ACT 5060 (Midterm Exam) Summer 2015

ACT 5060 (Midterm Exam) Summer 2015

1.      According to Michael Porter, which of the following is an example of product or service differentiation as a business strategy?

[removed]		A regional beer brewer that caters to local tastes.
[removed]		An automobile manufacturer that focuses on the rapid introduction of technological change in new automobile design.
[removed]		An online bookseller utilizing efficient scale facilities and overhead cost control.
[removed]		A manufacturer focused on designing and building corporate jet aircraft.

 

2.      _______________ are specific units of work performed to serve customer needs that consume costly resources.

[removed]		Activity cost drivers
[removed]		Customer cost drivers
[removed]		Organizational cost drivers
[removed]		Structural cost drivers

3.      Which of the following is an assumption used in cost-volume-profit analysis?

[removed]		All costs are classified as fixed or variable
[removed]		The total cost function is linear
[removed]		The total revenue function is linear
[removed]		All of the above

4.      Under variable costing, which of the following costs are assigned to inventory?

[removed]		Fixed manufacturing costs
[removed]		Variable non-manufacturing costs
[removed]		Variable manufacturing costs
[removed]		None of the above

5.      Brahtz Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:

 

 

During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.

What is the total manufacturing cost for machine setups?

[removed]		$75
[removed]		$50
[removed]		$2,500
[removed]		$5,000

6.      Total contribution margin is calculated by subtracting:

[removed]		Cost of goods sold from total revenues
[removed]		Fixed costs from total revenues
[removed]		Total manufacturing costs from total revenues
[removed]		Total variable costs from total revenues 7.      Which of the following statements regarding sales mix is true? [removed] A shift in the sales mix can have a significant impact on the bottom line. [removed] One of the limiting assumptions of the basic cost-volume-profit model is that the analysis is for a single product or the sales mix is constant. [removed] Sales mix analysis is important in multiple-product or service organizations. [removed] All of the above are true

8.      For which of the following manufactured products would process costing be more appropriate?

[removed]		Modular homes
[removed]		Luxury liners
[removed]		Nylon fiber production
[removed]		Special order printing

9.      Over the short term, which type of costs is indifferent to activity level changes?

[removed]		Variable costs
[removed]		Fixed costs
[removed]		Mixed costs
[removed]		Step costs

10.  Which one of the following statements about difficulties in cost estimation is true?

[removed]		Changes in the company’s production technology make estimating the company’s production costs easier
[removed]		The shorter the time period, the higher the probability of inappropriately matching activity and cost
[removed]		The stronger the economy, the harder it is to accurately match activity and cost
[removed]		When prices of a company’s raw materials or labor are rapidly increasing, cost estimations based on previous periods will overestimate future costs

11.  How is depreciation on the manufacturing building and equipment classified in financial reporting?

[removed]		As an irrelevant cost because it has already been incurred
[removed]		As a current expense
[removed]		As part of the cost of the products produced
[removed]		As a period cost

12.  A profit-volume graph:

[removed]		Is most useful in situations where there are multiple cost drivers
[removed]		Plots both revenue and total cost on the Y axis
[removed]		Plots contribution margin on the Y axis and volume on the X axis
[removed]		Plots total profit on the Y axis against total volume on the X axis

13.  What is the purpose for using predetermined overhead rates?

[removed]		Delays in product costing can be avoided
[removed]		Variation in cost assignment due to seasonality can be prevented
[removed]		Variation in cost assignment due to short-term variations in volume can be prevented
[removed]		Use of predetermined overhead rates serves all the above purposes

14.  Contribution margin is calculated by subtracting:

[removed]		Total variable costs from total revenues
[removed]		Total manufacturing costs from total revenues
[removed]		Fixed costs from total revenues
[removed]		Cost of goods sold from total revenues

15.  Examples of activity cost drivers include all of the following except:

[removed]		Inspecting incoming raw materials
[removed]		Machine time spent working on a product
[removed]		Deciding how to arrange raw materials inventory within the warehouse
[removed]		Receiving (loading) raw materials into the warehouse 16.  The process of selecting strategies to achieve goals is often referred to as: [removed] Controlling [removed] Organizing [removed] Motivating [removed] Planning

17.  All of the following costs are included in inventory under absorption costing except:

[removed]		Direct materials
[removed]		Direct labor
[removed]		Fixed manufacturing expenses
[removed]		Variable selling expenses 18.  The following data was input into a spreadsheet program to determine the Intercept, Slope and R2 (RSQ) for Patient Days and Maintenance Costs for a local hospital:

The estimated fixed maintenance cost for the hospital is:

[removed]		$5,468
[removed]		$3,431
[removed]		$0.759
[removed]		$0.683

19.  To stay competitive in the express delivery business, both Federal Express and United Parcel Service must compete against each other based on which of the following?

