Question 1.1. (TCO 1) Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management? (Points : 5)

  Pricing and product-mix decisions         Cost reduction decisions         Design decisions         Discretionary decisions

Question 2.2. (TCO 1) Bristol Company produces a special spray nozzle.  The budgeted indirect total cost of inserting the spray nozzle is $200,000.  The budgeted number of nozzles to be inserted is 80,000.  What is the budgeted indirect cost allocation rate for this activity? (Points : 5)

  $3.00         $2.50         $2.00         $3.50

Question 3.3. (TCO 2) Fixed overhead costs include (Points : 5)

  the cost of sales commissions.         property taxes paid on plant facilities.         indirect materials.         energy costs.

Question 4.4. (TCO 2) Information pertaining to Brenton Corporation’s sales revenue is presented in the following table:

February              March               April

Cash Sales                    $160,000            $150,000         $120,000             Credit Sales                      300,000              400,000           280,000                Total Sales                   $460,000            $550,000          $400,000

Management estimates that 5% of credit sales are not collectible.  Of the credit sales that are collectible, 75% are collected in the month of sale and the remainder in the month following the sale.  Cost of purchases of inventory each month are 80% of the next month’s projected total sales.  All purchases of inventory are on account; 50% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton’s budgeted total cash payments in March for inventory purchases are

(Points : 5)

  $385,000.         $505,000.         $306,250.         $280,000.

Question 5.5. (TCO 2) Budgeting provides all of the following EXCEPT (Points : 5)

  a means to communicate the organization’s short-term goals to its members.         support for the management functions of planning and coordination.         a means to anticipate problems.         an ethical framework for decision making.

Question 6.6. (TCO 3) The cost components of an air conditioner include $35 for the compressor, $15 for the sheet-molded compound frame, and $100 per unit for assembly.  The factory machines-and-tools cost is $80,000.  The company expects to produce 1,500 air conditioners in the coming year.  What cost function best represents these costs? (Points : 5)

  y = 1500 + 126.5X         y = 1,500 + 55,000X         y = 80,000 + 150X         y = 55,000 + 126.50X

Question 7.7. (TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods? (Points : 5)

  Quantitative analysis method         Industrial engineering method         Account analysis method         Conference method

Question 8.8. (TCO 4) A computer system installed last year is an example of a(n) (Points : 5)

  avoidable cost.         differential cost.         relevant cost.         sunk cost.

Question 9.9. (TCO 5) The theory of constraints is used for cost analysis when (Points : 5)

  a manufacturing company produces multiple products and uses multiple manufacturing facilities and/or machines.         using a long-term time horizon.         operating costs are assumed fixed.         All of the above

Question 10.10. (TCO 5) Producing more nonbottleneck output (Points : 5)

  allows for the maximization of overall contribution.         creates less pressure for the bottleneck workstations.         creates more inventory and increases throughput contribution.         creates more inventory, but does not increase throughput contribution.

Question 11.11. (TCO 6) Byproducts and main products are differentiated by (Points : 5)

  number of units per processing period.         weight or volume of outputs per period.         the amount of sales value per unit.        None of the above

Question 12.12. (TCO 6) Which of the following is a disadvantage of the physical-measure method of allocating joint costs? (Points : 5)

  The measurement basis for each product may be different.         There is a need for a common denominator.         The physical measure may not reflect the product’s ability to generate revenues.         All of the above

Question 13.13. (TCO 7) Life-cycle budgeting is particularly important when (Points : 5)

  the development period for R&D is short and inexpensive.         there are significant nonproduction costs.         most costs are locked in during production.         a low percentage of costs are incurred before any revenues are received.

Question 14.14. (TCO 7) Each month, Haddon Company has $300,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (75% fixed).  Haddon’s monthly sales are $600,000.

The markup percentage on full cost to arrive at the target (existing) selling price is

(Points : 5)

  25%.         41%.         80%.         20%.

Question 15.15. (TCO 8) The costs used in cost-based transfer prices (Points : 5)

  are actual costs.         are budgeted costs.         can either be actual or budgeted costs.         are lower than the market-based transfer prices.

Question 16.16. (TCO 8) Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound.  Division A incurs costs of $0.80 per pound while Division B incurs additional costs of $3 per pound.  Which of the following formulas correctly reflects the company’s operating income per pound? (Points : 5)

  $5 – ($1.25 + $2.50) = $1.25         $5 – ($0.75 + $2.50) = $1.75         $5 – ($0.80 + $3) = $1.20         $5 – ($0.25 + $1.25 + $3.50) = 0

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