flexible-budget variance = $230,000 (F), market-size variance = $34,000 (U), calculate the sales-quantity variance.
$170,000 (U)
Twenty Technologies, currently sells 17" monitors for $ 290. It has costs of $ 250. A competitor is bringing a new 17" monitor to market that will sell for $ 270. Management believes it must lower the price to $ 270 to compete in the market for 17" monitors. Twenty Technologies believes that the new price will cause sales to increase by 20%, even with a new competitor in the market. Twenty Technologies' sales are currently 5,100 monitors per year.
$189.00
Stefan Ceramics is in the business of selling ceramic vases. It has two departments, molding and finishing. Molding department purchases tungsten carbide and produces ceramic vases out of it. Ceramic Vases are then transferred to finishing department, which designs it as per the requirement of the customers. During the month of July, molding department purchased 720 kgs of tungsten carbide at $280 per kg. It started manufacture of 4,200 vases and completed and transferred 3,800 vases during the month. It has 400 vases in the process at the end of the month. It incurred direct labor charges of $1,700 and other manufacturing costs of $600, which included electricity costs of $700. Stefan had no inventory of tungsten carbide at the end of the month. It also had no beginning inventory of vases. The ending inventory was 40% complete in respect of conversion costs. What is the total conversion costs for the month of July?
$2,300
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $120 Direct labor 80 Man. support 105 Marketing costs 45 Fixed costs: Man. support 185 Marketing costs 55 Total costs 590 Markup (45%) 266 Targeted sell price $856 What is the change in operating profits if the one-time-only special order for 1,030 units is accepted for $550 a unit by Crandle?
$206,000 increase in operating profits
After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $ 300. The annual target sales volume for interior doors is 29,000. Magnificent has target operating income of 20% of sales. What is the target cost for each interior door?
$240
Jack's Back Porch manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $300 per table, consisting of 60% variable costs and 40% fixed costs. The company has surplus capacity available. It is Jack's Back Porch's policy to add a 70% markup to full costs. Jack's Back Porch is invited to bid on a one-time-only special order to supply 150 rustic tables. What is the lowest price Jack's Back Porch should bid on this special order?
$27,000
Gracius Manufacturing is approached by a European customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. Gracius Manufacturing has a policy of adding a 30% markup to full costs and currently has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $ 80 Direct labor 40 Manufacturing OH 20 Marketing costs 30 Fixed costs: Manufacturing OH 110 Marketing costs 20 Total costs 300 Markup (30%) 90 Est. selling price $ 390 What is the full cost of the product per unit for Gracius Manufacturing?
$300
Sales of Granite City Products Inc. have been on a steady decline for the last 12 months. A market research study conducted revealed that the product of Granite City Products Inc. can be sold only for $480 as opposed to the current market price charged of $580 per unit. Granite City Products Inc. has decided to revise its sales price to $480. The annual sales target volume of the product after price revision is 280 units. Granite City Products Inc. wants to earn 30% on its sales amount.
$336.00
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $140 Direct labor 110 Man. support 155 Marketing costs 85 Fixed costs: Man. support 145 Marketing costs 85 Total costs 720 Markup (50%) 360 Targeted sell price $1,080 For Crandle Manufacturers Inc., what is the minimum acceptable price of this special order?
$490
After conducting a market research study, Magnificent Manufacturing decided to produce a new interior door to complement its exterior door line. It is estimated that the new interior door can be sold at a target price of $ 260. The annual target sales volume for interior doors is 22,000. Magnificent has target operating income of 30% of sales. What are target sales revenues?
$5,720,000
LaCrosse Products has a budget of $904,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,500 in variable costs. The new method will require $40,900 in training costs and $109,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 154,000 units. Appraisal costs for the year are budgeted at $610,000. The new prevention procedures will save appraisal costs of $50,100. Internal failure costs average $16 per failed unit of finished goods. The internal failure rate is expected to be 4% of all completed items. The proposed changes will cut the internal failure rate by one- third. Internal failure units are destroyed. External failure costs average $56 per failed unit. The company's average external failures average 4% of units sold. The new proposal will reduce this rate by 45%. Assume all units produced are sold and there are no ending inventories. How much will appraisal costs change assuming the new prevention methods reduce material failures by 40% in the appraisal phase?
