1) Investing in a new equipment, such as flexible manufacturing systems that can be
programmed to switch quickly from producing one product to producing another can
decrease capacity as it would incur excess overhead costs.
2) Companies seek to minimize value-added costs because they do not provide benefits
to customers.
3) Manufacturing salaries and wages incurred in the factory are period costs.
4) A flat or slightly sloped regression line indicates a strong relationship between the
cost driver and costs.
5) Cost-based budgeting is a budgeting method that focuses on the budgeted cost of the
activities necessary to produce and sell products and services.
6) In cost-plus pricing, the markup is a rigid number that determines the actual selling
price.
7) An on-time delivery rate is considered a nonfinancial measure of customer
satisfaction.
8) A sunk cost is:
A) a cost which may be saved by not adopting an alternative.
B) a cost which may be shifted to the future with little or no effect on current
operations.
C) a cost which cannot be avoided because it has already been incurred.
D) a cost which does not entail any dollar outlay but which is relevant to the
decision-making process.
9) On the assembly floor, Crystal is paid $20 an hour for straight-time assuming 8
working hours a day and five working days in a week. She is paid $30 an hour for
overtime. One week she worked 52 hours.
Required:
a.What is Crystal’s total compensation for the week?
b.What amount of compensation would be reported as direct manufacturing labor?
c.What amount of compensation would be reported as manufacturing overhead?
10) Financial planning software packages assist management with ________.
A) assigning responsibility to various levels of management
B) identifying the target customer
C) sensitivity analysis in their planning and budgeting activities
D) achieving greater commitment from lower management
11) Which of the following is a learning-curve model?
A) the cumulative average-time learning model and the incremental unit-time learning
model
B) the simple regression model and the multiple regression model
C) the multicollinearity learning model and the goodness of fit learning model
D) the account analysis learning model and the conference learning method model
12) Effective planning of variable overhead costs includes ________.
A) choosing the appropriate level of investment
B) eliminating value-added costs
C) redesigning products to use fewer resources
D) reorganizing management structure
13) Sales of Blair Inc. have been on a steady decline for the last 12 months. A market
research study conducted revealed that the product of Blair Inc. can be sold only for
$400 as opposed to the current market price charged of $500 per unit. Blair Inc. has
decided to revise its sales price to $400. The annual sales target volume of the product
after price revision is 200 units. Blair Inc. wants to earn 18% on its sales amount.
What is the total target cost?
A) $77,408
B) $65,600
C) $53,792
D) $14,760
14) For May, the company will report a(n) ________.
A) favorable sales-mix variance
B) unfavorable sales-mix variance
C) favorable sales-volume variance
D) unfavorable sales-volume variance
15) The contribution margin for October is:
A) $260,000
B) $232,000
C) $196,500
D) $369,500
16) Companies must always examine their pricing ________.
A) based on the supply of the product
B) based on the cost of producing the product
C) through the eyes of their customers
D) through the eyes of their competitors
17) Direct Disk Drive Company operates a computer disk manufacturing plant. Direct
materials are added at the end of the process. The following data were for June 20X5:
How many units must be accounted for during the period?
A) 215,000 units
B) 190,000 units
C) 169,500 units
D) 140,000 units
18) Which of the following is the correct mathematical expression is used to calculate
variable overhead efficiency variance?
A) (Actual rate – Budgeted rate) x Budgeted quantity
B) (Actual quantity x Budgeted rate) – (Budgeted input quantity allowed for actual
output x Budgeted rate)
C) (Actual quantity / Budgeted rate) – (Budgeted quantity / Budgeted rate)
D) (Actual quantity / Budgeted rate) x Budgeted quantity allowed for actual output
19) Which of the following statements is true of budgets?
A) Master budgets express management’s operating and financial plans.
B) Financial budgets are prepared before the master budget is prepared.
C) Operating budgets are prepared independently of the master budget.
D) Financial budgets are working documents at the core of the budgeting process.
20) When the level of activity decreases, variable costs will:
A) increase per unit.
B) increase in total.
C) decrease in total.
D) decrease per unit.
21) Make a list of steps of designing an accounting based performance measure. Give
example of decisions taken under each step.
22) Bob and Dale have just purchased a small honey manufacturing company that was
having financial difficulties. After a brief operating period, they decided that the
company’s main problem was an improper budgeting function. The company made a
good product and market potential was great.
Required:
Describe the usual budgeting cycle that well-managed companies adopt?
23) Briefly explain each of the three methods used to determine a transfer price.
24) Griffith Vehicle has received three proposals for its new vehicle-painting machine.
Information on each proposal is as follows:
Required:
Determine each proposal’s payback.
25) Generally, companies follow one of two broad strategies: offering a quality product
at a low price, or offering a unique product or service priced higher than the
competition. Is it possible to follow a strategy that is “in the middle”?
26) A company has a plant in a high tax jurisdiction that produces products for a facility
in a low tax jurisdiction. Suggest a strategy, including transfer prices, which will result
in the lowest tax for the overall corporation.
27) Comfort Company manufactures pillows. The 2015 operating budget is based on
production of 25,000 pillows with 0.75 machine-hour allowed per pillow. Budgeted
variable overhead per hour was $25.
Actual production for 2015 was 27,000 pillows using 19,050 machine-hours. Actual
variable costs were $23 per machine-hour.
Required:
Calculate the variable overhead spending and efficiency variances.
28) What are the two assumptions behind a simple linear cost function? Briefly explain
the three ways that a linear cost function may behave?