DeVry ACCT 434 Week 4 Midterm;1.;Question;(TCO 1) Which of the following is a sign that an ABC system may be useful?;Student Answer;Operations staff agrees with accountants about the costs of manufacturing and marketing products and services.;There are small amounts of indirect costs.;Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.;Products a company is less suited to produce and sell show small profits.;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;The above activities are used by Department A and B as follows;Department A;Department B;Account inquiry hours;2,000 hours;4,000 hours;Account billing lines;400,000 lines;200,000 lines;Account verification accounts;10,000 accounts;8,000 accounts;Correspondence letters;1,000 letters;1,600 letters;How much of the inquiry cost will be assigned to Department A?;Student Answer;$80,000;$400,000;$160,000;None of the above;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 flexible-budget variance is;Question 5.;Question;(TCO 3) Which of the following does NOT represent a cause-and-effect relationship?;Student Answer;It makes sense that if a complex product has a large number of parts, it will take longer to assemble than a simple product with fewer parts.;Material costs increase as the number of units produced increases.;A company is charged 40 cents for each brochure printed and mailed.;Utility costs increase at the same time that insurance costs increase.;Question 6.;Question;(TCO 4) Relevant costs in a make-or-buy decision of a part include;Student Answer;setup overhead for the manufacture of the product using the outsourced part.;currently used manufacturing capacity that has alternative uses.;annual plant insurance that will remain the same.;corporate office costs that will be allocated differently.;Question 7.;Question;(TCO 5) The theory of constraints is used for cost analysis when;Question 8.;Question;(TCO 5) Jensen Company has relevant costs of $80 per unit to manufacture Part A. A current supplier offers to make Part A for $70 per unit. If capacity is constrained, the opportunity cost of buying Part A from the supplier is;Comments;Question 9.;Question;(TCO 3)For January, the cost components of a picture frame include $0.35 for the glass, $0.65 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $400. A total of 1,000 frames is expected to be produced in the coming year. What cost function best represents these costs?;Question 10.;Question;(TCO 4)Sunk costs;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;d. material ordering;e. production scheduling;f. warehouse expense;g. engineering design;Question 2.;Question;(TCO 2) Lubriderm Corporation has the following budgeted sales for the next six-month period;Month Unit Sales;June 90,000;July 120,000;August 210,000;September 150,000;October 180,000;November 120,000;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 a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.;Question 3.;Question;(TCO 3) The Wildcat Company has provided the following information;Units of Output30,000 Units42,000 Units;Direct materials $180,000 $252,000;Workers' wages 1,080,000 1,512,000;Supervisors' salaries 312,000 312,000;Equipment depreciation 151,200 151,200;Maintenance 81,600 110,400;Utilities384,000 528,000;Total $2,188,800 $2,865,600;Using the high-low method and the information provided above, identify the linear cost function equation.;Question 4.;Question;(TCO 5) Kirkland Company manufactures a part for use in its production of hats. When 10,000 items are produced, the costs per unit are;Direct materials $0.60;Direct manufacturing labor 3.00;Variable manufacturing overhead 1.20;Fixed manufacturing overhead 1.60;Total$6.40;Mike Company has offered to sell to Kirkland Company 10,000 units of the part for $6.00 per unit. The plant facilities could be used to manufacture another item at a savings of $9,000 ifKirklandaccepts the offer. In addition, $1.00 per unit of fixed manufacturing overhead on the original item would be eliminated.;a. What is the relevant per unit cost for the original part?;b. Which alternative is best for Kirkland Company By how much?
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