Why is it important to identify the most appropriate cost drivers for a particular product?

A) so managers can identify the activities necessary to manufacture a product

B) so managers can control product costs better

C) so managers can predict product costs better and make better decisions

D) B and C

Answer:

Cost drivers are ________.

A) the different functions in the value chain

B) different types of functional areas in the firm

C) measures of activities that require the use of resources and thereby cause costs

D) different types of cost calculations

Answer:

Within the relevant range, the total amount of ________ cost changes in direct proportion to changes in the cost driver. Within the relevant range, the total amount of ________ cost does not change in direct proportion to changes in the cost driver.

A) fixed; variable

B) variable; fixed

C) step; mixed

D) mixed; step

Answer:

What happens when the cost-driver level increases within the relevant range?

A) Total fixed costs remain unchanged.

B) Fixed costs per unit of cost driver increase.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver increase.

Answer:

Which of the following costs is a fixed cost?

A) cost of dairy ingredients used to produce ice cream

B) depreciation expense on factory building

C) fuel used by delivery trucks

D) labor wages of workers who mix dairy ingredients to make ice cream

Highlander Corporation is a manufacturer that uses the average cost method to account for costs of production. Highlander manufactures a product that is produced in three separate departments : Molding, Assembling and Finishing. The following information was obtained for the assembling department for the month of June: Work in process, June 1, 4,000 units composed of the following" Transferred in from the molding department amount $ 60,000, percent of completion 100%. cost added by the assembling department: direct materiasl $ 0. percent of completion 0%, direct labor $ 12,300, percent of completion 60%, factory overhead applied $ 17,000, work in proces , june 1 $ 77.000. The following activity occured during the month of June: (1) 20,000 units were transferred in from the molding department at a cost of $ 300,000. (2) Cost were added by the assembling department as follows: Direct materials $ 93,000. Direct labor $ 43,200, factory overhead $ 19,420 total $ 156,220. (3) Materials added at the end of the process. (4) 18,000 units were completed and transferred to the finishing department. At June 30, 6000 units were still in process. The degree of completion of work in process at June 30 follows: Driect labor 70%, Factory overhead 35%. Required Prepare in good form a cost of production report for the assembling department for the month of june. Show supporting computations in good form. The repor should include: a) Equivalent units of productions, b) total manufacturing costs, c) cost per equivalent unit.e) dollar amount of inventory cost transferred cost.

Cost of debt with fees. Kenny Enterprises will issue a bond with a par value of ​$1000​, a maturity of twenty​ years, and a coupon rate of 8.0​% with semiannual​ payments, and will use an investment bank that charges ​$25 per bond for its services. What is the cost of debt for Kenny Enterprises at the following market​ prices?

A. $920

B. $1,000

C. $1,080

D. $1,173

You are given the task of calculating the cost of capital of Kingston Toys. The company faces a tax rate of 40%. The company has 100,000 common shares. You estimate that the beta of the common stock is 1.5. The equity market risk premium is estimated to be 5%, and the risk-free rate is 5%. The company has just paid a dividend of $2 per share. You expect that the dividends will grow at a rate of 15% until Year 4. After Year 4, the dividends are expected to grow at a constant rate of 5%. You decide to employ the CAPM approach to calculate the cost of equity. The company has two different debt issues that are outstanding. The first issue consists of 1,000 semi-annual coupon bonds. Each bond has a face value of $1000. The annual coupon rate is 10%, and the bonds are currently trading at a YTM that equals 12%. The bonds will mature 10 years from now. The second issue consists of 1000 zero coupon bonds. Each bond has a face value of $1000, and will mature 15 years from now and is trading at 50% of its face value. Using the information provided above, calculate the weighted average cost of capital of Kingston Toys.

No tables or spreadsheets please - need to see calculations clearly written out (by hand is preferred for clarity). Thanks

Bill rides the subway at a cost of $.75 per trip but would switch if the price were any higher. His only alternative is a bus that takes five minutes longer, but costs only $.50. His only alternative is a bus that takes five minutes longer but costs only $.50. He makes 10 trips a year. The city is considering renovations of the subway system that will reduce the trip by 10 minutes, but fares would rise by $.40 per trip to cover the costs. The fare increase and reduced travel time both take effect in one year and last forever. The interest-rate is 25%.

a. As far as Bill is concerned, what are the present values of the project benefits and costs?

b. The city’s population consists of 55,000 middle-class people, all of whom are identical to Bill, and 5000 poor people. Poor people are either unemployed or have jobs close to their homes, so they do not use any form of public transportation. What are the total benefits and costs of the project for the city as a whole? What is the net present value of the project?

c. Some members of the city Council propose an alternative project that consists of an immediate tax of $1.25 per middle-class person to provide free legal services for the poor in both of the following two years. The legal services are valued by the poor at a total of $62,500 per year. (Assume this amount is received at the end of each of the two years.) What is the present value of the project?

d. If the city must choose between the subway project and the legal services project, which should select? What is the “distribution of weight” of each daughter received by a person that would make the present values of the two projects just equal? That is, how much must each dollar of income to report person be waited relative to that of the middle-class person? Interpret your answer.

Arden Corporation is considering an investment in a new project with an unlevered cost of capital of 8.9 % . ​Arden's marginal corporate tax rate is 40 % ​, and its debt cost of capital is 5.2 % .

a. Suppose Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new​ project?

b. Suppose Arden adjusts its debt once per year to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new project​ now?

c. Suppose the project has free cash flows of $ 9.7 million per​ year, which are expected to decline by 2.2 % per year. What is the value of the project in parts ​(a​) and ​(b​) ​now?

a. Suppose Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 . What is the appropriate WACC for the new​ project? If Arden adjusts its debt continuously to maintain a constant​ debt-equity ratio of 0.5 ​, the appropriate WACC for the new project in this case is

You must evaluate the purchase of a proposed piece of equipment. The cost of the equipment is $50,000. The installation and transportation cost of bringing the equipment to its location is $6,000. The equipment falls into the MACRS 3-year class. The project is expected to increase revenues by $80,000 each year and increase operating costs (excluding depreciation) by $30,000 each year. This project leads to an increase in net operating working capital by $10,000. You can salvage the equipment for $10,000 at the end of the project. What is the project's cash flow in Years 1, 2, 3, 4? (use MACRS of 33%, 45%, 15%, 7%). Use the NPV and IRR criteria to evaluate this project. Is this project profitable? Use marginal tax rate of 21% and WACC of 10%.

Which of the following is true of the full cost and successful efforts accounting methods?

A. In any given year, income under the full cost method is always higher than under the successful efforts method.

B. Larger oil and gas companies are quite sensitive to the full cost /successful efforts choice since the amounts of their exploration and development costs are large in comparison to their total assets.

C. Cumulative income is the same under both the full cost and the successful efforts methods.

D. Firms using the full cost method report higher assets, which makes them look bigger

name three professional cost management organizations and explain their roles and objectives