Premium Essay

Cost Accounting Chapter 11 Question1

In: Business and Management

Submitted By moosyy
Words 1176
Pages 5

Assignment Print View

Score: 40 out of 40 points (100%)



10 out of
10.00 points

Sako Company’s Audio Division produces a speaker that is used by manufacturers of various audio products. Sales and cost data on the speaker follow:

Selling price per unit on the intermediate market Variable costs per unit Fixed costs per unit (based on capacity) Capacity in units


Sako Company has a Hi­Fi Division that could use this speaker in one of its products. The Hi­Fi Division will need 10,000 speakers per year. It has received a quote of $32 per speaker from another manufacturer.
Sako Company evaluates division managers on the basis of divisional profits.

1. Assume that the Audio Division is now selling only 49,000 speakers per year to outside customers.

a. From the standpoint of the Audio Division, what is the lowest acceptable transfer price for speakers sold to the Hi­Fi Division?

b. From the standpoint of the Hi­Fi Division, what is the highest acceptable transfer price for speakers acquired from the Audio Division?



Assignment Print View

c. If left free to negotiate without interference, would you expect the division managers to voluntarily agree to the transfer of 10,000 speakers from the Audio Division to the Hi­Fi Division? Yes

d. From the standpoint of the entire company, should the transfer take place? Transfer should take place.

2. Assume that the Audio Division is selling all of the speakers it can produce to outside customers.

a. From the standpoint of the Audio Division, what is the…...

Similar Documents

Premium Essay

Intermediate Accounting Chapter 11

...Chapter 11 Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment Questions for Review of Key Topics Question 11-1 The terms depreciation, depletion, and amortization all refer to the process of allocating the cost of property, plant, and equipment and finite-life intangible assets to periods of use. The only difference between the terms is that they refer to different types of these long-lived assets; depreciation for plant and equipment, depletion for natural resources, and amortization for intangibles. Question 11-2 The term depreciation often is confused with a decline in value or worth of an asset. Depreciation is not measured as decline in value from one period to the next. Instead, it involves the distribution of the cost of an asset, less any anticipated residual value, over the asset's estimated useful life in a systematic and rational manner that attempts to match revenues with the use of the asset. Question 11-3 The process of cost allocation for plant and equipment and finite-life intangible assets requires that three factors be established at the time the asset is put into use. These factors are: 1. Service (useful) life — The estimated use that the company expects to receive from the asset. 2. Allocation base — The value of the usefulness that is expected to be consumed. 3. Allocation method — The pattern in which the usefulness is expected to be consumed. Question......

Words: 16063 - Pages: 65

Premium Essay

Cost Accounting Chapter 19

...Cost Accounting, 14e (Horngren/Datar/Rajan) Chapter 19 Balanced Scorecard: Quality, Time, and the Theory of Constraints Objective 19.1 1) Quality management provides an important competitive edge because it: A) reduces costs B) increases customer satisfaction C) often results in substantial savings and higher revenues in the short run D) All of these answers are correct. Answer: D Diff: 1 Terms: quality Objective: 1 AACSB: Ethical reasoning 2) Quality of design measures how closely the characteristics of products or services match the needs and wants of customers. Conformance quality: A) measures the same things B) is the performance of a product or service according to design and product specifications C) is making the product according to design, engineering, and manufacturing specifications D) focuses on fitness of uses from a customer perspective Answer: B Diff: 1 Terms: design quality Objective: 1 AACSB: Ethical reasoning 3) Which of the following FAIL to satisfy conformance quality? A) machines that fail to meet the needs of customers B) machines that break down C) depositing a customer's check into the correct account D) All of these answers are correct. Answer: B Diff: 2 Terms: conformance quality Objective: 1 AACSB: Reflective thinking 4) Costs incurred in precluding the production of products that do NOT conform to specifications are: A) prevention costs B) appraisal costs C) internal failure costs D)......

