Cornerstones of Cost Management 2nd Edition

Chapter 1--Introduction to Cost Management Key 1. An accounting information system collects, records, summarizes, analyzes, and manages data to transform inputs into information that is provided to users. TRUE TRUE TRUE 2. The two major subsystems of the accounting information system are the financial accounting information system and

90. Which of the following positions would most likely be a staff manager? A. manager of a Sears store B. president C. manager of a clothing division D. controller A. manager of a Sears store B. president C. manager of a clothing division D. controller A. manager of a Sears

Chapter 10--Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing Key 1. Responsibility accounting is a system that measures the results of each responsibility center and compares those results with some expected or budgeted outcome. TRUE TRUE TRUE 2. A responsibility center is a part of a business whose

102. In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: Case 1 Case 2 Division A: Capacity in units 100,000 100,000 Number of units sold

Chapter 11--Strategic Cost Management Key 1. Strategic cost management is the identification of strategies to develop a competitive advantage. TRUE TRUE TRUE 2. Strategic decision making is important to achieve good inventory control. FALSE FALSE FALSE 3. The objective of strategic cost management is to reduce costs

94. Life-cycle cost management emphasizes A. cost control. B. cost reduction. C. normal costing. D. process costing. A. cost control. B. cost reduction. C. normal costing. D. process costing. A. cost control. B. cost reduction. C. normal costing. D. process costing. 95. The difference between the sales price needed

137. Prior to installing a JIT system, Clarendon Company used machine hours to assign maintenance costs to its three products of 6-inch, 8-inch, and 11-inch insulation. The maintenance costs totaled $400,000 per year. The machine hours used by each product and the quantity produced of each product are as follows:

Chapter 12--Activity-Based Management Key 1. Activity-based management focuses managements attention on activities resulting in improving customer value and profits. TRUE TRUE TRUE 2. Activity-based costing does not provide good information for activity-based management. FALSE FALSE FALSE 3. Activity-based costing is very concerned with waste issues. FALSE FALSE

102. When different units that perform the same types of activities within the same organization are compared to the unit with the best performance, this practice is called A. variance benchmarking. B. competitive benchmarking. C. external benchmarking. D. internal benchmarking. A. variance benchmarking. B. competitive benchmarking. C. external benchmarking. D.

Chapter 13--The Balanced Scorecard: Strategic-Based Control Key 1. Activity-based responsibility accounting focuses on processes and uses both operational and financial measures. TRUE TRUE TRUE 2. Activity-based responsibility accounting employs dynamic standards and emphasizes and supports continuous improvement. TRUE TRUE TRUE 3. A strategic-based responsibility accounting system transforms

93. The perspective that defines the capabilities needed by the organization to create long-term improvement is the A. financial perspective. B. customer perspective. C. process perspective. D. learning and growth perspective. A. financial perspective. B. customer perspective. C. process perspective. D. learning and growth perspective. A. financial perspective. B. customer

Chapter 14--Quality and Environmental Cost Management Key 1. A quality product or service is one that meets or exceeds customer expectations. TRUE TRUE TRUE 2. If costs of quality were evaluated accurately, they would range in the 2 to 4 percent of sales range. FALSE FALSE FALSE

100. The following information pertains to Molotov, Inc., for 2014: Sales $20,000,000 Internal failure costs 600,000 External failure costs 400,000 Appraisal costs 250,000 Prevention costs 100,000 Cost of goods sold 10,000,000 If quality costs were reduced to 2.5 percent of sales, profits would increase by A.

