1. Which of the following quality costs incurred by Everis Ltd., a company which manufactures and sells laptops, is classified as internal failure cost?

A.

Contribution margin forgone on lost future laptop sales.

B.

Cost of quality training programs.

C.

Costs of rework on faulty laptops.

D.

Cost of replacement laptops provided under warranty.

2. Jane Maxwell is a financial planner at Trifle Consulting. Jane's annual salary (including on-costs) is $100 000. It is estimated she works 37 hours a week and 45 weeks per year (the other weeks relate to annual leave and public holidays). She also spends 100 hours a year on non-client related work, including administrative duties (30 hours), attending training (60 hours) and idle time (10 hours). To cover both overhead costs and profit, Trifle Consulting requires a margin of 30 per cent of labour cost when calculating billable rate.

What is Jane's chargeout rate per billable hour (rounded to nearest dollar)?

A.

$83

B.

$64

C.

$78

D.

$60

3. Cofission Electronics make small electronic parts. The management accountant at Cofission, Jasmine Vake, decides to implement an activity- based costing (ABC) system. She lists the following points to support her decision:

i. The recent cost report shows that the ratio of prime costs to manufacturing overhead cost is approximately 1:3.

ii. Cofission is a small company.

iii. Cofission has three product lines: basic parts (parts that are common to many products and many suppliers), customised parts (electronic parts that are highly customised to very specialised electric motors), prototypes (where Cofission Electronics need to design as well as manufacture these specialised electronic parts).

iv. Cofission Electronics has recently implemented a flexible manufacturing system; this practically eliminates any setup costs; with this system, product customisation takes very little additional time.

You are not convinced that all of the above points support Jasmine's decision. Which of the above points contradict Jasmine's decision?

A.

ii and iv

B.

ii

C.

i and ii

D.

i, ii and iv

4. Everis Ltd. manufactures and sells mini laptops has faced tough competition from other manufacturers in the market. The market price of mini laptops with similar specifications is $600. Assume Everis wants to make a profit of $120 on each mini laptop sold. What is the target cost for the mini laptop?

A.

$720

B.

$600

C.

$480

D.

$360

5. Twista Manufacturing has the following activities and activity costs per year: Machining ($20 000); Forklifting ($10 000); machine setup ($32 000) and quality inspection ($40 000). The operation starts with setting up the machines; each batch of products requires a different setup. This is followed by machining, where the cost of machining varies directly with the number of machine hours. Forklifts are used to move the work in progress around. Because quality is important, an inspection is carried out for each batch of products.

The following information is also available:

• Number of machine hours per year: 20 000 machine hours
• Number of lifts moves per year: 500 moves
• Number of batches a year: 4000 batches
• Each year, Twista Manufacturing produces 5000 units of Product X. These units of Product X require 5000 machine hours, 120 moves and 500 batches to produce. The direct materials and direct labour together cost $15 per unit of Product X.

Which of the following activities should be grouped together in the same activity cost pool?

A.

Machining and forklifting.

B.

Machining and machine set up.

C.

Forklifting and quality inspection.

D.

Machine set up and quality inspection.