Question 1:
SchickelInc regularly uses material B39U and currently has in stock 460 liters of thematerial for which it paid $3,128 several weeks ago If this were to be sold asis on the open market as surplus material, it would fetch $595 per liter Newstocks of the material can be purchased on the open market for $645 per liter,but it must be purchased in lots of 1,000 liters You have been asked todetermine the relevant cost of 760 liters of the material to be used in a jobfor a customer The relevant cost of the 760 liters of material B39U is:
$6,450
$4,902
$4,672
$4,522
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Question 2:
MunafoCorporation is a specialty component manufacturer with idle capacityManagement would like to use its extra capacity to generate additional profitsA potential customer has offered to buy 6,500 units of component VGI Each unitof VGI requires 1 unit of material I57 and 5 units of material M97 Dataconcerning these two materials follow:
Material I57 is in use in many of thecompany’s products and is routinely replenished Material M97 is no longer usedby the company in any of its normal products and existing stocks would not bereplenished once they are used up
What would be the relevant cost of thematerials, in total, for purposes of determining a minimum acceptable price forthe order for product VGI?
$174,850
$213,850
$171,925
$213,130
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Question 3
WinderCorporation is a specialty component manufacturer with idle capacityManagement would like to use its extra capacity to generate additional profitsA potential customer has offered to buy 3,000 units of component QEA Each unitof QEA requires 5 units of material F85 and 5 units of material E71 Dataconcerning these two materials follow:
Material F85 is in use in many of thecompany’s products and is routinely replenished Material E71 is no longer usedby the company in any of its normal products and existing stocks would not bereplenished once they are used up
What would be the relevant cost of thematerials, in total, for purposes of determining a minimum acceptable price forthe order for product QEA?
$141,750
$126,702
$145,965
$126,295
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Question 4:
MotorCompany manufactures 10,000 units of Part M-l each year for use in itsproduction The following total costs were reported last year:
Valve Company has offered to sell Motor10,000 units of Part M-l for $18 per unit If Motor accepts the offer, some ofthe facilities presently used to manufacture Part M-l could be rented to athird party at an annual rental of $15,000 Additionally, $4 per unit of thefixed overhead applied to Part M-l would be totally eliminated Should MotorCompany accept Valve Company’s offer, and why?
Yes,because it would be $25,000 cheaper to buy the part
No,because it would be $15,000 cheaper to make the part
Yes,because it would be $10,000 cheaper to buy the part
No,because it would be $5,000 cheaper to make the part
________________________________________
Question 5:
SardiInc is considering whether to continue to make a component or to buy it froman outside supplier The company uses 17,000 of the components each year Theunit product cost of the component according to the company’s cost accountingsystem is given as follows:
Direct materials $ 820
Direct labor 830
Variable manufacturing overhead 120
Fixed manufacturing overhead430
Unit product cost $2200
Assume that direct labor is a variablecost Of the fixed manufacturing overhead, 70% is avoidable if the componentwere bought from the outside supplier In addition, making the component uses 2minutes on the machine that is the company’s current constraint If thecomponent were bought, this machine time would be freed up for use on anotherproduct that requires 4 minutes on the constraining machine and that has acontribution margin of $700 per unit
When deciding whether to make or buy thecomponent, what cost of making the component should be compared to the price ofbuying the component?
$2071
$2550
$2421
$2200
Question 6:
WoodCarving Corporation manufactures three products Because of a recent lack ofskilled wood carvers, the corporation has had a shortage of available laborhours The following per unit data relates to the three products of thecorporation:
Letter Openers Elvis Statues CandleHolders
Sales price $30 $80 $42
Variable costs $20 $40 $20
Labor hours required 1 6 2
Assume that Wood Carving only has 1,800labor hours available next month Also assume that Wood Carving can only sell800 units of each product in a given month What is the maximum amount ofcontribution margin that Wood Carving can generate next month given this laborhour shortage?
