1. (TCO 1) Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management? (Points: 5)
2. (TCO 1) Danielle Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 60,000. What is the budgeted indirect cost allocation rate for this activity? (Points: 5)
3. (TCO 2) Fixed overhead costs include: (Points: 5)
4.TCO 2) Information pertaining to Brenton Corporation’s sales revenue is presented in the following table:
5. (TCO 2) Financing decisions PRIMARILY deal with: (Points: 5)
6. (TCO 3) The cost components of an air conditioner include $35 for the compressor, $11.50 for the sheet molded compound frame, and $80 per unit for assembly. The factory machines and tools cost is $55,000. The company expects to produce 1,500 air conditioners in the coming year. What cost function best represents these costs? (Points: 5)
7. (TCO 3) Which cost estimation method may use time-and-motion studies to analyze the relationship between inputs and outputs in physical terms? (Points: 5)
8. (TCO 4) Sunk costs: (Points: 5)
9. (TCO 5) Throughput contribution equals revenues minus: (Points: 5)
10. (TCO 5) Keeping the bottleneck operation busy and subordinating all nonbottleneck operations to the bottleneck operation involves: (Points: 5)
11. (TCO 6) What type of cost is the result of an event that results in more than one product or service simultaneously (Points: 5)
12. (TCO 6) Which of the following is a disadvantage of the physical-measure method of allocating joint costs? (Points: 5)
13. (TCO 7) Life-cycle costing is the name given to: (Points: 5)
- (TCO 7) Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon’s monthly sales are $500,000.
The markup percentage on full cost to arrive at the target (exisitng) selling price is
15. (TCO 8) Transfer prices should be judged by whether they promote: (Points: 5)
16. (TCO 8) Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound while Division B incurs additional costs of $2.50 per pound. Which of the following formulas correctly reflects the company’s operating income per pound? (Points: 5)
17. (TCO 8) When companies do not want to use market prices or find it too costly, they typically use ________ prices, even though suboptimal decisions may occur. (Points: 5)
18. (TCO 9) To guide cost allocation decisions, the benefits-received criterion: (Points: 5)
19. (TCO 9) The Hassan Corporation has an Electric Mixer Division and an Electric Lamp Division. Of a $20,000,000 bond issuance, the Electric Mixer Division used $14,000,000 and the Electric Lamp Division used $6,000,000 for expansion. Interest costs on the bond totaled $1,500,000 for the year. What amount of interest costs should be allocated to the Electric Mixer Division? (Points: 5)
20. (TCO 10) The net present value method focuses on: (Points: 5)
21. (TCO 10) The Zeron Corporation wants to purchase a new machine for its factory operations at a cost of $950,000. The investment is expected to generate $350,000 in annual cash flows for a period of four years. The required rate of return is 14%. The old machine can be sold for $50,000. The machine is expected to have zero value at the end of the four-year period. What is the net present value of the investment? Would the company want to purchase the new machine? Income taxes are not considered. (Points: 5)
22. (TCO 11) The four cost categories in a cost of quality program are (Points: 5)
23. (TCO 11) Regal Products has a budget of $900,000 in 20X6 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $60,000 in variable costs. The new method will require $18,000 in training costs and $120,000 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 150,000 units. Appraisal costs for the year are budgeted at $600,000. The new prevention procedures will save appraisal costs of $30,000. Internal failure costs average $15 per failed unit of finished goods. The internal failure rate is expected to be 3% 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 $54 per failed unit. The company’s average external failures average 3% 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 will internal failure costs change if the internal product failures are reduced by 50% with the new procedures? (Points: 5)
24. (TCO 12) Obsolescence is an example of which cost category? (Points: 5)
25. (TCO 12) Liberty Celebrations, Inc., manufactures a line of flags. The annual demand for its flag display is estimated to be 100,000 units. The annual cost of carrying one unit in inventory is $1.60, and the cost to initiate a production run is $30. There are no flag displays on hand but Liberty had scheduled 60 equal production runs of the display sets for the coming year, the first of which is to be run immediately. Liberty Celebrations has 250 business days per year. Assume that sales occur uniformly throughout the year and that production is instantaneous. If Liberty Celebrations does not maintain a safety stock, the estimated total carrying cost for the flag displays for the coming year is the estimated total setup cost for the flag displays for the coming year is (Points: 5)
Questions based on a case sudy given in the tutorial :
Question 1: What is the annual operating income from Deluxe at the current price of $5,000?
Question 2: What is the annual operating income from Deluxe if the price is reduced to $4,000 and sales in units increase by 25%?
What is the estimated life-cycle operating income for the first year?
- (TCO 8) Sportswear Company manufactures socks. The Athletic Division sells its socks for $6 a pair to outsiders. Socks have manufacturing costs of $2.50 each for variable and $1.50 for fixed. The division’s total fixed manufacturing costs are $105,000 at the normal volume of 70,000 units.
The European Division has offered to buy 15,000 socks at the full cost of $4. The Athletic Division has excess capacity and the 15,000 units can be produced without interfering with the current outside sales of 70,000. The 85,000 volume is within the division’s relevant operating range.
Explain whether the Athletic Division should accept the offer. Support your decision showing all calculations.