Words: 11093 - Pages: 45

Premium Essay

Accounting 203 Chapter 11 Test

...ACCOUNTING 203 Chapter 11 Practice Test True and False Questions 1. Fixed costs are irrelevant in a decision. 2. Any cost that is avoidable is relevant for decision purposes. 3. Sunk costs are sometimes relevant in decision making. 4. Fixed costs that do not differ between alternatives are sunk costs. 5. The book value of a machine, as shown on the balance sheet, is relevant in a decision concerning the replacement of that machine by another machine. 6. Depreciation expense on existing factory equipment is generally relevant to a decision of whether to accept or reject a special offer for a company’s product. 7. Managers should not authorize working overtime at a workstation that contains a bottleneck. 8. An avoidable cost is a cost that can be eliminated (in whole or in part) as a result of eliminating a sunk cost. Multiple Choice Questions 9. Opportunity costs are: A) not used for decision making. B) the same as variable costs. C) the same as historical costs. D) relevant to decision making. 10. The opportunity cost of making a component part in a factory with no excess capacity is the: A) variable manufacturing cost of the component. B) fixed manufacturing cost of the component. C) total manufacturing cost of the component. D) net benefit foregone from the best alternative use of the capacity required. Everett Community College Tutoring Center 1 11. Firestone Wall Company is considering renting Machine Y to replace Machine X. It is expected that Y will waste......

Words: 1284 - Pages: 6

Premium Essay

Cost Accounting

...Accounting 310 Examination Study Guide for Chapters 3 & 4 01. How will the contribution margin and the break-even point change as a result of a change in the selling price, variable costs, or fixed costs? 02. Which of the following variables will not have an impact on a company’s break-even point? Change in variable costs, sale price, number of units sold, or fixed costs? 03. What factors would cause the margin of safety to decrease? A change in fixed costs, total revenue, break-even point, or variable costs? 04. What is the breakeven point in dollars or units given an absorption income statement figures including such items as sales, cost of sales, and selling expenses as an example? 05. Be prepare to calculate a new break-even point if the price, variable costs, or fixed costs change given information from a absorption income statement. 06. Could you calculate how fixed costs would have to be decreased to maintain the same dollar amount of operating profit? 07. If a Manufacturing Company has a fixed cost of $XXX,XXX for the production of tubes. Estimated sales are ZZZ,ZZZ units. A before tax profit of $KKKKK is desired by the controller. If the tubes sell for $Y each, what unit contribution margin is required to attain the profit target? 08. Given the dollar amount of sales, fixed expenses and variable expenses, what would expected net income be if the company experienced a ?? percent increase in fixed costs and ?? percent increase in sales volume? 09. If......

Words: 672 - Pages: 3

Premium Essay

Chapter 21 Cost Accounting

...CHAPTER 21 CAPITAL BUDGETING AND COST ANALYSIS 21-1 No. Capital budgeting focuses on an individual investment project throughout its life, recognizing the time value of money. The life of a project is often longer than a year. Accrual accounting focuses on a particular accounting period, often a year, with an emphasis on income determination. 21-2 The five stages in capital budgeting are the following: 1. An identification stage to determine which types of capital investments are available to accomplish organization objectives and strategies. 2. An information-acquisition stage to gather data from all parts of the value chain in order to evaluate alternative capital investments. 3. A forecasting stage to project the future cash flows attributable to the various capital projects. 4. An evaluation stage where capital budgeting methods are used to choose the best alternative for the firm. 5. A financing, implementation and control stage to fund projects, get them under way and monitor their performance. 21-3 In essence, the discounted cash-flow method calculates the expected cash inflows and outflows of a project as if they occurred at a single point in time so that they can be aggregated (added, subtracted, etc.) in an appropriate way. This enables comparison with cash flows from other projects that might occur over different time periods. 21-4 No. Only quantitative outcomes are formally analyzed in capital budgeting decisions. Many effects of capital......

