Next Step Company is a two-division firm and has the following information available

1. Next Step Company is a two-division firm and has the following information available for this year:
Common fixed costs $ 800,000
Direct fixed costs of Division A 200,000
Direct fixed costs of Division B 400,000
Sales revenue of Division A 1,200,000
Sales revenue of Division B 1,800,000
Variable costs of Division A 240,000
Variable costs of Division B 360,000
What is Division A's contribution margin?

		$ 840,000
		$ 960,000
		$ 560,000
		$(240,000)

2. Information for Tube division is as follows:
Net earnings for division $40,000
Asset base for division $100,000
Target rate of return 16%
Operating income margin 12%
Weighted average cost of capital 8%
What is Tube's residual income?

		$26,000
		$24,000
		$32,000
		$95,200

3. Which of the following is an anticipated result of implementing a just-in-time management philosophy?

		A smaller number of raw material orders will be placed.
		Inventory carrying costs will be lowered.
		The purchasing manager will have an increased role in ordering raw materials.
		Inventory carrying costs will be eliminated.

4. All of the following are key elements of a just-in-time philosophy, except:

		Increased coordination throughout the value chain
		Reduced inventory
		Reduced production times
		Lack of a need for accurate product cost information

5. Seemore Company manufactures binoculars. The actual costs for 2013 and 2014 were as follows:

	2013		2014
Direct materials:
Plastic case	$ 8.00		$ 7.60
Lens set	34.00		34.40
Direct labor	64.00	(1.6 hours)	60.00	(1.5 hours)
Indirect manufacturing costs:
Variable	16.00		14.20
Fixed	4.00	(100,000 units)	3.80	(120,000 units)

Beginning in 2014, Seemore implemented a continuous improvement program that required a first-year cost reduction target of a 7 percent reduction of the 2013 base.






Seemore’s continuous improvement target for direct labor in 2014 was:

		$64.00
		$60.00
		$59.52
		$70.40

6. Tracey Sales Co. has predicted the following costs for this year for 500,000 units:

	Manufacturing	Selling and Administrative
Variable	$ 800,000	$250,000
Fixed	1,200,000	300,000
Total	$2,000,000	$550,000

What is the markup on variable manufacturing costs needed to break even?

		218.75 percent
		212.50 percent
		150.00 percent
		25.00 percent

7. This capital budgeting model considers the time value of money.

		Accounting rate of return
		Internal rate of return
		Both A and B
		Neither A nor B

8. Pickleball Company is considering the following investment proposal:
Initial investment:
Depreciable assets (straight-line) $72,000
Working capital 8,000
Operations (per year for 4 years):
Cash receipts $50,000
Cash expenditures 22,000
Disinvestment:
Salvage value of equipment $6,000
Recovery of working capital 8,000
Discount rate: 10 percent
Using a spreadsheet or financial calculator, determine the net present value for the investment.
The investment's net present value is:

		$ 8,756
		$18,318
		$88,756
		$98,318

9. Which of the following expenditures would be classified as part of the initial investment phase for equipment?

		Expenditures to increase working capital
		Expenditures to maintain equipment
		Expenditures for production operations
		All of the above

10. Which of the following aspects of manufacturing must be understood in order to implement activity based costing in a production setting?

		The production process
		The activities that occur in the production process must be known
		The cost drivers that generate activities within the production process
		All of the above

11. The forecasted sales pertain to Arrow Corporation:

Month	Sales
September	$400,000
October	320,000

Finished Goods Inventory (August 31): 28,000


Arrow Corporation has a selling price of $5 on all units and expects to maintain ending inventories equal to 25 percent of the next month's sales.

How many units does Arrow expect to produce in September?

		28,000
		36,000
		34,000
		68,000

12. The Mighty Manufacturing Company expects to incur the following per unit costs for 1,000 units of production:

Direct materials	2 lb. @ $40 = $80
Direct labor	1 hr. @ $48= $48
Variable overhead	75% of direct labor costs
Fixed overhead	50% of direct labor costs

What is the total cost reported in the manufacturing cost budget?

		$128,000
		$188,000
		$ 94,000
		$ 80,000