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Q:
The sequence of the budgets within the master budget are dictated by GAAP.
Q:
Why are operations managers faced with ethical and social challenges?
Q:
What is a knowledge society?
Q:
Identify the three productivity variables used in the text.
Q:
Why are organizations becoming more global?
Q:
Why are organizations changing from batch (large) shipments to just-in-time (JIT) shipments?
Q:
Services are often knowledge-based. Provide two examples, and explain why they are knowledge-based.
Q:
How do services differ from goods? Identify five ways.
Q:
Continuous budgeting is the practice of revising the entire set of budgets for the periods remaining and adding new budgets to replace those for the periods that have elapsed.
Q:
Why are services typically more difficult to standardize, automate, and make efficient?
Q:
Operations managers should be well versed in what disciplines in order to make good decisions?
Q:
Budgets are long term financial plans that generally cover more than a one-year period.
Q:
Identify the items that Fredrick W. Taylor believed management should be more responsible for.
Q:
Define operations management. Will your definition accommodate both manufacturing and service operations?
Q:
Identify two operations-related tasks carried out by Hard Rock Caf. Match each to its area of the Ten Critical Decisions.
Q:
Identify three or more operations-related tasks carried out by Hard Rock Caf.
Q:
Productivity is the ratio of __________ to __________. Using this relationship, productivity can be improved by __________ or __________.
Q:
__________ is the total of all outputs produced by the transformation process divided by the total of the inputs.
Q:
__________ is the operations management trend that moves more decision making to the individual worker.
Q:
Personnel who will have performance evaluated according to the budget standards should not be consulted and involved in preparing the budget.
Q:
__________ is the ability of the organization to be flexible enough to cater to the individual whims of consumers.
Q:
To convert variable costing net income to absorption costing net income, ____________________ the fixed production cost in ending inventory and _______________________ the fixed production cost in beginning inventory.
add; subtract
Q:
When a tangible product is not included in a service, such as with counseling, it is called a __________.
Q:
_______________________ costing is the only acceptable basis for both external reporting and tax reporting.
Absorption
Q:
Henry Ford and __________ are credited with the development of the moving assembly line.
Q:
_______________________ is the amount remaining from manufacturing margin after all variable selling, general and administrative expenses have been deducted.
Contribution margin
Q:
"Should we make or buy this component?" is an issue in the __________ critical decision area.
Q:
Reported income is identical under absorption costing and variable costing when the units produced _______________ the units sold.
equal
Q:
Marketing, Production, and __________ are the three functions that all organizations must perform to create goods and services.
Q:
________________ is the amount remaining from sales revenues after cost of goods sold has been deducted.
Gross margin
Q:
__________ is the set of activities that transforms inputs into goods and services.
Q:
_______________________ is the amount remaining from sales revenues after all variable expenses have been deducted.
Contribution margin
Q:
Starbucks stopped requiring signatures on credit-card purchases under $25 in an attempt to reduce __________ .
Q:
On a contribution margin income statement, expenses are grouped according to _______________.
cost behavior
Q:
A business's stakeholders, whose conflicting perspectives cause ethical and social dilemmas, include
A) lenders
B) suppliers
C) owners
D) employees
E) all of the above
Q:
Under absorption costing, the product unit cost consists of direct labor, direct materials, variable overhead, and _______________________.
fixed overhead
Q:
Which of the following is not among the ethical and social challenges facing operations managers?
A) honoring stakeholder commitments
B) maintaining a sustainable environment
C) efficiently developing and producing safe, quality products
D) increasing executive pay
E) providing a safe workplace
Q:
Under variable costing, the product unit cost consists of _______________________,direct materials, and variable overhead.
direct labor
Q:
Among the ethical and social challenges facing operations managers are
A) honoring financial commitments
B) maintaining a sustainable environment
C) developing low-cost products
D) providing an efficient workplace
E) all of the above
Q:
________________________ is equal to Sales minus Variable manufacturing costs.
Manufacturing margin
Q:
Among the ethical and social challenges facing operations managers are
A) honoring stakeholder commitments
B) maintaining a sustainable environment
C) efficiently developing and producing safe, quality products
D) providing a safe workplace
E) all of the above
Q:
When excess capacity exists, managers should accept a special order if the special order price exceeds the ________________________.
total variable costs
Q:
A cleaning company uses $10 of chemicals, $40 of labor, and $5 of misc. expenses for each house it cleans. After some quality complaints, the company has decided to increase its use of chemicals by 50%. By what % has multifactor productivity fallen?