Words: 11670 - Pages: 47

Premium Essay

Accounting Chapter 11 and 12

...Week Six Homework – Chapter 11 & 12 Accounting S11-7 1. Earnings = Net income − preferred dividends per share /average number of common shares outstanding 2. Earnings per share of common stock: Income (loss) from continuing operations Income (loss) from discontinued operations Income (loss) before extraordinary item and cumulative effect of change in accounting principle Extraordinary gain or loss Cumulative effect of change in accounting principle Net income (net loss) 3. Earnings per share is useful because it relates a company’s income to one share of the company’s stock. Stock prices are quoted at an amount per share. Earnings per share is used to help determine the value of a share of stock. S11-12 1. Management of Ashburnham Computer, Inc. is responsible for the company’s financial statements. 2. The accounting standard for financial statements is accounting principles generally accepted in the United States of America. 3. Management has established and maintains internal accounting control over financial reporting to fulfill its responsibility for reliable financial information. 4. Independent Registered Public Accounting Firm, auditors located in Portage, Michigan, gave an outside opinion on Ashburnham’s financial statements. Independent Registered Public Accounting Firm released its opinion on December 28, 2010. 5. The audit covered Ashburnham’s balance sheets at September 30, 2010, and......

Words: 543 - Pages: 3

Premium Essay

Cost Accounting Chapter 11

...CHAPTER 11: DECISION MAKING AND RELEVANT INFORMATION TRUE/FALSE 1. A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses. Answer: True Difficulty: 1 Objective: 1 2. Feedback from previous decisions uses historical information and, therefore, is irrelevant for making future predictions. Answer: False Difficulty: 2 Objective: 1 Historical costs may be helpful in making future predictions, but are not relevant costs for decision making. 3. The amount paid to purchase tools last month is an example of a sunk cost. Answer: True Difficulty: 2 Objective: 2 4. For decision making, differential costs assist in choosing between alternatives. Answer: True Difficulty: 1 Objective: 2 5. For a particular decision, differential revenues and differential costs are always relevant. Answer: True Difficulty: 1 Objective: 2 6. A cost may be relevant for one decision, but not relevant for a different decision. Answer: True Difficulty: 2 Objective: 2 7. Revenues that remain the same for two alternatives being examined are relevant revenues. Answer: False Difficulty: 1 Objective: 2 Revenues that remain the same between two alternatives are irrelevant for that decision since they do not differ between alternatives. 8. Sunk costs are past costs that are unavoidable. Answer: True Difficulty: 1 Objective: 2 9. Quantitative factors......

Words: 12467 - Pages: 50

Premium Essay

Cost Accounting Chapter 9

... CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSIS 9-1 No. Differences in operating income between variable costing and absorption costing are due to accounting for fixed manufacturing costs. Under variable costing, only variable manufacturing costs are included as inventoriable costs. Under absorption costing, both variable and fixed manufacturing costs are included as inventoriable costs. Fixed marketing and distribution costs are not accounted for differently under variable costing and absorption costing. 9-2 The term direct costing is a misnomer for variable costing for two reasons: a. Variable costing does not include all direct costs as inventoriable costs. Only variable direct manufacturing costs are included. Any fixed direct manufacturing costs and any direct nonmanufacturing costs (either variable or fixed) are excluded from inventoriable costs. b. Variable costing includes as inventoriable costs not only direct manufacturing costs but also some indirect costs (variable indirect manufacturing costs). 9-3 No. The difference between absorption costing and variable costs is due to accounting for fixed manufacturing costs. As service or merchandising companies have no fixed manufacturing costs, these companies do not make choices between absorption costing and variable costing. 9-4 The main issue between variable costing and absorption costing is the proper timing of the release of fixed manufacturing costs as costs of the period: a. at the time of......