170. The costs of processes that produce, market, deliver, and dispose of products are called: A. Ecocosts B. Internal failure costs C. Environmental product costs D. External failure costs A. Ecocosts B. Internal failure costs C. Environmental product costs D. External failure costs A. Ecocosts B. Internal failure costs C.

a. Long-Range Performance Report Exceptional Foods For the Year Ended December 31, 2015 Actual Costs* Long-Range 2015 Target Costs** Variance Prevention costs: Training program $ 12,000 $ 7,500 $ 4,500 U Supplier evaluation 26,000 9,375 16,625 U Total prevention $ 38,000 $16,875 $ 21,125 U Appraisal costs: Test labor $

Chapter 15--Lean Accounting and Productivity Measurement Key 1. Lean manufacturing is concerned with eliminating waste in manufacturing processes. TRUE TRUE TRUE 2. Lean manufacturing adds value by reducing labor costs. FALSE FALSE FALSE 3. Customer value is the difference between what a customer receives and what they

108. Which of the following is NOT a disadvantage of partial productivity measures? A. partial measures used in isolation B. the ability to focus on a particular input C. trade-offs effects among input productivity may be missed D. a decline in the productivity of an input may lead to an

154. Information about DeLorean Corporation is as follows: 2014 2015 Output (units) 40,000 42,000 Selling price per unit $25 $25 Change in profits $48,012.50 Profit-linked measurements: Materials $550.00 Labor 412.50

Chapter 16--Cost-Volume-Profit Analysis Key 1. Cost-volume-profit analysis focuses on the break-even point and the impact of changes in fixed costs and price. TRUE TRUE TRUE 2. The break-even point is the point where total costs equal sales revenues. TRUE TRUE TRUE 3. The term net income is

89. The following diagram is a cost-volume-profit graph for a manufacturing company: The difference between line AB and line AC (area BAC) is the A. contribution ratio. B. total variable cost. C. contribution margin per unit. D. total fixed cost. A. contribution ratio. B. total variable cost.

Chapter 17--Activity Resource Usage Model and Tactical Decision Making Key 1. Tactical decision making consists of choosing among alternatives with an immediate or limited end in view. TRUE TRUE TRUE 2. Sound tactical decision making is limited to achieve small objectives. FALSE FALSE FALSE 3. The first

88. Figure 17-2 Wannabee Company manufactures a product with the following costs per unit at the expected production level of 84,000 units: Direct materials $12 Direct labor 36 Variable manufacturing overhead 18 Fixed manufacturing overhead 24 The company has the capacity to produce 90,000 units. The

119. The following three situations are given for Gioulis Architects: I. Gioulis Architects employs 10 architects who can supply a capacity of 18,000 billable hours per year. The costs related to these 10 architects amounts to $900,000 or $50 per hour. Last year, the firm billed 17,800 hours.

Chapter 18--Pricing and Profitability Analysis Key 1. The relationship between supply and demand helps set pricing. TRUE TRUE TRUE 2. Price elasticity of demand is the percent change in price demanded for a given percent change in quantity. FALSE FALSE FALSE 3. Goods that are price elastic

86. Octagonal Company has the following information for 2014: Selling price $150 per unit Variable production costs $40 per unit produced Variable selling and admin. expenses $16 per unit sold Fixed production costs $200,000 Fixed selling and admin. expenses $140,000 Units produced 10,000 units Units sold 8,000 units

148. Lilah Fabulous operates a catering company. Lilah provides food and servers for parties. She also rents tables, chairs, dinnerware, glassware, and linens. Jeff and Jessica Mantooth contacted Lilah about catering for their daughter's wedding. They have requested an open bar, hors d'oeuvres (enough for 300 people), a large wedding

Chapter 19--Capital Investment Key 1. Capital investment decisions are concerned with planning, setting goals, arranging financing, and the selection of long-term assets. TRUE TRUE TRUE 2. Independent projects directly affect the cash flows of other projects once accepted or rejected. FALSE FALSE FALSE 3. Nondiscounting models for

86. Heckrwee Industries is considering a project that would require an initial investment of $101,000. The project would result in cost savings of $62,000 in year 1 and $70,000 in year 2. The internal rate of return is A. under 15%. B. between 16% and 17%. C. between 18% and

Chapter 2--Basic Cost Management Concepts Key 1. The cost management information system is primarily concerned with producing outputs for internal users using inputs and processes needed to satisfy management objectives. TRUE TRUE TRUE 2. The Financial accounting information system provides information for three broad objectives: costing services and

