ACCT 102 Chapters 9 & 10

A retailer has three departments - Housewares, Appliances, and Clothing - and buys advertising that benefits all departments. Advertising expense is $150,000, and departmental sales follow: Housewares, $356,250; Appliances, $641,250; and Clothing, $427,500. How much advertising expense is allocated to Appliances if allocation is based on departmental sales?

• $37,500

• $67,500

• $45,000

• $150,000

• $641,250

A division reports the information below. What is the divisions return on investment?

Sales........................$500,000

Income.........................75,000

Average Assets.......200,000

• 37.5%

• 30%

• 15%

• 40%

• 2.5%

A division reports the information below. What is the investment turnover?

Sales........................$500,000

Income.........................75,000

Average Assets.......200,000

• 37.5

• 15

• 2.5

• 2.67

• 4

A company operates three retail departments X, Y, and Z as profit centers. Which department has the largest departmental contribution to overhead, and what is the amount contributed?

• Department Y, $55,000

• Department Z, $125,000

• Department X, $500,000

• Department Z, $200,000

• Department X, $60,000

Brownley Company has one service department and two operating (production) departments. Payroll Department costs are allocated to the two operating departments in proportion to the number of employees in each. Listed below are the operating data for the current period:

The total cost of operating the Milling Department for the current period is:

• $13,600.

• $97,600.

• $20,400.

• $84,000.

• $104,400.

A cost that cannot be changed because it arises from a past decision and is irrelevant to future decisions is

• an uncontrollable cost

• an out-of-pocket cost

• a sunk cost

• an incremental cost

• an opportunity cost

A company produced 3,000 defective music players. The player cost $12 each to produce. A recycler offers to purchase the defective players as is for $8 each. The defects can be reworked for $10 each and the players then sold at their regular market price of $19 each. The company should:

• rework the players and sell at regular price

• sell the players to the recycler at $8 each

• sell 2,000 to the recycler and rework the rest

• sell 1,000 to the recycler and rework the rest

• throw the defective players away

A company's productive capacity is 480,000 machine hours. Product X requires 10 machine hours to produce; Product Y requires 2 machine hours to produce. Product X sells for $32 per unit and has variable costs of $12 per unit. Product Y sells for $24 per unit and has variable costs of $10 per unit. Assuming that the company can sell as many of either product it produces, it should

• Produce 48,000 units of Product X

• Produce X and Y in the ratio of 83% X and 17% Y

• Produce two of Product X for every one of Product Y

• Product only Product X

• Produce only Product Y

A company receives a special one-time order for 3,000 units of its product at $15 per unit. The company has excess capacity and it currently produces and sells the units at $20 each to its regular customers. Production costs are $13,50 per unit, which includes $9 of variable costs. To produce the special order, the company must incur additional fixed costs of $5,000. Should the company accept the special order?

• Yes, the revenue exceeds the costs

• No, as costs exceed revenue

• No, as the offer is $5 less than regular price

• Yes, as costs exceed revenue

• No, because costs exceed $15 per unit when total costs are considered

Elliot Company produces two products, Product A and Product B. Elliot can sell all the units it produces of each product, but it has limited production capacity. Product A requires 4 direct labor hours per unit, and Product B requires 5 direct labor hours per unit. Contribution margin per unit is $220 for Product A and $250 for Product B. If the company has 20,000 direct labor hours available, the best sales mix is:

• 2,000 units of Product A and 2,500 units of Product B.

• 2,500 units of Product A and 2,000 units of Product B.

• 0 units of Product A and 2,000 units of Product B.

• 4,000 units of Product A and 0 units of Product B.

• 5,000 units of Product A and 0 units of Product B.