Question 1: The costing method that has been labeled as a "black hole" is commonly known as:
a. Absorption costing
b. Fixed costing
c. Break-even point costing
d. Variable costing
Question 2: Paymaster, Inc., a computer software store, provided that following information on 1999 operations.
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Cost of Goods Sold
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$600,000
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Store manager's salary
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$80,000
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Assistant's salary
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$40,000
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Operating costs (store)
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$120,000
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Sales personnel salary (four employees)
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$29,000 each
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Commissions of 15% of sales
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$?
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Advertising and promotion per year
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$20,000
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Sales personnel salary (four employees)
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$1,200,000
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Paymaster is a small company and has hired you to perform some management advisory services. Paymaster sold 2,500 high quality payroll programs last year. Using the information provided:
What is the variable cost per unit sold?
a. $320
b. $312
c. $240
d. $72
The Gameshop manufactures specialized board games. Management is attempting to search for ways to reduce manufacturing labor costs and has received a proposal from a consulting company to rearrange the production floor next year. Currently, the system requires 10 machine operators and 2.5 individuals to handle direct materials. Employee pay averages $7.50 per hour and will increase to $8.50 per hour next year. Each employee currently works 2,500 hours but that will decrease to 2,400 hours if the proposal is accepted. The proposal only requires 8.5 workers.
Question 3: Which of the following decisions should management accept?
a. Do not change the production floor.
b. Rearrange the production floor.
c. Either a or b, because the employees cannot be laid off.
d. It doesn't matter because the costs incurred will remain the same.
Question 4: Which of the following departments is NOT a support department for an ink manufacturing company?
a. Food services
b. Health services
c. Mixing and bottling
d. Security
Question 5: The department that adds value to a product sold to a customer is:
a. A personnel department
b. An operating department
c. A support department
d. A service department
Raynor Manufacturing purchases trees from Tree Nursery and processes them up to the splitoff point, where two products (paper and pencil casings) are obtained. The products are then sold to an independent company that markets and distributes them to retail outlets. The following information was collected for the month of October.
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Trees processed:
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50 trees (yield is 30,000 sheets of paper and 30,000 pencil casings,
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and no scrap)
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Production:
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30,000 sheets of paper and 30,000 pencil casings
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Sales:
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Paper: 29,000 @ $0.04 per page
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Pencil casings: 30,000 @ $0.10 per casing
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The cost of purchasing 50 trees and processing them up to the splitoff point to yield 30,000 sheets of paper and 30,000 pencil casings is $1,500.
Raynor manufacturing's accounting department reported no beginning inventories; however, ending inventories amounts reflected 1,000 sheets of paper in stock.
Question 6: What is the paper's sales value at the splitoff point?
a. $120
b. $1,160
c. $1,200
d. $1,950
Question 7: All of the following are reasons for restricting resources EXCEPT:
a. The attempt to formulate long-run production plans.
b. The attempt to improve long-run supply reliability.
c. The protection of an "infant" segment.
d. The belief that products produced externally are of a higher quality and will be delivered quickly.
Question 8: For each of the following independent cases, find the unknowns designated by the capital letters.
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Case 1
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Case 2
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Direct materials used
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H
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$40,000
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Direct manufacturing labor
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$30,000
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$15,000
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Variable Marketing, Distribution
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K
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T
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Fixed manufacturing overhead
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I
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$20,000
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Fixed marketing, distribution
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J
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$10,000
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Gross Margin
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$25,000
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$20,000
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Finished goods inventory, Jan 1, 1999
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0
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$5,000
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Finished goods inventory, Dec 31, 1999
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0
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$5,000
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Contribution Margin (dollars)
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$30,000
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V
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Revenues
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$100,000
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$100,000
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Direct materials inventory, Jan 1, 1999
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$12,000
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$20,000
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Direct materials inventory, Dec 31, 1999
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$5,000
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W
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Variable manufacturing overhead
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$5,000
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X
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Work in process, Jan 1, 1999
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0
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$9,000
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Work in process, Dec 31, 1999
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0
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$9,000
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Purchases of direct materials
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$15,000
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$50,000
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Breakeven point (in revenues)
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$66,667
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Y
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Cost of goods manufactured
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G
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U
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Operating Income (loss)
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L
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($5,000)
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