126. Figure 2-11 Information from the records of the Abel Corporation for July 2014 was as follows: Sales $1,230,000 Selling and administrative expenses 210,000 Direct materials used 264,000 Direct labor 300,000 Factory overhead * 405,000 *variable overhead is $205,000, fixed overhead is $200,000 Inventories

173. Which of the following items is NEVER relevant to the cost flows of a service organization? A. finished goods inventory B. materials inventory C. work-in-process inventory D. all of the above are always relevant. A. finished goods inventory B. materials inventory C. work-in-process inventory D. all of the above

Chapter 20--Inventory Management: Economic Order Quantity, JIT, and the Theory of Constraints Key 1. Effective inventory management conserves investment capital and facilitates response to customer demands. TRUE TRUE TRUE 2. Just-in-case inventory management is a traditional inventory model based on a wait-until-needed demand. FALSE FALSE FALSE 3.

98. A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100, 200, and 300 units of X, Y, and Z, respectively, what is the expected return? A. $36,000 B. $28,000 C.

Chapter 3--Cost Behavior Key 1. Costs can display variable, fixed, or mixed behavior, and it important that they are classified accurately. TRUE TRUE TRUE 2. A cost that does not change as output changes is a variable cost, and one that changes is a fixed cost. FALSE FALSE

129. Total costs may be computed as follows: A. Fixed costs + (Variable costs per unit Unit volume) B. (Fixed costs per unit Unit volume) + Variable costs C. Fixed costs per unit + (Variable costs per unit Unit volume) D. (Fixed costs per unit Unit volume) + Variable costs

175. Figure 3-8 The following computer printout estimated overhead costs using multiple regression: t for H(0) Std. error Parameter Estimate Parameter = 0 Pr > t of parameter Intercept 1000 1.96 0.0250 510.204 Setup hours 25 81.96 0.0001 0.305 # of parts

Chapter 4--Activity-Based Costing Key 1. Unit based costing first assigns overhead costs to departmental pools and then assigns these costs to products using predetermined overhead rates. TRUE TRUE TRUE 2. Management information systems can be divided into a unit-based type and activity-based type. TRUE TRUE TRUE 3.

84. Lamar Corporation uses departmental manufacturing overhead rates to apply overhead. Direct labor cost is used to apply manufacturing overhead in Department A and machine hours are used for Department B. Dept. A Dept. B direct labor cost $66,000 $33,000 factory overhead $79,200 $60,000 direct labor hours 8,000

120. Figure 4-11 Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers: Number of Labor Product Number of Orders Transactions Labor Hours I 15 50 500

152. Figure 4-18 Marion Manufacturing uses an activity-based costing system. The company produces Model X and Model Y. Information relating to the two products is as follows: Model X Model Y Units produced 20,000 40,000 Machine hours 8,000 10,000 Direct labor hours 14,000 16,000 Engineering labor (hours)

175. Figure 4-21 Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: Model F Model G Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number

196. Simonson Company manufactures two products (DD and EE). The overhead costs have been divided into four cost pools that use the following activity drivers: Number of Number of Number of Labor Labor Product Orders Setups Transactions Hours DD 60 20 50 2,000 EE 20 80 70

Chapter 5--Product and Service Costing: Job-Order System Key 1. A production process may yield a tangible product or a service and their unique characteristics determine the best approach for developing a cost management system. TRUE TRUE TRUE 2. Manufacturing firms produce intangible products that cannot be inventoried. FALSE

113. Figure 5-5 Tonneau Corporation had the following information available for October 2014: Work in Process, October 1 $20,000 Materials placed into production, October 27,500 Direct labor, October 37,500 Factory overhead rate is 150 percent of direct labor costs. Job cost

136. Figure 5-9 The Omega Company manufactures customized motors on a job-order basis. Job 492 is an order for 100 units. It requires the following: direct materials $3,000 direct labor ($10/hr) 1,000 overhead (150% DL$) 1,500 After inspection, 2 units required rework which