Words: 13275 - Pages: 54

Free Essay

Cost Accounting Answer Chapter 015

...CHAPTER 15 Budgeting and Financial Planning ANSWERS TO REVIEW QUESTIONS 15.1 Organization goals are broad-based statements of purpose. Strategic plans take the broad-based statements and express them in terms of detailed steps needed to attain those goals. Budgets are the short-term plans used to implement the steps included in the strategic plans. For example, a company may have a goal of "Becoming the number 1 company in the industry." The strategic plans would include such statements as: "Increase sales volume by 20% per year." The master budget would state the number of units that are needed to be produced and sold in the coming period to meet the 20% volume increase as well as the production and marketing costs necessary to attain that objective. The master budget would also include estimates of the levels of cash, accounts receivable, inventories, and fixed assets needed to support the budgeted level of activity. 15.2 Operational budgets specify how an organization's operations will be carried out to meet the demand for its goods and services. The operational budgets prepared in a hospital would include a labor budget showing the number of professional personnel of various types required to carry out the hospital's mission, an overhead budget listing planned expenditures for such costs as utilities and maintenance, and a cash budget showing planned cash receipts and disbursements. 15.3 An example of using the budget to allocate resources in a university is found...

Words: 342 - Pages: 2

Premium Essay

Cost Accounting Chapter 17 Notes

...Chapter 17 Process Costing ➢ Process Costing – the method of assigning total cost to many identical or similar units. Each unit receives the same or similar amounts of direct material costs, direct labor costs, and indirect manufacturing costs. Unit costs are computed by dividing total costs incurred by the number of units of output from the production process. The main difference between process costing and job costing is the extend of averaging used to compute unit costs of products or services. o Focus on individual units o Focus on cost components (Beginning WIP and Currently added. o Focus on when costs are introduced into the process. o Focus on beginning and ending inventories and percentage of completion. o This system in the assembly department has a single direct-cost category (DM), and a single indirect-cost category (conversion costs: DL and MOH). Assuming that we only use direct materials are added at one time and conversion costs are added evenly after that ➢ Equivalent Units of Production (EUP) – a derived amount of output units that (1) takes the quantity of each input (factor of production) in units completed and in incomplete units of work in process and (2) converts the quantity of input into the amount of completed output units that could be produced with that quantity of input. EUP is calculated separately for each input (DM, DL or MOH (CC). Ex: If 50 physical units......

Words: 1702 - Pages: 7

Premium Essay

Chapter 11 Intermediate Accounting

...CHAPTER 11 Depreciation, Impairments, and Depletion ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) | | |Brief Exercises | | | Concepts for | |Topics |Questions | |Exercises |Problems |Analysis | |1. |Depreciation methods; meaning of |1, 2, 3, 4, 5, 6, | |1, 2, 3, 4, 5, 8, |1, 2, 3 |1, 2, 3, 4, 5 | | |depreciation; choice of depreciation |10, 14, | |14, 15 | | | | |methods. |20, 21, 22 | | | | | |2. |Computation of |7, 8, 9, 13 |1, 2, 3, 4 |1, 2, 3, 4, |1, 2, 3, |1, 2, 3 | | |depreciation. | | |5, 6, 7, |4, 8, 10, 11, 12 | | | | | | |10, 15 | | | |3. |Depreciation base. |6, 7 |5 |8, 14 |1, 2, 3, |3 | | | ...

Words: 21765 - Pages: 88

Premium Essay

Cost Accounting

...Cost Management a s t r a t e g i c e m p h a s i s 5 Fifth Edition Blocher | Stout | Cokins Cost Management A Strategic Emphasis Cost Management A Strategic Emphasis Fifth Edition Edward J. Blocher University of North Carolina at Chapel Hill Kenan-Flagler Business School David E. Stout Youngstown State University Williamson College of Business Administration Gary Cokins Strategist, Performance Management Solutions SAS/Worldwide Strategy COST MANAGEMENT: A STRATEGIC EMPHASIS Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2010, 2008, 2005, 2002, 1999 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOW/DOW 0 9 ISBN 978-0-07-352694-2 MHID 0-07-352694-0 Vice president and editor-in-chief: Brent Gordon Editorial director: Stewart Mattson Executive editor: Richard T. Hercher, Jr. Editorial coordinator: Rebecca Mann Marketing manager:......

