An ending inventory valuation on an absorption costing balance sheet would
a. sometimes be less than the ending inventory valuation under variable costing.
b. always be less than the ending inventory valuation under variable costing.
c. always be the same as the ending inventory valuation under variable costing.
d. always be greater than or equal to the ending inventory valuation under variable
costing.
Wyman Corporation
Wyman Corporation. has the following information for May:
All material is added at the start of the process and all finished products are transferred
out.
Refer to Wyman Corporation. Assume that weighted average process costing is used.
What is the cost per equivalent unit for material?
a. $0.99
b. $1.18
c. $1.64
d. $1.73
The role of safety stock in an organization is to
a. reduce the lead time for an order to be received.
b. reduce the probability of a stockout.
c. reduce the order point.
d. decrease the economic order quantity.
Peoria Company
Peoria Company has two departments (Processing and Packaging) and uses a job-order
costing system. Peoria applies overhead in Processing based on machine hours and on
direct labor cost in Packaging. The following information is available for August:
Refer to Peoria Company What is the overhead application rate for Packaging?
a. $ 0.44
b. $ 2.28
c. $16.00
d. $36.50
Chronologically, in what order are the sales, purchases, and production budgets
prepared?
a. sales, purchases, production
b. sales, production, purchases
c. production, sales, purchases
d. purchases, sales, production
Which of the following is(are) the same between the weighted average and FIFO
methods of calculating EUPs?
a. no yes no
b. yes yes yes
c. yes no no
d. yes no yes
Refer to Commodore Company. Using the four-variance approach, what is the fixed
overhead spending variance?
a. $ 250 U
b. $ 250 F
c. $1,000 U
d. $2,250 F
Shannon Companies
Refer to Shannon Companies. For Company B, what are the budgeted cash
disbursements?
a. $600
b. $700
c. $500
d. $400
Budget slack is a condition in which
a. demand is low at various times of the year.
b. excess machine capacity exists in some areas of the plant.
c. there is an intentional overestimate of expenses or an underestimate of revenues.
d. managers grant favored employees extra time off.
Which of the following statements is true regarding by-products or scrap?
a. Process costing is the only method that should result in by-products or scrap.
b. Job order costing systems will never have by-products or scrap.
c. Job order costing systems may have instances where by-products or scrap result from
the production process.
d. Process costing will never have by-products or scrap from the production process.
Nelson Corporation
Nelson Corporation has the following information available for May of the current
year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Nelson Corporation. Prepare a schedule showing the computation for cost per
equivalent unit assuming the (a) FIFO and (b) weighted average method.
In comparing two projects, the ____ is often used to evaluate the relative riskiness of
the projects.
a. payback period
b. net present value
c. internal rate of return
d. discount rate
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product Z (round to the nearest dollar)?
a. $5,500
b. $4,000
c. $2,500
d. $4,757
The learning and growth perspective of the balanced scorecard addresses how well the
organization is doing with regard to important customer criteria.
In a balanced scorecard, measurements should be directly linked to
a. organizational strategy and values.
b. the cost management system.
c. current organizational profitability.
d. activity-based management concepts.
Lewis Company has only 25,000 hours of machine time each month to manufacture its
two products. Product X has a contribution margin of $50, and Product Y has a
contribution margin of $64. Product X requires 5 hours of machine time, and Product Y
requires 8 hours of machine time. If Lewis Company wants to dedicate 80 percent of its
machine time to the product that will provide the most income, the company will have a
total contribution margin of
a. $250,000.
b. $240,000.
c. $210,000.
d. $200,000.
For traditional costing purposes, R&D costs are
a. capitalized and allocated over the product life cycle.
b. expensed as incurred.
c. capitalized and amortized over three years.
d. charged to the future accounting periods that receive the benefit of the R&D
expenditures.
In a highly regulated, monopolistic industry, such as the electrical utility or TV cable, a
cost management system is
a. of limited need because costs are typically passed along to customers via the rate
structure.
b. essential because of the need to provide the highest degree of cost efficiency possible
for customers.
c. critical to the needs of empowered employees making decisions at various levels of
the organizational hierarchy.
d. of no use because there is no attempt by management to control costs.
Putnam Company
Below is an income statement for Putnam Company:
Refer to Putnam Company. What was Putnam’s margin of safety?
a. $150,000
b. $175,000
c. $200,000
d. $300,000
A machine constraint creates
a. an autonomation.
b. a bottleneck.
c. a push inventory system.
d. the need for third-party logistics.
