The amount of productive capacity available over and above the productive capacity
employed to meet customer demand in the current period is the unused capacity.
The constant gross-margin percentage NRV method makes the simplifying assumption
of treating the joint products as though they comprise a single product.
Fixed costs for the period are by definition a lump sum of costs that remain unchanged
and therefore the fixed overhead spending variance is always zero.
A weaknesses of the payback method is that it does not consider a project’s cash flows
after the payback period.
Work-in-Process Control will be decreased (credited) for the amount of direct-labor
costs incurred.
Partially completed units in ending work in process are 100 percent complete with
regard to their direct materials costs if the direct materials are introduced at the
beginning of the process.
The production-volume variance, which relates only to fixed manufacturing overhead,
exists under absorption costing but not under variable costing.
When spoiled goods have a disposal value, the net cost of spoilage is computed by
adding the disposal value to the costs of the spoiled goods accumulated to the
inspection point.
All inventory costs are available in financial accounting systems.
It is appropriate to incorporate expected learning-curve efficiencies when evaluating
performance.
Tally Corp. sells software during the recruiting seasons. During the current year, 10,000
software packages were sold resulting in $470,000 of sales revenue, $130,000 of
variable costs, and $48,000 of fixed costs.
If sales increase by $80,000, operating income will increase by ________. (Round
interim calculations to two decimal places and the final answer to the nearest whole
dollar.)
A) $30,588
B) $32,000
C) $48,000
D) $57,872
The Chapeau Company is noted for an exceptionally impressive line of one-size fits-all
men’s hats. Chapeau has established the following selling and distribution support
activity-cost pools and their corresponding activity drivers for the year 2018:
Required:
a. Determine the activity-cost-driver rate for each of the four selling and distribution
activities.
b. Under what circumstances is it appropriate to use each of the activity-cost drivers?
c. Describe at least one possible negative behavioral consequence for each of the four
activity-cost drivers.
Milan Company has identified three cost pools to allocate overhead costs. The
following estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 290
Machine-hours 1,681.68
Square feet of area 50
Under activity-based costing, what is the amount of machine maintenance costs allocated
to the Mossman Job? (Do not round any intermediary calculations.)
A) $1,881.88
B) $200.20
C) $1,681.68
D) $210.45
The Japanese use the term kaizen when referring to________.
A) scarce resources
B) pro forma financial statements
C) continuous improvement
D) the sales forecast
Which of the following statements is true of a peanut-butter costing system?
A) A peanut-butter costing system typically has more-homogeneous indirect cost pools.
B) A peanut-butter costing system broadly averages or spreads the cost of resources
uniformly to cost objects.
C) A peanut-butter costing system assumes that all costs are variable.
D) In a peanut-butter costing system, costs of activities are used to assign costs to other
cost objects such as products or services based on the activities the products or services
consume.
The dual-rate cost-allocation method classifies costs in each cost pool into a ________.
A) budgeted-cost pool and an actual-cost pool
B) variable-cost pool and a fixed-cost pool
C) direct-cost pool and an indirect-cost pool
D) direct-cost pool and a reciprocal-cost pool
Cross-sectional data analysis includes ________.
A) using a variety of time periods to measure the dependent variable
B) using the highest and lowest observation
C) observing different entities during the same time period
D) comparing information in different cost pools
The difference between budgeted contribution margin per composite unit for the actual
mix and the budgeted contribution margin per composite unit for the budgeted mix is
the ________.
A) material-mix variance
B) flexible-budget variance
C) sales-mix variance
D) sales-volume variance
Tran-North American Industries Inc. is looking at a change in its manufacturing process
that will cause manufacturing cycle time to increase from 250 hours to 425 hours. The
increase in the manufacturing time will result in an estimated loss in revenues of
$19,000. Carrying costs are estimated at $2.00 per hour and the controller estimates that
44 orders for raw materials are expected for the year. What is the expected change in
revenues as a result of the increase in manufacturing cycle time? (Round the final
answer to the nearest whole dollar.)
A) $34,400
B) $37,400
C) $19,000
D) $3000
Sales-mix variance = $300,000 (F), sales-quantity variance = $250,000 (F),
flexible-budget variance = $120,000 (F), market-size variance = $80,000 (U), calculate
the sales-volume variance.
