TCO 4) The three elements of the profit margin are: (Points : 4) Selling price per unit, variable cost per unit, and fixed cost per unit. Total revenues, total variable costs, and total fixed cost. Selling price per unit, variable cost per unit, and total fixed costs. Selling price per unit, total variable costs, and fixed cost per unit.
| 2. (TCO 4) Werth Company produces tie racks. The estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 units at a price of $20 per unit. How much is the break-even point in units? (Points : 4) 48,000 72,000 3,600 8,471 |
| 3. (TCO 4) Paula Corporation sells a single product at a price of $275 per unit. Variable cost per unit is $135 and fixed costs total $356,860. If sales are expected to be $825,000, what is Paulas margin of safety? (Points : 4) $468,140 $124,025 $700,975 $405,000 |
| 4. (TCO 5) Which of the following is treated differently in full costing than in variable costing? (Points : 4) Direct materials Fixed manufacturing overhead Direct labor Variable manufacturing overhead |
| 5. (TCO 5) Which of the following items appears on a variable costing income statement but not on a full costing income statement? (Points : 4) Sales Gross margin Net income Contribution margin |
6. (TCO 5) Peak Manufacturing produces snow blowers. The selling price per snow blower is $100. Costs involved in production are: Direct Material per unit | $20 | Direct Labor per unit | 12 | Variable manufacturing overhead per unit | 10 | Fixed manufacturing overhead per year | $148,500 | In addition, the company has fixed selling and administrative costs of $150,000 per year. During the year, Peak produces 45,000 snow blowers and sells 30,000 snow blowers. How much is net income using full costing? (Points : 4) $1,641,000 $1,590,000 $1,441,500 $1,491,000 |
| 7. (TCO 5) The cost objective is the (Points : 4) reason for allocating the cost. calculation based on budgeted amounts. product, service, or department that is to receive the allocation. maximum amount to be allocated to any single department. |
| 8. (TCO 6) The overriding concern in forming a cost pool is to ensure that (Points : 4) there are no variable costs in the cost pool. the total amount in the cost pool is less than the direct costs for the product. only costs that have been budgeted are included in the cost pool. the costs in the pool are homogeneous or similar. |
9. (TCO 6) AC Consulting Company has purchased a new $18,038 copier. This overhead cost will be shared by the purchasing, accounting, and information technology departments since those are the only departments which will be able to access the machine. The company has decided to allocate the cost based on the number of copies made by each department. Each department has estimated the number of copies which will be made over the life of the copier. Department | Copies | Purchasing | 250,000 | Accounting | 300,000 | Information Tech | 425,000 | If cost allocations are computed to four significant digits and the purchasing department makes 58,000 copies this year, how much overhead will be allocated to purchasing? (Points : 4) $4,185 $4,624 $77,750 $1,073 |
| 10. (TCO 7) A company is currently making a necessary component in house (the company is producing the component for its own use). The company has received an offer to buy the component from an outside supplier. A machine is being rented to make the component. If the company were to buy the component, the machine would no longer be rented. The rent on the machine, in relation to the decision to make or buy the component, is: (Points : 4) sunk and therefore not relevant. avoidable and therefore not relevant. avoidable and therefore relevant. unavoidable and therefore relevant. |
| 11. (TCO 7) BigByte Company has 12 obsolete computers that are carried in inventory at a cost of $13,200. If these computers are upgraded at a cost of $7,500, they could be sold for $15,300. Alternatively, the computers could be sold "as is" for $9,000. What is the net advantage or disadvantage of reworking the computers? (Points : 4) $6,300 advantage $1,200 disadvantage $5,400 disadvantage $3,000 advantage |
| 12. (TCO 7) YXZ Companys market for the Model 55 has changed significantly, and YXZ has had to drop the price per unit from $275 to $135. There are some units in the work in process inventory that have costs of $160 per unit associated with them. YXZ could sell these units in their current state for $100 each. It will cost YXZ $10 per unit to complete these units so that they can be sold for $135 each. Which of the following is the amount of sunk costs in this problem? (Points : 4) $160 per unit $10 per unit $125 per unit $100 per unit |
Describe a process costing system, including the types of companies that commonly use this system. How can process costing information be used in incremental analysis? (Points : 20) Process costing a large quantity of identical or similar products are mass produced auto assembly plants, hot dog manufacturing, any large mechanized production facility. It is mostly used in the production of items like beverages, food, nails and screws. These items are processed through individual processes where costs are applied to each batch of produced goods. Often times manufacturers carefully use process costing in streamlining their manufacturing process to ensure that each batch has production costs applied in similar amounts.
2. (TCO 7) Each year, ACE Engines surveys 7,600 former and prospective customers regarding satisfaction and brand awareness. For the current year, the company is considering outsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize results for $50,000. Robert Ace, the president of ACE Engines, believes that RBG will do a higher-quality job than his company has been doing, but is unwilling to spend more than $12,000 above current costs. The head of bookkeeping for ACE has prepared the following summary of costs related to the survey in the prior year. Mailing | $27,000 | Printing (done by Lester Print Shop) | 9,000 | | Salary of Pat Fisher, part-time employee who stuffed envelopes and summarized data when surveys were returned (130 x $16) | 2,080 | | Share of depreciation of computer and software used to track survey responses and summarize results | 1,200 | | Share of electricity/phone/etc. based on square feet of space occupied by Pat Fisher vs. entire company | 600 | Total | $39,880 | Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey as in the past. Will ACE accept the RBG offer? Why or why not? (Points : 25) |
