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Hello, Yoseph Orshan

1102ACCT640_WB2Lourdes White , Faculty Member (Bios)Class Announcements

SyllabusCourse Content

Peer evaluation form

due May 11:performance evaluationsurvey

Student informationform

Netiquette

Web broadcast lectures

How to view webbroadcast lectures

rubrics for caseanalysis

How conferenceparticipation is graded

How to achieve theLearning Objectives

Unit 1: introduction tomanagement accountingand ethics

Unit 2: job-order andactivity-based costing

Unit 3: cost behaviorand cost-volume-profitrelationships

Unit 4: pricing andprofitability analysis

Unit 5: segmentreporting, decentralizationand profit planning

Unit 6: standard costsand the BSC

Unit 7: relevant costs

Check figures for allchapters

Exams

ConferencesStudy Groups

WebliographyAssignments FolderPortfolio

Final Exam

Please select the best response to each question.

1. [1 point]Costs that are always relevant in decision-making are:

a) avoidable costs.b) fixed costs.c) sunk costs.d) variable costs.

2. [1 point]After the level of sales volume exceeds the breakeven point:

a) the contribution margin ratio increasesb) the total contribution margin will turn from negative to positivec) the total contribution margin exceeds the total fixed costsd) total fixed costs per unit will remain constant.

3. [1 point]A company manufactures three different product lines: Model X, Model Y and Model Z. Considerable market demand exists for all three models. Financial data per unit are below:

Model X Model Y Model Z

Selling price $50 $60 $70

Direct materials 6 6 6

Direct labor ($12 per hour) 12 12 24

Variable overhead costs ($4 per machine hour) 4 8 8

Fixed overhead costs 10 10 10

Which model has the greatest contribution per machine hour?

a) Model xb) Model yc) Model zd) Both models y and z

4. [1 point]A company manufactures three different product lines: Model X, Model Y and Model Z. Considerable market demand exists for all three models. Financial data per unit are below:

Model X Model Y Model Z

Selling price $50 $60 $70

Direct materials 6 6 6

Direct labor ($12 per hour) 12 12 24

Variable overhead costs ($4 per machine hour) 4 8 8

Fixed overhead costs 10 10 10

If there is a machine breakdown, which model is the most profitable to produce?

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Chat RoomClass Members

a) Model xb) Model yc) Model zd) Both models x and y

5. [1 point]The opportunity cost of using one unit of the constrained resource in a volume trade-off decision is equal to:

a) the profitability index for the company's best selling product.b) the profitability index for the product whose production would be cut back if necessary.c) the profitability index of the product with the fastest growing sales.d) the profitability index of the company's most profitable product.

6. [1 point]In a predetermined overhead rate in a job-order costing system that is based on machine-hours, which of the following would be used in the numerator and denominator?

a)Numerator Denominator

Actual manufacturing overhead Actual machine-hours

b)Numerator Denominator

Actual manufacturing overhead Estimated machine-hours

c)Numerator Denominator

Estimated manufacturing overhead Actual machine-hours

d)Numerator Denominator

Estimated manufacturing overhead Estimated machine-hours

7. [1 point]The employees at Mobile Sun Lotion Company roam the beaches with a tank of premium suntan lotion strapped on their backs. For a $2 charge, the employees will spray sunbathers with suntan lotion. Lastyear, Mobile sprayed 250,000 customers and incurred the following costs:

Total variable costs $175,000

Total fixed costs 50,000

Total costs $225,000

Assuming that this activity is within the relevant range, what would Mobile's total contribution margin have been last year if only 240,000 customers were sprayed?

a) $255,000b) $262,000c) $305,000d) $312,000

8. [1 point]A company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data given below:

Mirrors Windows

Total expected units produced 8,000 7,000

Total expected material moves 300 900

Expected direct labor-hours per unit 5 7

The total materials handling cost for the year is expected to be $38,448.00.

