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An operating unit of an organization is called an investment center if it is responsible A. only for costs. B. only for revenues. C. for costs and revenues. D. for investments in assets. Answer: Chipper Division of Acme Corp. sells […]

A debit balance in the labor-efficiency variance account indicates that A. standard hours exceed actual hours. B. actual hours exceed standard hours. C. standard rate and standard hours exceed actual rate and actual hours. D. actual rate and actual hours […]

One disadvantage of the high-low method is the highest and lowest points may not be representative of normal operating activities. Answer: One advantage of the step method is that all reciprocal services are recognized between service departments. Answer: FALSE Only […]

The following information has been gathered for the GHI Manufacturing Company for its fiscal year ending December 31: What is the predetermined manufacturing overhead rate assuming direct labor cost is used as the activity base? A. 4% B. 47.2% C. […]

The Shapely Company uses the high-low method to determine its cost equation. The following information was gathered for the past year: If Shapely expects to use 10,000 machine hours next month, what are the estimated direct labor costs? A. $160,000 […]

In a sell-or-process-further decision, the additional costs incurred after the split-off point are irrelevant. Answer: The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations. Answer: […]

A machine distributor sells two models, basic and deluxe. The following information relates to its master budget. Actual sales were 7,000 basic models and 2,800 deluxe models. The actual sales prices were the same as the budgeted sales prices for […]

Traditional product costing systems (e.g., job and process costing) are designed primarily to accumulate cost information for financial reporting. Answer: In general, and holding all other things constant, an unfavorable variance decreases operating profits. Answer: TRUE A favorable variance increases […]

Which one of the following will not occur in an organization that gives managers throughout the organization maximum freedom to make decisions? (CMA adapted) A. more effective solutions to operational problems B. individual managers regarding the managers of other segments […]

Partial productivity measures are most closely related to what type of variances? A. price variances B. sales mix variances C. efficiency variances D. production volume variances Answer: Pardee Company makes 30% of its sales for cash and 70% on account. […]

The Clapton Company manufactures two products: Alpha and Beta. The costs and revenues are as follows: Total demand for Alpha is 10,000 units and for Beta is 6,000 units. Machine time is a scarce resource. During the year, 50,000 machine […]

In deciding whether to outsource a service department or not, the cost of the service department should be estimated using the step method of allocation. Answer: One potential disadvantage of the reciprocal method is it could overstate the cost of […]

Which of the following cost items is not allocable as joint costs when a single manufacturing process produces several main products and several by-products? A. Direct materials B. Variable overhead C. Direct labor D. Fixed overhead E. Freight-out Answer: Which […]

Lombard Carts produces two models of push carts, the Standard and the Deluxe. Data on operations and costs for the month are: Required: Compute the total cost for each model, assuming Lombard Carts uses: (a) Direct labor hours to allocate […]

Administrative functions are not included in the value chain because they are implicitly included in every business function. Answer: The predetermined overhead rate is computed by dividing the estimated activity of the allocation base into the estimated manufacturing overhead costs. […]

Given the following information, compute the total number of units for the period. A. 360 B. 432 C. 640 D. 840 Answer: Using beginning balances for the investment base in computing return on investment (ROI) might encourage managers to acquire […]

QC Enterprises quality control report for August contains the following items. What would be the total of the external failure costs on the August quality control report for QC Enterprises? A. $70,000 B. $110,000 C. $120,000 D. $140,000 Answer: The […]

Which of the following sales variances is further analyzed into the market size and industry volume variances? A. Quantity B. Efficiency C. Mix D. Activity Answer: The labor mix variance is actual total hours at A. actual mix times actual […]

Activity-based costing (ABC) techniques used to evaluate customer profitability can also be applied to evaluating suppliers. Answer: If a company has three cost pools, it should have three different cost allocation bases. Answer: TRUE If the same driver could be […]

Underapplied overhead occurs when the balance in the Manufacturing Overhead Control account is: A. greater than the balance in the Applied Manufacturing Overhead account. B. equal to the balance in the Applied Manufacturing Overhead account. C. less than the balance […]

The AZ Company manufactures kitchen utensils. The company is currently producing well below its full capacity. The BV Company has approached AZ with an offer to buy 20,000 utensils at $0.75 each. AZ sells its utensils wholesale for $0.85 each; […]

Managers face ethical situations on a daily basis, while accountants face them infrequently. Answer: The budget (or spending) variance for fixed production costs is the difference between the actual fixed costs and the budgeted fixed costs on the master budget. […]

A cost driver is a variable that causes costs. Answer: The production mix variance measures the impact of substituting one material for another material during the production process. Answer: TRUE The production mix can be either materials or labor. Customer […]

Level return on investments (ROI) over the life of a long-term project is more likely when ROI is computed using A. historical costs and net book values. B. historical costs and gross book values. C. current costs and net book […]

You have been provided with the following information regarding the VLCD Manufacturing Company: This information is based on forecasted sales of 33,000 units. Required: (a) What are the expected operating profits for the upcoming year? (b) What is the break-even […]

The Richburn Manufacturing Company increased its merchandise inventory by $17,000 over the year. The company also granted its customers more liberal credit terms which increased the accounts receivable by $37,500. Sales were $975,000 and the accounts payable decreased by $27,500. […]

The coefficient of correlation is A. the range of values over which the probability may be estimated based upon the regression equation results. B. the proportion of the total variance in the dependent variable explained by the independent variable. C. […]

Fenway Telcom has three divisions, commercial, retail and consumer, that share the common costs of the company’s computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year: What is […]

A company’s break-even point will not be changed by: A. a change in total fixed costs. B. a change in the number of units produced and sold. C. a change in the variable cost ratio. D. a change in the […]

In a weighted-average process costing system, the costs in the beginning Work-in-Process Inventory are not used to compute the costs transferred-out. Answer: One of the most common decisions facing managers is determining the price at which to sell one of […]

A division earning a profit will increase its return on investment (ROI) if it increases operating expenses and A. sales by the same dollar amount. B. sales by the same percentage. C. investment by the same dollar amount. D. investment […]

Cost of goods sold includes the actual costs of the goods sold and the cost of selling them to the customer. Answer: Continuous improvement involves the search for and implementation of the best way to do something as practiced by […]

Overestimating a period’s allocation base will understate the predetermined overhead rate. Answer: Unused resource capacity plus the amount of the resources used is equal to the amount of resources supplied. Answer: TRUE Unused + Used = total available Service organizations, […]

The following selected data were taken from the books of the Bixby Box Company. The company uses job costing to account for manufacturing costs. The data relate to June operations. A) Materials and supplies were requisitioned from the stores clerk […]

The process of creating a formal plan and translating goals into a quantitative format is (CMA adapted) A. budgeting. B. benchmarking. C. cost-benefit analysis. D. value-added analysis. E. activity-based costing. Answer: BC Enterprises’ quality control report for August contains the […]

Which of the following methods provides no data for service departments to monitor each other’s costs? A. Direct method. B. Reciprocal method. C. Step method. D. All three methods, Direct, Reciprocal, and Step, provide data for monitoring costs. Answer: Controllable […]