A) 0%
B) 8.3%
C) 25%
D) 50%
E) none of the above or unable to determine
Q:
A per unit cost that is constant at all production levels is a ________________________ cost per unit.
variable
Q:
A cleaning company uses 10 lbs each of chemicals A, B and C for each house it cleans. After some quality complaints, the company has decided to increase its use of chemical A by an additional 10 lbs for each house. By what % has productivity (houses per pound of chemical) fallen?
A) 0%
B) 10%
C) 15%
D) 25%
E) 33%
Q:
________________________ is a costing method that includes all manufacturing costs in unit product costs.
Absorption costing
Q:
Firm A operates 10 hours each day, producing 100 parts/hour. If productivity were increased 20%, how many hours would the plant have to work to produce 1000 parts?
A) less than 2 hours
B) between 9 and 10 hours
C) between 2 and 6 hours
D) between 6 and 8 hours
E) between 8 and 9 hours
Q:
________________________ costing treats fixed overhead as a period cost.
Variable
Q:
Productivity tends to be more difficult to improve in the service sector because the work is
A) often difficult to automate
B) typically labor-intensive
C) frequently processed individually
D) often an intellectual task performed by professionals
E) All of the above make service productivity more difficult.
Q:
Absorption costing is also called ________________________ costing.
full
Q:
The service sector has lower productivity improvements than the manufacturing sector because
A) the service sector uses less skilled labor than manufacturing
B) the quality of output is lower in services than manufacturing
C) services usually are labor-intensive
D) service sector productivity is hard to measure
E) none of the above
Q:
A traditional product costing approach is referred to as ______________.
absorption costing or full costing
Q:
Three commonly used productivity variables are
A) quality, external elements, and precise units of measure
B) labor, capital, and management
C) technology, raw materials, and labor
D) education, diet, and social overhead
E) quality, efficiency, and low cost
Q:
_______________ and _______________ are product costs that can be directly traced to the product.
Direct labor; direct materials (either order)
Q:
Which of the following is not true when explaining why productivity tends to be lower in the service sector than in the manufacturing sector?
A) Services are typically labor-intensive.
B) Services are often difficult to evaluate for quality.
C) Services are often an intellectual task performed by professionals.
D) Services are difficult to automate.
E) Service operations are typically capital intensive.
Q:
The factor responsible for the largest portion of productivity increase in the U.S. is
A) labor
B) management
C) capital
D) All three combined; it is impossible to determine the contribution of individual factors.
E) None of these
Q:
Product costs consist of direct labor, direct materials, and _________________.
manufacturing overhead
Q:
Fanelli Company had net income of $678,000 based on variable costing. Beginning and ending inventories were 5,000 units and 4,200 units, respectively. Assume the fixed overhead cost per unit was $.50 for both the beginning and ending inventory. What is net income under absorption costing?
Q:
The largest contributor to productivity increases is __________, estimated to be responsible for __________ of the annual increase.
A) management; over one-half
B) Mr. Deming; one-half
C) labor; two-thirds
D) capital; 90%
E) technology; over one-half
Q:
Toth, Inc. had net income of $950,000 based on variable costing. Beginning and ending inventories were 60,000 units and 56,000 units, respectively. Assume the fixed overhead cost per unit was $.85 for both the beginning and ending inventory. What is net income under absorption costing?
Q:
Productivity can be improved by
A) increasing inputs while holding outputs steady
B) decreasing outputs while holding inputs steady
C) increasing inputs and outputs in the same proportion
D) decreasing inputs while holding outputs steady
E) none of the above
Q:
Anchovy, Inc., a producer of frozen pizzas, began operations this year. During this year, the company produced 16,000 cases of pizza and sold 15,000. At year-end, the company reported the following income statement using absorption costing:
Sales (15,000 $48) $720,000
Cost of goods sold (15,000 $19) 285,000
Gross margin $435,000
Selling and administrative expenses 79,000
Net income $356,000
Production costs per case total $19, which consists of $15.50 in variable production costs and $3.50 in fixed production costs (based on the 16,000 units produced). Eight percent of total selling and administrative expenses are variable. Compute net income under variable costing.
