ACCT 550.008 Spings014 Exam, Version A : Name SO LUTON “Matiple Ch (1 point each) : Circle the best answer From among thos listed. 1. Relevant costs are best described as: ‘a Future coss, Future costs that differ between competing decision alternatives © Opportunity coss & Sunkcots ©: Costs that remain the same across decision akernatives bu differ between decisions. 2. The external acquisition of services or components is considered in: ‘Avoidable cost: of production. by Special orders decision, Make or buy dxsion Value chai analysis. ©. Equipment replacement. 53. The Chterchat Co. manufactures and sells 25,000 telephones per year. The fell manufacturing costs per telephone are as flows toe wetter s ai e Diet ite Sh Cat 30x priev0= "250.000 mer’ arabe monfactringoveresd ‘ t39foe0 tes verge fred manufacang ovesead eat sovo 0,00) moe (oS teat i ‘The Gonguin Co. tas offered to sell Chiterchat 25,000 telephones for $34 perunit. If Chittercha accepts oer, $180,000 of fixed overhead will be eliminated. Chiterchat should lake the telephones; te savings is $70,000, Buy the relephones; the savings is $500,000, © Buy the telephones; the savings is $320,000, 4. Make the telephones; th savings is $250,000. «Make the telephones: he saving i $180,000 4. Which ofthe followings nr a record required for operating a job cost sytem? A) Production orders Job cost sheets Sales call sheets ‘Matera requisition forns E) Direct labor time record 5. For which of the following products would job order costing be leat likely tobe used? AA) Residesial building B) Shipbuilding {) Morigag foan processing Orie paper manofacturng, Hospital surgery 6. How is depreciation onthe manufacturing building and equipment classified in financial reporting? ‘A) Asan ielevant cost because ihas already been incured 1B) Asacurent expense ‘As part ofthe cost ofthe products produced ‘Asa period cos Ike advertising ‘As par of general and administrative expensesACCT 5301.002 Spring 2014 Exam #3, Version & 2 7. Bassa Corp. manwactares a product wit the following fll uit costs aa volume of 10,000 units: ‘Direct water $300 30 Direct labor io 1 900 Manufacturing overhead (30% variable) 200 elim eapns 0S ats ime | JS oSsqen Adhminsvave expenses (105 variable) 19° 10] “50x10 A Tova per wit SLi ‘An infemational company recently approached Brasarde's management with an offr to purchase 1,000 units or $900 each. Brassirde currently sells the producto dealers for $1,300 each, Brasarde's capacity is sulicien to produce the extra 1,000 units. No selling expenses would be incurred on this special order, tf Brassarde's management accepts the offer, OMS | a. Decrease by $200200 increase by $150,000 Increase by $90,000 4. Decrease by $400000 Decrease by $80,000 8. The most appropristecos driver forthe activity of moving luggage in an airport is 4. The numberof pilots forthe airplanes, numberof pieces of luggage moved The number of employees assigned tothe job of moving lugeage. 4. The amount of revenue generated by ticket sles, fe. The average outsice temperatures, 9, Which ofthe following isa te characteristic of actvity-based costing? EA) Actvity-based costing uses a smaller umber of cost pools than does traditional costing. FB) Relative to tational costing methods, actviy-tased costing is more coxemed with ieniying frees and ex concerned wih asl ters fovea co {EC Activity-based éosting removes the use ofall judgment from the allocation process. 1D) Actvity-based costing is commonly performed with a muted trumpet. Activty-based costing asigns costs to cost objects based on usage of activity called cost drivers 10. Which of the following product costing methods produces the most precise product citing information? A) Average unit costng ‘Activity-based coting Departmental overhead rate methods 1) Organization-basd costing E) Plantwide overhead rates 11. Activity-based costing’ primary benefit is that it provide: ‘A) Absolutely accuat product costing information B) Data for external financial reporting purposes “More jobs for industrial engineers and accountants ‘More precise cos dat for internal decision-making purposes A lage increase in administrative expenses 12, The ypicl objective t which cots are sasigned aA value chain product or service, ‘A cost pool. 4. Overhead, fe AnactivityACCT 5801.002 Spring 2014 Exam #9, Version A 3 13, Turtle, Ine. uses actvty-based costing. The company produces X ard Y. Information relating tothe two. products sas follows: x oy Unis prods 38.000 Machine hours 15.900 Diet abr-ours 1000-24 000-4900 Materia handing umber of moves) 4000" 12000 Seups wooo 1000 “The following oss ar epord: Motes handing 5320000 co/peay Prod: eure Laborrnedoveread —s600007746°7/9end "584, ov Setups 80.000 ned overhead cont asigned o product X ar: ( ‘et000 ©) $875000 ) $548,000 5) 3960000 14. Although adding more activity cost pools to an actvity-based costing system may improve the precision of| Product costing, this increase in precision must be judged against: 2. The price of underwater coverage. Tye price