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Budgeting and cost management test 2

1. 1- Describe Limitations of the learning curve analysis. 2- Identify Advantages and disadvantages of ABM:
Analyzing the behavior of competitors. distance learning , Forecasting long-term demand. , Avoiding industry overcapacity,
2. The managers of Rochester Manufacturing are discussing ways to allocate the cost of service departments, such as Quality Control and Maintenance, to the production departments. To aid them in this discussion, the controller has provided the following information Quality Control Maintenance Machining Assembly Total Budgeted overhead costs before allocation $350,000 $200,000 $400,000 $300,000 $1,250,000 Budgeted machine hours -- -- 50,000 -- 50,000 Budgeted direct labor hours -- -- -- 25,000 25,000 Budgeted hours of service: Quality Control -- 7,000 21,000 7,000 35,000 Budgeted hours of service: Maintenance 10,000 -- 18,000 12,000 40,000 If Rochester Manufacturing uses the step-down method of allocating service costs beginning with quality control, the maintenance costs allocated to the assembly department would be  
30.72, 60 , 23.04 matching excercise , 23.63,
3. In developing the budget for the next year, which one of the following approaches would most likely result in a successful budget with the greatest amount of positive motivationand goal congruence?
30,600 pounds., 38,200 pounds. . , 43,200 pounds, 114,600 pounds,
4. Tucariz Company processes Duo into two joint products, Big and Mini. Duo is purchased in 1,000 gallon drums for $2,000. Processing costs are $3,000 to process the 1,000 gallons of Duo into 800 gallons of Big and 200 gallons of Mini. The selling price is $9 per gallon for Big and $4 per gallon for Mini. If the sales value at splitoff method is used to allocate joint costs to the final products, the per gallon cost (rounded to the nearest cent) of producing Big is
Permit the divisional manager to develop the goal for the division that in themanager’s view will generate the greatest amount of profits., Have senior management develop the overall goals and permit the divisionalmanager to determine how these goals will be met., Have the divisional and senior management jointly develop goals and objectiveswhile constructing the corporation’s overall plan of operation., Have the divisional and senior management jointly develop goals and thedivisional manager develop the implementation plan.,
5. A company has the following budget formula for annual electricity expense in its shop: Expense = $7,200 %2b (Units produced × $0.60) In practice, items such as wood screws and glue used in the production of school desks and chairs would most likely be classified as
flexible budgeting., linear programming., linear regression., variable costing.,
6. Consider the following situation for Weisman Corporation for the prior year.  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted per unit revenues and costs were as follows. Per Unit Sales price $100 Direct materials 30 Direct labor 20 Variable manufacturing costs 10 Fixed manufacturing costs 5 Variable selling costs 12 Fixed selling costs ($3,600 total) 4 Fixed administrative costs ($1,800 total) 2 The operating income for Weisman for the prior year using absorptio Consider the following situation for Weisman Corporation for the prior year.  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted per unit revenues and costs were as follows. Per Unit Sales price $100 Direct materials 30 Direct labor 20 Variable manufacturing costs 10 Fixed manufacturing costs 5 Variable selling costs 12 Fixed selling costs ($3,600 total) 4 Fixed administrative costs ($1,800 total) 2 The operating income for Weisman for the prior year using absorptioConsider the following situation for Weisman Corporation for the prior year.  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted per unit revenues and costs were as follows. Per Unit Sales price $100 Direct materials 30 Direct labor 20 Variable manufacturing costs 10 Fixed manufacturing costs 5 Variable selling costs 12 Fixed selling costs ($3,600 total) 4 Fixed administrative costs ($1,800 total) 2 The operating income for Weisman for the prior year using absorptioConsider the following situation for Weisman Corporation for the prior year.  The company produced 1,000 units and sold 900 units, both as budgeted.  There were no beginning or ending work-in-process inventories and no beginning finished goods inventory.  Budgeted and actual fixed costs were equal, all variable manufacturing costs are affected by volume of production only, and all variable selling costs are affected by sales volume only.  Budgeted per unit revenues and costs were as follows. Per Unit Sales price $100 Direct materials 30 Direct labor 20 Variable manufacturing costs 10 Fixed manufacturing costs 5 Variable selling costs 12 Fixed selling costs ($3,600 total) 4 Fixed administrative costs ($1,800 total) 2 The operating income for Weisman for the prior year using absorption costing was
A significant reduction in factory overheads, which are a component of fixedcosts., Renegotiation of the union contract calling for much higher wage rates. online learning games , A large drop in material costs, as a result of purchasing the material from aforeign source. teaching , A significant change in labor productivity.,
7. A company has accumulated data for the last 24 months in order to determine if there is an independent variable that could be used to estimate shipping costs. Three possible independent variables being considered are packages shipped, miles shipped, and pounds shipped. The quantitative technique that should be used to determine whether any of these independent variables might provide a good estimate for shipping costs is
5,120 hours., 6,400 hours., 8,000 hours, 10,000 hours,
8. Aerosub Inc. has developed a new product for spacecraft that includes the manufacturing of a complex part. The manufacturing of this part requires a high degree of technical skill. Management believes there is a good opportunity for its technical force to learn and improve as they become accustomed to the production process. The production of the first unit requires 10,000 direct labor hours. If an 80%25 learning curve is used and eight units are produced, the cumulative average direct labor hours required per unit of the product will be
$13,600, $14,200, $15,300, $15,840.,
9. he Jung Corporation’s budget calls for the following production: Qtr 1 -- 45,000 units Qtr 2 -- 38,000 units Qtr 3 -- 34,000 units Qtr 4 -- 48,000 units Each unit of product requires three pounds of direct material. The company’s policy is to begin each quarter with an inventory of direct materials equal to 30%25 of that quarter’s direct material requirements. Budgeted direct materials purchases for the third quarter would be
$5.63 per gallon., $5.00 per gallon., $4.50 per gallon., $3.38 per gallon.,
10. When considering normal and abnormal spoilage, which one of the following is theoretically the best accounting method for spoilage in a process-costing system?