$12,000
$19,600
$19,000
$19,800
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Question 7:
EllyIndustries is a multi-product company that currently manufactures 30,000 unitsof Part MR24 each month for use in production The facilities now being used toproduce Part MR24 have a fixed monthly cost of $150,000 and a capacity toproduce 35,000 units per month If Elly were to buy part MR24 from an outsidesupplier, the facilities would be idle, but its fixed costs would continue at40% of their present amount The variable production costs of Part MR24 are $11per unit
If Elly Industries continues to use 30,000units of Part MR24 each month, it would realize a net benefit by purchasingPart MR24 from an outside supplier only if the supplier’s unit price is lessthan:
$1400
$1100
$1600
$1300
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Question 8:
EllyIndustries is a multi-product company that currently manufactures 30,000 unitsof Part MR24 each month for use in production The facilities now being used toproduce Part MR24 have a fixed monthly cost of $150,000 and a capacity toproduce 35,000 units per month If Elly were to buy part MR24 from an outsidesupplier, the facilities would be idle, but its fixed costs would continue at40% of their present amount The variable production costs of Part MR24 are $11per unit
If Elly industries is able to obtain PartMR24 from an outside supplier at a unit purchase price of $15, the monthlyusage at which it will be indifferent between purchasing and making Part MR24is:
32,000units
22,500units
30,000units
35,000units
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Question 9:
AhronCompany makes 80,000 units per year of a part it uses in the products itmanufactures The unit product cost of this part is computed as follows:
Direct materials $1490
Direct labor 1750
Variable manufacturing overhead 190
Fixed manufacturing overhead 2110
Unit product cost $5540
An outside supplier has offered to sell thecompany all of these parts it needs for $4660 a unit If the company acceptsthis offer, the facilities now being used to make the part could be used tomake more units of a product that is in high demand The additionalcontribution margin on this other product would be $560,000 per year
If the part were purchased from the outsidesupplier, all of the direct labor cost of the part would be avoided However,$1360 of the fixed manufacturing overhead cost being applied to the part wouldcontinue even if the part were purchased from the outside supplier This fixedmanufacturing overhead cost would be applied to the company’s remainingproducts
What is the maximum amount the companyshould be willing to pay an outside supplier per unit for the part if thesupplier commits to supplying all 80,000 units required each year?
$700
$5540
$6240
$4880
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Question 10:
YounesInc manufactures industrial components One of its products, which is used inthe construction of industrial air conditioners, is known as P06 Dataconcerning this product are given below:
The above per unit data are based on annualproduction of 4,000 units of the component Direct labor can be considered tobe a variable cost
The company has received a special,one-time-only order for 500 units of component P06 There would be no variableselling expense on this special order and the total fixed manufacturingoverhead and fixed selling and administrative expenses of the company would notbe affected by the order However, assume that Younes has no excess capacityand this special order would require 30 minutes of the constraining resource,which could be used instead to produce products with a total contributionmargin of $10,000 What is the minimum price per unit on the special orderbelow which the company should not go?
$67
$83
$103
$20
Question 11:
ElfvingCompany produces a single product The cost of producing and selling a singleunit of this product at the company’s normal activity level of 80,000 units permonth is as follows:
Direct materials $3750
Direct labor $600
Variable manufacturing overhead $100
Fixed manufacturing overhead $1150
Variable selling & administrativeexpense $180
Fixed selling & administrative expense $800
The normal selling price of the product is$7110 per unit
An order has been received from an overseascustomer for 1,000 units to be delivered this month at a special discountedprice This order would have no effect on the company’s normal sales and wouldnot change the total amount of the company’s fixed costs The variable sellingand administrative expense would be $150 less per unit on this order than onnormal sales
Direct labor is a variable cost in thiscompany
Suppose the company is already operating atcapacity when the special order is received from the overseas customer Whatwould be the opportunity cost of each unit delivered to the overseas customer?