$50,100 decrease
Sales-mix variance = $300,000 (F), sales-quantity variance = $250,000 (F), flexible-budget variance = $120,000 (F), market-size variance = $80,000 (U), calculate the sales-volume variance.
$550,000 (F)
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $130 Direct labor 100 Man. support 125 Marketing costs 45 Fixed costs: Man. support 175 Marketing costs 95 Total costs 670 Markup (45%) 302 Targeted sell price $972 What is the contribution margin per unit?
$572
Emrald Corp currently uses a manufacturing facility costing $560,000 per year; 90% of the facility's capacity is currently being used. A start-up business has proposed a plan that would utilize the other 10% of the facility and increase the overall costs of maintaining the space by 11%. If the incremental method were used, what amount of cost would be allocated to the start-up business?
$61,600
Premier Corp expects to spend $800,900 in 2017 in appraisal costs if it does not change its incoming materials inspection method. If it decides to implement a new receiving method, it will save $60,500 in fixed appraisal costs and variable costs of $0.50 per unit of finished product. The new method involves $140,500 in training costs and an additional $150,300 in annual equipment rental. Internal failure costs average $250 per failed unit of finished goods. During 2016, 6% of all completed items had to be reworked. External failure costs average $450 per failed unit. The company's average external failures are 2% of units sold. The company carries no ending inventories, because all jobs are on a per order basis and a just-in-time inventory ordering method is used. What would be the change in the external failure budget, if 600,300 units are used and assuming external failures are reduced by 12%.
$648,324 decrease
Dartmouth Building Products Inc. provides the following information. Corporate advertising costs = $860,000 Division A-$4,900,000 Division B-$19,600,000 Number of ads run on Division A products 600 Number of ads run on Division B products 4,400 Assume that customers with higher revenues benefited more from corporate advertising costs than customers with lower revenues. What is the allocated corporate costs for Division B?
$688,000
Crandle Manufacturers Inc. is approached by a potential customer to fulfill a one-time-only special order for a product similar to one offered to domestic customers. The company has excess capacity. The following per unit data apply for sales to regular customers: Variable costs: Direct materials $160 Direct labor 100 Man. support 105 Marketing costs 95 Fixed costs: Man. support 175 Marketing costs 65 Total costs 700 Markup (40%) 280 Targeted sell price $980 What is the full cost of the product per unit?
$700
Golden Generator Supply is approached by Mr. Stephen, a new customer, to fulfill a large one-time-only special order for a product similar to one offered to regular customers. Golden Generator Supply has excess capacity. The following per unit data apply for sales to regular customers: Direct materials $ 170 Direct labor 150 Variable support 230 Fixed support 100 Total costs 650 Markup (10%) 65 Est selling price $ 715 If Mr. Stephen wanted a long-term commitment, and not a one-time-only special order, for supplying this product, calculate the most likely price to be quoted assuming the markup remains the same?
$715
LaCrosse Products has a budget of $910,000 in 2017 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $80,800 in variable costs. The new method will require $40,500 in training costs and $103,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 151,000 units. Appraisal costs for the year are budgeted at $606,000. The new prevention procedures will save appraisal costs of $50,400. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 2% of all completed items. The proposed changes will cut the internal failure rate by one-third. Internal failure units are destroyed. External failure costs average $50 per failed unit. The company's average external failures average 2% of units sold. The new proposal will reduce this rate by 50%. Assume all units produced are sold and there are no ending inventories. How much do external failure costs change if all changes are as anticipated with the new prevention procedures? Assume all units produced are sold and there are no ending inventories.
$75,500 decrease
Consider the following information attributed to the material management department Budgeted usage of materials-handling-labor-hours 3,500 Budgeted cost pools: Fixed costs $154,000 Variable costs $126,000 (3,500 hours x $36 per hour) The company uses the single-rate method to allocate support costs to the Machining and Assembly Departments. Assuming that the actual hours tracked in the Machining and Assembly department are 500 for the month, what would be the allocation rate and how much cost would be allocated to the Machining and Assembly Department for the operations of the month? (Round final answers to the nearest dollar.)