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If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost should be allocated to the mirrors? (Round off your answer to the nearest wholedollar.)

a) $19,696b) $16,020c) $19,224d) $17,280

9. [1 point]Of the following transfer pricing methods which is often regarded as the best?

a) Administered transfer priceb) Market-based transfer pricec) Cost-based transfer priced) Negotiated transfer price

10. [1 point]A company produces and sells a single product. Data concerning that product appear below:

Selling price $240.00

Variable expense per unit $81.60

Fixed expense per month $997,920

The unit sales to attain the company's monthly target profit of $44,000 is closest to:

a) 7,896b) 12,769c) 6,578d) 4,341

11. [1 point]When capacity is insufficient in the short run to meet demand, products should be ranked by:

a) the contribution margin per unit divided by the amount of the constrained resource required by one unitb) total contribution margin divided by the number of unitsc) total contribution margind) the absolute profitability index

12. [1 point]A company is considering the use of residual income as a measure of the performance of its divisions. What major disadvantage of this method should the company consider before deciding to institute it?

a) this method does not take into account differences in the size of divisions.b) investments may be adopted that will decrease the overall return on investment.c) the minimum required rate of return may eliminate desirable investments.d) residual income does not measure how effectively the division manager controls costs.

13. [1 point]A company produces 1,000 units of a component per month. The total manufacturing costs of the component are as follows:

Direct materials $10,000Direct labor 5,000Variable overhead 5,000Fixed overhead 30,000

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Total manufacturing cost $50,000

An outside supplier has offered to supply the component at $30 per unit. It is estimated that 20% of the fixed overhead assigned to the component will no longer be incurred if the company purchases it fromthe outside supplier. What is the maximum price that the company should be willing to pay the outside supplier?

a) $30 per unit.b) $26 per unit.c) $20 per unit.d) $15 per unit.

14. [1 point]Oak Cabinets Company maintains a cafeteria for its employees. For June, total variable food costs were budgeted at $48 per employee, based on a budgeted level of 1,000 employees in operatingdepartments. During the month, an average of 1,100 employees worked in operating departments. The cafeteria's actual total variable food costs for the month came to $57,750. How much variable food costshould be charged to the operating departments at the end of the month for performance evaluation purposes?

a) $57,750b) $52,500c) $48,000d) $52,800

15. [1 point]The amount of markup is usually higher if

a) there are practically no substitutes for this productb) demand is weakc) competition is intensed) demand is elastic

16. [1 point]A company has two divisions, the Selling Division and the Buying Division. The Selling Division manufactures an intermediate product and then "sells" them to the Buying Division, which completes theproduct and sells the final product to retailers. The market price for the Buying Division to purchase one unit of the intermediate product is $20. Fixed costs assume 100,000 units.

Unit costs for the intermediate product of the Selling Division are: Direct materials $4 Direct labor $3 Variable overhead $2 Division fixed costs $1Unit costs for the final product of the Buying Division (excluding the intermediate product) are: Direct materials $5 Direct labor $1 Variable overhead $1 Division fixed costs $9

Assume the transfer price for the intermediate product is 180% of full costs of the Selling Division and 100,000 units are produced and transferred to the Buying Division. If the Buying Division sells100,000 units of the final product at a price of $60 to outside customers, what is the operating income of both divisions together?

a) $4,400,000b) $3,400,000c) $3,000,000d) indeterminable

17. [1 point]Which of the following statements is true about the Balanced Scorecard?

a) financial performance and nonfinancial performance are always correlatedb) all performance measures should be consistent with the organization's strategy

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c) all four perspectives of the BSC should receive equal weights for evaluating individual performanced) financial measures help predict future performance, while nonfinancial measures help assess the results of past management decisions.

18. [1 point]Which of the following is a key point to consider when allocating service department costs?

a) Fixed and variable costs should not be separately allocated.b) Fixed costs should not be allocated in predetermined lump-sum amounts.c) Variable costs should be allocated based on actual usage of the cost driver.d) Common fixed costs should be allocated.

