1) In job order costing, only direct costs are used to determine the cost of a job.
2) An example of an intrinsic reward is recognizing employee accomplishment with a
plaque.
3) When a firm maximizes profits it will simultaneously minimize opportunity costs.
4) Process costing systems are used when products manufactured are relatively
homogeneous and there are few and relatively small differences in the production
requirements for different products.
5) Many companies quantify their customer relationships by using nonfinancial metrics
on satisfaction and loyalty.
6) An incentive-based reward system is only effective if employees understand how to
improve their measured performance.
7) For service companies, in contrast, customer behavior determines the quantity of
demands for organizational resources that produce and deliver the service to customers.
8) A bank customer with a high checking account balance and few transactions is a high
cost-to-serve customer.
9) When the operating budget is used as a control device, managers are more likely to
be motivated to budget higher sales than actually anticipated.
10) An activity-based costing system is meant to perform the role of operational control
as well as to provide the basis for costing inventory for financial reporting.
11) In general, the selection of activity cost drivers requires making trade-offs between
accuracy and the cost of measurement.
12) The operating costs considered by the theory of constraints are all direct
manufacturing costs, including direct materials and direct labor.
13) The use of low-quality raw materials is likely to result in an unfavorable material
quantity variance and a favorable material price variance.
14) To be profitable, a company must generate revenues to cover costs incurred
throughout the entire value chain.
15) The objective to discover and develop new, more effective, or safer
products/services can be measured by the time spent with key customers at targeted
accounts learning about their future opportunities and needs.
16) The Institute of Management Accountants (IMA):
A) is a professional organization of management accountants
B) is a professional organization of financial accountants
C) issues standards for management accounting
D) a professional organization of management accountants that issues standards for
management accounting
17) The contemporary management view of motivation, the ________ is based on
initiatives to improve the quality of working life.
A) balanced scorecard
B) human resources model of motivation
C) scientific management school
D) results control system
18) Power Cycle Manufacturing, Inc., is considering reorganizing its plant into
manufacturing cells. The following estimates have been prepared to evaluate the
benefits from the reorganization:
Inventory carrying costs are estimated to be 10% per year.
As a result of the layout reorganization, incremental manufacturing costs are projected
to:
A) increase by $168,000 annually
B) increase by $40,000 annually
C) decrease by $40,000 annually
D) decrease by $33,000 annually
19) Marine Industrial Coatings, Inc. is considering replacing its existing computer
system with a new computer system. The new system can offer considerable savings in
computer processing and inventory management costs. Information about the existing
system and the new system follow:
Sunk costs include:
A) the original cost of the existing system
B) the original cost of the new system
C) the current salvage value of the existing system
D) the annual operating cost of the new system
20) Donnelly Company has three products, R2, R4, and R2D2. The following
information is available:
Assuming Product R2D2 is discontinued and the space formerly used to produce the
product is rented for $6,000 per year, operating income will:
A) increase by $3,300
B) increase by $4,500
C) increase by $6,000
D) increase by $7,200
21) Under traditional costing systems, selling and administrative costs have been
largely ignored because they:
A) are hard to quantify except at exorbitant cost of measurement
B) have been negligible in amount relative to total costs
C) in the past they have been inventoriable for financial reporting purposes under
GAAP
D) relate to a varied mix of products
22) According to the hierarchy of ethical principles presented in the text, an action
prohibited by ________ should also be unacceptable to ________.
A) legal rules, societal norms
B) personal norms, professional memberships
C) organizational norms, societal norms
D) professional memberships, legal rules
23) The best chance of incorporating engineering flexibility into products and services
is during the:
A) research, development, and engineering cycle
B) manufacturing cycle
C) post-sale service and disposal cycle
D) operating cycle
24) The ________ summarizes planned revenues from each product.
A) capital spending plan
B) production plan
C) administrative and discretionary spending plan
D) sales plan
25) Warranty costs are an example of:
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
26) The characteristic of a management accounting and control system that means the
language used and the technical methods of producing management accounting
information not conflict within various parts of the organization is referred to as being:
A) in control
B) accurate
C) consistent
D) Kaizen
27) The PRIMARY reason for using cost variances is:
A) that they diagnose the cause of a problem and what should be done to correct it
B) for superiors to communicate expectations to lower level employees
C) to administer appropriate disciplinary action
D) for financial control of operating activities
28) The evaluation phase of the process of control in MACS focuses on:
A) comparing the planned level to current performance to identify discrepancies and
consider corrective measures
B) measuring the current level of performance
C) returning the system to an in control state
D) selecting measures to determine how well objectives are met
29) If a business offers both routine and specialized services, a single cost driver rate
will overprice:
A) the routine service
B) the specialized service
C) both the routine and the specialized service
D) neither the routine nor the specialized service
30) Talladega Industries, Inc., (TII) developed the following standard costs for direct
material and direct labor for one of their major products, the 10-gallon plastic container.
During August, TII produced and sold 10,000 containers using 980 pounds of direct
materials at an average cost per pound of $32 and 500 direct labor hours at an average
wage of $15.25 per hour.
