When a multi-product plant operates at full capacity, quite often decisions must be made as to which products to emphasize. These decisions are frequently made with a short-run focus. In making such decisions, managers should select products with the:
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1 .A member of the board of directors of Central Communications Co. is offered a license by a third party to operate a cellular phone system. The director does not present this offer to the board of directors for approval but informally mentions it to a fellow board member, who does not think it will be a problem. The director buys the license. Which of the following statements is correct regarding the director's actions?
A The director acted properly in purchasing the license. B The director breached a duty of care by failing to use prudent business judgment. C The director breached a duty of loyalty by usurping a corporate opportunity. D The director breached the duty of due diligence.
2 .Kimbeth Manufacturing uses a process costsystem to manufacture Dust Density Sensors for the mining industry. Thefollowing information pertains to operations for the month of May: Units Beginning work-in-process inventory, May 1 16,000 Started in production during May 100,000 Completed production during May 92,000 Ending work-in-process inventory, May 31 24,000 The beginninginventory was 60 percent complete for materials and 20 percent complete forconversion costs. The ending inventory was 90 percent complete for materialsand 40 percent complete for conversion costs.Costs pertainingto the month of May are as follows:·Beginning inventory costs are: materials, USD54,560;direct labor USD20,320; and factory overhead, USD15,240.·Costs incurred during May are: materials used, USD468,000;direct labor, USD182,880; and factory overhead, USD391,160.Using the FIFOmethod, the equivalent unit cost of materials for May is:
A USD5.46 B USD4.60 C USD4.50 D USD4.80
3 .Zeta Company is preparing its annual profitplan. As part of its analysis of the profitability of individual products, thecontroller estimates the amount of overhead that should be allocated to theindividual product lines from the information given below. Wall Mirrors Specialty Windows Units produced 25 25 Material moves per product line 5 15 Direct labor hours per unit 200 200 Budgeted materials handling costs USD50,000 Underactivity-based costing (ABC), the materials handling costs allocated to oneunit of wall mirrors would be:
A USD2,500 B USD1,500 C USD500 D USD1,000
4 .What is the normal effect on the numbers ofcost pools and allocation bases when an activity-based cost (ABC) systemreplaces a traditional cost system? Cost pools Allocation bases
A No effect; Increase B Increase; Increase C Increase; No effect D No effect; No effect
5 .Pinecrest Co. had variable costs of 25% of sales, and fixed costs of USD30,000. Pinecrest's break-even point in sales dollars was:
A USD30,000 B USD40,000 C USD24,000 D USD120,000
7 .A flexible budget is appropriate for a: Marketing budget Direct material usage budget
A No; Yes B Yes; No C Yes; Yes D No; No
8 .A manufacturing company that produces trivetshas established the following standards for the current year: Standard price per pound USD3.00 Standard material usage per trivet 2.00 During April, the company purchased 10,000 pounds of material for USD33,000 and used 9,400 pounds to produce 4,500 trivets. Four thousand trivets were sold during April. What amount should be reported as the materials' quantity (usage) variance?
A USD3,000 unfavorable. B USD1,320 unfavorable. C USD4,200 unfavorable. D USD1,200 unfavorable.
9 .Wendy's Sandwich Shop purchased an asset for USD100,000 that has no salvage value and a 10-year life. Wendy's effective income tax rate is 40 percent, and it uses the straight-line depreciation method for income tax reporting purposes. Wendy's annual depreciation tax shield from the asset would be:
A USD2,000 B USD10,000 C USD4,000 D USD6,000
10 .In inventory management, the safety stock will tend to increase if the:
A Carrying cost increases. B Variability of lead-time increases. C Fixed order cost decreases. D Cost of running out of stock decreases.