ofthe product. The cost of developing and maintaining the addtional cst pools. “The tax rates fr income in he country. fe, The volume of product sold 15, Bighco, Inc. has two categories of overhead: maintenance and inspection. Costs expected for these categories {forthe coming year areas follows: ‘Mainienance $300,000 Inspection 200,000, ‘The practical capacity of machine-hours for al jobs during the years 2,000, and for inspections is 1,000 These are the cost drivers for maintenance and inspection cos, respecively. The following data have been assembled for use in developing abd for s proposed job: Direct materials $3,000 Direct labor $8,000, Machine-nours 00 hours Number of inspections 6 Direc laboehours 800 Using dhe appropiate cost drivers, the ttl cost of the potential jb is a. $11,000 '. $13,200, ©. $23,000 4. $31,000 524,200 16. When cost-besed pricing is employed and markup is based on manefacturing costs, the markup must be sufficiently large enough to: \Cover selling expenses, administrative expenses, and provide forthe desired profit ‘Cover selling and administrative expenses (©) Be noticed ona distant horizon yet be small on case inspection 1D) Provide forthe desired profit, ) Cover selling expenses and provide fr the desired profit‘ACCT 5301.002 Spring 2014 Exam 3, Version A 4 17, Which ofthe following i no a drawback to cos-based pricing? ‘A)Cost-based pricing requires accurate cos assignments 'B) The greater the poron of unassigned costs, the greater the likelihoed of overpricing and underprcing individual products. )Cost-based pricing assumes goods or services are relatively scarce, and customers are, generally, willing to the price ina competitive envconme ‘rarket, ) Cost-based pricing rewards inefficiency, ost based approaches increase the time and cost of binging new product to 18, Blue Mountain Company has the following budgeted costs for 10,000 units Variable Costs Fined Coss Manufacturing $300,000, '$100,000 Selling & Administrative 00.000 50,000 Total 400,000, $150,000 ‘Whats the markup on variable costs needed to obiina target profit of $100,0007| AY 1000 percent B), 1250 percent ©) 25.0 percent 6255 percent 37.3 peecent 19, Skinny Co. is considering the production ofa new line of jeans. Based on preliminary market esearch, ‘management has decided that each pair of jeans shold be priced at $200, Furthermore, management believes ‘thatthe profit margin should be 40 percent of sales revenue. The company has 100 million in assets and $60 millon in curent Kabilties. Whats the target cost? A) S40 5) $80 120 ‘160 E) $40 alin 20, Which budgeting approach secks to reduce costs periodically? The continuous improvement approsch ‘The inpavoutput approach ©. The activity based approach A. Participative budgeting approach © Bombastc budgeting proach 2L,, Which of the following is a disadvantage of ROL asa performance measure? (JAY Itencourages managers to increase the sizeof their operations It discourages managers of departments with high ROIs from investing in average ROI projects. encourages managers o pay careful attention tothe relationships among sales, expenses, and investment =P) Itencourages cos efficiency AFB) lediscourages excessive investment in operating asst, 22, Generally, the budgeting process concludes with the preparation of which of the following that is (ate) acceptable to senior management: ‘A) Cash budget 5B) Production budget ©) Coffee break Selling expense budget judged Financial statements‘ACCT 5801.002 Spring 2034 Exam #9, Version A 5 23, Creekstone Company has a sales budget fr June of $200,000. Cos of goods sold is expected tobe 60 percent ‘of sales. All goods are purchased inthe month used and paid for inthe month following purchase. The beginning inventory of merchandise is $10,000, and an ending inventory of $12,000 is dered, Beginning accounts payable is $76,000. The purchases for June ae expected tobe Sane Qe ponies (r4DiP 41340 ~ 190 abe, S12 Ger 24, Aiton Fas Co. is in he poses of pein sb! fr net Sor Cost of gis sl as Bsn ‘wired pat of ees” pes nd ts be ee aap ‘month of sale, Wages are estimated at 10 percent of sales and are paid during the month of sale Other ‘operating costs amounting to 15 percent of sles are tobe paid inthe month following the month of sales. Sales Mah sax ford, fay soto ach sna, April $480,000 “YX 6 = LES ty sou Wha banc ipa ge on of aa 10" sis00 eet 3 Saco Spon sana Ssnpoo 25. Which ofthe sources ited below would a manager be LEAST likely to consider n deciding whether or not to siscontinuea given segment? — AA) Direct segment cass An evaluation of the importance ofthe segment to overall operations (©) Segment contribution margin Segment margin Segment share of home office costs allocated onthe bass of revenues 26, A balanced scorecard typically includes ll of he following, EXCEPT: Cena messes Customer slsfction measures D) intemal processes measures E) Innovation measures 27, Which he owing semen is TRUE: 4) There onimvesinen can be ose by mapyng tum on equ times set ove ©) inte ong ben pasty mater br See eS Sea ca essen orm ser suing alloced compo Segre ers {efoystranster picing int system used ony in aegning spice 0 prod or service wansfered between two ‘ptt centers within a company. {eB nasa re ft nerdy se cng pn i ce Sean ciurbuen margin 5) ints othe Bt rotabiy mabe for dec then a eugene gent F income ater allocstd corporate headquarters cos and income tates,‘ACCT 5301.002 Spring 2014 Exam 43, Version A ‘ 28, A responsibily center where the manager can control both revenues and expense Jevel is refered toa: a. Invesiment center 1b. Cost center. Profit center. Revenue cener ©. Asset center, pM hat ia transfer peice? 