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 estimated $500 salvage value of the existing machine in
10 years represents a(n)
A. sunk cost.
B. opportunity cost of selling the existing machine now.
C. opportunity cost of keeping the existing machine for 10 years.
D. opportunity cost of keeping the existing machine and buying the new machine.
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Using the step method, what amount of Administration
costs is allocated to B (round to the nearest dollar)?
A. $72,973
B. $291,892
C. $145,946
D. $389,189
Benchmarking does which of the following activities relative to a “best-in-class” (BIC)
company?
A. yes yes yes
B. yes no no
C. no no yes
D. yes no yes
The following information pertains to Gemini Company’s cost-volume-profit
relationships:
How much will be contributed to profit before taxes by the 1,501st unit sold?
A. $850
B. $700
C. $150
D. $0
Spending levels in prior years are often the basis of
A. traditional budgets.
B. zero-base budgets.
C. variance targets.
D. engineered cost analyses.
Thunder Sports Enterprises
The Basketball Division of Thunder Sports Enterprises reported the following financial
data for the year:
Refer to Thunder Sports Enterprises. If expenses increased by $15,000 in the Basketball
Division,
A. return on investment would decrease.
B. residual income would increase.
C. the target rate of return would decrease.
D. asset turnover would decrease.
Stillwater Corporation
The following information is available for Stillwater Corporation for the current year:
All materials are added at the start of production.
Refer to Stillwater Corporation. Assume that the FIFO EUP cost for material and
conversion are $1.50 and $4.75, respectively. Using FIFO what is the total cost assigned
to the units transferred out?
A. $414,194
B. $339,094
C. $445,444
D. $396,975
The net cost of normal spoilage in a job-order costing system in which spoilage is
common to all jobs should be
A. assigned directly to the jobs that caused the spoilage.
B. charged to manufacturing overhead during the period of the spoilage.
C. charged to a loss account during the period of the spoilage.
D. allocated only to jobs that are completed during the period.
Financial incentives are
A. different from monetary rewards
B. the same thing as a salary element
C. provided to all employee groups.
D. available to top management whose performance exceeds targeted objectives
Rosewood Corporation
Rosewood Corporation produces a single product. The following cost structure applied
to its first year of operations:
Refer to Rosewood Corporation. Assume for this question only that Rosewood
Corporation manufactured and sold 5,000 units in the current year. At this level of
activity it had an income of $30,000 using variable costing. What was the sales price
per unit?
A. $16.00
B. $18.80
C. $12.80
D. $14.80
Webber Corporation is interested in purchasing a state-of-the-art stamping machine for
its manufacturing plant. The new machine has been designed to basically eliminate all
errors and defects in the production process. The new machine will cost $180,000, and
have a salvage value of $80,000 at the end of its eight-year useful life. Stone has
determined that cash inflows for years 1 through 8 will be as follows: $33,000;
$58,000; $28,000; $39,000; $27,000; $22,000, $27,000 and $29,000, respectively.
Maintenance will be required in years 3 and 6 at $14,000 and $9,000 respectively.
Webber uses a discount rate of 12 percent and wants projects to have a payback period
of no longer than six years.
Present value tables or a financial calculator are required.
The most valid reason for using something other than a full-cost-based transfer price
between units of a company is because a full-cost price
A. is typically more costly to implement.
B. does not ensure the control of costs of a supplying unit.
C. is not available unless market-based prices are available.
D. does not reflect the excess capacity of the supplying unit.
A capital budget is used by management to determine
A. no no
B. no yes
C. yes no
D. yes yes
Buckingham Company
Buckingham Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
May when Buckingham produced 4,500 units:
Refer to Buckingham Company. Using the four-variance approach, what is the variable
overhead spending variance?
A. $4,375 U
B. $4,375 F
C. $8,750 U
D. $6,562 U
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 efficiency variance?
A. $2,050 F
B. $2,050 U
C. $2,040 U
D. $2,040 F
Levine Company
Levine Company has a job-order costing system and an overhead application rate of
125 percent of direct labor cost. Job #123 is charged with direct material of $18,000 and
overhead of $9,000. Job #124 has direct material of $4,500 and direct labor of $12,000.
Refer to Levine Company. What is the total cost of Job #124?
A. $15,000
B. $16,500
C. $31,500
D. $43,500
What are three significant cost drivers that have been disregarded by traditional
product costing system?
The branch of accounting that is most concerned with addressing the needs of the firm
as a whole is ____________________ accounting
Why is it important for organizations to conduct post investment audits of capital
projects?
When information on actual project results is gathered and compared to actual results,
the process is referred to as a(n) ______________________________________.
From the following information for the Bentwater Company, compute prime costs and
conversion costs for the current period.
Raw material purchased during the period cost $40,800; overhead incurred and paid or
accrued for the period was $21,750; and 23,600 direct labor hours were incurred at a
rate of $13.75 per hour.
Bridges Industries manufactures wood furniture. In the Lamination Department,
varnish is added when the goods are 60 percent complete as to overhead. The units that
are spoiled during processing are found upon inspection at the end of production.
Spoilage is considered discrete.
All other units were transferred to finished goods
A decision in which projects are ranked according to their impact on the achievement
of company objectives is referred to as a(n)
___________________________________.
The following information is for the Bayway Manufacturing Company for November.
Prepare in good form a Statement of Cost of Goods Manufactured and Statement of
Cost of Goods Sold.
In a net present value analysis, how can an analyst explicitly and formally consider the
influence of risk on the present value of certain cash flows?