A) $750,000 (F)
B) $500,000 (F)
C) $630,000 (F)
D) $550,000 (F)
Marshall Company uses a standard cost system. In March, $270,000 of variable
manufacturing overhead costs were incurred and the flexible-budget amount for the
month was $310,000. Which of the following variable manufacturing overhead entries
would have been recorded for March?
It only makes sense to implement an ABC system when ________.
A) a single product is produced in bulk
B) its benefits exceed its implementation costs
C) it traces more costs as direct costs
D) production process is labor-intensive
Ridez Manufacturing currently produces 4,000 bicycles per month. The following per
unit data apply for sales to regular customers:
The plant has capacity for 6,000 bicycles and is considering expanding production to 5,000
bicycles. What is the per unit cost of producing 5,000 bicycles?
A) $91.80 per unit
B) $111.25 per unit
C) $69.80 per unit
D) $86.20 per unit
Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of
adding a 25% markup to full costs and currently has excess capacity. The following
information pertains to the company’s normal operations per month:
Quick Connect Products is approached by an overseas customer to fulfill a one-time-only
special order for 150 units. All cost relationships remain the same except for a one-time
setup charge of $2025. No additional design, marketing, or distribution costs will be
incurred. What is the minimum acceptable bid per unit on this one-time-only special order?
A) $30.20
B) $173.20
C) $186.70
D) $188.50
Daniels Corporation used the following data to evaluate their current operating system.
The company sells items for $19 each and had used a budgeted selling price of $20 per
unit.
What is the static-budget variance of revenues?
A) $299,000 favorable
B) $260,000 favorable
C) $260,000 unfavorable
D) $299,000 unfavorable
In joint costing, which of the following changes may lead to a change in product
classification?
A) main product sales price increases due to a new application
B) byproduct sales price decreases due to a new government regulation
C) main product becomes technologically obsolete and it’s market value falls
significantly
D) byproduct losses value due to a competing products
Springfield Corporation, whose tax rate is 30%, has two sources of funds: long-term
debt with a market value of $8,400,000 and an interest rate of 8%, and equity capital
with a market value of $14,000,000 and a cost of equity of 13%. Springfield has two
operating divisions, the Blue division and the Gold division, with the following
financial measures for the current year:
What is Economic Value Added (EVA) for the Blue Division? (Round intermediary
calculations to four decimal places.)
A) -$86,580
B) $86,580
C) $404,280
D) -$230,550
To recognize the disposal value of normal spoilage, ________.
A) Manufacturing Overhead Control account is debited with spoiled goods at current
net disposal value.
B) Materials Control account is debited with spoiled goods at current net disposal
value.
C) Work-in-Process Control account is debited with spoiled goods at current net
disposal value.
D) Manufacturing Overhead Control account is credited with spoiled goods at current
net disposal value.
Making design decisions is an example of managing costs:
A) during planning phase; before they are incurred but are “locked in”
B) during the production phase; when they are incurred
C) after the production phase; after they are locked in
D) after they are committed to during the budgeting phase
Which of the following is not true of a properly executed budgetary cycle?
A) deviations from plan are only investigated at the conclusion of the fiscal year as
actual data can be finally compiled
B) past performance and market feedback are considered in setting budget amounts
C) specific financial and nonfinancial expectations are set
D) during the fiscal year, managers investigate deviations from plans
Conversion costs include ________.
A) direct materials and direct manufacturing labor costs
B) direct manufacturing labor and manufacturing overhead costs
C) direct materials and manufacturing overhead costs
D) only direct materials
In general, if inventory increases during an accounting period, ________.
A) variable costing will report less operating income than absorption costing
B) absorption costing will report less operating income than variable costing
C) variable costing and absorption costing will report the same operating income
D) both variable costing and absorption costing will show losses
Ms. Sophia Jones, the company president, has heard that there are multiple breakeven
points for every product. She does not believe this and has asked you to provide the
evidence of such a possibility. Some information about the company for 2017 is as
follows:
What are breakeven sales in units using absorption costing? (Round any intermediary
calculations to the nearest cent and your final answer up to the next whole unit.)