$530
$680
$740
$2480
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Question 12:
ElfvingCompany produces a single product The cost of producing and selling a singleunit of this product at the company’s normal activity level of 80,000 units permonth is as follows:
Direct materials $3750
Direct labor $600
Variable manufacturing overhead $100
Fixed manufacturing overhead $1150
Variable selling & administrativeexpense $180
Fixed selling & administrative expense $800
The normal selling price of the product is$7110 per unit
An order has been received from an overseascustomer for 1,000 units to be delivered this month at a special discountedprice This order would have no effect on the company’s normal sales and wouldnot change the total amount of the company’s fixed costs The variable sellingand administrative expense would be $150 less per unit on this order than onnormal sales
Direct labor is a variable cost in thiscompany
Suppose there is not enough idle capacityto produce all of the units for the overseas customer and accepting the specialorder would require cutting back on production of 400 units for regularcustomers The minimum acceptable price per unit for the special order isclosest to:
$5472
$5600
$7110
$6580
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Question 13:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
Expected cash collections in December are:
$310,000
$297,200
$201,500
$95,700
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Question 14:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 for November,$310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
The cost of December merchandise purchaseswould be:
$192,000
$248,000
$232,000
$117,600
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Question 15:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
December cash disbursements for merchandisepurchases would be:
$192,000
$248,000
$117,600
$243,200
Question 16:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
The excess (deficiency) of cash availableover disbursements for December would be:
$46,600
$19,200
$32,900
$13,700
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Question 17:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
The net income for December would be:
$32,900
$13,700
$19,900
$40,900
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Question 18:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
The cash balance at the end of Decemberwould be:
$63,300
$57,900
$25,000
$38,300
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Question 19:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
The accounts receivable balance, net ofuncollectible accounts, at the end of December would be:
$108,500
$198,000
$102,300
$83,200
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Question 20:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
Accounts payable at the end of Decemberwould be:
$248,000
$192,000
$117,600
$74,400
Question 21:
DillyFarm Supply is located in a small town in the rural west Data regarding thestore’s operations follow:
– Sales are budgeted at $290,000 forNovember, $310,000 for December, and $210,000 for January
– Collections are expected to be 65% in themonth of sale, 33% in the month following the sale, and 2% uncollectible
– The cost of goods sold is 80% of sales
– The company purchases 70% of itsmerchandise in the month prior to the month of sale and 30% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $21,100
– Monthly depreciation is $21,000
– Ignore taxes
Retained earnings at the end of Decemberwould be:
$311,400
$347,200
$325,100
$335,200
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Question 22:
BrambleCorporation is a small wholesaler of gourmet food products Data regarding thestore’s operations follow:
– Sales are budgeted at $340,000 forNovember, $320,000 for December, and $310,000 for January
– Collections are expected to be 80% in themonth of sale, 16% in the month following the sale, and 4% uncollectible
– The cost of goods sold is 75% of sales
– The company purchases 60% of itsmerchandise in the month prior to the month of sale and 40% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $24,000
– Monthly depreciation is $15,000
– Ignore taxes
Expected cash collections in December are:
$256,000
$310,400
$54,400
$320,000
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Question 23:
BrambleCorporation is a small wholesaler of gourmet food products Data regarding thestore’s operations follow:
– Sales are budgeted at $340,000 forNovember, $320,000 for December, and $310,000 for January
– Collections are expected to be 80% in themonth of sale, 16% in the month following the sale, and 4% uncollectible
– The cost of goods sold is 75% of sales
– The company purchases 60% of itsmerchandise in the month prior to the month of sale and 40% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $24,000
– Monthly depreciation is $15,000
– Ignore taxes
The cost of December merchandise purchaseswould be:
$240,000
$235,500
$139,500
$255,000
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Question 24:
BrambleCorporation is a small wholesaler of gourmet food products Data regarding thestore’s operations follow:
– Sales are budgeted at $340,000 forNovember, $320,000 for December, and $310,000 for January
– Collections are expected to be 80% in themonth of sale, 16% in the month following the sale, and 4% uncollectible
– The cost of goods sold is 75% of sales
– The company purchases 60% of itsmerchandise in the month prior to the month of sale and 40% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $24,000
– Monthly depreciation is $15,000
– Ignore taxes
December cash disbursements for merchandisepurchases would be:
$246,000
$235,500
$139,500
$240,000
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Question 25:
BrambleCorporation is a small wholesaler of gourmet food products Data regarding thestore’s operations follow:
– Sales are budgeted at $340,000 forNovember, $320,000 for December, and $310,000 for January
– Collections are expected to be 80% in themonth of sale, 16% in the month following the sale, and 4% uncollectible
– The cost of goods sold is 75% of sales
– The company purchases 60% of itsmerchandise in the month prior to the month of sale and 40% in the month of sale Payment for merchandise ismade in the month following the purchase
– Other monthly expenses to be paid in cashare $24,000
– Monthly depreciation is $15,000
– Ignore taxes
The excess (deficiency) of cash availableover disbursements for December would be:
$68,600
$12,200
$28,200
$40,400
Question 26:
Anactivity-based costing system that is designed for internal decision-makinggenerally will not conform to generally accepted accounting principles Whichof the following is NOT a reason for this happening?
