1. (TCO 7) Harper Companys Job 501 for the ma

1. (TCO 7) Harper Companys Job 501 for the ma

1. (TCO 7) Harper Companys Job 501 for the manufacture of 2,200 coats was completed during August at the unit costs presented as follows. Final inspection of Job 501 disclosed 200 spoiled coats, which were sold to a jobber for $6,000.Direct materials$20Direct labor18Factory overhead (which includes anallowance of $1 for spoiled work) 18$56Assume that spoilage loss is charged to all production during August. What would be the unit cost of the good coats produced on Job 501? (Points : 11)$57.50$55.0056.00$58.60Question 2.2. (TCO 7) Scrap material consists of (Points : 11)defective units that may be used or sold.raw materials remaining from the production cycle, but usable for purposes other than the original purpose.raw materials remaining from the production cycle but not usable for any purpose.finished goods that do not meet quality control standards and cannot be reworked.Question 3.3. (TCO 7) A wholesale distributor of lenses and frames has been seeking to minimize its inventory costs and is planning to apply the economic order quantity model to its main product, lens blanks. The data in the next column are available for the next year.Demand 1,000,000 unitsAverage unit costs $20.00Cost of ordering $72.00 per orderUnit carrying costs 5% of average per unit costManagement believes it can reduce the cost of ordering to $50.00 by implementing an online ordering system with the lens manufacturer.If management does not implement the online ordering system, assume that its EOQ will be 12,000 units.If, however, management decides to implement the online ordering system, this will change the economic order quantity and save the company ordering costs by what amount?Increase (Decrease) in EOQ Order Cost Savings (Expenditures) for EOQ Change (Points : 11)2,000 units $(1,000)600 units $(13,200)(2,000) units $1,0001,100 units $22,000Question 4.4. (TCO 7) Huron Corporation purchases 60,000 headbands per year. The average normal purchase lead time is 20 working days, safety stock equals 7 days normal usage, and the corporation works 240 days per year. Huron should reorder headbands when the quantity in inventory reaches (Points : 11)5,000 units.6,750 units.1,750 units.5,250 units.Question 5.5. (TCO 7) In a JIT costing system, factory overhead should be charged to (Points : 11)raw materials.cost of goods sold.finished goods.work-in-process.Question 6.6. (TCO 8) The technique that incorporates the time value of money by determining the compound interest rate of an investment at which the present value of the after-tax cash inflows over the life of the investment is equal to the initial investment is the (Points : 11)average rate of return method.internal rate of return method.capital asset pricing model.profitability index method.Question 7.7. (TCO 8) On January 1, Mojo Company purchased a new machine for $100,000 to be depreciated over 5 years. It will have no salvage value at the end of its useful life. For both book and tax purposes, depreciation will be $20,000 per year. The machine is expected to produce annual cash inflows from operations, before income taxes, of $40,000. Assume that Mojo uses a discount rate of 12% and that its income tax rate will be 40% for all years. The present value of $1 at 12% for five periods is 0.57, and the present value of an ordinary annuity of $1 at 12% for five periods is 3.61. The NPV of the machine should be (Points : 11)$15,520 positive.$15,520 negative.$14,000 positive.$13,680 negative.Question 8.8. (TCO 8) Paula bought a machine costing $1,000, which will produce cash inflows of $1,400 over the next 4 years. Determine the payback period given the following cash flows.YearAfter-Tax Cash FlowsCumulative Cash Flows1$400$400230070035001,20042001,400(Points : 11)2 years2.60 years2.86 years3 yearsQuestion 9.9. (TCO 8) In order to motivate subunit managers to exert effort to maximize their own subunits operating income, interdivisional transfers of a product preferably should be made at prices (Points : 11)equally to fully allocated costs to the producing subunit.equal to the market price of the product.equal to variable costs of the producing subunit.negotiated by top management.Question 10.10. (TCO 9) The proposed transfer price is based on outlay cost. Outlay cost plus opportunity cost is (Points : 11)the retail price.the price representing the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale.the price usually set by an absorption-costing calculation.the price set by charging for variable costs plus a lump-sum or additional markup, but less than full markup.Question 11.11. (TCO 9) The Chicago division sells goods internally to the Detroit division of the same company. The quoted external price in industry publications from a supplier near Chicago is $200 per ton plus transportation. It costs $20 per ton to transport the goods to Detroit. Chicagos actual market cost per ton to buy the direct materials to make the transferred product is $100. Actual per-ton direct labor is $50. Other actual costs of storage and handling are $40. The company president selects a $220 transfer price. This is an example of (Points : 11)market-based transfer pricing.cost-based transfer pricing.negotiated transfer pricingcost plus 20% transfer pricing.Question 12.12. (TCO 9) Milton Industries is a vertically integrated firm with several divisions that operate as decentralized profit centers. Miltons Savvy Division manufactures scientific instruments and uses the products of two of Miltons other divisions. The Bored Division manufactures printed circuit boards (PCBs). One PCB model is made exclusively for the Savvy Division using proprietary designs, whereas less complex models are sold in outside markets. The products of the Transistor Division are sold in a well-developed competitive market; however, one transistor model is also used by the Savvy Division. The costs per unit of the products used by the Savvy Division are presented below.PCBTransistorDirect materials$2.50$ .80Direct labor4.501.00Variable overhead2.00.50Fixed cost.80.75Total cost$9.80$3.05The Bored Division sells its commercial products at full cost plus a 25% markup and believes the proprietary board made for the Savvy Division would sell for $12.25 per unit on the open market. The market price of the transistor used by the Savvy Division is $3.70 per unit.Assume that the Savvy Division is able to purchase a large quantity of transistors from an outside source at $2.90 per unit. The Transistor Division, having excess capacity, agrees to lower its transfer price to $2.90 per unit. This action would (Points : 11)allow evaluation of both divisions on the same basis.subvert the profit goals of the Transistor Division while optimizing the profit goals of the Savvy Division.cause mediocre behavior in the Transistor Division as lost opportunity costs increase.optimize the overall profit goals of Milton Industries.Question 13.13. (TCO 9) GivenSegment ASegment BNet income$ 5,0000Sales60,000$750,000Investment24,000 500,000Minimum ROI %20%6%For Segment A, ROI is (Points : 11)6%.20%.20.8%.7.5%.Question 14.14. (TCO 7) The amount of inventory that a company will tend to hold in safety stock will increase as the(Points : 11)sales level falls to a permanently lower level.cost of carrying inventory decreases.variability of sales decreases.length of time that goods are in transit decreases.Question 15.15. (TCO 7) For inventory management, ignoring safety stocks, which of the following is a valid computation of the reorder point? (Points : 11)The economic order quantityThe economic order quantity times the anticipated demand during lead timeThe anticipated demand per day during lead time times lead time in daysThe square root of the anticipated demand during the lead timeQuestion 16.16. (TCO 9) What transfer price should be used if the market for the product to be transferred is perfectly competitive? (Points : 20)Question 17.17. (TCO 7) There are six categories of costs associated with inventoriable goods for sale. What are they? (Points : 35)Question 18.18. (TCO 9) If the divisions of a company are operating in different countries, how is it possible to compare their performance? (Points : 35)


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