BA225 Managerial Accounting
University of Maryland, Baltimore County (UMBC)
Fundamental Managerial Accounting Concepts
Thomas Edmonds, Philip Olds, Bor-Yi Tsay
BA 225 TEST 2
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1. The Euro Company sells two kinds of luggage. The company projected the following cost information for the two products:
The company's total fixed costs are expected to be $280,000.
Based this information, what is the combined number of units of the two products that would be required to breakeven (round your answer to the nearest whole unit)
2. All of the following are variables that could be considered in a decision to outsource a component that is currently being produced in house. Which of the following is not likely to be relevant?
3. Brumlow Company has a contribution margin ratio of 25%. The company is considering a proposal that will increase sales by $100,000. What increase in profit can be expected assuming total fixed costs increase by $20,000?
4. Espy Company is trying to decide between the following two alternatives:
Which of the following conclusions can be drawn from this example?
5. All of the following are internal failure costs except:
6. Barney Company produces and sells two models of speakers for use with desktop computers. The following monthly data are provided:
Total monthly fixed costs are expected to be $15,000. What is the break-even volume in sales dollars at the expected sales mix?
7. A modern cost allocation process that employs multiple cost drivers is:
8. Hartsel Company makes steel and titanium handle bars for bicycles. It requires approximately 1 hour of labor to make one handle bar of either type. During the most recent accounting period, the company made 8,000 steel bars and 2,000 titanium bars. Setup costs amounted to $48,000 for the 24 batches (i.e., 12 of each type) of bars produced during the period. If activity-based costing is used to allocate overhead costs to the two products, the amount of setup cost assigned to the titanium bars will be:
9. Kleinfeldt Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increased to $6,000. How much overhead cost will be assigned to Job 2 after automation?
10. Managing quality costs to achieve the highest level of customer satisfaction is known as:
11. All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:
12. Hazell Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $4,000 to two different jobs as follows: Job 1: (10 hours) = $2,000 Job 2: (10 hours) = $2,000 Assume that, then, the production process for Job 1 was automated. Now Job 1 requires only 2 hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $6,000. Select the incorrect statement from the following.
13. Fernando Company reported the following information for its two products:
Due to labor constraints, demand for the products is greater than supply. Product X requires 2 hours of labor to produce and product Y requires 5 hours of labor to produce. Which of the following statements is true?
14. Great Products Company currently outsources an electrical switch that is a component in one of its products. The switches cost $20 each. The company is considering making the switches internally at the following projected annual production costs:
The company expects an annual need for 5,000 switches. If the company makes the product, it will have to utilize factory space currently being leased to another company for $1,500 a month. If the company decides to make the parts, total costs will be:
15. Andy is trying to decide which one of two job offers he will accept. Several items are presented below:
Select the items that are relevant to Andy's decision.
16. Gleam Clean cleans and waxes floors for commercial customers. The company is presently working at less than capacity with equipment and employees at times idle. The company recently received an order from a potential customer outside the company's normal geographic service region for a price of $9,000. The size of the proposed job is 22,000 square feet. The company's normal service costs are as follows:
If the company accepts the special offer:
17. Kritzberg Company sells a product at $60 per unit that has unit variable costs of $40. The company's break-even sales volume is $120,000. How much profit will the company make if it sells 4,000 units?
18. Quill Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:
19. Select the correct statement regarding quantitative and qualitative information.
20. Select the correct statement regarding activity-based costing (ABC).
21. Serious Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $20 each. The company is considering making the switches internally and has conducted a study to determine the costs involved. The costs below are projected annual production costs:
Assume that the company needs 10,000 of the switches, which would be produced in two batches. Assume also that the company will still be operating within the relevant range. If Serious Safety decides to make the parts under these conditions, the total relevant costs will be:
22. The costs and revenues associated with two alternatives are listed below:
Which alternative should be selected based on this information?
23. The following information is provided for two products:
Assume the products will be sold in a store where shelf space is a scarce resource and there is sufficient room for only one of the two products. Expected sales for Product X are 8,000 units, and expected sales for Product Y are 6,000 units. Which product should be sold and why?
24. Traditionally, the most popular company-wide base for allocating overhead to products was:
25. Which of the following activity costs would not likely be included in a unit-level activity cost pool?
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