A) 5,321 units
B) 5,393 units
C) 6,617 units
D) 11,350 units
Premier Corp expects to spend $801,000 in 2017 in appraisal costs if it does not change
its incoming materials inspection method. If it decides to implement a new receiving
method, it will save $60,300 in fixed appraisal costs and variable costs of $0.50 per unit
of finished product. The new method involves $150,000 in training costs and an
additional $157,000 in annual equipment rental.
Internal failure costs average $180 per failed unit of finished goods. During 2014, 4%
of all completed items had to be reworked. External failure costs average $400 per
failed unit. The company’s average external failures are 3% of units sold. The company
carries no ending inventories, because all jobs are on a per order basis and a just-in-time
inventory ordering method is used.
How much will external failure costs change assuming 810,000 units of materials are
received and that product failures with customers are cut in half with the new receiving
method?
A) $16,020 increase
B) $4,860,000 decrease
C) $2,187,000 decrease
D) $9,720,000 decrease
Standard cost per output unit for each variable direct cost input is calculated by
multiplying ________.
A) standard input allowed for one output unit by standard price per input unit
B) standard input allowed for one output unit by actual price per input unit
C) actual input allowed for one output unit by standard price per input unit
D) actual input allowed for one output unit by actual price per input unit
Taunton Company uses the high-low method to estimate its cost function. The
information for 2017 is provided below:
Machine-hours Costs
Highest observation of cost driver 4,000 $332,000
Lowest observation of cost driver 3,000 $312,000
What is the estimated cost function for the above data?
A) y = 332,000 + 83X
B) y = 312,000 + 104X
C) y = 252,000 + 20.00X
D) y = 92.00X
The product strategy in which companies first determine the price at which they can sell
a new product and then design a product that can be produced at a low enough cost to
provide adequate operating income is referred to as ________.
A) cost-plus pricing
B) target costing
C) kaizen costing
D) full costing
A major advantage of using the FIFO process-costing method is that:
A) FIFO makes the unit cost calculations simpler
B) in contrast with the weighted-average method, FIFO is considered GAAP
C) FIFO provides managers with information about changes in the costs per unit from
one period to the next
D) in the period of rising prices, it leads to lower operating income and lower tax
payments, saving the company cash and increasing the company’s value
Which of the following is an area that customers want to see improved levels of
performance?
A) higher sales margin
B) quality of the product
C) lower marginal costs
D) profit margins
Loft Lake Cabinets is approached by Ms. Jenny Zhang, a new customer, to fulfill a
large one-time-only special order for a product similar to one offered to regular
customers. The following per unit data apply for sales to regular customers:
Direct materials $50.00
Direct labor 62.50
Variable manufacturing support 30.00
Fixed manufacturing support 37.50
Total manufacturing costs 180.00
Markup (60%) 108.00
Targeted selling price $288.00
Loft Lake Cabinets has excess capacity. Ms. Zhang wants the cabinets in cherry rather
than oak, so direct material costs will increase by $15 per unit.
Required:
a. For Loft Lake Cabinets, what is the minimum acceptable price of this one-time-only
special order?
b. Other than price, what other items should Loft Lake Cabinets consider before
accepting this one-time-only special order?
c. How would the analysis differ if there was limited capacity?
The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 29,500 gallons
The costs of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 29,500 gallons of saleable product was $49,000.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. What is the constant gross margin percent for Brital?
A) 66%
B) 29%
C) 32%
D) 41%
Comparison of the actual results for a project to the costs and benefits expected at the
time the project was selected is referred to as ________.
A) the audit trail
B) management control
C) a post-investment audit
D) a cost-benefit analysis
The top management at Amore Corp, a manufacturer of computer games, is attempting
to recover from a flood that destroyed some of their accounting records. The main
computer system was also severely damaged. The following information was salvaged:
What is the Alpha Division’s return on sales (e)?
A) 38.5%
B) 160.0%
C) 62.5%
D) 37.5%
Service-sector companies ________.
A) do not produce tangible products but cost accounting is still utilized in service firms.
B) do not manufacture a product and therefore do not apply or adapt cost accounting to
their operations.
C) purchase and then sell tangible products by changing their basic form and therefore
need cost accounting.
D) purchase merchandise then sell it without changing its basic form and therefor do
not need cost accounting systems.