[removed]		Price/Cost
[removed]		Service
[removed]		Quality
[removed]		All of the above

20.  Betsy’s Brew is a successful brewery engaged in the development and production of specialty micro brews. It uses manufacturing cost hierarchy to allocate costs to various activities. During the past year, it has incurred $1,450,000 of product development costs, $950,000 of materials handling costs, $2,500,000 of production line labor costs, $900,000 for production setup costs, $500,000 in power costs for cooling beer and running equipment and $1,750,000 for manufacturing facility management.
Using the manufacturing cost hierarchy, what is the total cost that would be classified as facility-level activity costs?

[removed]		$ 500,000
[removed]		$1,750,000
[removed]		$1,500,000
[removed]		$2,000,000

21.   Lincoln Corp. obtained the following information from its absorption costing accounting records:

The total Period Costs incurred this period equals:

[removed]		$15,000
[removed]		$20,000
[removed]		$48,000
[removed]		$68,000

22.  Managerial accounting is primarily focused on:

[removed]		Providing creditors information on the status of their loans
[removed]		Providing investors with useful information for valuing securities
[removed]		Providing the Internal Revenue Service with information to determine the amount of taxes owed
[removed]		Providing managers with relevant information to help achieve organizational goals

23.  Which of the following can be considered to be unethical behavior?

[removed]		Forecasting the amount of ending inventory on hand at the end of a budgetary period
[removed]		Transferring ending inventory to another warehouse in another geographic location
[removed]		Keeping inventory that is unlikely to be used so as to avoid recording a loss
[removed]		Building up inventory in anticipation of increased sales in the next accounting period

24.  Which of the following is an example of an organizational cost driver?

[removed]		Deciding how to arrange raw materials inventory within a warehouse
[removed]		Inspecting incoming raw materials
[removed]		Determining the best location for a manufacturing facility
[removed]		Receiving raw materials into the warehouse
[removed]		None of the above

25.  Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will:

[removed]		Not affect the break-even sales volume if there is an offsetting 20 percent increase in fixed costs
[removed]		Reduce the break-even sales volume by 20 percent
[removed]		Reduce total costs by 20 percent
[removed]		Reduce the slope of the total costs line by 20 percent 26.  Which of the following is an appropriate setting for job order production? [removed] Products are produced in batches of identical units. [removed] Products are produced in single units [removed] Neither A nor B are examples of job order production. [removed] Both A and B are examples of job order production.

27.  A cost that is constant within a relevant range but differs outside the relevant range of activity is best classified as what type of cost?

[removed]		Variable cost
[removed]		Fixed cost
[removed]		Mixed cost
[removed]		Step cost 28.  Which of the following is the most reasonable cost driver for direct material costs? [removed] The quantity of direct materials used [removed] Purchasing department activity [removed] Direct labor hours [removed] Square footage of the warehouse used to store raw materials

29.  The Snape Corporation has the following data for 2014:
Selling price per unit $10
Variable costs per unit $6
Fixed costs $20,000
Units sold 12,000
Snape’s 2014 operating leverage is:

[removed]		0.50
[removed]		2.00
[removed]		4.00
[removed]		1.71

30.  To compete on the basis of service, the seller must carefully manage:

[removed]		The degree to which products or services meet customer’s needs
[removed]		Timely delivery and customer support
[removed]		Communications between buyer and seller
[removed]		Operating and maintenance costs 31.  Cari German uses gas to heat her home. She has accumulated the following information regarding her monthly gas bill and monthly heating degree-days. The heating degree-days value for a month is found by first subtracting the average temperature for each day from 65 degrees and then summing these daily amounts together for the month. Month Heating Degree-Days Gas Bill February 1,900 $254 April 600 $101 What will be the increase in Cari’s monthly gas bill per heating degree-day using the high-low method? [removed] $0.3309 [removed] $0.1177 [removed] $46.00 [removed] $153.00

32.  The following costs related to Summertime Company for a relevant range of up to 20,000 units annually:
Variable Costs:
Direct materials $5.00
Direct labor 1.50
Manufacturing Overhead 2.50
Selling and administrative 3.00
Fixed Costs:
Manufacturing overhead $20,000
Selling and Administrative 10,000
The selling price per unit of product is $15.00.
At a sales volume of 15,000 units, what is the total profit for Summertime Company?

