All of the following are factors affecting direct versus indirect cost classification
except:
A) materiality of the cost
B) cost accuracy
C) information technology’s ability to trace costs in an economically feasible way
D) design of operations
Which of the following information is needed to prepare a flexible budget?
A) actual units sold
B) actual variable cost
C) actual selling price per unit
D) actual fixed cost
The Peric Manufacturing Shop produces motorcycle parts. Typically, 17 pieces out of a
job lot of 1200 parts are spoiled. Costs are assigned at the inspection point, $60.00 per
unit. Spoiled pieces may be disposed at $8.00 per unit. The spoiled goods must be
inventoried appropriately when the normal spoilage is detected. The current job requires
the production of 3600 good parts.
Which of the following journal entries would be correct if the spoilage occurred due to
specifications required for Job 101?
A)
B)
C)
D)
Emrald Corp currently uses a manufacturing facility costing $520,000 per year; 85% of
the facility’s capacity is currently being used. A start-up business has proposed a plan
that would utilize the other 15% of the facility and increase the overall costs of
maintaining the space by 12%. If the stand-alone method were used, what amount of
cost would be allocated to the start-up business?
A) $75,660
B) $78,000
C) $66,300
D) $87,360
A step variable-cost function ________.
A) is fixed over the long run but not over the short run
B) is often approximated with a continuous variable-cost function
C) remains the same over a wide range of activity
D) example includes adding additional warehouse space
Garfield Company has the following information for the current year:
What is the difference between operating incomes under absorption costing and variable
costing?
A) $180,000
B) $100,000
C) $50,000
D) $110,000
The Alfarm Corporation processes raw milk up to the split-off point where two
products, cream and liquid skim, are produced and sold. There was no beginning
inventory. The following material was collected for the month of February:
The cost of purchasing 760,000 gallons of direct materials and processing it up to the
split-off point to yield a total of 738,000 gallons of good product was $2,350,000. When
using the physical-volume method, what is Cream’s approximate production cost per
gallon? (Round intermediary percentages to the nearest hundredth.)
A) $2.64
B) $3.09
C) $3.18
D) $3.33
________ is a measure of the balanced scorecard’s internal-business-process
perspective.
A) Market share
B) Manufacturing downtime
C) Return on investment
D) Number of customer complaints
If management takes a multiple-year view in the decision model and judges success
according to the current year’s results, a problem will occur in the ________.
A) decision model
B) performance evaluation model
C) production evaluation model
D) quantitative model
Russell Company has the following projected account balances for June 30, 2018:
Required:
a. Prepare a budgeted income statement for June 2018
b. Prepare a budgeted balance sheet as of June 30, 2018.
The manufacturing cycle including related delays can be reduced by ________.
A) batching similar jobs together for processing
B) decreasing the capacity of a bottleneck resource
C) not setting up flexible manufacturing systems
D) increasing the time for setups and processing
Gavin and Alex, baseball consultants, are in need of a microcomputer network for their
staff. They have received three proposals, with related facts as follows:
The company uses straight-line depreciation for all capital assets.
Required:
a. Compute the payback period, net present value, and accrual accounting rate of return
with initial investment, for each proposal. Use a required rate of return of 14%.
b. Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best?
Why?
Aspen Manufacturing Company sells its products for $33 each. The current production
level is 50,000 units, although only 40,000 units are anticipated to be sold.
Required:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.
The Michigan Manufacturing Company has provided the following information:
Units of Output 31,000 Units 45,000 Units
Direct materials $ 316,800 $ 443,520
Workers’ wages 1,188,000 1,663,200
Supervisors’ salaries 361,000 322,000
Equipment depreciation 166,320 166,320
Maintenance 75,000 86,000
Utilities 422,400 580,800
Total $2,528,720 $3,261,840
Using the high-low method and the information provided above,
a. identify the linear cost function equation and
b. estimate the total cost at 38,000 units of output.
The difference between actual costing and normal costing is ________.
A) normal costing uses actual quantities of direct-costs
B) actual costing uses actual quantities of direct-costs
C) normal costing uses budgeted indirect-costs
D) actual costing uses actual quantities of cost-allocation bases
Cost-plus contracts negotiated with suppliers of the government usually involves
________.
A) a price that allows the contractor to break-even
B) a price that covers the contract’s cost plus other noncash benefits
C) the supplier’s cost to perform the contact (provide the product or service) plus a fee
D) a price that covers the contractor’s direct costs plus an amount to cover overhead
costs
Trusted Products Company makes a household appliance with model number L800.
The goal for 2018 is to reduce direct materials usage per unit. No defective units are
currently produced. Manufacturing conversion costs depend on production capacity
defined in terms of L800 units that can be produced. The industry market size for
appliances increased 2% from 2017 to 2018. The following additional data are available
for 2017 and 2018:
Overall, was Trusted Products’s strategy successful in 2018?
A) Yes, because total revenues increased
B) No, because operating income decreased
C) No, because direct materials usage per unit increased
D) No, because direct material cost per unit decreased
A company budgets 10,000 units of sales based on a projected selling price of $13.00.
