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1. Russell Co. produces three products — U, V, and W — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow
2. The Insurance Plus Company has two service departments — actuarial and premium rating, and two production departments — marketing and sales. The distribution of each service department's efforts to the other departments is shown below:
3. Marin Products produces three products — DBB-1, DBB-2, and DBB-3 from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Key information about Marin's production, sales, and costs follows.
4. A key ethical issue in cost allocation involves costing in an international context, because the choice of a cost allocation method can affect:
5. Hatchett Inc. produces joint products L, M, and N from a joint process. Information concerning a batch produced in May at a joint cost of $75,000 was as follows:
6. The mathematical technique that underlies the reciprocal cost allocation method is:
7. Russell Co. produces three products — U, V, and W — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow.
8. Hatchett Inc. produces joint products L, M, and N from a joint process. Information concerning a batch produced in May at a joint cost of $75,000 was as follows:
9. For the purposes of cost accumulation, which of the following are identifiable as different individual products before the split-off point?
10. The cost allocation method most widely used because of its accuracy and ability to provide a detailed level of analysis is:
11. In making decisions about whether to sell or further process joint products, allocation of common or joint costs is:
12. Hartwicke Manufacturing Company has two service departments — product design and engineering support, and two production departments — assembly and finishing. The distribution of each service department's efforts to the other departments is shown below:
13. The reciprocal method can be solved using the Excel function:
14. Russell Co. produces three products — U, V, and W — from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow
15. The direct method of departmental cost allocation ignores:
16. Technology and complexity issues often lead management to simplify and to:
17. Questions 44 and 45 are based on the maintenance expenses of a company, which are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures:
18. A retailer, in business for over 50 years, has developed the following regression model from the past 60 months of operating data: Monthly sales dollars = $50,000 + $4.70A + $30B - $1,000X. Where A = number of customers. B = advertising dollars per month. X = 1 if a winter month. X = 0 if other months. An appropriate interpretation of this model is that:
19. The identification of cost drivers is perhaps the most important step in developing the cost estimate because:
20. Accurate cost estimates are required by strategic management for all except:
21. Which of these job characteristics would result in the learning curve having less of an effect?
22. Burmer Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. Data regarding the machine hours and maintenance costs for the last year and the results of the regression analysis are as follows:
23. In least squares regression analysis, the cost to be estimated is the:
24. Jackson, Inc. is preparing a budget for the coming year and requires a breakdown of the cost of electrical power used in its factory into the fixed and variable elements. The following data on the cost of power used and direct labor hours worked are available for the last six months of this year:
25. Which of the following means that two or more independent variables are highly correlated with each other?
26. Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
27. Simple regression analysis involves the use of:
28. Sterling Glass Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
29. Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants are baked?
30. Data collected on the cost objects and cost drivers for cost estimation must be:
31. Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople.
32. OutlyTech Corp. expected to sell 24,000 telephone switches. Fixed costs were $12,144,000, unit sales price was $3,200, and unit variable costs were $1,440. OutlyTech's margin of safety ratio is:
33. The equation method and the contribution margin method:
34. Kelvin Co. produces and sells socks. Variable costs are $4 per pair, and fixed costs for the year total $90,000. The selling price is $6 per pair. The sales dollars required to make an after-tax profit of $15,000, given an income tax rate of 40 percent, are calculated to be
35. Kelvin Co. produces and sells socks. Variable costs are $4 per pair, and fixed costs for the year total $90,000. The selling price is $6 per pair. The sales units required to make an after-tax profit of $15,000, given an income tax rate of 40 percent, are:
36. CVP analysis with multiple products assumes that sales will continue at the same mix of products, expressed in either sales units or sales dollars. This assumption is essential, because a change in the product mix will probably change:
37. Cleaning Care Inc. expects to sell 10,000 mops. Fixed costs are $10,000, unit sales price is $12, and unit variable costs are $7. Cleaning Care's margin of safety in units is:
38. A relatively low margin of safety ratio for a product is usually an indication that the product:
39. Which of the following factors is not involved in studying cost/volume/profit relationships?
40. Cathy's Towels sells three items: bath towels, hand towels and washcloths in a 4:3:2 mix (a batch of 9 towels has 4 bath towels, 3 hand towels and 2 washcloths). Each bath towel sells for $10 and costs $4, each hand towel sells for $5 and costs $2; and each washcloth sells for $2.50 and costs $1. The shop's annual fixed expenses are $324,000, and the tax rate is 40%. How many bath towels must the firm sell at the breakeven point?
41. Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales units required to make an after-tax profit of $10,000, given an income tax rate of 20 percent, are calculated to be (round up to nearest whole unit:
42. Grant's Western Wear is a retailer of western hats located in Atlanta, Georgia. Although Grant's carries numerous styles of western hats, each hat has approximately the same price and invoice purchase cost, as shown below. Sales personnel receive large commissions to encourage them to be more aggressive in their sales efforts. Currently the economy of Atlanta is really humming, and sales growth at Grant's has been great. However, the business is very competitive, and Grant has relied on its knowledgeable and courteous staff to attract and retain customers, who otherwise might go to other western wear stores. Also, because of the rapid growth in sales, Grant is finding it more difficult to manage certain aspects of the business, such as restocking of inventory and hiring and training new salespeople.
43. The CVP model assumes that over the relevant range of activity:
44. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.
45. High operating leverage is a measure of the risk of change in profit a firm assumes when it has relatively:
46. Joint costs may be allocated in more than one way (e.g. weight versus resale value).
47. According to the study guide, even if managers properly determine how to allocate costs, they will not be able to properly estimate future costs.
48. Cost volume profit analysis can be used to find the breakeven point in dollars as well as in units.
49. Analyzing relevant costs is an important consideration for managers. Based on this premise, one could then surmise that Noah was given all of the relevant information necessary by God to build the ark.
50. Passages, such as James 4:13-17, discuss business and the pursuit of profits.
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