Accounting 285 – Exam II – Spring 2006
Cool Company uses ABC costing.
Which of the following is most likely to be the
cost driver for the cost of ordering parts?
a. weight of parts ordered
b. number of orders placed
c. direct labor cost
d. depreciation expense
Robinson Company planned to make 500,000 cans of pasta sauce and spend $250,000
on tomatoes during November.
However, demand was weak due to increased
competition, and only 450,000 cans of pasta sauce were produced.
The actual cost
incurred was $230,000.
Tomato prices were as expected during the period. Which of
the following statements would be a fair statement regarding Robinson’s performance
on tomato usage?
Robinson was under flexible budget by $20,000 and did a good job
Robinson was over budget by $5,000 and did a poor job of controlling costs.
Robinson’s flexible budget for tomatoes for performance evaluation should have been
Both a and c are correct
A company normally sells its product for $15 per unit.
Normally, the variable cost of
production is $9 per unit and the variable selling cost is $2 per unit.
costs for production are $5,000,000 and for selling and administrative are $1,000,000.
An exporter has approached the company about buying 1,000,000 units at a price of
$12 per unit.
The company’s capacity is 5,000,000 units, and they are currently only
The variable selling cost of $2 per unit will be avoided on the
Assume existing sales will be unaffected by the special order.
company uses variable costing. What will be the impact on profits from accepting the
Profits will increase by $3,000,000
Profits will increase by $1,000,000
Profits will decrease by $1,000,000
Profits will decrease by $3,000,000