$577,500., $600,000., $645,000., $660,000.,
11. Data regarding Rombus Company%27s budget are shown below. Planned sales 4,000 units Material cost $2.50 per pound Direct labor 3 hours per unit Direct labor rate $7 per hour Finished goods beginning inventory 900 units Finished goods ending inventory 600 units Direct materials beginning inventory 4,300 units Direct materials ending inventory 4,500 units Materials used per unit 6 pounds Rombus Company%27s production budget will show total units to be produced of
$3.51., $3.88., $3.99., $4.00.,
12. What is the key strategic issue when a firm is considering capacity expansion?
Both normal and abnormal spoilage cost should be charged to a separate expenseaccount., Normal spoilage cost should be charged to good units and abnormal spoilage costshould be charged to a separate expense account., Both normal and abnormal spoilage costs should be charged to good units., Normal spoilage costs should be charged to a separate expense account andabnormal spoilage cost should be charged to good units.,
13. Mack Inc. uses a weighted-average process costing system. Direct materials and conversion costs are incurred evenly during the production process. During the month of October, the following costs were incurred. Direct materials $39,700 Conversion costs 70,000 The work-in-process inventory as of October 1 consisted of 5,000 units, valued at $4,300, that were 20%25 complete. During October, 27,000 units were transferred out. Inventory as of October 31 consisted of 3,000 units that were 50%25 complete. The weighted-average inventory cost per unit completed in October was
65,000 units., 70,000 units., 85,000 units., 90,000 units.,
14. Streeter Company produces microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter usually maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. However, due to a work stoppage, the finished goods inventory at the end of the first quarter is 8,000 units less than it should be. How many units should Streeter produce in the second quarter?
Plant cafeteria., Machine setups., Material handling., Robotics painting.,
15. Colt Company uses a weighted-average process cost system to account for the cost of producing a chemical compound. As part of production, Material B is added when the goods are 80%25 complete. Beginning work-in-process inventory for the current month was 20,000 units, 90%25 complete. During the month, 70,000 units were started in process, and 65,000 units were completed. There were no lost or spoiled units. If the ending inventory was 60%25 complete, the total equivalent units for Material B for the month was
direct labor., factory overhead. ESL , direct materials., period costs.,
16. Dawson Manufacturing developed the following multiple regression equation, utilizing many years of data, and uses it to model, or estimate, the cost of its product. Cost = FC %2b a*L %2b b*M Where: FC = fixed costs L = labor rate per hour M = material cost per pound Which one of the following changes would have the greatest impact on invalidating the results of this model?
3,700., 4,000., 4,300, 4,600.,
17. Donehart Corporation produces agricultural vehicles. Most of the component parts for these vehicles are subcontracted to reliable vendors. The final assembly of all vehicles is accomplished at Donehart’s plant. Donehart’s Engineering Department has developed a new fuel injection system that can be produced in-house because of the availability of production capacity. The first production run of the new fuel injection system has already been completed in-house. This 80-unit production run took 60 direct labor hours per unit to produce based on the cumulative average labor hours per fuel injection unit. Donehart has experienced an 80%25 learning curve with similar products, and this experience indicates that learning tends to cease by the time 640 systems are produced. Donehart’s direct labor cost (including employee benefits) is $18 per direct labor hour. Donehart’s management must decide whether to continue producing the fuel injection system or to subcontract the work. Donehart’s purchasing agent has received a proposal from Midland, Inc., a company specializing in fuel injection systems. From past contracts, Midland has proven to be efficient and reliable. The terms of Midland’s proposal are outlined below. -Donehart must supply all materials required for the fuel injection system units.-The first 80 units produced by Midland will require direct labor input at the rate of 56 hours per unit. Current direct labor cost is $20 per hour .-The direct labor cost charged to Donehart will be the hourly rate in effect at the time the work is performed. Midland is currently negotiating its labor contract, which includes a 4%25 increase in direct labor cost and should be applicable when Donehart signs the contract .-A learning curve factor of 75%25 will be applied through the first 640 units produced, and all benefits derived from the learning factor will accrue to Donehart .-Donehart must pay the actual labor cost incurred plus a 5%25 margin. If Donehart manufactures the units in-house, what is the average labor hours per unit after manufacturing 640 units?
75,000 units., 78,000 units., 80,000 units., 86,000 units.,
18. Country Ovens is a family restaurant chain. Due to an unexpected road construction project, traffic passing by the Country Ovens restaurant in Newtown has significantly increased. As a result, restaurant volume has similarly increased well beyond the level expected. Which type of budget would be most appropriate in helping the restaurant manager plan for restaurant labor costs?
Zero-based budget., . Rolling budget., Activity-based budget., Flexible budget.,
19. When using activity-based costing techniques, which one of the following departmental activities would be expected to use machine hours as a cost driver to allocate overhead costs to production?
Advantages: - Uses continues improvement to maintain the firm’s competitive advantage. - Allocates more resources to activities, products and customers that add more value, strategically redirecting the management focus. - Eliminate non-value added activities. - Measures process effectiveness and identifies areas to reduce costs or increase customer value. - Works well with JIT Process. - Ties Performance management to ABC to provide consistent inventories for using ABC. Disadvantages: - Changin, , ,