1. Determine the following information using absorption costing and variable costing: Absorption costing a. Manufacturing cost _______________ b. Per-unit cost _______________ c. Cost of ending inventory _______________ Variable costing a. Manufacturing cost _______________ b. Per-unit cost _______________ c. Cost of ending inventory _______________ Basic facts: Direct materials $1,000 Direct labor $2,000 Variable overhead $1,500 Fixed overhead $1,000 Units produced 100 Units sold 80

No beginning inventory

2. What is the prime cost per unit and conversion cost per unit: a. Prime cost _______________ b. Conversion cost _______________

Basic facts: Direct material $1,000 Direct labor $500 Overhead $200 Units produced 50

3. Determine the breakeven point for both total sales and units: a. Sales _______________ b. Units _______________

Basic facts:

Fixed overhead $20,000 Contribution margin 20% Price per unit $10

4. Calculate the contribution margin to demonstrate the impact of changes in higher leverage and lower leverage product changes:

a. Higher leverage contribution margin - Lower sales volume _______________ - Higher sales volume _______________ b. Lower leverage contribution margin - Lower sales volume _______________ - Higher sales volume _______________ Basic facts: Higher leverage - Sales $200 and $400 - Variable expense 25% - Fixed expenses $40 Lower leverage - Sales $200 and $400 - Variable expense 50% - Fixed expenses $40

5. Determine the change in contribution margin as a result of a change in sales mix for the following: a. Base case _______________ b. Favorable mix change ______________ c. Unfavorable mix change _______________ Basic facts: - Sales price per unit in all three cases $10 - Contribution margin: Product A 20%, Product B 30%, Product C 40% and Product D 50% - Sales units for base case 25 units for all four products - Sales units for favorable mix change: Product A 10 units, Product B 20 units, Product C 30 units and Product D 40 units - Sales units for unfavorable mix change: Product A 40 units, Product B 30 units, Product C 20 units and Product D 10 units

6. Determine cost of goods sold: _______________ Basic facts: Beginning finished goods inventory $3,000 Ending finished goods inventory $6,000 Direct material $15,000 Direct labor $10,000 Overhead $5,000 7. What is the contribution margin % and gross margin %: Contribution margin % _____________ Gross margin % ______________ Basis facts: Sales $80 Direct material $28 Direct labor $12 Overhead $10 indirect and $10 direct SG&A expense $12 indirect $4 direct

8. Determine the cost and cash impact of keeping or replacing Machine X: Keep Cost _____________ Cash ______________ Replace Cost ____________ Cash _____________ Basic facts: - Original purchase price for Machine X = $20,000 - Machine X has a 10 year life and straight line depreciation, or $2,000 depreciation per year - Book value after year 6: $20,000-$12,000=$8,000 - Loss on disposal of machine X $3,000 - Replacement machine: $16,000 acquisition cost Annual cash operating cost: Machine X $40,000 and Replacement Machine $24,000 9. What is the purchase price variance and material usage variance: Purchase price variance ______________ Material usage variance ______________

Basic facts: - 100 pounds - Standard price $2.00 per pound - Actual price $1.75 per pound - Cost $2.00 per pound - Standard usage 500 pounds - Actual usage 575 pounds

10. What is the labor rate variance and labor efficiency variance: Labor rate variance ______________ Labor efficiency variance ______________ Basic facts: - Standard hours 175 - Actual hours 200 - Standard labor rate $20 per hour - Actual labor rate $15 per hour

11. What is the spending variance: _______________ Basic facts: Budgeted expenditures $30,000 Actual expenditures $35,000 12. What is the under applied overhead absorption variance: _______________ Basic data: Standard units 500 Actual units 400 Standard overhead per unit $10

13. Calculate days DSO, DIOH and DPO on hand based on the following information: DSO _______________ DIOH _______________ DPO _______________

Basic facts annual (first year of operation): - Sales $365,000 - Accounts receivable at year end $60,000 - Cost of sales $182,500 - Inventory at year end $25,000 - Accounts payable at year end $22,500

14. What is the cash conversion cycle based on the data in question 13: _______________

15. If you add 5 days to the DSO, DIOH, and DPO based on the data in question 13 and the standard CCC is as calculated in question 13 what is the CCC $ variance: ______________

16. Name three key success factors related to management control systems and responsibility: _______________ _______________

_______________ 17. Goal congruence is achieved when _____________, working in their own perceived best interest, make decisions that help meet the overall goals of the organization.

18. What are the three types of responsibility centers: _______________ _______________

_______________ 19. How many organizations have implemented ISO 9001 and in how many countries: Organizations ______________

Countries _______________

20. Delegation of freedom to make decisions is called: _____________ 21. In a decentralized organization first-level managers generally have the best information concerning local conditions: True _______________

False ______________

22. For decentralization to work, autonomy is not necessary: True ________________ False ________________

23. The most common profitability measures include: _____________ _____________

_____________

_____________ 24. What is the formula for EVA: ____________________________ 25. The price that one segment charges another segment of the same organization for a product or service is known as a: _________________ 26. What is the formula for a transfer price: __________________________

27. What are two attributes of capital assets: _______________ _______________ 28. CIP is reduced in value when an asset is: ______________

29. When does a depreciation charge start for a fixed asset: ______________

30. What is the benefit of accelerated depreciation: _______________

31. What is the objective of discounted-cash-flow models: ______________

32. What is the net present value: _____________ Basic facts: - Original investment $10,000 - Useful life 4 years - Annual income generated from investment (cash inflow) $2,500 - Minimum desired rate of return 10%

- NPV factor by year: 1 .9091, 2 .8264, 3 .7513, and 4 .6830

33. IRR determines the discount rate at which the NPV equals: _______________ _______________

34. Sensitivity analysis shows the __________________________ that would occur if financial projections differ from those expected.

35. What are the three types of cash flows that should be considered when relevant cash flows are arrayed: _______________ _______________ _______________

36. Cost of capital is the Companys: _______________________________

37. What is the Companys cost of capital: ______________ Basic facts: - Expected equity return 12% - Cost of debt 6% - Companys capital structure 60% equity and 40% debt

38. What is the payback period: _____________ Basic facts: - $25,000 capital expenditure - $10,000 annual cash saving or generation

39. What are the four types of typical cost objectives: _______________ _______________ _______________ _______________

40. What are two popular methods for allocating service costs: _______________ _______________

41. When are by-product cost identified: ________________

42. How is overhead (based on machine hours) applied to a particular product: ____________________________ 43. What is the applied overhead: ____________ Basic facts: - 100 direct labor hours - Overhead rate per direct labor hour $5.00 44. _______________ costing includes fixed overhead in the cost of products. 45. _______________ costing excludes fixed overhead from the cost of products. 46. Which of the two costing methods in questions 43 and 44 is based on GAAP requirements: _______________

47. Process costing is used when large numbers of nearly: ____________________________ 48. Job-order costing allocates costs to products that are identified by individual: _______________________________

49. Service industries typically use process costing: True _______________ False _______________ 50. Organizations using JIT production systems usually have large inventories: True _______________ False _______________