The actual units sold were 15,000 at a price of $10. What is the flexible budget for
sales?
A) $195,000
B) $150,000
C) $130,000
D) $100,000
Many companies have switched from absorption costing to variable costing for internal
reporting ________.
A) to comply with external reporting requirements as required by GAAP
B) to increase bonuses for managers
C) to reduce the undesirable incentive to build up inventories that would show higher
operating income
D) so the denominator level is more accurate
A budget is an end product of negotiations among senior and subordinate mangers
because ________.
A) budgeting is their mutual responsibility
B) senior managers alone cannot spare the time required for the budgeting process
C) senior managers are responsible for providing information on competitors
performance and subordinate managers are responsible for information on external
market conditions
D) senior managers want very challenging targets, while subordinates may want targets
that are relatively easier to achieve.
Which of the following is the formula for investment assuming that total assets
employed is the measure?
A) total assets available minus the sum of idle assets
B) total assets available minus the sum of idle assets and assets purchased for future
expansion
C) total assets available minus assets purchased for future expansion
D) total assets minus current liabilities
Life-cycle costing is best described by which of the following?
A) it is a method of cost planning to reduce manufacturing costs to targeted levels
B) it is the process of tracking and accumulating costs that are incurred within the
manufacturing and distribution links of the value chain
C) it is the process of tacking and accumulating business function costs across the entire
value chain
D) it is a costing system that focuses on reducing costs during the manufacturing cycle
Craylon Corp sells two products X and Y. X sells for $200 and Y sells for $160. Both X
and Y sell for $310 as a bundle. What is the revenue allocated to product Y, if product X
is termed as the primary product in the bundle?
A) $110
B) $40
C) $80
D) $155
Excellent Manufacturers Inc. has a current production level of 20,000 units per month.
Unit costs at this level are:
Direct materials $0.26
Direct labor 0.40
Variable overhead 0.16
Fixed overhead 0.21
Marketing – fixed 0.25
Marketing/distribution – variable 0.42
Current monthly sales are 18,000 units. Jax Company has contacted Excellent about
purchasing 1,550 units at $2.00 each. Current sales would NOT be affected by the
one-time-only special order, and variable marketing/distribution costs would NOT be
incurred on the special order. What is Ratzlaff Company’s change in operating profits if
the special order is accepted?
A) $4,929.00 increase in operating profits
B) $4,929.00 decrease in operating profits
C) $1,829.00 increase in operating profits
D) $1,829.00 decrease in operating profits
What is it that a statistical quality control chart does?
A) it shows a graph of a series of random events of a process
B) it plots each observation relative to specified ranges that represent the expected
distribution
C) it plots control observations over various periods of time
D) it plots only those observations outside specified limits
LaCrosse Products has a budget of $910,000 in 2017 for prevention costs. If it decides
to automate a portion of its prevention activities, it will save $80,800 in variable costs.
The new method will require $40,500 in training costs and $103,000 in annual
equipment costs. Management is willing to adjust the budget for an amount up to the
cost of the new equipment. The budgeted production level is 151,000 units.
Appraisal costs for the year are budgeted at $606,000. The new prevention procedures
will save appraisal costs of $50,400. Internal failure costs average $15 per failed unit of
finished goods. The internal failure rate is expected to be 2% of all completed items.
The proposed changes will cut the internal failure rate by one-third. Internal failure
units are destroyed. External failure costs average $50 per failed unit. The company’s
average external failures average 2% of units sold. The new proposal will reduce this
rate by 50%. Assume all units produced are sold and there are no ending inventories.
How much do external failure costs change if all changes are as anticipated with the
new prevention procedures? Assume all units produced are sold and there are no ending
inventories.
A) $75,500 decrease
B) $75,500 increase
C) $151,000 decrease
D) None of these answers is correct.
Gregory Enterprises has identified three cost pools to allocate overhead costs. The
following estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 200
Machine-hours 1,600
Square feet of area 50
Which method of allocation probably best estimates actual overhead costs used? 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 they best reflect the relative consumption of
resources.
D) Three activity-cost drivers because product costs can be significantly cross-subsidized.
Assume the following cost information for Fernandez Company:
What is the number of units that must be sold to earn an after-tax net income of $50,000?
(Do not round interim calculations and round the final answer to the nearest unit.)
A) 1,082 units
B) 929 units
C) 650 units
D) 817 units
Which of the following would be considered an actual cost of a current period?
A) The $25 of materials in a manufactured chair that is ready to be shipped to the
customer
B) The $22 of direct material cost per unit assumed in the actual budget of a
manufacturer of chairs
C) The expected cost of materials for a chair as a result of engineering specifications
D) The average of historical material cost data for a chair manufactured in several past
accounting periods
Which of the following would be an explicit agreement of reimbursement on a
contract?
A) contractor will produce a bill at the end of the contract without having disclose costs
B) contractor will seek payment for contract without having to submit a bid or disclose
a mark-up
C) contractor agrees with customer before the project begins, on a set price
D) Contractor will bill the customer based on what the contractor perceives to be the
going rate