Multiple Choice 10 9 Essay 4 Question 1. Question : (TCO 1) Which of the following is a sign that an ABC system may be useful? Question 2. Question : (TCO 1) Merriamn Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Account inquiry hours $400,000 10,000 hours Account billing lines $280,000 4,000,000 lines Account verification accounts $150,000 40,000 accounts Correspondence letters $ 50,000 4,000 letters Total costs $880,000 How much of account verification costs will be assigned to Department A? Question 3. Question : (TCO 2) Budgeting provides all of the following EXCEPT Question 4. Question : (TCO 2) White planned to use $82 of material per unit but actually used $80 of material per unit, and planned to make 1,200 units but actually made 1,000 units. The sales-volume variance is Question 5. Question : (TCO 3) Which cost estimation method analyzes accounts in the subsidiary ledger as variable, fixed, or mixed using qualitative methods? Question 6. Question : (TCO 4) In evaluating different alternatives, it is useful to concentrate on Question 7. Question : (TCO 5) Which of the following is a relevant cost to be included in a make-or-buy decision? Question 8. Question : (TCO 5) Konrade’s Engine Company manufactures part TE456 used in several of its engine models. Monthly production costs for 1,000 units are as follows: � � Direct materials � � � � � �$40,000 Direct labor � � � � � � �10,000 Variable overhead costs � � � � 30,000 Fixed overhead costs � � � � �20,000 Total costs � � � � � � $100,000 It is estimated that 10% of the fixed overhead costs assigned to TE456 will no longer be incurred if the company purchases TE456 from the outside supplier. Konrade’s Engine Company has the option of purchasing the part from an outside supplier at $85 per unit. If Konrade’s Engine Company accepts the offer from the outside supplier, the monthly avoidable costs (costs that will no longer be incurred) total Question 9. Question : (TCO 3) The cost function y = 100 + 10X Question 10. Question : (TCO 4) Opportunity costs Question 1. Question : (TCO 1) For each of the following activities, identify an appropriate activity-cost driver. a. machine maintenance b. machine setup c. quality control material ordering d. production scheduling e. warehouse expense f. engineering design Question 2. Question : (TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period: Month � � � � � Unit Sales There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds. Prepare production budgets in units for July, August, and September. Question 3. Question : (TCO 3) As part of his job as cost analyst, Max Thompson collected the following information concerning the operations of the Machining Department: � � Observation � � �Machine-hours � � Total Operating Costs January � � � � 4,000 � � � � � $45,000 February � � � � 4,600 � � � � � 49,500 March � � � � �3,800 � � � � � 45,750 April � � � � � 4,400 � � � � � 48,000 May � � � � � 4,500 � � � � � 49,800 Use the high-low method to determine the estimating cost function with machine-hours as the cost driver. Question 4. Question : (TCO 5) Lewis Auto Company manufactures a part for use in its production of automobiles. When 10,000 items are produced, the costs per unit are: Direct materials � � � � � �$12 Direct manufacturing labor � � �60 Variable manufacturing overhead � 24 Fixed manufacturing overhead � �32 Total � � � � � � � � � $128 Monty Company has offered to sell Lewis Auto Company 10,000 units of the part for $120 per unit. The plant facilities could be used to manufacture another part at a savings of $180,000 if Lewis Auto accepts the supplier’s offer. In addition, $20 per unit of fixed manufacturing overhead on the original part would be eliminated. A. What is the relevant per unit cost for the original part? B. Which alternative is best for Lewis Auto Company? By how much?
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