3.) The amount charged fora product or service that one division provides another. “The amount charged or goods and services offered tothe government. «. An amount charged to cover the costs associated with imporvexpot taxes 4. The amount charged the final consumer to cover al cost incurred along the value chain ©: The cast of wansferritg from one project fo another, 30. Which ofthe following i legitimate disadvantage of a 100%-of-variable-cost transfer pricing? is price will nat allew the selling division to make a long run profit {© b This price wll iscowsage the purchasing division from buying internally ©. AL his price ifthe seling division docs not have excess capacity, the velling di F anything tthe outside markt 4. the seling division has excess capacity his transfer price wil eften lead the purchasing division to act, inconsistently with corperate goals ion will ot wish to sell EXERCISES: Be sure to show any calculations required. EXERCISE A (6 points) The Contry Co. manufactures 10,000 rolls of cable each period, The cable is used a an input for producing several other products that Wideck manufactres. Te fll mantfacturing costs fora batch of 10rlls oF eable ar: Direct materials $410 -67G 0D Direct abor Wo) g 70x 107? a ‘Variable manufacturing oveead 109, Average fixed manufacturing overhead 480 Tata TL ‘The fixed manufacturing overhead is comprised of deprecation expenses elated to prior investments in facilities 1nd equipment that ar used inthe manufacturing ofthe cable. These aisels have no other use than forthe ‘manufacturing of the cable. An ouside supplier has offered to sell Caray the 10.000 rolls of cable necessary to ‘meet production needs this period fora lump-sum of $850,000. Contes selling price is $116 per oll. Required: Contry accepts this outside supplier's offer, how much better of or worse off will the company be? Fes0/000 620, %0 £190, 07 mers oF,‘ACO 301.002 Spring 2014 Exam, Version A 7 EXERCISE B (10 poins) The Vapor Co. produces 3 produey Ath the following information for Apeil 2014: Product | Product? | Product3 | Total Dizeei Material Cost [$95,000 5007 500 ___| S50 00 Direct Labor Cos $30,000. $40,000, '$50,000 [$120,000 Direct Labor Hours [1,500 hows | 2.000 hous | 2,500 hows | 6,000 hows This produced [2.000 [a.000 6,000 72000] arora seats SSEODD ANT ape a eso Gag Vapor EET Fossa mataing cot perant pus WEauaponcas/50jo00 fingene 125 Yo ‘a. The total cost for Product 2. mx Zp en (e — Biew OU PEK w$2, 000 = 124,000 92 30 Rom £13 = fon a xercise €(12 poins) Libbock Machining Company bas developed the following activity cost information for ss manulactring actives Shaping {$40 per hour “Assembly $20 per hour Inspection $5 per unit Machine setop $300 per batch a batch ode or 10 units of Product B-XV: * One inspection pr uni + 038 hour o shaping for ech un + 1 2hours of asembly peru. ‘Required Calclte the tl costo produce bach of 100 units of Produ 87-XV SPEND (ooKbs = Syd 4 shox #0 = 5200 rsp fhnn ee Aye Z6f02 EXERCISE D (8 points) The forecasted sles pertin to Brownfield, ne, ©; === HiscilBeriod Sales wis i seooano “Zo, G02 iy Soom Aust 0060 Catena: 6 pee mt of ke {Ofc n mn lige Accra Rca Beagle S160000 Niner Gis in se ee ry ‘Sept ae 12000 company sso Sern, The company pans mii cag inves 20 gent of derenncuaate Regt How hn nis does Broiled ian ay? Jane wits produced 2¥,000 6,0, 0 ++ 10,010~ 12, 000 ily ents produced _SB,000___ sya 4 1g,000 —10, 000‘ACCT S9t1.002 Spring 2014 Exam 3, Veision A EXERCISE E (12 points) Provide the missing amounts in the following situations: “Eastern Division ‘Western Di Sales 2. $10,000,000, [Net operating income sis ve 400,000 Operating asses , $00, 0: 40,000 Return on investment 259% 208 Return on sales 10% «Aso Investment Turnover eae $0 SHORT ANSWER (2 points each) ‘A. What isthe general rule forthe use of limited resourcesin the production of products? 'B. When might a court cas be involved after pricing decisions fr special ones? © What is included in conversion costs? D. Give two examples of resources that are wsed by activites, 1 2 E. Give wo examples of non-vale-added costs 1 F. With the target costing approach, how isthe target cost ealculted? G. How can minimizing after-market costs lead toa competitive advantage? H. Whats the value chain fora product? 1 What isa zero-based budget? J. Listewe ways in which the EVA approach differs fom “residual income"? 2