$80 an hour for a total of $40,000
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases DVDs from Globe at $29.00 per DVD; DVDs are shipped in packages of 65. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 321,000 DVDs at a rate of 6,800 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $117.50 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $9.50 What are the annual relevant carrying costs?
$9,209
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases DVDs from Globe at $29.00 per DVD; DVDs are shipped in packages of 70. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 320,000 DVDs at a rate of 6,500 DVDs per week. DVD Mart earns 13% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $115.50 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $6.50 What is the economic order quantity?
62.49 packages
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases DVDs from Globe at $30.00 per DVD; DVDs are shipped in packages of 66. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,500 DVDs per week. DVD Mart earns 10% on its cash investments. The purchase-order lead time is one week. The following cost data are available: Relevant ordering costs per purchase order $118.50 Carrying costs per package per year: Relevant insurance, materials handling, breakage, etc., per year $5.50 How many deliveries will be made during each time period?
63.71 deliveries
A financial analyst for Simon Manufacturing prepared the following report.... What is the cumulative customer-level operating income as a percentage of customer level operating income for the top 4 most profitable (operating income) customers?
89.7%
Assembly department of Zahra Technologies had 200 units as work in process at the beginning of the month. These units were 45% complete. It has 300 units which are 25% complete at the end of the month. During the month, it completed and transferred 600 units. Direct materials are added at the beginning of production. Conversion costs are allocated evenly throughout production. Zahra uses weighted-average process-costing method. What is the number of equivalent units of work done during the month with regards to direct materials?
900 units
How is value-engineering relevant to a well done customer profitability analysis, especially when an ABC system is utilized to calculate customer profits (or losses)?
ABC offers the opportunity to analyze the costs of activities assigned to each customer and to determine if improvements can be made to optimize profits
John's 8 year old Chevrolet Trail Blazer requires repairs estimated at $10,000 to make it road worthy again. His wife, Sherry, suggested that he should buy a 5 year old used Jeep Grand Cherokee instead for $10,000 cash. Sherry estimated the following costs for the two cars: Trail Grand Acquisition:$25,000 $11,000 Repairs: $11,000 Annual operating costs (Gas, maintenance,insurance): $2,680 $ 1,800 What should John do? What are his savings in the first year?
Buy the Grand Cherokee; $ 880
What is the term for an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control?
Cost leadership
Monticello Corp manufactures expensive tables. Its varnishing department is fully automated and requires substantial inspection to keep the machines operating properly. An improperly varnished table is very expensive to correct. Inspection hours for the 5,800 tables varnished in September totaled 1,700 hours by 10 employees. Eight quarts of varnish were used, on average, for each table. The standard amount of varnish per table is nine quarts. The cost of inspection for September was equal to the budgeted amount of $40,100. The $40,100 represents a(n) ________.
activity cost pool
While allocating corporate costs to divisions ________.
allocate both variable and fixed costs to divisions and then to customers
To discourage unnecessary use of a support department, management might ________.
allocate support department costs based upon user department usage
A costing system that omits recording some or all of the journal entries relating to the cycle from purchase of direct materials to the sale of finished goods is called:
backflush costing
Flexible budget contribution margin is equal to ________.
budgeted contribution margin per unit times actual units sold of each product
When using the dual-rate method, the fixed cost allocation is based on ________.
budgeted usage
In a process-costing system average unit costs are calculated ________.
by dividing total costs in a given accounting period by total units produced in that period
Lean accounting is much simpler than traditional product costing because:
calculating actual product costs by value streams requires less overhead allocation
When analyzing the change in operating income, the strategy component of productivity will increase when ________.
capacity is reduced
Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory is a(n) ________.
carrying cost
Corny Solutions processes various corn related food items. One of its facilities located in Iowa, performs some initial processing of corn on the cob once it arrives from the corn fields. The corn from that facility will be further processed elsewhere into corn for popping and corn meal. The costs incurred at the Iowa plant would be considered:
common costs
Which of the following statements about pricing is true?
companies in competitive markets use the market approach to pricing
When analyzing the change in operating income, the strategy component of price-recovery ________.