Words: 399292 - Pages: 1598

Premium Essay

Test Bank for Advanced Accounting Chapter 11 11 Student: ___________________________________________________________________________ 1. If 1 British pound can be exchanged for 180 cents of U.S. currency, what fraction should be used to compute the indirect quotation of the exchange rate expressed in British pounds? A. 1/180 B. 1/.56 C. 1.8/1 D. 1/1.8 Suppose the direct foreign exchange rates in U.S. dollars are: 2. Based on the information given above, the indirect exchange rates for the Singapore dollar and the Cyprus Pound are: A. 1.7655 Singapore dollars and 1.4235 Cyprus pounds respectively. B. 0.2975 Singapore dollars and 1.5132 Cyprus pounds respectively. C. 2.1622 Singapore dollars and 0.4625 Cyprus pounds respectively. D. 1.4235 Singapore dollars and 0.3979 Cyprus pounds respectively. Based on the information given above, how many U.S. dollars must be paid for a purchase of citrus fruits costing 10,000 Cyprus pounds? A. $25,132 B. $15,132 C. $3,979 D. $35,775 Based on the information given above, how many Singapore dollars are required to purchase goods costing 10,000 US dollars? A. 7,025 B. 14,235 C. 17,655 D. 2,975 Upon arrival in Chile, Karen exchanged $1,000 of U.S. currency into 480,000 Chilean Pesos. While returning after her two month visit, she exchanged her remaining 50,000 Pesos into $100 of U.S. currency. What amount of gain or a loss did Karen experience on the 50,000 pesos she held during her visit and converted to U.S. dollars at the departure date? A. Loss of $4. B. Gain of $4. C.......

Words: 4206 - Pages: 17

Premium Essay

Cost Accounting Chapter 1

...CHAPTER 1 The Changing Role of Managerial Accounting in a Dynamic Business Environment ANSWERS TO REVIEW QUESTIONS 1-1 The explosion in e-commerce will affect managerial accounting in significant ways. One effect will be a drastic reduction in paper work. Millions of transactions between businesses will be conducted electronically with no hard-copy documentation. Along with this method of communicating for business transactions comes the very significant issue of information security. Businesses need to find ways to protect confidential information in their own computers, while at the same time sharing the information necessary to complete transactions. Another effect of e-commerce is the dramatically increased speed with which business transactions can be conducted. In addition to these business-to-business transactional issues, there will be dramatic changes in the way managerial accounting procedures are carried out, one example being e-budgeting, which is the enterprise-wide and electronic completion of a company’s budgeting process. 2. Plausible goals for the organizations listed are as follows: (a) (1) To achieve and maintain profitability, and (2) to grow on-line sales of books, music, and other goods. (b) American Red Cross: (1) To raise funds from the general public sufficient to have resources available to meet any disaster that may occur, and (2) to provide assistance to people who are victims of a......

Words: 4230 - Pages: 17

Premium Essay

Cost Accounting

... | COST ACCOUNTING AREA: CONTROL IMBA NUMBER OF SESSIONS: 20 PROFESSOR: SALVADOR CARMONA □ Ph.D (Accounting). Universidad de Sevilla. □ Last version, November 2006 COURSE DESCRIPTION A cost accounting system collects and classifies costs and assigns them to cost objects. The goal of a cost accounting system is to measure the cost of designing, developing, producing (or purchasing), selling, distributing, and servicing particular products or services. Cost allocation is at the heart of most accounting systems. Cost behavior -how the activities of an organization affect its costs- is also fundamental to cost accounting systems. The data provided by a cost accounting system is used for various purposes, which include product costing, planning and control, and decision making. This course mainly focuses on the first of these objectives -products costing. COURSE GOALS Students, as future managers, will utilize, at a minimum, the output of cost systems, which are the primary internal information systems in a firm. Students taking this course will gain an understanding of cost accounting systems, which includes a familiarization with: The goals of cost accounting systems; the fundamental features and design of cost accounting systems; and the various uses of the data provided by cost accounting decisions. A sound understanding of these issues is necessary to interpret cost accounting system outputs; to transform them......

Words: 1350 - Pages: 6