Reworking a product is an internal failure cost.
An operations flow document shows all processes necessary to manufacture one unit of
a product.
In an ‘œend-of-pipe’ strategy, managers produce the pollutant, and then clean it up.
The formula for price/rate variance is (AP – SP) x SQ.
Market based transfer prices are most effective for common high-cost and high-volume
standardized services.
A service department provides services that benefit other internal units of an
organization.
Overapplied factory overhead that is immaterial in amount is closed to cost of goods
sold at year end.
The manager of a profit center has the ability to set selling prices.
Managers must often use multiple measures to effectively rank capital projects.
In a special order decision, unavoidable current fixed costs are taken into consideration
in setting a sales price.
Magnificent Motor Corporation
The Engine Division of Magnificent Motor Corporation uses 5,000 carburetors per
month in its production of automotive engines. It presently buys all of the carburetors it
needs from two outside suppliers at an average cost of $100. The Carburetor Division
of Magnificent Motor Corporation manufactures the exact type of carburetor that the
Engine Division requires. The Carburetor Division is presently operating at its capacity
of 15,000 units per month and sells all of its output to a foreign car manufacturer at
$106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units
that are transferred internally.
Refer to Magnificent Motor Corporation. If the two divisions agree to transact with one
another, corporate profits will
A. drop by $30,000 per month.
B. rise by $20,000 per month.
C. rise by $50,000 per month.
D. rise or fall by an amount that depends on the level of the transfer price.
Delta, Epilson, and Sigma Companies
Three new companies (Delta, Epilson, and Sigma) began operations on January 1 of the
current year. Consider the following operating costs that were incurred by these
companies during the complete calendar year:
Refer to Delta, Epilson, and Sigma Companies. Based on sales of 10,000 units, which
company will report the greater income before income taxes if variable costing is used?
A. Delta Company
B. Epsilon Company
C. Sigma Company
D. All of the companies will report the same income before income taxes.
Birmingham Corporation manufactures batons. Birmingham can manufacture 300,000
batons a year at a variable cost of $750,000 and a fixed cost of $450,000. Based on
Birmingham’s predictions, 240,000 batons will be sold at the regular price of $5.00
each. In addition, a special order was placed for 60,000 batons to be sold at a 40 percent
discount off the regular price. The unit relevant cost per unit for Birmingham’s decision
is
A. $1.50.
B. $2.50.
C. $3.00.
D. $4.00.
Terrell Corporation
Terrell Corporation produces various products used in the construction industry. The
Plumbing Division produces and sells 100,000 copper fittings each month. Relevant
information for last month follows:
Top-level managers are trying to determine how a transfer price can be set on a transfer
of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products
Division.
Refer to Terrell Corporation. A transfer price based on variable cost will be set at ____
per unit.
A. $0.50
B. $0.65
C. $0.95
D. $1.10
Management accounting
A. is more concerned with the future than is financial accounting.
B. is less concerned with segments of a company than is financial accounting.
C. is more constrained by rules and regulations than is financial accounting.
D. all of the above are true.
Victoria Company
Victoria Company manufactures three products in a joint process which costs $25,000.
Each product can be sold at split-off or processed further and then sold. 10,000 units of
each product are manufactured. The following information is available for the three
products:
Refer to Victoria Company. If Product A is processed beyond the split-off point, profit
will:
A. increase by $210,000
B. increase by $120,000
C. increase by $ 90,000
D. remain unchanged
Goods will flow through a production process at the rate of the
A. slowest part of the process.
B. fastest part of the process.
C. average of all the parts of the process.
D. time standards set using externally calibrated benchmarks.
Discretionary costs are often difficult to control because
A. it is difficult to measure the cost.
B. they cannot be changed in the short run.
C. they cannot be changed from period to period.
D. it is difficult to measure the benefits of discretionary activities.
Which of the following indicates that the first cash flow is at the end of a period?
A. yes no
B. yes yes
C. no yes
D. no no
The addition of material in a successor department that causes an increase in volume is
called
A. accretion.
B. reworked units.
C. complex procedure.
D. undetected spoilage.
The traditional compensation package provides
A. fixed monthly or weekly salaries plus performance bonuses.
B. the same salary structure for all groups of employees.
C. no incentive for non-top management to improve performance.
D. no need to include incentive compensation.
Morrison Company
Morrison Company manufactures two products: digital cameras and video cameras. The
company uses an activity-based costing system. The annual production and sales
volume of digital cameras is 10,000 units and of video cameras is 8,000 units. Direct
costs for the digital cameras are $122; for the video cameras, direct costs are $153.
For overhead costs, there are three activity cost pools with the following expected
activities and estimated total costs:
Refer to Morrison Company. Using ABC, the total cost per digital camera is
approximately:
A. $126.82
B. $127.11
C. $130.55
D. $131.50
The margin of safety would be negative if a company(‘s)
A. was presently operating at a volume that is below the break-even point.
B. present fixed costs were less than its contribution margin.
C. variable costs exceeded its fixed costs.
D. degree of operating leverage is greater than 100.
In a process costing system, the journal entry to record the transfer of goods from
Department #2 to Finished Goods Inventory is a
A. debit Work in Process Inventory #2, credit Finished Goods Inventory.
B. debit Finished Goods Inventory, credit Work in Process Inventory #1.
C. debit Finished Goods Inventory, credit Work in Process Inventory #2.
D. debit Cost of Goods Sold, credit Work in Process Inventory #2.
Profit under absorption costing may differ from profit determined under variable
costing. How is this difference calculated?
A. Change in the quantity of all units in inventory times the relevant fixed costs per
unit.
B. Change in the quantity of all units produced times the relevant fixed costs per unit.
C. Change in the quantity of all units in inventory times the relevant variable cost per
unit.
D. Change in the quantity of all units produced times the relevant variable cost per unit.
A cost management system should
A. identify and evaluate new activities.
B. determine whether the organization is effective and efficient.
C. identify the cost of consumed resources within the organization.
D. all of the above.
Money spent on employee training is a
A. prevention cost.
B. appraisal cost.
C. empowerment cost.
D. Pareto cost.
Oil Division
The Oil Division is one of the operating units of Automotive Solutions, Inc. The
following operating data of the division is presented below:
Refer to Oil Division. What was the return on investment for the Oil Division?
The rate of return required by a company that is used to determine the imputed interest
portion of future cash receipts and disbursements is referred to as the
_______________________.
What are the functions of a mission statement?
What are the characteristics of firms best-suited to open-book management?
The balanced scorecard perspective that focuses on using a firm’s intellectual capital to
adapt to customer needs through product or service innovations is the
______________________________ perspective.
A company that manufactures large quantities of homogeneous goods will normally
use a ____________________ costing system.
The three stages of production for a manufacturing firm are
_________________________, ______________________________, and
_________________________.