[removed]		$ 30,000
[removed]		$ 15,000
[removed]		$225,000
[removed]		$300,000

33.  The method of accounting for inventory that assigns all manufacturing costs to inventory is sometimes referred to as:

[removed]		Prime costing
[removed]		FIFO
[removed]		The weighted average cost method
[removed]		Absorption costing

34.  Product or service differentiation involves:

[removed]		Any changes made to a product or service
[removed]		The use of new technologies in manufacturing
[removed]		Shifting sales to growing markets
[removed]		Creating something that is perceived as unique and worth a premium price

35.  In deciding whether to sell a joint product or to process it further, management should consider:

[removed]		All joint costs and separately identifiable costs
[removed]		Only joint costs that vary with production volume
[removed]		The separately identifiable costs of the product under consideration
[removed]		Variable joint and variable separately available costs

36.  The introduction of production technology in a manufacturing process would likely result in which of the following?

[removed]		Decreasing the probability of inappropriately matching activity and costs in the short run
[removed]		Shifting to production technology makes cost estimation and prediction easier
[removed]		Shifting to production technology requires identifying the most appropriate activity that matches costs
[removed]		Increasing the probability that the coefficient of determination will likely decrease in the short run

37.  Assuming sales prices and cost behavior remain unchanged, when variable costing is used, when does net income change in response to changes in unit sales?

[removed]		Only when number of units sold exceeds number of units produced
[removed]		Only when number of units produced exceeds number of units sold
[removed]		Only when number of units sold exactly equals number of units produced
[removed]		Under all the above conditions

38.  The determination of the mathematical relationship between activity level and cost is known as:

[removed]		Cost control
[removed]		Cost estimation
[removed]		Cost prediction
[removed]		Regression analysis

39.  Using the weighted average method, whenever units in process are produced to a different percentage of completion for materials and labor, this creates a condition where:

[removed]		The number of equivalent units in process will invariably be different for materials and conversion costs
[removed]		The cost per equivalent unit for materials and conversion will be equal.
[removed]		It is inappropriate to use the process costing method.
[removed]		None of the above

40.  A basic assumption of the cost-volume-profit model is that:

[removed]		All costs can be accurately classified as either fixed or variable
[removed]		Cost drivers can be organized into unit-level, batch-level, product-level and facility-level factors
[removed]		Higher volumes of product require lower prices
[removed]		The mix of products changes over time

41.  Wesley’s income statement is as follows:
Sales (10,000 units) $150,000
Less variable costs – 48,000
Contribution margin $102,000
Less fixed costs – 24,000
Net income $ 78,000
If sales increase by 1,000 units, profits will:

[removed]		Increase by $12,000
[removed]		Increase by $10,200
[removed]		Increase by $4,800
[removed]		Increase by $8,000

42.  Which of the following statements best defines a goal for an organization?

[removed]		Increase next year’s sales by 10 percent over current year sales
[removed]		Providing high quality products and services to customers
[removed]		Adopt a cost effective plan for providing new products and services to customers
[removed]		Become the world’s largest provider of consumer goods 43.  Facility level activities of an organization would not include: [removed] Building maintenance [removed] Machine set up [removed] Property taxes [removed] The production supervisor’s salary

44.  Determine the unit break-even point, assuming fixed costs are $60,000 per period, variable costs are $16.00 per unit, and the sales price is $25.00 per unit.

[removed]		5,000
[removed]		6,667
[removed]		15,000
[removed]		12,000

45.  The Fairmont Machine Shop wants to develop a cost estimating equation for its monthly cost of electricity. It has the following data:
Month Cost of Electricity (Y) Direct Labor-Hours (X)
January $14,000 1,500
April $15,000 1,700
July $17,000 2,000
October $14,500 1,600
What would be the best equation using the high-low method?

[removed]		Y = $4,000 + $7X
[removed]		Y = $0 + $9X
[removed]		Y = $1,000 + $8X
[removed]		Y = $5,000 + $6X

46.  Which of the following would be classified as a fixed selling and administrative cost?

[removed]		Sales Commissions
[removed]		Depreciation on office equipment
[removed]		Depreciation on factory equipment
[removed]		Wages of production supervisor

47.  At its current level of sales, a company has a degree of operating leverage of 6. This means that a 10% increase in sales would result in a:

[removed]		6% Increase in before-tax profit
[removed]		10% Increase in before-tax profit
[removed]		60% Increase in contribution margin
[removed]		60% Increase in before-tax profit

48.  The following procedure performed by a home oil delivery company is the best example of a unit level activity within a customer cost hierarchy:

[removed]		Opening an account for a new customer
[removed]		Processing monthly customer billings
[removed]		Pumping home heating oil into a customer’s oil tank
[removed]		Purchasing a new delivery truck

49.  A decision to work closely with a limited number of suppliers for the purpose of ensuring that the proper materials are available at the optimal time is an example of:

[removed]		A batch level cost driver
[removed]		An activity cost driver
[removed]		An organizational cost driver
[removed]		A structural cost driver

50.  In the following equation for total cost, Y = a + bX, the slope of the total cost line is an approximation of which of the following?

[removed]		Total Cost
[removed]		Fixed Cost
[removed]		Variable Cost
[removed]		Volume

 

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