$356,000 - ($3.50 1,000 units) = $352,500
Q:
Which of the following nets the largest productivity improvement?
A) increase output 15%
B) decrease input 15%
C) increase both output and input by 5%
D) increase output 10%, decrease input 3%
E) decrease input 10%, increase output 3%
Q:
Chilly Chips, Inc., a producer of ice cream, began operations this year. During this year, the company produced 160,000 cartons of ice cream and sold 145,000. At year-end, the company reported the following income statement using absorption costing:
Sales (145,000 $6.50) $942,500
Cost of goods sold (145,000 $3.50) 507,000
Gross margin $435,000
Selling and administrative expenses 252,000
Net income $183,000
Production costs per carton total $3.50, which consists of $2.30 in variable production costs and $1.20 in fixed production costs (based on the 16,000 units produced). Sixty percent of total selling and administrative expenses are variable. Compute net income under variable costing.
$183,000 - ($1.20 15,000 units) = $165,000
Q:
Which productivity variable has the greatest potential to increase productivity?
A) labor
B) globalization
C) management
D) capital
E) none of the above
Q:
The total of all outputs produced by the transformation process divided by the total of the inputs is
A) utilization
B) greater in manufacturing than in services
C) defined only for manufacturing firms
D) multifactor productivity
E) none of the above
Q:
Dataport Company reports the following annual cost data for its single product:
Normal production and sales level 89,000 units
Direct materials $14.00 per unit
Direct labor $21.00 per unit
Variable overhead $27.00 per unit
Fixed overhead $3,738,000 in total
This product is normally sold for $230 per unit. If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing?
Q:
Heather, Incorporated reports the following annual cost data for its single product:
Normal production and sales level 60,000 units
Direct materials $9.00 per unit
Direct labor $6.50 per unit
Variable overhead $11.00 per unit
Fixed overhead $720,000 in total
This product is normally sold for $56 per unit. If Heather increases its production to 80,000 units while sales remain at the current 60,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing?
Q:
Productivity measurement is complicated by
A) the competition's output
B) the fact that precise units of measure are often unavailable
C) stable quality
D) the workforce size
E) the type of equipment used
Q:
The Dulac Box plant produces 500 cypress packing boxes in two 10-hour shifts. Due to higher demand, they have decided to operate three 8-hour shifts instead. They are now able to produce 600 boxes per day. What has happened to productivity?
A) It has not changed.
B) It has increased by 37.5 boxes/hr.
C) It has increased by 20%.
D) It has decreased by 8.3%.
E) It has decreased by 9.1%.
Q:
Countdown Inc. sold 17,000 units of its product at a price of $81 per unit. Total variable cost per unit is $72.09, consisting of $69.05 in variable production cost and $3.04 in variable selling and administrative cost. Compute the contribution margin for the company.
$81.00 - $72.09 = $8.91 17,000 units = $151,470
Q:
The Dulac Box plant works two 8-hour shifts each day. In the past, 500 cypress packing boxes were produced by the end of each day. The use of new technology has enabled them to increase productivity by 30%. Productivity is now approximately
A) 32.5 boxes/hr
B) 40.6 boxes/hr
C) 62.5 boxes/hr
D) 81.25 boxes/hr
E) 300 boxes/hr
Q:
Materials Corporation sold 12,000 units of its product at a price of $67 per unit. Total variable cost per unit is $54.94, consisting of $45.05 in variable production cost and $9.89 in variable selling and administrative cost. Compute the contribution margin for the company.
$67.00 - $54.94 = $12.06 12,000 units = $144,720
Q:
The Dulac Box plant produces 500 cypress packing boxes in two 10-hour shifts. What is the productivity of the plant?