19. [1 point]A corporation has provided the following data from its activity-based costing system:

Activity Cost Pool Total Cost Total Activity

Assembly $613,250 55,000 machine-hours

Processing orders $46,170 1,500 orders

Inspection $146,110 1,900 inspection-hours

Data concerning one of the company's products, Product W58B, appear below:

Selling price per unit $113.70Direct materials cost per unit $48.14Direct labor cost per unit $11.62Annual unit production and sales 360Annual machine-hours 1,040Annual orders 60Annual inspection-hours 30

According to the activity-based costing system, the profit margin for product W58B is:

a) $3,668.60b) $5,975.60c) $5,515.40d) $19,418.40

20. [1 point]Using the following data for March, calculate the cost of goods manufactured:

Direct materials $29,000Direct labor $19,000Manufacturing overhead $27,000Beginning work in process inventory $11,000Ending work in process inventory $12,000

The cost of goods manufactured was:

a) $74,000b) $86,000c) $76,000d) $75,000

21. [1 point]

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A job order cost system uses a predetermined overhead rate based on estimated activity and estimated manufacturing overhead cost. At the end of the year, underapplied overhead might be explained bywhich of the following situations?

a)Actual activity Actual manufacturing overhead costs

Greater than estimated Greater than estimated

b)Actual activity Actual manufacturing overhead costs

Greater than estimated Less than estimated

c)Actual activity Actual manufacturing overhead costs

Less than estimated Greater than estimated

d)Actual activity Actual manufacturing overhead costs

Less than estimated Less than estimated

22. [1 point]Departmental overhead rates are generally preferred to plant-wide overhead rates when:

a) the activities of the various departments in the plant are not homogeneous.b) the activities of the various departments in the plant are homogeneous.c) most of the overhead costs are fixed.d) all departments in the plant are heavily automated.

23. [1 point]For a home improvement job, estimated direct materials are $4,000, direct labor is $5,500, and variable plus fixed manufacturing overhead costs are $7,400. A bid on this job, assuming absorption costingapproach and a 20% markup, would be:

a) $11,400b) $20,280c) $15,480d) $13,680

24. [1 point]A company manufactures three different product lines: Model X, Model Y and Model Z. Considerable market demand exists for all three models. Financial data per unit are below:

Model X Model Y Model Z

Selling price $50 $60 $70

Direct materials 6 6 6

Direct labor ($12 per hour) 12 12 24

Variable overhead costs ($4 per machine hour) 4 8 8

Fixed overhead costs 10 10 10

If there is excess capacity, which model is the most profitable to produce?

a) Model xb) Model yc) Model zd) Both models x and y

25. [1 point]A company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available:

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MonthlyFixed Cost

VariableCost PerUnit Sold

Sales commissions $0.75

Shipping $1.30

Advertising $30,000 $0.20

Executive salaries $25,000

Depreciation on office equipment $15,000

Other $7,000

All of these expenses (except depreciation) are paid in cash in the month they are incurred.

If the company has budgeted to sell 18,000 units in January, then the total budgeted variable selling and administrative expenses for January will be:

a) $13,500b) $23,400c) $37,900d) $40,500

26. [1 point]The following information pertains to a company's cost-volume-profit relationships:

Breakeven point in units sold 1,000Variable expenses per unit $500Total fixed expenses $150,000

How much will be contributed to net operating income by the 1,001st unit sold?

a) $650b) $500c) $150d) $0

27. [1 point]A company manufactures three different product lines: Model X, Model Y and Model Z. Considerable market demand exists for all three models. Financial data per unit are below:

Model X Model Y Model Z

Selling price $50 $60 $70

Direct materials 6 6 6

Direct labor ($12 per hour) 12 12 24

Variable overhead costs ($4 per machine hour) 4 8 8

Fixed overhead costs 10 10 10

Which model has the greatest contribution per unit?

a) Model xb) Model yc) Model zd) Both models x and y

28. [1 point]A company has received a request for a special order of 6,000 units of product Y45 for $13.70 each. Product Y45's unit product cost is $11.50, determined as follows:

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Product cost per unit:

Directmaterials $2.50

Directlabor 1.90

Variableoverhead 2.30

Fixedoverhead 4.80

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Direct materials and direct labor are variable costs. The special order would have no effect on the company's total fixed costs. The customer would like modifications made to product Y45that would increase the existing variable costs by $8.10 per unit and that would require an investment of $20,000 in special molds that would have no savage value. This special order wouldhave no effect on the company's other sales. The company has ample spare capacity for producing the special order. If the special order is accepted, the company's overall net operatingincome would increase (decrease) by:

a) ($26,600)b) $13,200c) ($55,400)d) ($21,300)

29. [1 point]If turnover is 1.45, net operating income is $5,000,000, sales is $35,000,000, ROI is:

a) 2.071%b) 20.71%c) 200.71%d) 10.15%

30. [1 point]In calculating the break-even point for a multi-product company, which of the following assumptions are commonly made?

