Accounting Week 4 Quiz

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Question 1
1.
Inventory values calculated using variable costing as opposed to absorption costing will generally be

equal.

less.

greater.

twice as much.
2 points
Question 2
1.
Figure 7-5.Rizzo Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:
Product Machine Hours Setups Receiving Orders Packing Orders
35mm 10,000 100 200 400
Digital 10,000 250 800 2,000
Costs $60,000 $40,000 $8,000 $24,000

Refer to Figure 7-5. Calculate a consumption ratio for setups on the digital cameras.

0.688

0.730

0.700

0.714

0.500
2 points
Question 3
1.
Figure 8-9.The following information pertains to Stark Corporation:
Beginning inventory 0 units
Ending inventory 5,000 units
Direct labor per unit $20
Direct materials per unit 16
Variable overhead per unit 4
Fixed overhead per unit 10
Variable selling costs per unit 12
Fixed selling costs per unit 16

Refer to Figure 8-9. What is the value of ending inventory using the variable costing method?

$310,000

$250,000

$200,000

$390,000
2 points
Question 4
1.
Figure 8-3.Martin Company uses 625 units of a part each year. The cost of placing one order is $8; the cost of carrying one unit in inventory for a year is $4. Refer to Figure 8-3. Martin has decided to begin ordering 40 units at a time. What is the average annual carrying cost of Martin’s new policy?

$80

$60

$160

$4

$90
2 points
Question 5
1.
Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
I. Activity Data
Activity Cost
Inspecting components (sampling only) $ 190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor Bello
Inc. Company
Unit Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7-3. Calculate the total activity cost per component associated with using Traynor Inc., as the supplier.

$15.75

$10.00

$19.38

$20.00

$22.80
2 points
Question 6
1.
Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
I. Activity Data
Activity Cost
Inspecting components (sampling only) $ 190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor Bello
Inc. Company
Unit Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7-3. Calculate the activity rate for reworking products based on rework hours. Round to the nearest whole dollar.

$599 per hour

$595 per hour

$602 per hour

$605 per hour

$622 per hour
2 points
Question 7
1.
The inventory cost that can include lost sales, cost of expediting, and cost of interrupted production is called

ordering cost.

carrying cost.

stockout cost.

setup cost.

storing cost.
2 points
Question 8
1.
To calculate an activity rate, the ____ of each activity must be determined.

practical capacity

expenditure level

processing ratio

value
2 points
Question 9
1.
Activity-based management attempts to

identify and eliminate all unnecessary activities.

increase the efficiency of necessary activities.

add new activities that increase value.

do all of these.
2 points
Question 10
1.
Which of the following is not a traditional reason for carrying inventory?

to satisfy customer demand

to avoid shutting down manufacturing facilities

to buffer against unreliable production processes

to hedge against future price increases

all of these are traditional reasons for carrying inventory
2 points
Question 11
1.
Figure 8-5.Sanders Company has the following information for last year:
Selling price $190 per unit
Variable production costs $52 per unit produced
Variable selling and admin. expenses $18 per unit sold
Fixed production costs $240,000
Fixed selling and admin. expenses $180,000
Units produced 12,000
Units sold 7,000

There were no beginning inventories. Refer to Figure 8-5. What is the income for Sanders using the absorption costing method?

$520,000

$480,000

$1,200,000

$500,000
2 points
Question 12
1.
Complying with the filing requirements of the IRS is an example of a

recreational activity.

discretionary activity.

recommended activity.

required activity.
2 points
Question 13
1.
Figure 7-4.Honeydew Company produces two products, a high end laptop computer under the label Bunsen Laptops, and an inexpensive desktop computer under the label Beaker Computers. The two products use two overhead activities, with the following costs:
Setting up equipment $ 2,000
Machining 12,000

The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.
Bunsen Beaker
Direct Labor $20,000 $5,000
Direct Materials 15,000 4,000
Units 2,000 2,000
Machine hours 750 1,500
Setup hours 50 50

Refer to Figure 7-4. Calculate the overhead cost per unit for Bunsen Laptops, using a plantwide rate based on direct labor costs.

$9.63 per laptop

$22.45 per laptop

$5.60 per laptop

$7.22 per laptop

$7.50 per laptop
2 points
Question 14
1.
The formula for total carrying cost is

number of orders per year ? cost of placing an order.

number of orders per year/cost of placing an order.

average number of units in inventory ? cost of carrying one unit in inventory.

average number of units in inventory/cost of carrying one unit in inventory.

ordering cost + carrying cost.
2 points
Question 15
1.
The formula for ordering cost is the

number of orders per year ? cost of placing an order.

number of orders per year/cost of placing an order.

average number of units in inventory ? cost of carrying one unit in inventory.

average number of units in inventory/cost of carrying one unit in inventory.

ordering cost + carrying cost.
2 points
Question 16
1.
Figure 7-3.Hamilton Company manufactures engines. Hamilton produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Traynor Inc. and Bello Company. Both suppliers are reliable and rarely deliver late; however, Traynor sells the component for $10.00 per unit and Bello sells the same component for $8.95. Hamilton purchases 70% of its components from Bello, because of the lower price. The total annual demand is 75,000 units.
I. Activity Data
Activity Cost
Inspecting components (sampling only) $ 190,000
Reworking products (due to failed component) $2,254,000
Warranty work (due to failed component) $1,723,000

II. Supplier Data
Traynor Bello
Inc. Company
Unit Purchase Price $10.00 $8.95
Units Purchased 22,500 52,500
Sampling Hours 50 2,450
Rework hours 135 3,625
Warranty hours 475 6,000

Refer to Figure 7-3. Calculate the activity rate for inspecting components based on sampling hours.

$78 per hour

$72 per hour

$77.25 per hour

$80 per hour

$76 per hour
2 points
Question 17
1.
Receiving provides 12,000 receiving hours and costs $60,000 per year. What is the activity rate for receiving?

$14 per receiving hour

$5 per receiving hour

$4 per receiving hour

$4.50 per receiving hour

cannot be determined from this information
2 points
Question 18
1.
Figure 8-5.Sanders Company has the following information for last year:
Selling price $190 per unit
Variable production costs $52 per unit produced
Variable selling and admin. expenses $18 per unit sold
Fixed production costs $240,000
Fixed selling and admin. expenses $180,000
Units produced 12,000
Units sold 7,000

There were no beginning inventories. Refer to Figure 8-5. What is the cost of ending inventory for Sanders using the variable costing method?

$300,000

$280,000

$120,000

$260,000
2 points
Question 19
1.
Figure 8-1.Last year, Fabre Company produced 20,000 units and sold 18,000 units at a price of $12. Costs for last year were as follows:
Direct materials $25,000
Direct labor 35,000
Variable factory overhead 12,000
Fixed factory overhead 37,000
Variable selling expense 9,000
Fixed selling expense 7,500
Fixed administrative expense 15,500

Fixed factory overhead is applied based on expected production. Last year, Fabre expected to produce 20,000 units. Refer to Figure 8-1. What is operating income for last year under absorption costing?

$41,000

$67,520

$85,900

$111,300

$45,000
2 points
Question 20
1.
Costs incurred when products and services prior to being delivered do not conform to specifications or customer needs are

prevention costs.

appraisal costs.

a different category of quality-related costs.

external failure costs.

internal failure costs.

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