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Study Resources (Accounting)

21.Ausco Products provides the following information: Product X Product Y Product Z Estimated sales (units) 200 400 200 Estimated labour hours per unit 1 2 5 Contribution margin per unit $4 $8 $10 The total labour availability is limited to 1000 hours at these costs. Which products should Ausco Products produce? A. Product X only. B. Product Y only. C. Product Z only. D. Product X and Y. 22.Ausco Products provides the following information: Product X Product.
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PROBLEM 1.Harglo Construction is considering purchasing a radio antenna for broadcasting to service trucks over the airwaves, rather than using telephone lines. The antenna is expected to reduce cash operating costs by $2000 the first year, $2500 the second year, and $3000 the third year. The antenna will cost $6000, will.
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2.Hardware Products manufactures a wide variety of products in its plant located in Boston, Massachusetts. Listed below are some of the manufacturing and administrative activities identified by management. 1. Employees who will be working on a particular product line go through a week-long training program either when they are first hired or.
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SHORT ANSWER 1.Describe the accounting rate of return (ARR) and payback period methods of evaluating capital projects, including the formula and decision criterion associated with each method. 2.Describe the major disadvantages of using the accounting rate of return (ARR) and payback period methods as bases for evaluating capital projects. .
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31.Hamilton has budgeted total manufacturing overhead costs for the year as $125 000, based on 20 000 direct labour hours. The ratio of variable manufacturing overhead costs to fixed manufacturing overhead costs is 2:1. In a given month, 2000 direct labour hours are budgeted for production. How much overhead is.
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              CASE 1.In the US in the 1970s Lockheed Aircraft Corporation paid USD $12.5 million in ‘fees’ to All Nippon Airways (ANA) to secure the sale of 21 Tristar aircraft. Carl Kochian, the president of Lockheed at that time, defended his actions with reference to the following: ? That the figure involved was.
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MULTIPLE CHOICE 1.Knowledge of unit costs is necessary to companies for many reasons. Which of the following are uses of unit cost information? I.Valuation of inventories II.Controlling costs III.Setting selling prices A. I only B. I and II only C. I and III only D. I, II, and III 2.Management requires information about the cost of products for all of the following reasons.
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21.A positive net present value indicates that: A. the IRR is less than the discount rate. B. the cost of capital is greater than the present value of the future cash inflows. C. the projected return on the investment is expected to exceed the cost of capital plus the cost of the initial investment. D. the IRR is.
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21.The overhead absorption rate is determined by using: A. estimated costs. B. marginal costs. C. average costs. D. historical costs. 22.The application of overhead costs to products involves the use of: A. exact figures. B. fixed costs only. C. variable costs only. D. estimates. 23.If the allocated overhead using a predetermined overhead rate is less than the actual overhead costs, the difference is: A. expensed to the statement of comprehensive.
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TRUE/FALSE 1.Incremental or differential costs are the increases in costs or benefits between alternative opportunities available to an entity. 2.Sunk costs are costs that have been incurred, or whose payment cannot be avoided; they are irrelevant to future decisions. 3.Avoidable costs are those costs that will not be incurred if a particular decision.
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SHORT ANSWER 1.Why do entities budget? 2.What are the typical types of budgets of a manufacturing company? 3.What is a sales budget, and how is it generated? 4.What is the manufacturing company’s production budget, and how is it generated? 5.What is ‘responsibility accounting’ and how does it contribute to positive budgeting culture? .
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6.A company is considering two projects with the following cash flows: (Albright, 12, p.4) Year Project A Project B 0 ($526 677) ($74 809) 1 $180 000 $30 000 2 $180 000 $30 000 3 $180 000 $30 000 4 $180 000 $30 000 5 $180 000 -0- Present value of $1 to be received after N periods: N Periods Interest Rate Period 1 Period 2 Period 3 Period 4 Period 5 19% 0.8403 0.7062 0.5934 0.4987 0.4190 20% 0.8333 0.6944 0.5787 0.4823 0.4019 21% 0.8264 0.6830 0.5645 0.4665 0.3855 22% 0.8197 0.6719 0.5507 0.4514 0.3700 Present value of an annuity of $1 for.