Somemanufacturing costs (ie, the costs of idle capacity andorganization-sustaining costs) will not be assigned to products
First-stageallocations may be based on subjective interview data
Somenonmanufacturing costs are assigned to products
Allocationbases other than direct labor-hours, direct labor cost, and machine-hours areused
________________________________________
Question 27:
AbelCompany uses activity-based costing The company has two products: A and B Theannual production and sales of Product A is 200 units and of Product B is 400units There are three activity cost pools, with estimated costs and expectedactivity as follows:
The cost per unit of Product B is closestto:
$7473
$1769
$4158
$8153
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Question 28:
(Appendix8A) Groats Catering uses activity-based costing for its overhead costs Thecompany has provided the following data concerning the activity rates in itsactivity-based costing system:
Activity Cost Pools Preparing Meals ArrangingFunctions
Wages$115 $18000
Supplies$040 $32000
Other expenses $015 $13000
The number of meals served is the measureof activity for the Preparing Meals activity cost pool The number of functionscatered is used as the activity measure for the Arranging Functions activitycost pool
Management would like to know whether thecompany made any money on a recent function at which 150 meals were served Thecompany catered the function for a fixed price of $1800 per meal The cost ofthe raw ingredients for the meals was $1240 per meal This cost is in additionto the costs of wages, supplies, and other expenses detailed above
For the purposes of preparing actionanalyses, management has assigned ease of adjustment codes to the costs asfollows: wages are classified as a Yellow cost; supplies and raw ingredients asa Green cost; and other expenses as a Red cost
Suppose an action analysis report isprepared for the function mentioned above What would be the “redmargin” in the action analysis report? (Round to the nearest wholedollar)
$(195)
$105
$(45)
$(145)
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Question 29:
(Appendix8A) Groats Catering uses activity-based costing for its overhead costs Thecompany has provided the following data concerning the activity rates in itsactivity-based costing system:
Activity Cost Pools Preparing Meals ArrangingFunctions
Wages$115 $18000
Supplies$040 $32000
Other expenses $015 $13000
The number of meals served is the measureof activity for the Preparing Meals activity cost pool The number of functionscatered is used as the activity measure for the Arranging Functions activitycost pool
Management would like to know whether thecompany made any money on a recent function at which 150 meals were served Thecompany catered the function for a fixed price of $1800 per meal The cost ofthe raw ingredients for the meals was $1240 per meal This cost is in additionto the costs of wages, supplies, and other expenses detailed above
For the purposes of preparing actionanalyses, management has assigned ease of adjustment codes to the costs asfollows: wages are classified as a Yellow cost; supplies and raw ingredients asa Green cost; and other expenses as a Red cost
Suppose an action analysis report isprepared for the function mentioned above What would be the “yellowmargin” in the action analysis report? (Round to the nearest wholedollar)
$233
$108
$183
$288
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Question 30:
(Appendix8B) Addison Company has two products: A and B Annual production and sales are800 units of Product A and 700 units of Product B The company hastraditionally used direct labor-hours as the basis for applying allmanufacturing overhead to products Product A requires 02 direct labor hoursper unit and Product B requires 06 direct labor hours per unit The total estimatedoverhead for next period is $71,286
The company is considering switching to anactivity-based costing system for the purpose of computing unit product costsfor external reports The new activity-based costing system would have threeoverhead activity cost pools–Activity 1, Activity 2, and General Factory–withestimated overhead costs and expected activity as follows:
(Note: The General Factory activity costpool’s costs are allocated on the basis of direct labor hours)
The overhead cost per unit of Product Bunder the activity-based costing system is closest to:
$5662
$2238
$7374
$4752
Question 31:
(Appendix8B) Kebort Manufacturing Corporation has a traditional costing system in whichit applies manufacturing overhead to its products using a predet