Overheads, efficiency ratio, cost reduction target - Multiple choice
1. Tayla Industries has total budgeted fixed over head of $100,000, and budgeted variable overhead of $20 per unit for the coming period. Expected sales are 40,000 units; expected production is 50,000 units; practical (maximum) capacity is 100,000 units. If Tayla Industries uses a normal costing system and a plant wide predetermined overhead rate, the budgeted overhead per unit is
a. $22.50.
b. $22.00.
c. $21.00.
d. None of the above (a, b, or c.).
2. Chuckle's Toy Manufacturing has recently performed an activity-based costing analysis of one of its best-selling toys, the Main Man Robot. The analysis shows the following estimated monthly cost per 1,000 unit productions run:
|
Currently feasible costs per month
|
|
|
Expected monthly revenues
|
$300,000
|
|
Unit-level resources and activities
|
$ 96,000
|
|
Batch-level resources and activities
|
20,000
|
|
Product-level resources and activities
|
40,000
|
|
Customer-level resources and activities
|
24,000
|
|
Facility-level resources and activities
|
70,000
|
|
Total feasible costs per month:
|
$250,000
|
Chuckle's management has targeted a required return of 20% of monthly revenues. To achieve its objective, Chuckle's monthly cost reduction target is:
a. $10,000
b. $50,000
c. $60,000
d. $0 - the company has already achieved its required return of 20%
3. Timber Company does roadwork for municipalities. They analyzed their business operations and found that the value added activities in paving a road take on average 90 minutes a day, and the nonvalue added activities take on average 390 minutes a day. Timber improved their value added activities from 90 minutes to 150 minutes, and reduced their nonvalue added activities to 330 minutes. Their efficiency ratio improved by
a. 12.5%
b. 31.25%
c. 40%
d. 66 2/3%