TwoShaft Inc. manufactures a wide

TwoShaft Inc. manufactures a wide variety of parts for recreational

TwoShaft Inc. manufactures a wide variety of parts for recreational boating, including boat engines. The component is purchased by OEM (Original Equipment Manufacturers) such as Mercury and Honda, for use in the larger and more powerful outboards. The units sell for $660, and sales volume averages 32,000 units per year. Recently, TwoShaft’s major competitor lowered the price of the equivalent part to $590. The market was very competitive, and TwoShaft realized it had to meet the new price or lose significant market share. The controller assembled the following data for the most recent year:

The target cost for maintaining current market share and profitability is (round to nearest cent):

A. $466.61.

B. $417.12.

C. $396.61.

D. $390.61.

E. $460.61.

22. Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models – one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).

The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools:

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

The product cost for model B-13 is:

A. $1,457.82.

B. $1,293.32.

C. $1,159.34.

D. $905.31.

E. $980.91.

23.

Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models – one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).

The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools:

 

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

The product cost for model F-32 is:

A. $1,457.82.

B. $1,293.32.

C. $1,159.34.

D. $905.31.

E. $980.91.

24. Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models – one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).

The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools:

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

The profit margin based on manufacturing cost for model B-13 is:

A. $481.68.

B. $314.69.

C. $239.09.

D. $317.18.

E. $338.16.

25. Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models – one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).

The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools:

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

The profit margin based on manufacturing cost for model F-32 is:

A. $481.68.

B. $314.69.

C. $239.09.

D. $317.18.

E. $338.16.

 

26. Lens Care Inc. (LCI) manufactures specialized equipment for polishing optical lenses. There are two models – one mainly used for fine eyewear (F-32) and another for lenses used in binoculars, cameras, and similar equipment (B-13).

The manufacturing cost of each unit is calculated using activity-based costing, using the following manufacturing cost pools:

LCI currently sells the B-13 model for $1,775 and the F-32 model for $1,220. Manufacturing costs and activity usage for the two products are as follows:

If the market price for B-13 and F-32 are reduced to $1,695 and $1,095 respectively, and Lens Care wants to maintain market share and profitability, what is the target cost for B-13 and F-32 (round to nearest whole dollar)?

A. A

B. B

C. C

D. D

E. E

27. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13(round up to whole units)?

A. 11

B. 46

C. 34

D. 28

E. 53

28. To achieve the target cost, Lens Care plans to reduce materials handling costs. How many parts must be removed from B-13 in order to achieve the target cost for B-13 (round up to whole units)?

A. 11

B. 46

C. 34

D. 28

E. 53

29. Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Standards’ workbenches due to aggressive pricing by competitors. Quality’s workbench sells for $1,140 whereas the competition’s comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables.

Cost data based on sales of 13,000 tables:

The current cost per unit is:

A. $588.

B. $523.

C. $465.

D. $637.

E. $445.

30. The current profit per unit is:

A. $503.

B. $674.

C. $616.

 

D. $524.

E. $694.

31. Quality Industries manufactures large workbenches for industrial use. Yewell Hartnet, the Vice President for marketing at Quality Industries, concluded from market analysis that sales were dwindling for Standards’ workbenches due to aggressive pricing by competitors. Quality’s workbench sells for $1,140 whereas the competition’s comparable workbench sells for $1,060. Yewell determined that a price drop to $1,060 would be necessary to retain market share and annual sales of 13,000 tables.

Cost data based on sales of 13,000 tables:

If the profit per unit is maintained, the target cost per unit is:

A. $488.81.

B. $556.54.

C. $515.81.

D. $423.73.

E. E)$345.42.

32. In order to reduce costs so as to reach the desired target cost, Quality Industries should also focus on reducing the cost of:

A. Direct materials

B. Direct labor

C. Machine setups

D. Mechanical assembly

33. Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products:

Which is the most profitable product if there is no constraint on labor time?

A. Product X.

B. Product Y.

C. Product Z.

D. More than one of the products has equal total contributions per labor minute.

E. There isn’t enough information to answer the question.

34. Suzy Co. produces and sells three products (X, Y, and Z). The following data relate to the three products:

Which is the most profitable product if there is a constraint on labor time, so that total demand for all products cannot be met?

A. Product X.

B. Product Y.

C. Product Z.

D. More than one of the products has equal total contributions per labor minute.

E. There isn’t enough information to answer the question.

35. Ken Yalters, the COO of FreshSkin, asked his cost management team for a product line profitability analysis for his firm’s two products – Askin and Bskin. The two products are skin care products that require a large amount of research and development and advertising. He received the report below. Ken concluded that Askin was the more profitable product, and that perhaps cost-cutting measures should be applied to the Bskin product.

Seventy-five percent of the research and development and selling expenses were traceable to Askin.

Profit before taxes for the Askin product, per life-cycle income statements, is:

A. $175,000.

B. $425,000.

C. $522,500.

D. $207,500.