Borderbooks Company uses activity-based costing. The company produces soft and hard-cover books. The estimated costs and expected activity for each of the activity pools follow: Activity Estimated Expected Activity Cost Pool Cost Hard-Cover Soft-Cover Total Activity 1 $15,675 800 300 1,100 Activity 2 $11,900 500 200 700 Activity 3 $27,600 800 400 1,200 The activity center rate for Activity 3 is? Answer

4 points

Question 27

1. The difference in total costs between two alternatives is referred to as the?

   Answer

   		opportunity cost.
   		sunk cost.
   		direct cost.
   		incremental cost.

4 points

Question 28

1. What is the major difference between ABC and ABM?

   Answer

   		The goal of ABC is to accurately measure costs while the goal of ABM is to manage and control the activities which cause the costs.
   		There is no difference; ABC and ABM are two names for the same thing.
   		ABC focuses on control while ABM focuses on measurement.
   		ABC is used in managerial accounting while ABM is used in financial accounting.

4 points

Question 29

1. A company believes it can sell 10,000,000 units of its proposed new garage door opener at a price of $100 each. If the company desires to make a profit of 40% of selling price on the garage door opener, what is the target cost per opener?

   Answer

   		$60
   		$100
   		$140
   		$40

4 points

Question 30

1. Which of the following is not a criterion used to allocate fixed costs?

   Answer

   		relative benefits
   		ability to bear costs
   		feasible outcomes
   		equity

4 points

Question 31

1. The Flybynighter Company sells one product with a variable cost of $4 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand. If fixed costs are $100,000 and the following chart represents the demand at various prices:

   Units Sold 25,000 Price $9 Units Sold 35,000 Price $8 Units Sold 45,000 Price $7 Units Sold 55,000 Price $6

   What price should be charged in order to maximize profits?

   Answer

   		$7
   		$9
   		$6
   		$8

4 points

Question 32

1. Albright Company allocates the estimated $270,000 of its accounting department costs to its production and sales departments since the accounting department supports the other two departments particularly with regard to payroll and accounts payable functions. The cost will be allocated based on the number of employees in the production and sales departments. Information regarding costs and employees follows:

   The Accounting Department has 4 Employees The Production Department has 48 Employees The Sales Department has 12 Employees

   How much of the accounting department costs will be allocated to the production and sales departments, respectively?

   Answer

   		$67,500 $202,500
   		$216,000 $54,000
   		$202,500 $67,500
   		$54,000 $216,000

4 points

Question 33

1. Turner Company sells product X for $21 per unit. Unit product costs are as follows:

   Direct materials $4 Direct labor $5 Manufacturing overhead $10 Total $19

   A special order to purchase 20,000 units was recently received. There is enough capacity to fill the order and filling this order would not disrupt current operations. Turner Company would incur an additional $3 per unit for shipping costs. Forty percent of the manufacturing overhead costs are fixed and would be incurred no matter how many units are produced. In negotiating a price, the minimum acceptable selling price would be?

   Answer

4 points

Question 34

1. Which of the following is not a valid criticism of cost plus pricing?

   Answer

   		The firm's demand curve is ignored in setting the price and quantity.
   		The method is difficult.
   		The method employs circular reasoning.
   		It is difficult to determine the appropriate markup.

4 points

Question 35

1. SM Press Company manufactures books. The company is trying to decide whether to print the individual pages in-house (the current practice) or have a printing company perform this task. The cost of having the printing done by the printing company is relevant to this decision?

   Answer True False

3 points

Question 36

1. AFM Corporation, which manufactures bowling pins, receives a special order to manufacture 10,000 special pins that are painted various colors. The cost of direct materials per special pin would be $1.25, the direct labor cost per special pin would be $0.75, and variable overhead per special pin would be $0.40. In addition, though no additional fixed costs would be incurred for this special order, the typical fixed cost per pin manufactured is $1.00. If the customer is willing to pay $2.80 per pin, what would be the additional or incremental operating income or loss if the order is accepted?

   Answer

4 points

Question 37

1. How is the contribution margin calculated when utilizing variable costing?

   Answer

   		Sales less variable cost of goods sold, less variable selling and administrative expenses, less fixed cost of goods sold, less fixed selling and administrative expenses
   		Sales less cost of goods sold
   		Sales less variable cost of goods sold
   		Sales less variable cost of goods sold, less variable selling and administrative expenses

4 points

Question 38

1. During 20x8, Lyle Lanly, Inc. produced, among other products, 10,000 calculators, incurring the following unit costs: $5.05 in direct materials, $3.00 in direct labor, $2.00 in variable overhead, $4.00 in fixed overhead, $0.50 in variable administrative expenses, and $1.00 in fixed administrative expenses. An outsider had offered to produce the calculators for $12.00 each. Assuming that the factory space would have otherwise been idle, acceptance of the outside offer would have what affect on Lanly's profit?

   Answer

4 points

Question 39

1. Cost drivers in activity-based costing?

   Answer

   		are workers who influence cost control
   		are a grouping of individual costs whose total is allocated
   		are always related to production volume
   		often assign more costs to low-volume products than traditional allocation methods

4 points

Question 40

1. The Dropinsky Company's management wants to determine if Division Y should be eliminated. The following Segmented Income Statement data are available: Division X Division Y Division Z Total Sales $200 $300 $400 $900 Less variable costs 80 150 160 390 Contribution margin $120 $150 $240 $510 Less direct fixed costs 70 170 120 360 Segment margin $ 50 ($ 20) $120 $150 Less common fixed costs 90 Operating income $60 Assuming all direct fixed costs of Division Y are avoidable, what would be the change in operating income if Division Y were eliminated?

   Answer

4 points

Question 41

1. Palpatine Company sells X-wing Fighters and uses cost plus pricing. The Fighters have a variable cost per unit of $40.00. Palpatine has annual fixed costs of $500,000. If Palpatine can sell 50,000 Fighters and has a markup of 40% of total cost, what price will Palpatine charge?

   Answer