1) Longer manufacturing cycle times increase the inventory carrying costs and decrease
revenues.
2) The DuPont method recognizes the two basic ingredients in profit making: increasing
the income per dollar of revenues and using assets to generate more revenues.
3) Efficiency is the relative amount of inputs used to achieve a given output level.
4) Joint processing costs are relevant in deciding whether to process the product further.
5) ISO 9000 developed by the International Organization for Standardization is a set of
five international standards for quality management.
6) Each cost pool may have multiple cost allocation bases.
7) An unfavorable production-volume variance always infers that management made a
bad planning decision regarding the plant capacity.
8) Under Generally Accepted Accounting Principles (GAAP), fixed manufacturing
overhead costs are allocated as an inventoriable cost to the output units produced.
9) Partially completed units in ending work in process are 100 percent complete with
regard to their direct materials costs if the direct materials are introduced at the
beginning of the process.
10) Management accountants have important ethical responsibilities that are related to
competence, confidentiality, integrity, and credibility.
11) The step-down method allocates support department costs to only operating
departments in a sequential manner.
12) All costs are locked in at the design stage itself.
13) Tall Statues Inc., produces wood statues. Management has provided the following
information:
What is the cost per statue if throughput costing is used?
A) $20.70
B) $16.10
C) $10.35
D) $6.90
14) The ________ approach carries the underallocated or overallocated amounts to
overhead accounts in the following year.
A) adjusted allocation-rate
B) proration
C) write-off to cost of goods sold
D) None of these answers are correct.
15) The physical-measure method ________.
A) allocates joint costs to joint products in a way that each product has an identical
gross-margin percentage
B) allocates joint costs to joint products on the basis of a comparable physical measure
at the splitoff point
C) allocates joint costs to joint products on the basis of the relative sales value at the
splitoff point
D) allocates joint costs to joint products on the basis of relative NRV
16) Buck Corporation plans to grow by offering a computer monitor, the CM3000 that
is superior and unique from the competition. Buck believes that putting additional
resources into R&D and staying ahead of the competition with technological
innovations are critical to implementing its strategy.
Required:
a.Is Buck’s strategy one of product differentiation or cost leadership? Explain briefly.
Identify at least one key element that you would expect to see included in the balanced
scorecard:
b.for the financial perspective.
c.for the customer perspective.
d.for the internal business process perspective.
e.for the learning and growth perspective.
17) Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015.
Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs expensed on the income statement (excluding adjustments
for variances) total ________.
A) $14,400
B) $19,200
C) $24,000
D) 0
18) Inventoriable costs are expensed on the income statement ________.
A) when direct materials for the product are purchased
B) after the products are manufactured
C) when the products are sold
D) when the goods move from work-in process to finished goods account
19) Marcon Tech Corp., currently sells radios for $7,000. It has costs of $5,400. A
competitor is bringing a new radio to market that will sell for $5,850. Management
believes it must lower the price to $5,850 to compete in the market for radios. The
marketing department believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Marcon’s sales are currently 1,000 radios per
year.
Required:
a. What is the target cost for the new target price if target operating income is 20% of
sales?
b. What is the change in operating income if marketing department is correct and only
the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and
marketing department is correct in its estimation?
20) An advantage of using a bar chart to visualize customer profitability is that
________.
A) differences in commissions paid to sales persons stand out
B) the number of “unprofitable” customers stand out
C) trends in the volume of purchases become apparent
D) company can get ideas about new products or improved methods
21) Bee Company’s contribution margin for the second quarter is:
A) $463,200
B) $540,000
C) $851,200
D) $431,200
22) The Frontive Company has assembled the following data pertaining to certain costs
that cannot be easily identified as either fixed or variable. Frontive Company has heard
about a method of measuring cost functions called the high-low method and has
decided to use it in this situation.
What is the estimated total cost at an operating level of 9,000 hours?
A) $35,100
B) $40,300
C) $44,460
D) $39,644
23) A well-designed, activity-based cost system helps managers make better decisions
because information derived from an ABC analysis ________.
A) can be used to eliminate nonvalue-added activities
B) is easy to analyze and interpret
C) takes the choices and judgment challenges away from the managers
D) emphasizes how managers can achieve higher sales
24) The following costs were incurred in April:
Conversion costs during the month totaled:
A) $39,000
B) $54,000
C) $105,000
D) $51,000
25) Presented below are the production data for the first six months of the year for the
mixed costs incurred by Vertise Company.
Vertise Company uses the high-low method to analyze mixed costs.
How would the cost function be stated?
A) y = $484 + $1.12X
B) y = $5,298 + $1.19X
C) y = $2,388 + $1.12
D) y = $7,850 + $1.18X
26) The cost of visiting customers would most likely be classified as a ________.
A) customer output unit-level cost
B) customer batch-level cost
C) customer-sustaining cost
D) corporate-sustaining cost
27) What are the four key perspectives in the balanced scorecard?
28) When there are multiple support departments within an organization, it is common
to use journal entries to transfer-in costs from one department to another. What are
some of the points to remember about these costs?
29) The Plastechnics Company began operations several years ago. The company’s
product requires materials that cost $25 per unit. The company employs a production
supervisor whose salary is $2,000 per month. Production line workers are paid $15 per
hour to manufacture and assemble the product. The company rents the equipment
needed to produce the product at a rental cost of $1,500 per month. The building is
depreciated on the straight-line basis at $9,000 per year.
The company spends $40,000 per year to market the product. Shipping costs for each
unit are $20 per unit.
The company plans to liquidate several investments in order to expand production.
These investments currently earn a return of $8,000 per year.
Required:
Complete the answer sheet below by placing an “X” under each heading that identifies
the cost involved. The “Xs” can be placed under more than one heading for a single
cost, e.g., a cost might be a sunk cost, an overhead cost, and a product cost.
30) Explain the difference between locked in costs and costs incurred. Which of these
types of costs does a traditional accounting system emphasize? At which stage of the
value chain are most costs locked-in? At which stage of the value chain are most costs
incurred? What implication does this have for good cost management?
31) Discuss the importance of the sales forecast and items that influence its accuracy.
32) Discuss the three methods to dispose of production volume variance.