In their book Killer Customers, Larry Selden and Geoffrey Colvin estimate that the
bottom 5% of a company’s customers lose as much as 100% of the company’s profits.
The job order sheets are the subsidiary ledger that supports the Finished Goods
inventory account on the balance sheet.
In a process costing system, labor and overhead costs are typically combined and
referred to as conversion costs.
The master budget is a collection of smaller budgets that lead to pro-forma financial
statements.
Contribution margin = Sales revenue – Total variable costs.
A simple ABC model can have fewer than 20 activities; a complex model may include
up to 100 activities, but no more.
A favorable variance is a variance that increases the flexible budget amount relative to
the static budgeted amount.
The calculation to allocate cost to products or services is to divide the activity driver
consumption by the activity rate.
A company is preparing its cash budget for the first quarter of the year. It has $1,000 in
cash at the beginning of the period. Cash sales for the quarter are budgeted at $30,000.
Selling and administrative expenses are budgeted at $8,000, which includes $2,000
depreciation. Cash expenses are paid in the month incurred. Cash payment for
inventory purchases are budgeted at $25,000. The desired cash balance on March 31 is
$5,000. How much financing will the company need during the quarter?
a. $0
b. $2,000
c. $5,000
d. $7,000
To make predictions about costs and income, you must first separate costs by their
behavior,
a. Fixed or variable
b. Product or selling and administrative
c. Direct material, direct labor or manufacturing overhead
d. Direct or indirect
The 2013 and 2014 partial balance sheets for Ottoman Manufacturing Company appear
below along with selected financial information:
Required: a. Calculate Ottoman’s inventory turnover and average days to sell inventory
for 2014. b. Calculate Ottoman’s accounts receivable turnover and average collection
period for 2014.
Which of the following items would not be classified as direct material for Dole Food
Company?
a. Pineapple
b. Sugar
c. Stainless steel pots
d. Glass jars
Which of the following does not use information from the selling and administrative
expense budget?
a. Manufacturing overhead budget
b. Budgeted income statement
c. Cash budget
d. All of these budgets use information from the selling and administrative expense
budget.
On the breakeven graph, if sales price and variable cost remain constant and fixed costs
decrease, the total cost line will
a. Shift upward.
b. Shift downward.
c. Shift to the right.
d. Shift to the left.
Angora, Inc. uses activity-based costing to cost its two products: Standard and Deluxe.
The company has provided the following data relating to its activities:
Required:
a. What is the activity rate for the cutting cost pool?
b. If actual activity is the same as that estimated, what is the total amount of overhead
cost allocated to the Standard product?
To determine the present value of any future amount, you need to know
a. The opportunity cost
b. The stated maximum rate of return
c. The future amount to be received
d. All of these answer choices are correct
Which of the following is not a behavioral issue related to a top-down budgeting
environment?
a. Employees may feel that an imposed budget is unfair.
b. Employees will have no motivation to attempt to meet the budget.
c. Employees may engage in budgetary padding.
d. The organization ‘s resources may be wasted.
Which of the following is a measure that relates to the customer perspective?
a. Time to market
b. Market share
c. Revenue growth
d. Defect rate
The accounting department of a large corporation would be classified as a
a. Cost center.
b. Profit center.
c. Investment center.
d. Segment.
Feel Good Massage offers customized sports massages. Feel Good charges $75 for a
one-hour massage session that includes a ten-minute session in a therapeutic spa. The
spa is leased at a cost of $3,000 per year plus $10 per use. Feel Good pays the massage
therapists $20 per session.
Required:
a.What is Feel Good’s total annual cost of massages if 60 massages are sold? If 70 are
sold? If 80 are sold?
b.What is the company’s total cost per massage if 60 massages are sold? If 70 are sold?
If 80 are sold?
c.Should Feel Good consider raising the price charged for the sports massage? Why?
Activities that are performed for specific customers are classified as a
a. Delivery-level activity.
b. Customer-level activity.
c. Accounts receivable-level activity.
d. None of these answer choices are correct..
Stone Cliff Company manufactures custom-order furniture. During 2013, actual
manufacturing overhead totaled $720,000. Based on the 2013 results, and projected
production for 2014, management prepared the 2014 budget and estimated that
manufacturing overhead would total $800,000. The estimated number of direct labor
hours for 2014 is 500,000, and the estimated amount of direct labor cost is $1,000,000.
The company plans to use direct labor hours as the basis to allocate overhead to jobs.
During May and June 2014, employees worked on the following four jobs:
All jobs were started in May. Jobs X87 and A33 were completed and delivered to
customers during June. What was the balance of the work in process inventory account
on June 30?
a. $458,000
b. $479,520
c. $465,200
d. $156,200
One assumption made when using CVP as a decision tool is that all costs can be easily
and accurately separated into fixed and variable categories.
Complete the following table by identifying each item as a source or use of cash.
Units required to meet target operating income is calculated as (Total variable costs +
Target net income) divided Contribution margin per unit.
Place an “X” in the column that corresponds to the type of activity-level referred to in
each scenario.
What items decrease the following accounts: Raw Materials Inventory, Work in Process
Inventory, Finished Goods Inventory, Manufacturing Overhead, and Cost of Goods
Sold?
Explain the flow of a product through the production process. In your explanation
include the events that increase and decrease each inventory account. In addition,
discuss the effect of transactions related to the flow of products on the balance sheet
and income statements.
Compute a predetermined overhead rate and apply manufacturing overhead to
production.
A balanced scorecard should include five to seven measures in each of four
perspectives: Learning and growth, internal business processes, customer, and financial.
Required:
List five measures that relate to the internal business processes perspective.