Strategic planning is focused on short-term goals of less than five years.
A cost management system should use cost driver information to trace costs to products
and services.
As production becomes more automated, direct labor may be viewed more as a
conversion cost than as a prime cost.
Responsibility reports reflect the flow of information from operational units to top
management.
The difference between the actual wages paid to employees and the standard wages for
all hours worked is the labor rate variance.
The accounting rate of return considers the time value of money.
Most capital budgeting techniques focus on cash flows.
Quality control places the primary responsibility for product or service quality on the
provider.
ISO 9000 registration is required for regulated products sold in the European Union.
The objectives identified in an organization’s values statement must be objective in
nature.
The portion of an asset’s value on the balance sheet is referred to as an expired cost.
Net realizable value equals product sales revenue at split-off plus any costs necessary
to prepare and dispose of the product.
Williams Company
Williams Company has a job-order costing system and an overhead application rate of
120 percent of direct labor cost. Job #63 is charged with direct material of $12,000 and
overhead of $7,200. Job #64 has direct material of $2,000 and direct labor of $9,000.
Refer to Williams Company. What amount of direct labor cost has been charged to Job
#63?
A. $ 6,000
B. $ 7,200
C. $ 8,640
D. $14,400
The basis for measuring the cost of capital derived from bonds and preferred stock,
respectively, is the
A. pre-tax rate of interest for bonds and stated annual dividend rate less the expected
earnings per share for preferred stock.
B. pre-tax rate of interest for bonds and stated annual dividend rate for preferred stock.
C. after-tax rate of interest for bonds and stated annual dividend rate less the expected
earnings per share for preferred stock.
D. after-tax rate of interest for bonds and stated annual dividend rate for preferred stock.
For its most recent fiscal year, a firm reported that its contribution margin was equal to
40 percent of sales and that its net income amounted to 10 percent of sales. If its fixed
costs for the year were $60,000, how much were sales?
A. $150,000
B. $200,000
C. $600,000
D. can’t be determined from the information given
The Lumber Division
The Lumber Division of Home Innovations Company reported the following results for
a recent year
Refer to the Lumber Division
What was the profit margin for the Lumber Division?
A. 68%
B. 35%
C. 32%
D. 22%
Which of the following costs is irrelevant in making a decision about a special order
price if some of the company facilities are currently idle?
A. direct labor
B. equipment depreciation
C. variable cost of utilities
D. opportunity cost of production
Stillwater Corporation
The following information is available for Stillwater Corporation for the current year:
All materials are added at the start of production.
Refer to Stillwater Corporation. Using weighted average, what are equivalent units for
conversion costs?
A. 80,600
B. 78,100
C. 83,100
D. 75,600
Lewis Company has only 25,000 hours of machine time each month to manufacture its
two products. Product X has a contribution margin of $50, and Product Y has a
contribution margin of $64. Product X requires 5 hours of machine time, and Product Y
requires 8 hours of machine time. If Lewis Company wants to dedicate 80 percent of its
machine time to the product that will provide the most income, the company will have a
total contribution margin of
A. $250,000.
B. $240,000.
C. $210,000.
D. $200,000.
Lawson Corporation
Lawson Corporation has the following data for use of its machinery
Refer to Lawson Corporation. Using the high-low method, compute the variable cost
element.
A. $1.02
B. $.98
C. $1.31
D. $1.19
When inventory sits idle in a department, this would not affect the department’s
A. processing time.
B. throughput.
C. process quality yield.
D. dollar days.
Truman Corporation
The following information has been extracted from the financial records of Truman
Corporation for its first year of operations:
Refer to Truman Corporation. Based on absorption costing, Truman Corporation’s
income in its first year of operations will be
A. $21,000 higher than it would be under variable costing.
B. $70,000 higher than it would be under variable costing.
C. $30,000 higher than it would be under variable costing.
D. higher than it would be under variable costing, but the exact difference cannot be
determined from the information given.
The allocation of general overhead control costs to operating departments can be least
justified in determining
A. income of a product or functional unit.
B. costs for making management’s decisions.
C. costs of products sold.
D. costs for government’s “cost-plus” contracts.
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Assume that Administration costs have been allocated
and the balance in Personnel is $860,000. What amount is allocated to A (round to the
nearest dollar)?
A. $213,964
B. $106,982
C. $430,000
D. $0
An organization’s return on assets (ROA) is an example of a lead indicator.
In a production cell,
A. an individual worker may be expected to operate several different machines, do
setups, and perform preventive maintenance on the equipment.
B. each worker becomes an expert in the operation of a single piece of equipment.
C. machines are arranged so that similar machines are grouped together.
D. clear separation is maintained between those workers who operate the machinery
and those workers who set up and maintain the machinery.
Normal spoilage units resulting from a continuous process
A. are extended to the EUP schedule.
B. result in a higher unit cost for the good units produced.
C. result in a loss being incurred.
D. cause estimated overhead to increase.
A mixed cost has which of the following components?
A. yes no
B. yes yes
C. no no
D. no yes
Stayton Enterprises
Refer to Stayton Enterprises. For April, prime cost incurred was
A. $78,000.
B. $84,000
C. $51,000.
D. $45,000.
A company wishing to isolate variances at the point closest to the point of
responsibility will determine its material price variance when
A. material is purchased.
B. material is issued to production.
C. material is used in production.
D. production is completed.
Lindburgh Company
Lindburgh Company manufactures toy airplanes. Information on Lindburgh Company’s
labor costs follow:
The following information applies to the upcoming month of July for Lindburgh
Company:
Refer to Lindburgh Company. What amount of budgeted labor cost would appear in the
July selling, general, and administrative expense budget?
A. $10,000
B. $16,000
C. $15,000
D. $23,000
Define and discuss outsourcing.
______________________________ refers to the number of different processes
through which a product flows.
Wholesome Wheat Corporation
Wholesome Wheat Corporation grows grain in rural areas of the South. The
corporation’s costs per bushel of grain (based on an average yield of 130 bushels per
acre) follow:
Wholesome Wheat Corporation defines direct material costs as seed, fertilizer, water,
and other chemicals. The variable overhead costs represent maintenance and repair
costs of machinery. The fixed overhead costs are completely comprised of depreciation
expense on machinery and real estate taxes.
Refer to Wholesome Wheat Corporation. Assume for this question only that the
company decided to plant the grain. A local oil refiner has approached the company
about converting the crop to grain alcohol (used to make gasohol) rather than selling the
grain to the local grain elevator. If Wholesome Wheat converts the grain to alcohol, it
will incur additional costs of $0.60 per bushel, and the company will be able to sell the
crop to the oil refiner for the equivalent of $2.60 per bushel. Otherwise, the company
can sell the grain crop to the local grain elevator for $1.85 per bushel. If Wholesome
Wheat elects to sell the grain to the refinery, the company will not incur the variable
selling costs. What should the company do? Support your answer with calculations.
Costs that are incurred in the manufacture of two or more products from a common
process are referred to as _________________________.
Compare and contrast traditional manufacturing systems with flexible manufacturing
systems on the following factors:
The benefits foregone when one course of action is chosen over another are referred to
as ______________________________.
Consider the regression equation y = a + bX. The portion of the equation that
represents fixed costs is __________.
Discuss actual costing, normal costing, and standard costing.