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PROBLEM 1.Projected Profit   A company can determine its projected profit by using the following equation:           profit = total income – (total fixed costs + total variable costs) Based on market research, CSO Corporation feels its product will sell for $200 / unit. At that price, CSO can sell 150 units per month. Currently,.
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TRUE/FALSE 1.‘Budgetary slack’ can be referred to as dysfunctional behaviour where managers deliberately understate or overstate elements of a budget such as sales or costs in order to achieve budget. 2.Formulating guidelines for overall activity levels and policies on performance criteria, and communicating this information to the preparers of budgets, are all.
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11.The following information relates to the production cost of product PX 244. Selling price $55 Raw materials $12 Labour $18 Fixed overheads $16 What is the contribution per unit of PX 244? A. $9 B. $25 C. $37 D. $43 12.Consider the following information. Selling Labour Advertising Machinery Sales price cost cost costs Product X 12 000 units $5 per unit $3 per unit $400 $5000 Product Y 16 000 units $4 per unit $3.50 per unit $200 $6200 Which of the following is true? Product X: A. contributes more to profit.
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11.Period costs are: A. costs that are unlikely to represent future benefits. B. costs that are recognised in the accounting period in which they are incurred. C. costs for which the future benefits cannot be reliably measured. D. all of the above are period costs. 12.Which of the following are not production costs? A. Direct materials B. Indirect labour C. Selling expenses D. Indirect materials 13.Costs directly associated.
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21.All credit customers paid the amounts owing by the due date. How much credit sales did RTU Ltd have for July? A.$2050 B.$5000 C.$2950 D.$6540 22.How much total cash did RTU receive in August? A.$5450 B.$2600 C.$2050 D.$5290 23.All customers took the maximum allowed time to pay. All credit customers paid the amounts owing by the due date. How much.
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4.The Moony Company, which makes and sells two products, boys’ and girls’ bikes, has $30 000 to spend on advertising. The company has estimated that using the $30 000 to advertise boys’ bikes would increase sales of that product by 1000 units. Moony is uncertain, however, how many additional girls’.
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SHORT ANSWER 1.Breakeven point analysis is one of the most common uses of cost-volume-profit analysis. What is the breakeven point and why is it useful for managers to know what it is for their company? 2.List and explain two assumptions about costs and activities that are made in cost-volume-profit analysis. 3.Explain how the.
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5.Hartly Company manufactures three products: A, B, and C. A B C Selling price $180 $270 $240 Less variable expenses: Direct materials   24   72   32 Direct labour   97   86 140 Variable overhead    5    4    8 Total variable expenses 126 162 180 Contribution margin $ 54 $108 $ 60 The same raw material is used in all three products. The company has only 5000 kilograms of material on.
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MULTIPLE CHOICE 1.Sunk costs are: A. costs of replacing an item today. B. costs incurred and no longer recoverable. C. costs of an item discounted at an appropriate rate. D. equivalent to the historical cost of an item. 2.The selection of a special order will improve net profit when the order’s income exceeds: A. the direct labour cost of the order. B. the replacement.
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31.An entity is contemplating investing in a long-term project. A comparison of two mutually exclusive projects reveals that Project A has an initial outlay of $10 000 with cash inflows of $3400 for years 1–5; Project B has a cash outlay of $4500 with cash inflows of $1400 for years.
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11.Which of the following people are not involved in preparing a budget? A.The board of directors B.Shareholders C.Sales directors D.Production managers 12.Responsibility accounting reports are used: A.to determine which manager should be blamed if actual results do not comply with budgeted expectations. B.to evaluate a department manager’s effectiveness in generating revenues or controlling expenses. C.to determine if the.
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MULTIPLE CHOICE 1.Which of the following is not a reason for implementing a budget? A.For planning purposes B.As a form of communication C.To assist in preparing a balance sheet D.For coordinating functions 2.A detailed plan that describes the use of financial and operating resources over a specific period of time in the future is a(n): A.business plan. B.budget. C.statement.
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31.Which of the following statements is not true of absorption costing? A. When sales equal production, absorption costing yields the same profit as variable costing. B. When production exceeds sales, absorption costing shows a lower profit than variable costing does. C. When sales exceed production, absorption costing shows a lower profit than variable costing does. D. Absorption costing.