August’s direct material planning variance was:
A) $268,640 favorable
B) $270,600 unfavorable
C) $1,360 unfavorable
D) indeterminable using the above information
31) Breakeven time:
A) stresses profitability
B) tracks the entire cost of the design and development process
C) is denominated in time
D) All of the above are correct
32) A cost that is uniquely and unequivocally attributable to a single cost object is a:
A) capacity related resource
B) consumable resource
C) indirect cost
D) direct cost
33) The Troubadours Company is noted for an exceptionally impressive line of Mardi
Gras masks. Troubadours has established the following selling and distribution
overhead activity cost pools and their corresponding activity drivers for the year 2011:
ActivityCostCost driver
Marketing$60,000$1,000,000 of sales
Customer service $20,0005,000 customers
Order execution $ 10,000100 orders
Warehousing $ 10,00050 product lines
a.Determine the activity cost driver rate for each of the four selling and distribution
activities.
b.Under what circumstances would it be appropriate to use each of the activity cost
drivers to
determine the cost of the Mardi Gras masks?
c.Describe at least one possible negative behavioral consequence for each of the four
activity cost drivers.
34) Blitzer Enterprises has identified three cost pools and three corresponding cost
drivers to allocate overhead costs. The following estimates are provided for the coming
year:
The accounting records show the Gergen Job consumed the following resources:
Which method of allocation probably best estimates actual overhead costs used for
Blitzer Enterprises? Why?
A) Single direct labor-hours cost driver, because it is best to allocate total costs
uniformly to individual jobs
B) Single direct labor-hours cost driver, because it is easiest to analyze and interpret
C) Three activity-cost drivers, because it best reflects the relative consumption of
resources
D) Three activity-cost drivers, because product costs can be significantly
cross-subsidized
35) Units of production are most appropriate as an overhead cost assignment base
when:
A) it is a service department
B) only one product is manufactured
C) direct labor costs are low
D) factories produce a complex and varied mix of products
36) After conducting a market research study, Stewart Manufacturing decided to
produce a new interior door to complement its exterior door line. It is estimated that the
new interior door can be sold at a target price of $120. The annual target sales volume
for interior doors is 20,000. Stewart has a 20% expected return on sales target.
What is the target profit margin?
A) $480,000
B) $600,000
C) $384,000
D) $360,000
37) The whale curve shows:
A) the most profitable 20% of customers generate about 180% of sales
B) the most profitable 20% of customers generate about 80% of total sales
C) the most profitable 20% of customers generate about 80% of total profits
D) the most profitable 20% of customers generate about 180% of total profits
38) Bedtime Bedding Company manufactures pillows. The Cover Division makes
covers and the Assembly Division makes the finished pillows. The covers can be sold
separately for $5.00. The pillows sell for $6.00. The information related to
manufacturing for the most recent year is as follows:
Required:
a.Compute the operating income for each division and the company as a whole. Use
market value as the transfer price.
b.Are all managers happy with this concept? Explain.
39) When a subordinate is caught padding an expense report, the supervisor should
FIRST:
A) ignore the incident if it is the first offense
B) report the incident to the personnel department
C) confront the employee and ask him to submit a corrected expense report
D) take action that complies with the organization’s code of ethics
40) Characteristics of a process layout include:
A) continuous processing
B) long production paths
C) small amounts of inventory
D) no work-in-process storage areas
41) Fixed costs:
A) may be either direct or indirect costs
B) vary with production or sales volume
C) include parts and materials used to manufacture a product
D) can be adjusted in the short run to meet actual demands
42) Characteristics of cellular manufacturing include:
A) a layout that is usually circular like a cell
B) increasing the number of employees needed to produce a product
C) individual areas for employees so each can work independently without interruption
D) a flexible layout that can be easily adjusted to make a different product
43) The most important factor in successful organizations is:
A) weaknesses
B) competition
C) strategy
D) definition of quality
44) Give two examples of financial information and nonfinancial information.
45) Describe some of the drawbacks of using the operating budget as a control device.
46) Describe five reasons that loyal customers are valuable.
47) How do traditional costing and target costing differ in determining the selling price
of a product?
48) Allscott Company is developing its budgets for 2012 and, for the first time, they
will use the Kaizen approach. The initial 2012 income statement, based on static data
from 2011, is as follows:
Sales (140,000 units) $420,000
Less: Cost of goods sold 280,000
Gross margin 140,000
Operating expenses (includes $28,000 of depreciation) 112,000
Net income $28,000
Selling prices for 2012 are expected to increase by 8%, and sales volume in units will
decrease by 10%. The cost of goods sold as estimated by the Kaizen approach will
decline by 10% per unit. Other than depreciation, all other operating costs are expected
to decline by 5%.
Required:
Prepare a Kaizen-based budgeted income statement for the year ended December 31,
2012 .
49) Describe a cost center. What are some of the problems faced by cost centers?
50) Are negative variances always unfavorable and positive variances always
favorable? Explain.
51) What does the breakeven time (BET) metric for the product development process
measure?