I. Selling prices do not change as volume of each product changes.II. Variable expenses are constant per unit.

III. The sales mix is constant.

a) I and IIb) I and IIIc) II and IIId) I, II, and III

31. [1 point]Why are cashmere sweaters usually not sold in discount stores?

a) customers who buy cashmere sweaters typically have inelastic demandb) cashmere costs too much for discount retailers to buyc) the markup for cashmere sweaters is often very highd) all of the above

32. [1 point]A company is considering implementing an activity-based costing system with the following three activity cost pools:

Activity Cost Pool Total Activity

Fabrication 10,000 machine-hours

Order processing 800 orders

Other Not applicable

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The Other activity cost pool will be used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs:

Wages and salaries $320,000

Depreciation 220,000

Occupancy 120,000

Total $660,000

The distribution of resource consumption across activity cost pools is given below:

Activity Cost Pools

Fabrication Order Processing Other Total

Wages and salaries 20% 65% 15% 100%

Depreciation 15% 35% 50% 100%

Occupancy 5% 70% 25% 100%

The activity rate for the Fabrication activity cost pool is closest to:

a) $3.30 per machine-hourb) $13.20 per machine-hourc) $10.30 per machine-hourd) $8.80 per machine-hour

33. [1 point]The owner of a restaurant is contemplating investing in a new patio for outdoor dining. If net income for the patio is 15% of patio sales, $50,000 of average operating assets are used for the new patio, theminimum required return is 8%, and patio sales is $120,000, what is the residual income?

a) $18,000b) 36%c) $14,000d) 24%

34. [1 point]A company uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Last year, estimated manufacturing overhead cost was $300,000 based on an estimatedactivity level of 100,000 direct labor-hours. Actual overhead amounted to $325,000 with actual direct labor-hours totaling 110,000 for the year. How much was the overapplied or underapplied overhead?

a) $25,000 overappliedb) $25,000 underappliedc) $5,000 overappliedd) $5,000 underapplied

35. [1 point]A manufacturer wants to introduce a new product, for which the expected market price is $40. The company requires a 20% rate of return on investment on all new products. In order to produce and sell30,000 units each year, the company would have to make an investment of $850,000. The target cost per unit of product would be:

a) $16.50b) $23.50c) $28.33d) $34.33

36. [1 point]A company uses a predetermined overhead rate based on direct labor cost to apply manufacturing overhead to jobs. The predetermined overhead rates for the year are 200% for Department A and 50% for

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Department B. Job 123, started and completed during the year, was charged with the following costs:

Dept. A Dept. B

Direct materials $25,000 $5,000

Direct labor ? $30,000

Manufacturing overhead $40,000 ?

The total manufacturing costs associated with Job 123 should be:

a) $135,000b) $180,000c) $195,000d) $240,000

37. [1 point]For performance evaluation purposes, if budgeted fixed costs differ from actual fixed costs in a service department, this difference should be:

a) allocated both to operating departments and to other service departments on the basis of usage.b) allocated to operating departments only on the basis of usage.c) allocated to other service departments only on the basis of usage.d) retained in the service department itself.

38. [1 point]If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:

a) is a key aspect of the activity-based costing model.b) will systematically overcost high-volume products and undercost low-volume products.c) will systematically overcost low-volume products and undercost high-volume products.d) must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.

39. [1 point]A company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data given below:

Mirrors Windows

Total expected units produced 8,000 7,000

Total expected material moves 300 900

Expected direct labor-hours per unit 5 7

The total materials handling cost for the year is expected to be $38,448.00. If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost should beallocated to the windows? (Round off your answer to the nearest whole dollar.)

a) $18,752b) $19,224c) $22,428d) $28,836

40. [1 point]A company has two divisions, the Selling Division and the Buying Division. The Selling Division manufactures an intermediate product and then "sells" them to the Buying Division, which completes theproduct and sells the final product to retailers. The market price for the Buying Division to purchase one unit of the intermediate product is $20. Fixed costs assume 100,000 units.