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21.On a break-even graph, the break-even point is the point on the graph where the: A.revenue line crosses the fixed-cost line. B.revenue line crosses the line that represents fixed costs plus variable costs. C.revenue line crosses the contribution margin line. D.total cost line crosses the contribution margin line. 22.The dollar value that is available to.
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3.Manufacturing costs flow through an accounting system as products physically move through a factory. (a) Describe the movement of costs from raw materials to costs of goods sold in relation to the physical movement through the factors. (b) Explain how manufacturing costs can sometimes be classified as assets rather than expenses. 4.Your friend, Bumble Beasley,.
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2.The Multiproducts Company currently purchases a component for $30 each. The company has excess capacity and is considering the possibility of making the component. The Cost Accounting Department estimates that the following costs would be incurred to make each unit of the component: Direct materials   $8 Direct labour   10 Variable overhead    8 Total manufacturing.
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MULTIPLE CHOICE 1.In which of the following situations would it not be useful to apply the concepts and techniques used in capital investment decisions? A. A company is considering the purchase of a new machine that would reduce the cost of direct labour in the production process. B. A company is comparing the profitability and.
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SHORT ANSWER 1.In a manufacturing operation, costs can be divided into product costs and period expenses. (a) Explain the difference between product costs and period expenses. (b) Give two examples of costs classified as product costs. (c) Give two examples of costs classified as period expenses. 2.How is the variable cost approach used in managerial.
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TRUE/FALSE 1.The accounting rate of return (ARR) is a traditional method of project evaluation, which involves dividing either the average net profit by the average book value of the investment, or the average net profit by the total initial investment value. 2.The payback period is a method used to assist in making.
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TRUE/FALSE 1.Cost-volume-profit (CVP) analysis is a technique that examines the interrelationship between cost, volume and profit at constant activity levels. 2.A firm sells a product for $250. Variable costs are $100 per unit and total fixed costs are $120 000. The break-even point will be 800 units. 3.To calculate the break-even point, that.
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PROBLEM 1.Southern Mills is a textile manufacturing company in eastern Tennessee. Every year the company prepares a complete set of budgets. The budgeting process begins with information supplied by the Sales and Marketing department. The balance in Accounts Receivable at the beginning of the year was $900 000. The marketing department has predicted.
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3.For many years, Condor Company has produced a small part that it uses in the production of its standard line of equipment. The company’s cost of producing one part, based on a production level of 50 000 parts per year, is: Cost Per Part Direct materials $8.00 Direct labour   5.00 Variable overhead  10.00 Fixed overhead  12.00   Total $35.00 An outside supplier has offered.
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PROBLEM 1.The Transporter Company produces material-handling equipment for use in commercial manufacturing. As part of its operations, Transporter has three distinct product lines: belts, conveyors, and elevators. The company is currently considering the elimination of the belt product line. The belt line’s sales average $850 000 annually. Annual variable manufacturing costs.
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2.Southern Mills is a textile manufacturing company in eastern Tennessee. Every year the company prepares a complete set of budgets. The budgeting process begins with information supplied by the Sales and Marketing department. The balance in inventory at the beginning of the year was 500 000 square yards of fabric. The company.
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3.Southern Mills is a textile manufacturing company in eastern Tennessee. Every year the company prepares a complete set of budgets. The budgeting process begins with information supplied by the Sales and Marketing department. Variable manufacturing costs, for which direct labour hours is the cost driver, are expected to be $2 120 800. Fixed.
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MULTIPLE CHOICE 1.Under the assumptions used in cost-volume-profit analysis, as volume increases: A.fixed costs increase in proportion to the increase in volume. B.variable costs per unit remain the same. C.fixed costs per unit remain the same. D.variable costs per unit increase in proportion to the increase in volume. 2.All of the following are assumptions made in.
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11.Ridge NL is considering investing in a new project. Given the following information, which project would Ridge choose if a maximum payback period of 5.8 years is set? Project A Project B Initial investment $160 000 $180 000 Cash flows Year 1    25 000    25 000 Year 2    25 000    30 000 Year 3    25 000    35 000 Year 4   .
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