2024 – Unit 6 Unit 6 Management Level Control Final Exam Top of Form Time Remaining Question

target costing determines

Question 1.1.Target costing determines the desired cost for a product upon the basis of a given competitive price such that the product will: (Points : 2)

Question 2.2.The five steps of strategic decision making include all of the following except: (Points : 2)

Strategic decision making include

Question 3.3.The five steps of strategic decision making include all of the following except: (Points : 2)

Question 4.4.Strategic analysis uses which of the following to help a firm improve its competitive position through an analysis of product and production complexity? (Points : 2)

Question 5.5.The strategy map is a tool that is used: (Points : 2)

Question 6.6.Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period? (Points : 2)

factory overhead costs

Question 7.7.Factory overhead costs for a given period were 3 times as much as the direct material costs. Prime costs totaled $2,000. Conversion costs totaled $3,280. What are the direct labor costs for the period? (Points : 2)

Question 8.8.ABC Company listed the following data for the current year:

Budgeted Factory Overhead = $ 1,044,000
Budgeted Direct labor Hours = 69,600
Budgeted Machine Hours = 24,000
Actual Factory Overhead = 1,037,400
Actual Labor Hours = 72,400
Actual Machine Hours = 23,600

Assuming ABC Company applied overhead based on direct labor hours, the company’s predetermined overhead rate for the year is: (Points : 2)

Question 9.9.When completed units are transferred to the warehouse: (Points : 2)

Question 10.10.Effective implementation of activity-based costing (ABC) requires: (Points : 2)

Question 11.11.Standard costs are: (Points : 2)

Question 12.12.Process cost systems are used in all of the following industries except: (Points : 2)

Question 13.13.Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor hours, and had the following manufacturing overhead:

Overhead Cost Pool – Budgeted O/H $ – Budgeted Level for Cost Driver – O/H Cost Driver
Materials Handling $160,000 3,200 lbs. Material Weight
Machine Setup 13,200 390 S/U’s # of S/Us
Machine Repair 1,380 30,000 Mach. Hrs Machine Hrs.
Inspections 10,560 160 Inspections # of Inspections
Requirements for Job #971 which included 4 Units of Production:
D/L Hours = 20 Hours
D/Mat’ls = 130 lbs.
Machine S/U = 30 Set-ups
Machine Hrs. = 15,000 Machine Hours
Inspections = 15 Inspections.

Using ABC, the materials handling overhead cost assigned to Job #971 is: (Points : 2)

Question 14.14.Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year’s operation of the company are presented below.

Direct Materials January 1 = $77,000
Direct Materials December 31 = 40,000
WIP January 1 = 66,000
WIP December 31 = 42,000
Finished Goods January 1 = 115,000
Finished Goods December 31 = 100,000

Other Information:
Direct Materials Purchased = $324,000
Cost of Goods Available for Sale = 950,000
Actual Factory Overhead = 206,000

The cost of goods manufactured during the year is: (Points : 2)

Question 15.15.The point in a joint production process at which individual products can be identified for the first time is called the: (Points : 2)

Question 16.16.Cost-volume-profit (CVP) relationships that are curvilinear may be analyzed linearly by considering only: (Points : 2)

Question 17.17.Which of the following provides the most accurate cost estimation? (Points : 2)

Question 18.18.Net Realizable Value (NRV) of a product is: (Points : 2)

Question 19.19.Which of the following is an example of a physical measure used in the physical measure method? (Points : 2)

Question 20.20.Variable costs will generally be relevant for decision making because they: (Points : 2)

Question 21.21.Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to: (Points : 2)

Question 22.22.Which of the following is not true regarding the appropriate discount rate to be used in conjunction with discounted cash flow (DCF) decision models? (Points : 2)

Question 23.23.Joint (common) costs in a joint production process are relevant for determining: (Points : 2)

Question 24.24.Which of the following statements regarding a joint production process is NOT true? (Points : 2)

Question 25.25.In situations when management must decide on accepting or rejecting one-time-only special orders, where there is sufficient idle capacity, which one of the following is not relevant to the decision? (Points : 2)

Question 26.26.One of the key management functions is to perform a regular review of product profitability. Which question(s) below would not be asked when performing the analysis? (Points : 2)

Question 27.27.Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique’s combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the approximate internal rate of return (IRR) of the investment? (NOTE: To answer this question, students must have access to Table 2 from Appendix C, Chapter 12.) (Points : 2)

Question 28.28.____________________ is an important first step in value engineering because it identifies critical consumer preferences that will define the product’s desired functionality: (Points : 2)

Question 29.29.The theory of constraints (TOC) emphasizes which of the following? (Points : 2)

Question 30.30.An organization’s overall management accounting and control system: (Points : 2)

Question 31.31.The sequence of phases in the product or service’s life in the market – from the introduction of the product or service to the growth in sales and finally maturity, decline, and withdrawal from the market is the: (Points : 2)

Question 32.32.Traditional financial control systems have recently been criticized because: (Points : 2)

Question 33.33.Generally, firms will price a product more competitively at which stages of the product’s sales life cycle? (Points : 2)

Question 34.34.Information concerning Johnston Co.’s direct materials costs is as follows:

Standard $ per Lb. $ 6.45
Actual Lbs. Purchased 2,850
Actual Lbs. Used in production 2,750
Units of Material Produced 700
Materials Purchase Price Variance $ 855(F)
Budget Data for the Period:
Units to Manufacture 1,000
Units of DM 4,000 Lbs.

