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Questions
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. The company has a maximum of 4,800 direct labor hours per month when operating at full capacity. If there are no constraints on sales of either product, and the company could choose any proportions of product mix that they wanted, what is the optimum product mix to maximize operating income?
A) 900 units of small, 100 units of large
B) Zero units of small, 300 units of large
C) 300 units of small, 200 units of large
D) 600 units of small, zero units of large
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. The company has a maximum of 4,800 direct labor hours per month when operating at full capacity. If there are no constraints on sales of either product, and the company could choose any proportions of product mix that they wanted, what is the maximum contribution margin the company could earn?
A) $122,000
B) $176,000
C) $154,500
D) $168,000
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In making product mix decisions under constraining factors, which of the following is the key to choosing the product type to be maximized?
A) Revenue per unit
B) Contribution margin per unit of product
C) Contribution margin per unit of the constraining factor
D) Gross profit per unit using absorption costing
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. Calculate the contribution margin per direct labor hour for the large table.
A) $30 per direct labor hour
B) $32 per direct labor hour
C) $35 per direct labor hour
D) $36 per direct labor hour
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. Calculate the contribution margin per direct labor hour for the small table.
A) $29 per direct labor hour
B) $32 per direct labor hour
C) $35 per direct labor hour
D) $36 per direct labor hour
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Foster Corporation produces two products-P and Q. P sells for $4.00 per unit; Q sells for $5.25 per unit. Variable costs for P and Q are respectively, $2.50 and $3.09. There are 3,570 direct labor hours per month available for producing the two products. Product P requires 3 direct labor hours per unit and Product Q requires 4.5 direct labor hours per unit. The company can sell up to 800 units of each kind per month.
What is the maximum monthly contribution margin that Foster can generate under the circumstances? (Please round to nearest whole dollar.)
A) $1,785
B) $1,714
C) $1,762
D) $2,567
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Foster Corporation produces two products-P and Q. P sells for $4.00 per unit; Q sells for $5.25 per unit. Variable costs for P and Q are respectively, $2.50 and $3.09. There are 3,570 direct labor hours per month available for producing the two products. Product P requires 3 direct labor hours per unit and Product Q requires 4.5 direct labor hours per unit. The company can sell as many of either product as it can produce.
What is the maximum monthly contribution margin that Foster can generate under the circumstances? (Please round to nearest whole dollar.)
A) $1,785
B) $1,714
C) $1,650
D) $2,567
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Which of the following statements describes a scenario when management should consider dropping a business division?
A) The division has consistently reported an operating loss.
B) The division's avoidable fixed costs are less than its contribution margin.
C) The division's avoidable fixed costs are greater than its contribution margin.
D) The division's unavoidable fixed costs are greater than its operating loss.
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In deciding whether to drop its electronics product line, a company's manager should consider all of the following EXCEPT:
A) the variable and fixed costs it could save by dropping the product line.
B) the revenues it would lose from dropping the product line.
C) how dropping the electronics product line would affect sales of its other products, like CDs.
D) the amount of unavoidable fixed costs.
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If a product line has a negative contribution margin, the product line should probably be dropped, assuming no other significant considerations.
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In making product mix decisions under constraining factors, a company should maximize sales of the product with the highest contribution margin per unit.
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. The small table has a lower contribution margin per unit, but a higher contribution margin per direct labor hour.
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Custom Furniture manufactures a small table and a large table. The small table sells for $800, has variable costs of $520 per table, and takes eight direct labor hours to manufacture. The large table sells for $1,200, has variable costs of $720, and takes sixteen direct labor hours to manufacture. If the company has no sales limitations on either product, they should make and sell as many of the large tables as possible to maximize operating income.
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Quality Stereo Company has provided the following information regarding its activity-based costing system:
Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $75 per purchase order.
Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part.
Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts, and the direct materials cost per unit is $70. There are no direct labor costs. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders in all. What is the total cost of the 1,000 stereos?
A) $125,750
B) $55,750
C) $123,750
D) $122,000
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Which of the following statements is FALSE?
A) Many traditional costing systems can distort product costs and profitability.
B) Activity-based costing systems tend to be more costly than traditional costing systems.
C) Many traditional costing systems tend to combine various costs into a single cost pool.
D) Activity-based costing systems tend to use fewer cost pools than does a traditional costing system.
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What is the last step in developing an activity-based costing system?
A) Estimate the total quantity of the cost driver.
B) Estimate the total indirect costs of each activity.
C) Identify the activities.
D) Allocate costs to the cost object.
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Which of the following statements is CORRECT regarding activity-based costing systems?
A) They have separate indirect cost allocation rates for each activity.
B) They are not as accurate or precise as traditional costing systems.
C) They accumulate overhead costs by processing departments.
D) They are less complex and, therefore, less costly than traditional systems.
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Which of the following is MOST likely to be the cost driver for the packaging and shipping activity?
A) Number of components
B) Number of orders
C) Hours of testing
D) Number of setups
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JC Manufacturing produces products that use a variety of components. Which of the following cost drivers would be the MOST applicable for assigning material handling costs to the finished products?
A) Direct labor hours
B) Direct labor cost
C) Number of units produced
D) Number of components used
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The following four steps are necessary in order to use an activity-based costing system:
1. Compute the allocation rate for each activity.
2. Identify activities and estimate their total costs.
3. Identify the cost driver for each activity and then estimate the quantity of each driver's allocation base.
4. Allocate the indirect costs to the cost object.
In what order are these steps performed?
A) 1,2,3,4
B) 3,1,2,4
C) 2,3,1,4
D) 2,1,3,4
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An activity-based costing system can be a significant competitive advantage for a business which does bidding for manufacturing work.
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A traditional costing system employs multiple allocation rates, but an activity-based costing system uses only one single allocation rate.
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An activity-based costing system would be of less value to a business making a single product than it would be for a company with multiple products.
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Activity-based costing creates more precise matching of indirect costs with products.
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Activity-based costing systems combine many various elements of overhead into a single cost pool.
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Activity-based management refers to using activity-based cost information to make decisions that increase profits while satisfying customers' needs.