Exam 11: Reporting for Control

Which of the following would be classified as an internal failure cost on a quality cost report?

Leis Retail Company has two stores: M and N.During March,Store N had sales of $180,000,a segment margin of 30%,and traceable fixed expenses of $26,000.The company as a whole had a contribution margin ratio of 25% and $120,000 in total contribution margin.Based on this information,what were the total variable expenses in Store M for the month?

Galant Company's quality cost report is to be based on the following data: Downtime caused by quality problems \ 11,000 Rework labour and overhead \ 32,000 Quality circles \ 44,000 Returns arising from quality problems \ 97,000 Supervision of testing and inspection activities \ 18,000 Test and inspection of in-process goods \ 90,000 Systems development \ 28,000 Amortization of test equipment \ 25,000 Warranty repairs and replacements \ 59,000 Answer: Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.

A company had the following results last year: sales,$700,000; return on investment,28%; and margin,8%.What were the average operating assets last year?

The Axle Division of LaBate Company makes and sells only one product. Annual data on the Axle Division's single product follow: Unit Selling Price \ 50 Unit Variable Cost \ 30 Total Fixed Costs \ 200,000 Average Operating Assets \ 750,000 Minimum Required Rate of Return 12\% -Suppose the manager of Axle desires an annual residual income of $45,000.In order to achieve this,Axle should sell how many units per year?

Ieso Company has two stores: J and K. During November, Ieso Company reported operating income of $30,000 and sales of $450,000. The contribution margin in Store J was $100,000, or 40% of sales. The segment margin in Store K was $30,000, or 15% of sales. Traceable fixed expenses were $60,000 in Store J, and $40,000 in Store K. -What were Ieso Company's total fixed expenses for the year?

The following data are available for the South Division of Redride Products,Inc.and the single product it makes: Unit Selling Price \ 20 Variable Cost per Unit \ 12 Annual Fixed Costs \ 280,000 Average Operating Assets \ 1,500,000 How many units must South sell each year to have an ROI of 16%?

Which of the following best describes a segment of a business responsible for both revenues and costs?

When a division is operating at full capacity,the transfer price to other divisions should include opportunity costs.

Faust Company's quality cost report is to be based on the following data: Quality engineering \ 68,000 Quality circles \ 35,000 Supervision of testing and inspection activities \ 72,000 Net cost of scrap \ 76,000 Test and inspection of in-process goods \ 6,000 Liability arising from defective products \ 3,000 Warranty repairs and replacements \ 56,000 Debugging software errors \ 68,000 Rework labour and overhead \ 19,000 - What will be the total external failure cost appearing on the quality cost report?

The following information is available on Company B: Sales \ 950,000 Operating Income \ 56,000 Shareholders' Equity \ 100,000 Average Operating Assets \ 190,000 Minimum Required Rate of Return 20\% -What is the turnover for Company B?

The Holmes Division recorded operating data as follows for the past year: Sales \ 200,000 Operating Income \ 25,000 Average Operating Assets \ 100,000 Shareholders' Equity \ 80,000 Residual Income \ 13,000 -For the past year,what was the turnover?

Division A produces a part with the following characteristics: Capacity in Units 50,000 units Selling Price per Unit \ 30 Variable Costs per Unit \ 18 Fixed Costs per Unit \ 3 Division B, another division in the company, would like to buy this part from Division A. Division B is presently purchasing the part from an outside source at $\$ 28$ per unit. If Division A sells to Division $B , \$ 1$ in variable costs can be avoided. - Suppose Division A is currently operating at capacity and can sell all of the units it produces on the outside market for its usual selling price.From the point of view of Division A,any sales to Division B should be priced no lower than which of the following?

The use of return on investment as a performance measure may lead managers to make decisions that are NOT in the best interests of the company as a whole.

$\text { Eacker Company's quality cost report is to be based on the following data: }$ Quality engineering \ 72,000 Net cost of spoilage \ 70,000 Re-entering data because of keying errors \ 88,000 Test and inspection of incoming materials \ 68,000 Test and inspection of in-process goods \ 97,000 Technical support provided to suppliers \ 83,000 Maintenance of test equipment \ 31,000 Product recalls \ 73,000 Warranty repairs and replacements \ 46,000 - What will be the total prevention cost appearing on the quality cost report?

Divisions A and B of Denner Company reported the following results for October: Division A Division B Sales \ 90,000 \ 150,000 Variable Expenses as a 70\% 60\% Percentage of Sales Segment Margin \ 2,000 \ 23,000 If common fixed expenses were $31,000,what were the total fixed expenses?

Ordinarily,managers are NOT aware of the magnitude of their quality costs since these costs cut across departmental lines and are not normally tracked and accumulated by the cost system.

Which of the following would be classified as an external failure cost on a quality cost report?

The following information is available on Company A: Sales \ 900,000 Operating Income \ 36,000 Shareholders' Equity \ 100,000 Average Operating Assets \ 180,000 Minimum Required Rate of Return 15\% -What is Company A's residual income?

Harvie Company's quality cost report is to be based on the following data: Lost sales due to poor quality \ 50,000 Quality engineering \ 66,000 Test and inspection of incoming materials \ 88,000 Re-entering data because of keying errors \ 36,000 Net cost of scrap \ 46,000 Tets and inspection of in-process goods \ 62,000 Warranty repair's and replacements \ 32,000 Net cost of spoilage \ 89,000 Technical support provided to suppliers \ 70,000 Required: Prepare a quality cost report in good form with separate sections for prevention costs,appraisal costs,internal failure costs,and external failure costs.