Chapter 6--Process Costing Key 1. A process is a series of activities or operations, which are linked to perform a specific objective. TRUE TRUE TRUE 2. The cost flows for a process-costing system are totally different from those of a job order costing system. FALSE FALSE FALSE

92. Figure 6-7 Edelstein Company had the following data for 2014: Units in process at the beginning of the month 4,000 Units in process at the end of the month 10,000 Units started during the month 40,000 Materials are added at the beginning of the

137. Figure 6-15 The Davidson Company uses a weighted average process costing system. The following information was reported for the Assembly Process for January. Materials are added at the beginning of the process and are 100%. Units: units % complete for conversions work in process, 1/1

172. Figure 6-22 The following information is available for Department C for the month of August: Units Cost Work in process, August 1 (70% complete) 10,000 Direct materials $ 36,000 Direct labor 18,000 Manufacturing overhead 24,000

Chapter 7--Allocating Costs of Support Departments and Joint Products Key 1. Common costs are mutually beneficial costs, used in the output of two or more services or products. TRUE TRUE TRUE 2. Allocation increases total costs. FALSE FALSE FALSE 3. Producing departments create products and services to

86. Fairfield Company allocates common Building Department costs to producing departments (P1 and P2) based on space occupied, and it allocates common Personnel Department costs based on the number of employees. Space occupancy and employee data are as follows: Building Personnel Dept. P1 Dept. P2 Space occupied 2,000

139. Hibernation Company incurred $500,000 to manufacture the following products in a joint process: Selling Price Product Units Produced Weight per Unit per Unit I 1,250 8 lbs. $ 5 J 2,500 6 lbs. 10 K 3,750 4 lbs. 10 L 5,000 2 lbs. 5

164. Albemarle, Inc., has two producing departments. Each producing department is held responsible for a share of the costs of a support department. Actual and budgeted data are as follows: 2011 Support department hours used: Department X 8,000 Department Y 16,000 Total hours

Chapter 8--Budgeting for Planning and Control Key 1. A budget is a financial plan for the future used for planning, controlling, and decision making. TRUE TRUE TRUE 2. Budgeting means to set standards, receive feedback, and executing corrective action. FALSE FALSE FALSE 3. The budget director is

95. Which of the following is a financial budget? A. capital expenditures budget B. sales budget C. budgeted income statement D. overhead budget A. capital expenditures budget B. sales budget C. budgeted income statement D. overhead budget A. capital expenditures budget B. sales budget C. budgeted income statement D. overhead

129. Figure 8-8 Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2014 26,000 Unit production for 2014 26,000

176. Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed: Activity Cost Formula Design $5,000 + $0.05 per machine hour Machining $25,000 + $0.01 per machine hour Setups $35 per batch Purchasing $50 + $15 per

199. High Life Corporation has the following sales budget for the last four months of 2014: Month Sales September $400,000 October 320,000 November 440,000 December 360,000 Historically, the following trend has been established regarding cash collection of sales: 65 percent in month of sale 25 percent in

Chapter 9--Standard Costing: A Functional-Based Control Approach Key 1. Developing standards for input prices and quantities allows for a more detailed understanding of flexible budget variances. TRUE TRUE TRUE 2. Price standards specify amounts and quantity standards specify prices. FALSE FALSE FALSE 3. Standard costs are the

91. If actual fixed manufacturing overhead was $55,000 and there was a $1,400 unfavorable spending variance and a $1,000 unfavorable volume variance, budgeted fixed manufacturing overhead must have been A. $57,400. B. $53,600. C. $54,000. D. $51,700. A. $57,400. B. $53,600. C. $54,000. D. $51,700. A. $57,400. B. $53,600. C.

119. Mulligan Company uses standard costing for direct materials and direct labor. Management would like to use standard costing for variable and fixed overhead. The following monthly cost functions were developed for manufacturing overhead items: Overhead Item Cost Function Indirect materials $1.00 per DLH Indirect labor $1.25 per