FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 24: Differential Analysis, Product Pricing, and Activity-Based Costing

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 51

Multiple Choice

Review LaterAdd Note

Review Later

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. $\begin{array} { l l } \text { Fixed factory overhead cost } & \$ 38,700 \\\text { Fixed selling and administrative costs } & 7,500 \\\text { Variable direct materials cost per unit } & 4.60 \\\text { Variable direct labor cost per unit } & 1.88 \\\text { Variable factory overhead cost per unit } & 1.13 \\\text { Variable selling and administrative cost per unit } & 4.50\end{array}$ -The cost per unit for the production and sale of the company's product is

A) $12.11
B) $12.88
C) $15.00
D) $13.50

E) A) and B)
F) All of the above

Correct Answer

verified

Show Answer

Question 52

Multiple Choice

Review LaterAdd Note

Review Later

Mallard Corporation uses the product cost concept of product pricing. Below is cost information for the production and sale of 45,000 units of its sole product. Mallard desires a profit equal to a 12% rate of return on invested assets of $800,000. $\begin{array}{lc}\text { Fixed factory overhead cost } & \$ 82,000 \\\text { Fixed selling and administrative costs } & 45,000 \\\text { Variable direct materials cost per unit } & 5.50\\\text { Variable direct labor cost per unit } & 7.65 \\\text { Variable factory overhead cost per unit } & 2.25 \\\text { Variable selling and administrative cost per unit } & 0.90\end{array}$ -The cost per unit for the production of the company's product is

A) $13.15
B) $17.22
C) $15.40
D) $15.75

E) None of the above
F) All of the above

Correct Answer

verified

Show Answer

Question 53

True/False

Review LaterAdd Note

The amount of income that would result from an alternative use of cash is called opportunity cost.

Determine the markup percentage on variable cost.

What is the target cost of the company's product?

Activity-based costing provides more accurate and useful cost data than traditional systems.

When a bottleneck occurs between two products, the company must determine the contribution margin for each product and manufacture the product that has the highest contribution margin per bottleneck hour.

Activity-based costing is determined by charging products for only the services activities) they used during production.

Magpie Corporation uses the total cost concept of product pricing. Below is cost information for the production and sale of 60,000 units of its sole product. Magpie desires a profit equal to a 25% rate of return on invested assets of $700,000. $\begin{array} { l l } \text { Fixed factory overhead cost } & \$ 38,700 \\\text { Fixed selling and administrative costs } & 7,500 \\\text { Variable direct materials cost per unit } & 4.60 \\\text { Variable direct labor cost per unit } & 1.88 \\\text { Variable factory overhead cost per unit } & 1.13 \\\text { Variable selling and administrative cost per unit } & 4.50\end{array}$ -The dollar amount of desired profit from the production and sale of the company's product is

Which of the following reasons would cause a company to reject an offer to accept business at a special price?

The differential cost of producing Product P is $55 per pound.

The amount of increase or decrease in cost that is expected from a particular course of action as compared with an alternative is

Match each of the definitions that follow with the term a-e) it defines. -Not relevant to future decisions

Miramar Industries manufactures two products: A and B. The manufacturing operation involves three overhead activities-production setup, material handling, and general factory activities. Miramar uses activity­based costing to allocate overhead to products. An activity analysis of the overhead revealed the following estimated costs and activity bases for these activities: $\begin{array} { | l | l | c | } \hline \text { Activity } & \text { Cost } & \text { Activity Base } \\\hline \text { Production setup } & \$ 250,000 & \text { Number of setups } \\\hline \text { Material handling } & 150,000 & \text { Number of parts } \\\hline \text { General overhead } & 80,000 & \text { Number of direct labor hours } \\\hline\end{array}$ Each product's total activity in each of the three areas are as follows: $\begin{array} { | l | l | l | } \hline & \text { Product A } & \text { Product B } \\\hline \text { Number of setups } & 100 & 300 \\\hline \text { Number of parts } & 40,000 & 20,000 \\\hline \text { Number of direct labor hours } & 8,000 & 12,000 \\\hline\end{array}$ -What is the activity rate for production setup?

A bottleneck happens when a key piece of manufacturing machinery can produce 1,000 units per hour and demand for the product supports a production rate of 1,200 units per hour.

What is the differential revenue from the acceptance of the offer?

Jarrett Company is considering a cash outlay of $300,000 for the purchase of land, which it could lease out for $36,000 per year. If alternative investments are available that yield a 9% return, the opportunity cost of the purchase of the land is

A practical approach that is frequently used by managers when setting normal long-run prices is the cost-plus approach.

The product cost concept includes all manufacturing costs in the cost amount to which the markup is added to determine product price.

When estimated costs are used in applying the cost-plus approach to product pricing, the estimates should be based upon ideal levels of performance.