Reference no: EM13356825

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%