A) 25 boxes/hr
B) 50 boxes/hr
C) 5000 boxes/hr
D) none of the above
E) not enough data to determine productivity
Q:
Maloney Co. provided the following information for the year 2015:
Units produced and sold 4,400 units
Selling Price $400/unit
Direct materials $85/unit
Direct labor $55/unit
Fixed manufacturing overhead $130,000/yr
Fixed selling and administrative costs $165,000/yr
Variable manufacturing overhead $40/unit
There are no beginning inventories. Prepare an income statement using the variable costing format.
Maloney Co.Income StatementYear Ended December 31, 2015
Sales 1,760,000
- Variable Costs 792,000
Contribution Margin 968,000
- Fixed Costs 295,000
Operating Income 673,000
Feedback: Variable costs = 4,400 units ($85 + $55 + $40) = $792,000
Fixed costs = $130,000 + $165,000 = $295,000
Q:
State Industries has the following information for 2015:
Units produced and sold 3,000 units
Selling Price $260/unit
Direct materials $20/unit
Direct labor $40/unit
Fixed manufacturing overhead $120,000/yr
Fixed selling and administrative costs $160,000/yr
Variable manufacturing overhead $35/unit
Variable selling and administrative costs $25/unit
There are no beginning inventories. Prepare an income statement for the year under absorption costing.
State IndustriesIncome StatementYear Ended December 31, 2015
Sales(3,000 units $260) $780,000
- Cost of Goods Sold 405,000
Gross Margin 375,000
- Selling and Administrative Costs 235,000
Operating Income 140,000
Feedback: Cost of goods sold = {Total variable manufacturing costs (x units sold)} + Fixed manufacturing overhead.
Cost of goods sold = [($20 + $40 + $35)(Total variable manufacturing costs) 3,000 units] + $120,000 (Fixed manufacturing overhead). Cost of goods sold = $405,000.
Selling and administrative Costs = ($25 3,000 units) + $160,000 = $235,000.
Q:
Gibson Valves produces cast bronze valves on an assembly line, currently producing 1600 valves per shift. If the production is increased to 2000 valves per shift, labor productivity will increase by
A) 10%
B) 20%
C) 25%
D) 40%
E) 50%
Q:
32 Degrees, Inc., a manufacturer of frozen food, began operations on July 1 of the current year. During this time, the company produced 140,000 units and sold 140,000 units at a sales price of $125 per unit. Cost information for this period is shown in the following table:
Q:
Gibson Valves produces cast bronze valves on an assembly line, currently producing 1600 valves each 8-hour shift. If the productivity is increased by 10%, it would then be
A) 180 valves/hr
B) 200 valves/hr
C) 220 valves/hr
D) 880 valves/hr
E) 1760 valves/hr
Q:
Wrap-It Company, a manufacturer of wrapping paper, began operations on June 1 of the current year. During this time, the company produced 370,000 units and sold 310,000 units at a sales price of $50 per unit. Cost information for this period is shown in the following table:
Production costs
Direct materials $2.00 per unit
Direct labor $.80 per unit
Variable overhead $814,000 in total
Fixed overhead $481,000 in total
Non production costs
Variable selling and administrative $78,000 in total
Fixed selling and administrative $210,000 in total
a. Prepare Wrap-It's December 31st income statement for the current year under absorption costing.
b. Prepare Wrap-It's December 31st income statement for the current year under variable costing.
a.
WRAP-IT COMPANYIncome Statement (Absorption Costing)For the seven months ended December 31, xx
Sales (310,000 $50) $15,500,000
Cost of goods sold (310,000 $6.30*) 1,953,000
Gross margin 13,547,000
Selling and administrative expenses ($78,000 + $210,000) 288,000
Net income $13,259,000
*$2 + $.80 + ($814,000/370,000) + ($481,000/370,000) = $6.30
b.
WRAP-IT COMPANYIncome Statement (Variable Costing)For the seven months ended December 31, xx
Sales (310,000 $50) $15,500,000
Variable expenses
Variable production costs (310,000 $5.00*) 1,550,000
Variable selling and administrative 78,000
Contribution margin 13,872,000
Fixed expenses
Fixed overhead 481,000
Fixed selling and administrative expenses 210,000
Net income $13,181,000
*$2 + $.80 + ($814,000/370,000) = $5.00