(TCO 3) Managers are often required to make decisions about the future based on all the following except: estimated information. financial information. cost information. perfect information. Question 2. Question : (TCO 3) Just-in-time (JIT) methods of production are designed to: increase sales. reduce operating expenses. reduce inventories. increase product quality. Question 3. Question : (TCO 3) The Coyote Cafe had sales revenues and food costs in 2007 of $800 000 and $600 000 respectively. In 2008 Coyote will be introducing a new menu item that will generate $100 000 in sales revenues and $45 000 in food costs. Assuming no changes are expected for the other food items the differential operating profit for 2008 is: $55 000. $100 000. $155 000. $200 000. Question 4. Question : (TCO 1) The terms direct cost and indirect cost are commonly used in accounting. A particular cost might be considered a direct cost of a manufacturing department but an indirect cost of the product produced in the manufacturing department. Classifying a cost as either direct or indirect depends upon: whether an expenditure is unavoidable because it cannot be changed regardless of any action taken. whether the cost is expensed in the period in which it is incurred. the behavior of the cost in response to volume changes. the cost object to which the cost is being related. Question 5. Question : (TCO 1) Costs that change in direct proportion to a change in the related volume of an activity are called: manufacturing costs. sunk costs. variable costs. fixed costs. Question 6. Question : (TCO 1) Calculate the conversion costs from the following information: Fixed manufacturing overhead $2 000 Variable manufacturing overhead 1 500 Direct materials 4 000 Direct labor 3 000 $4 000 $7 000 $9 000 $6 500 Question 7. Question : (TCO 1) The excess of sales over variable costs is termed: the net income. the contribution margin. the operating profit. the gross margin. Question 8. Question : (TCO 6) Western Sales has the following information concerning its one and only product: Selling price per unit: $40 Variable cost per unit: $15 Total fixed costs: $250 000 Compute the contribution margin per unit. $40 $15 $25 $55 Question 9. Question : (TCO 6) The profit equation may be expressed as: total revenues – total costs = operating profit. total fixed costs – total variable costs = operating profit. price x units of output = operating profit. revenue – contribution margin = operating profit. Question 10. Question : (TCO 6) The following information pertains to Klyne Company: Sales: $500 000 Variable costs: $100 000 Fixed costs: $30 000 What is Klyne’s total contribution margin? $400 000 $370 000 $130 000 $500 000 (TCO 5) The practice of setting prices at the highest when the quantity demanded for the product approaches capacity is called: predatory pricing. target pricing. peak-load pricing. price fixing. Question 2. Question : (TCO 5) Forgone returns or income from not employing a resource to its best alternative use is a(n): sunk cost. opportunity cost. differential cost. marginal cost. Question 3. Question : (TCO 5) Differential analysis may be used for all the following except: a make-buy decision. adding or dropping a product. accepting a special order. costing our product using full absorption costing. Question 4. Question : (TCO 3) The method of cost estimation that utilizes all data points is the: high-low method. scattergraph method. account analysis method. regression analysis method. Question 5. Question : (TCO 3) The cost estimation method that calls for a review of each account making up the total cost being analyzed is: account analysis. regression analysis. high-low method. scattergraph method. Question 6. Question : (TCO 3) The systematic relationship between the amount of experience in performing a task and the time required to perform it is known as the: learning phenomenon. learning tree. implementation system. response time. Question 7. Question : (TCO 2) Which of the following statements does not reflect one of the fundamental themes underlying the design of cost systems for managerial purposes? Cost systems should have a decision focus. Different cost information is used for different purposes. Cost information for managerial purposes must meet the cost-benefit principle. The primary purpose of cost systems is to gather information in order to value inventory. Question 8. Question : (TCO 2) In a labor intensive company in which more overhead is used by the more highly skilled and paid employees which activity base would be most appropriate for applying overhead to production? Direct labor cost Direct material cost Direct labor hours Machine hours Question 9. Question : (TCO 2) What is the amount transferred in for Case C? Case C Beginning balance $7 900 Ending balance 8 300 Transferred in ???? Transferred out 21 100 $12 800 $20 700 $21 500 $29 400 Question 10. Question : (TCO 2) For which of the following businesses would the job order cost system be appropriate? Law office Crude oil refinery Baby formula manufacturer Soft drink producer (TCO 6) T-Tunes Inc. is considering the introduction of a new music player with the following price and cost characteristics: Sales price per unit: $125 Variable cost per unit: $75 Annual fixed costs: $180 000 (a) How many units must T-Tunes sell to break even? (b) How many units must T-Tunes sell to make an operating profit of $120 000 for the year? (c) What will the operating profit be assuming that the projected sales for the year are 7 500 units? Consider requirements (b) and (c) independent of each other. a) The number of units that T-tunes must sell to breakeven is calculated as follows: No of units Question 2. Question : (TCO 4) Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2010: Total factory overhead costs $180 000 Direct labor hours 50 000 hours Direct labor costs $250 000 Machine hours 60 000 hours Compute the predetermined factory overhead rate under three different bases: (1) direct labor hours (2) direct labor costs and (3) machine hours. Question 3. Question : (TCO 1) The Boyceville Machining Company provided you with the following information for the fiscal year ending on December 31: Work-in-process inventory 12/31 $28 950 Finished goods inventory 1/1 153 700 Direct labor costs incurred 502 150 Manufacturing overhead costs 1 364 700 Direct materials inventory 1/1 125 400 Finished goods inventory 12/31 255 500 Direct materials purchased 875 100 Work-in-process inventory 1/1 50 500 Direct materials inventory 12/31 84 700 (a) Compute the total manufacturing costs incurred during the year. (b) Compute the total work-in-process during the year. (c) Compute the cost of goods manufactured during the year. (d) Compute the cost of goods sold during the year. Question 4. Question : (TCO 5) The following information relates to a product produced by Bayfield Company: Direct materials $50 Direct labor 35 Variable overhead 30 Fixed overhead 40 Unit cost $155 Fixed selling costs are $1 000 000 per year. Although production capacity is 900 000 units per year Bayfield expects to produce only 800 000 units next year. The product normally sells for $180 each. A customer has offered to buy 60 000 units for $150 each. Compute the effect on the net income if Bayfield accepts the special order.
