The net realizable value approach is used to account for scrap and by-products when the
net realizable value is significant.
The amount of raw materials that must be purchased can be computed by the following
formula: Beginning inventory + Materials required – Ending inventory.
When making a decision to discontinue an operating segment, avoidable fixed costs are
not considered.
Joint costs occur before the split-off point in a production process.
Variable costing is commonly used for internal reporting.
Which of the following best represents a screening decision?
A. determining which project has the highest net present value
B. determining if a project’s internal rate of return exceeds the firm’s cost of capital
C. determining which projects are mutually exclusive
D. determining which are the best projects
ABC should be used in which of the following situations?
A. single-product firms with multiple steps
B. multiple-product firms with only a single process
C. multiple-product firms with multiple processing steps
D. in all manufacturing firms
Which of the following is not a question that needs to be answered with regard to
quality control?
A. What happens to the spoiled units?
B. What is the actual cost of spoilage?
C. How can spoilage be controlled?
D. Why does spoilage happen?
The standard predominantly used in Western cultures for motivational purposes is a(n)
____ standard.
A. expected annual
B. ideal
C. practical
D. theoretical
An internal reconciliation account is not required for internal transfers based on
A. market value.
B. dual prices.
C. negotiated prices.
D. cost.
Fox Corporation
Fox Corporation. has the following information for August:
All material is added at the start of the process and all finished products are transferred
out.
Refer to Fox Corporation. Assume that weighted average process costing is used. What
is the cost per equivalent unit for material?
A. $0.55
B. $1.05
C. $1.31
D. $1.83
In evaluating the performance of a profit center manager, the manager
A. and the sub-unit should be evaluated on the basis of the same costs and revenues.
B. should only be evaluated on the basis of variable costs and revenues of the sub-unit.
C. should be evaluated on all costs and revenues that are controllable by the manager
D. should be evaluated on all costs and revenues that can be directly traced to the
sub-unit.
Wimberley Company
Wimberley Company has the following information available for December when 3,500
units were produced (round answers to the nearest dollar).
Refer to Wimberley Company. What is the labor rate variance?
A. $875 F
B. $865 F
C. $865 U
D. $875 U
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
If A and C are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Riley Company. Which products would be processed further?
A. only Product A
B. only Product C
C. both Products A and C
D. neither Product A or C
In computing the accounting rate of return, the ____ level of investment should be used
as the denominator.
A. average
B. initial
C. residual
D. cumulative
The detailed plan for the acquisition and replacement of major portions of property,
plant, and equipment is known as the
A. capital budget.
B. purchases budget.
C. commitments budget.
D. treasury budget.
Perry Corporation is composed of three operating divisions. Overall, the Perry
Corporation has a return on investment of 20%. Division A has a return on investment
of 25%. If Perry Corporation. evaluates its managers on the basis of return on
investment, how would the Division A manager and the Perry Corporation president
react to a new investment that has an estimated return on investment of 23%?
A. accept accept
B. accept reject
C. reject accept
D. reject reject
Glassman Company
Glassman Company produces two products: A and B. The company has three overhead
functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each
period.
The overhead functions have the following hourly costs:
Refer to Glassman Company If total overhead is assigned to A and B on the basis of
direct labor hours, Product B will have an overhead cost per unit of
A. $76.97
B. $87.75
C. $88.64
D. None of the responses are correct.
In the Du Pont model, profit margin is a ratio of
A. income to sales.
B. income to assets.
C. sales to income.
D. sales to assets.
Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Savannah Motors. The $20,000 cost of the new machine represents a(n)
A. sunk cost.
B. future relevant cost.
C. future irrelevant cost.
D. opportunity cost.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product D?
A. $1,550
B. $1,017
C. $4,263
D. $2,170
If actual overhead exceeds applied overhead, factory overhead is said to be
____________________.
Identify and discuss how sales and costs are affected during the five stages of the
product life cycle.
An organizational unit whose manager is responsible for acquiring, using, and
disposing of assets in order to maximize return on assets is referred to as a(n)
______________________________.
Costs that are incurred to improve quality by precluding defects and improper
processing are referred to as ____________________ costs.
An artificial, computer-generated environment in which the user has the impression of
being a part of the environment is referred as ______________________________.
Outdoor Oasis, Inc.
Outdoor Oasis, Inc. has just finished its first year of business. Outdoor Oasis, Inc.
makes decorative outdoor furniture. The firm manufactured 2,500 pieces of furniture
during the year: 2,400 were sold at garden centers for $456,000; 100 pieces were
defective and could only be sold as scrap metal (25 pounds each and can be sold for
$2.50 per pound). No defective units could be reworked. During the year the following
costs were incurred:
Refer to Outdoor Oasis, Inc. Compute the total profits lost by the company from selling
scrap units during its first year of operations.
Consider the regression equation y = a + bX. The portion of the equation that represents
the variable rate is __________.
The branch of accounting that is most concerned with addressing the needs of specific
departments of the firm is ____________________ accounting
Discuss the characteristics of an organization for which a true cost management system
would be appropriate.
What factors make discretionary costs difficult to control?