Efficiency ratio and cost reduction target

Reference no: EM1315812

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%

Reference no: EM1315812

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