The actual purchase price per pound of direct materials is: (Points : 2)

Question 35.35.In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution margin, $27,000U

The actual amount of operating income earned in September was: (Points : 2)

Question 36.36.Of the three basic forms of management compensation (salary, bonus, benefits), the fastest growing part of total compensation is: (Points : 2)

Question 37.37.Any system of compensation: (Points : 2)

Question 38.38.Under variable costing, fixed manufacturing overhead costs would be classified as: (Points : 2)

Question 39.39.SBU is the acronym for: (Points : 2)

Question 40.40.Other things being equal, income computed by the variable costing method will exceed that computed by the full costing method if: (Points : 2)

Question 41.41.“Outsourcing” a cost center is often done to: (Points : 2)

Question 42.42.A current bonus can consist of: (Points : 2)

Question 43.43.When strategic performance measures or critical success factors are used to determine bonus compensation, the bonus will usually depend either on the amount of improvement in the measure or on: (Points : 2)

Question 44.44.In management compensation, the use of the balanced scorecard achieves: (Points : 2)

Question 45.45.The objectives of management compensation, when compared to the objectives used to develop performance measurement systems, are: (Points : 2)

Question 46.46.Which one of the following refers to the firm’s ability to pay its current operating expenses and maturing debt? (Points : 2)

Question 47.47.Jackson Supply Company has a 2 to 1 current ratio. This ratio would increase to more than 2 to 1 if the company: (Points : 2)

Question 48.48.The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.

Balance Sheet, December 31
2013 2012
Cash $ 340,000 $ 100,000
Accounts Receivable 350,000 400,000
Inventory 250,000 300,000
Total Current Assets $ 940,000 $ 800,000
Long Lived Assets 1,080,000 1,100,000
Total Assets $ 2,020,000 $ 1,900,000
Current Liabilities $ 200,000 $ 300,000
Long-Term Liabilities 600,000 500,000
Stockholder’s Equity 1,220,000 1,100,000
Total Liabilities & Equity $ 2,020,000 $ 1,900,000
Income Statement for the Year Ended December 31
Sales $ 4,750,000 $ 4,500,000
Cost of Sales 4,100,000 4,000,000 
Gross Margin $ 650,000 $ 500,000
Operating Expenses 350,000 400,000
Operating Income $ 300,000 $ 100,000
Taxes 120,000 40,000
Net Income $ 180,000 $ 60,000 
Cash Flow from Operations
Net Income $ 180,000 $ 60,000
Plus Depreciation Expense 50,000 50,000
+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –
+Increase (-Dec) in Current Liabilities (100,000) – 0 –
Cash Flow from Operations $ 230,000 $ 110,000

The current ratio for 2013 is: (Points : 2)

Question 49.49.The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.

Balance Sheet, December 31
2013 2012
Cash $ 340,000 $ 100,000
Accounts Receivable 350,000 400,000
Inventory 250,000 300,000
Total Current Assets $ 940,000 $ 800,000
Long Lived Assets 1,080,000 1,100,000
Total Assets $ 2,020,000 $ 1,900,000
Current Liabilities $ 200,000 $ 300,000
Long-Term Liabilities 600,000 500,000
Stockholder’s Equity 1,220,000 1,100,000
Total Liabilities & Equity $ 2,020,000 $ 1,900,000

Income Statement for the Year Ended December 31
Sales $ 4,750,000 $ 4,500,000
Cost of Sales 4,100,000 4,000,000 
Gross Margin $ 650,000 $ 500,000
Operating Expenses 350,000 400,000
Operating Income $ 300,000 $ 100,000
Taxes 120,000 40,000
Net Income $ 180,000 $ 60,000 

Cash Flow from Operations
Net Income $ 180,000 $ 60,000
Plus Depreciation Expense 50,000 50,000
+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –
+Increase (-Dec) in Current Liabilities (100,000) – 0 –
Cash Flow from Operations $ 230,000 $ 110,000

The inventory turnover ratio for 2013 is (rounded): (Points : 2)

Question 50.50.During October, Rover Industries produced 35,000 units of product with costs as follows:
DM = $ 84,000
DL = 43,000
Variable O/H = 13,000
Fixed O/H = 147,000
Total =$ 287,000
What is Rover’s unit cost for October, calculated on the variable costing basis? (Points : 2)