Unit costs for the intermediate product of the Selling Division are: Direct materials $4 Direct labor $3 Variable overhead $2

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Division fixed costs $1Unit costs for the final product of the Buying Division (excluding the intermediate product) are: Direct materials $5 Direct labor $1 Variable overhead $1 Division fixed costs $9

Assume the transfer price for the intermediate product is 180% of full costs of the Selling Division and 100,000 units are produced and transferred to the Buying Division. The Selling Division's operatingincome is:

a) $800,000b) $900,000c) $1,280,000d) $1,800,000

41. [1 point]Last month the cost of goods sold of a merchandising company was $86,000. The company's beginning merchandise inventory was $20,000 and its ending merchandise inventory was $21,000. What wasthe total amount of the company's merchandise purchases for the month?

a) $86,000b) $127,000c) $87,000d) $85,000

42. [1 point]Which one of the following factors need NOT be considered when evaluating a make-or-buy decision?

a) the quality of the supplier's productb) the reliability of delivery schedulec) the savings from the alternative use of the production equipmentd) the book value of the production equipment

43. [1 point]Holding all other things constant, if fixed costs increase, the profit-maximizing price will:

a) increase.b) remain the same.c) decrease.d) The effect cannot be determined.

44. [1 point]A company currently operates two stores, Uptown and Midtown:

Last year's results Uptown Midtown

Sales revenues $300,000 $400,000

Variable costs (120,000) (140,000)

Contribution margin $180,000 $260,000

Store related fixed costs (100,000) (100,000)

Allocated common fixed costs (90,000) (120,000)

Operating income (loss) ($10,000) $40,000

The company is considering closing the Uptown store because of its sustained operating losses during the last two years. It is estimated that all of store related and 20% of common fixed costs allocated toUptown can be avoided if the Uptown store is closed. What is the amount of avoidable costs if the Uptown store is closed?

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a) $100,000.b) $190,000.c) $118,000.d) $238,000.

45. [1 point]Which of the following would not affect the break-even point?

a) number of units actually soldb) variable expense per unitc) total fixed expensesd) selling price per unit

46. [1 point]All the following are considered to be benefits of participative budgeting, except for:

a) Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization.b) The budget estimates are prepared by those directly involved in activities.c) When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.d) Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

47. [1 point]A company currently operates two stores, Uptown and Midtown:

Last year's results Uptown Midtown

Sales revenues $300,000 $400,000

Variable costs (120,000) (140,000)

Contribution margin $180,000 $260,000

Store related fixed costs (100,000) (100,000)

Allocated common fixed costs (90,000) (120,000)

Operating income (loss) ($10,000) $40,000

The company is considering closing the Uptown store because of its sustained operating losses during the last two years. It is estimated that all of store related and 20% of common fixed costs allocated toUptown can be avoided if the Uptown store is closed. What would be the effect on total operating income for last year if the Uptown store had been closed before Jan 1st?

a) it would increase by $40,000b) it would decrease by $62,000c) it would increase by $8,000.d) it would increase by $118,000.

48. [1 point]A company is in the process of preparing its Selling and Administrative Expense Budget for next year. The following budget data are available:

MonthlyFixed Cost

VariableCost PerUnit Sold

Sales commissions $0.75

Shipping $1.30

Advertising $30,000 $0.20

Executive salaries $25,000

Depreciation on office equipment $15,000

Other $7,000

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All of these expenses (except depreciation) are paid in cash in the month they are incurred.

If the budgeted cash disbursements for selling and administrative expenses for April total $116,000, then how many units does the company plan to sell in April?

a) 17,333 unitsb) 18,250 unitsc) 24,000 unitsd) 26,800 units

49. [1 point]Customer order processing is an example of a:

a) Unit-level activity.b) Batch-level activity.c) Product-level activity.d) Organization-sustaining activity.

50. [1 point]A is a fixed cost; B is a variable cost. During the current year the level of activity has decreased but is still within the relevant range. We would expect that:

a) The cost per unit of A has remained unchanged.b) The cost per unit of B has decreased.c) The cost per unit of A has decreased.d) The cost per unit of B has remained unchanged.

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