compares the change in output price with the changes in input prices
Three major influences on pricing decisions are ________.
competition, costs, and customers
To guide cost allocation decisions, the fairness or equity criterion:
considers reasonableness as a matter of judgment rather than an operational criterion
Which of the following would be an explicit agreement of reimbursement on a contract?
contractor agrees with customer before the project begins, on a set price
An operating income analysis of Fast Processing Company revealed the following: Income 2017 $1,207,000 Growth 102,000 Recovery (95,000) Productivity 90,000 Income for 2018 $1,304,000 Fast's operating income gain is consistent with the ________.
cost leadership strategy
Which of the following best describes transferred-in costs?
costs incurred in a previous department or process that are carried forward as the product's cost as that product moves to another department or process in the production cycle
Which of the following classifications would the cost of visiting customers would most likely fit into?
customer-sustaining cost
When deciding to accept a one-time-only special order from a wholesaler, management should ________.
determine whether excess capacity is available
Which of the following is an example of value added cost?
direct machining costs
The method that allocates each department's budgeted costs to operating departments only is called:
direct method
Which of the following would be the case under the stand-alone method of allocating common costs ?
each party bears a proportionate share of the total costs in relation to their individual stand-alone costs
To reduce distribution-channel costs, a company could ________.
eliminate distribution to retailers and only service wholesalers
Dropping an unprofitable customer will ________.
eliminate most short-run costs assigned to that customer
All of the following are examples of quantitative factors except
employee morale
A system that comprises a single database that collects data and feeds it into software applications supporting all of a company's business activities is known as a(n) :
enterprise resource planning (ERP) system
When using the five-step decision process, which one of the following steps should be done last?
evaluation and feedback
Warranty repair cost is an example of which of the following?
external failure costs
Which of the following is a disadvantage of the weighted-average method compared to the FIFO process-costing method?
the information it provides about changes in unit prices from one period to the next is less useful than the information provided by FIFO
Which of the following describes reciprocal support?
the materials management department provides support to all departments including the production control department which also provides services to the materials management department
Which of the following is true of price bidding with the federal government?
the price is based on costs that include fully allocated manufacturing and design costs but not include marketing costs
Which component of strategy measures the reduction in costs attributable to a reduction in the quantity of inputs used in Year 2 relative to the quantity of inputs that would have been used in Year 1 to produce the Year 2 output?
the productivity component
Under economic-order-quantity decision model, which of the following is an assumption? Assume that ________.
the same quantity is ordered at each reorder point
When target costing and target pricing are used together ________.
the target cost is the estimated long-run cost that enables a product or service to achieve a desired profit
Price discounts are influenced by ________.
the volume of product purchased
To improve customer profitability, companies should track which of the following?
the volume of the products purchased by each customer
Short-run prices should at least recover ________.
variable cost of producing a product
The dual-rate cost-allocation method classifies costs in each cost pool into a:
variable-cost pool and a fixed-cost pool
Which of the following is true about discontinuing an unprofitable customer?
will not eliminate all costs assigned to and may result in losing more revenues relative to costs saved
The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only two users, the Large Plane Department and the Small Plane Department. The following data apply to the coming budget year:Actual usage for the year by the Large Plane Department was 60,000 technician hours and by the Small Plane Department was 80,000 technician hours. If a single-rate cost-allocation method is used, what amount of materials laboratory costs will be allocated to the Large Plane Department? Assume actual usage is used to allocate laboratory costs.
$6,720,000
Which of the following statements is true of the internal-business-process perspective of a balanced scorecard?
Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards.
Which of the following is a cost that, if eliminated, would reduce the actual or perceived value or utility (usefulness) customers experience from using the product or service?
Value-added cost
Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75 cent price increase, demand is expected to fall by 7,000 units. Current Projected Demand: 78,000 71,000 Selling price:$ 9.00 $ 9.75 Incremental cost per unit: $ 6.80 $ 6.80 Would you recommend the 75 cent price increase?
Yes, because operating profits increase.
A demand-pull system in which each component in a production line is produced immediately as needed by the next step in the production line is referred to as:
just-in-time production