Glassman Company
Glassman Company produces two products: A and B. The company has three overhead
functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each
period.
The overhead functions have the following hourly costs:
Refer to Glassman Company If total overhead is assigned to A and B on the basis of
units produced, Product B will have an overhead cost per unit of
a. $84.00.
b. $88.64.
c. $110.64.
d. None of the responses are correct.
Ellis Company
Ellis Company uses activity-based costing. The company produces two products: IPods
and MP3 players. The annual production and sales volume of IPods is 8,000 units and
of MP3 players is 6,000 units. There are three activity cost pools with the following
expected activities and estimated total costs:
Refer to Ellis Company. Using ABC, the cost per unit of IPods is approximately:
a. $ 2.40
b. $ 3.90
c. $ 6.60
d. $10.59
Brennan Company
The following information is for Brennan Company’s September production:
(Round all answers to the nearest dollar.)
Refer to Brennan Company. What is the material quantity variance?
a. $ 740 F
b. $ 750 F
c. $ 750 U
d. $2,625 U
The primary accounting document in a job-order costing system is a(n)
a. bill of materials.
b. job-order cost sheet.
c. employee time sheet.
d. materials requisition.
The indirect costs of converting raw material into finished goods are called
a. period costs.
b. prime costs.
c. overhead costs.
d. conversion costs.
Jackson Company.
Jackson Company manufactures wood file cabinets. The following information is
available for June of the current year.
The direct labor rate is $9.60 per hour and overhead for the month was $9,600.
Refer to Jackson Company. If there were 1,500 direct labor hours and $21,000 of raw
material purchased, Cost of Goods Manufactured is:
a. $49,100.
b. $45,000.
c. $51,000.
d. $49,500.
Using a single performance evaluation criterion for an investment center
a. is most effective because a manager can concentrate on a single goal.
b. can result in manipulation of the performance measure.
c. allows multinational investment centers’ performances to be equitably compared.
d. is only appropriate if the criterion is non-monetary.
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
Which of the following qualitative factors favors the buy choice in a make or buy
decision for a part?
a. maintaining a long-term relationship with suppliers
b. quality control is critical
c. utilization of idle capacity
d. part is critical to product
The cost of abnormal continuous losses is
a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit
basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.
Bartling Company transferred 5,500 units to Finished Goods Inventory during October.
On October 1, the company had 300 units on hand (40 percent complete as to both
material and conversion costs). On October 31, the company had 800 units (10 percent
complete as to material and 20 percent complete as to conversion costs). The number of
units started and completed during October was:
a. 5,200.
b. 5,380.
c. 5,500.
d. 6,300.
For a CPA firm, how would the wages of staff auditors be classified?
a. Yes No
b. No Yes
c. Yes Yes
d. No No
Which of the following would not be an appropriate cost driver to measure internal
failure?
a. design error
b. product failure
c. machine reliability
d. operator error
A management information system should do which of the following?
a. yes no yes
b. yes yes no
c. no no yes
d. yes yes yes
The interest rate used to find the present value of a future cash flow is the
a. prime rate.
b. discount rate.
c. cutoff rate.
d. internal rate of return.
In a just-in-time (JIT) environment, design changes may be made at any time during the
production process.
List and describe the pro-forma financial statements that are prepared at the end of the
budgeting process.
Business value-added activities add value to a product.
In setting compensation structures, fixed salary expense is normally notconsidered.
In a mutually inclusive project situation, if one project is chosen, all related projects are
also chosen.
Calculations for standard process costing are identical to those for weighted average
process costing.
An annual budget is an example of a single use tactical plan.
The FIFO method separates beginning inventory and current production to compute
cost per unit of production.
Three types of transfer prices are _________________________,
_________________________, and ____________________.
Costs that are incurred to improve quality by precluding defects and improper
processing are referred to as ____________________ costs.
Depreciation on factory equipment is normally a relevant cost in product line decisions.
Taylor Corporation
Taylor Corporation manufactures and sells baseball bats. For a recent period, its
production and sales objectives were each set at 20,000 units. Also, for this period the
firm had estimated costs as follows:
Refer to Taylor Corporation. For this question only, assume that Taylor Corporation
actually produced and sold 18,000 baseball bats. Taylor Corporation’s operations for the
period would (on an overall basis) be regarded as efficient if total costs were below
what amount?
Discuss pay-for-performance plans.
Lead time in a production process includes both value and non-value added time.
The ___________________________________ restates an organization’s strategy into
clear and objective performance measures.
The direct method of service department cost allocation allows a partial recognition of
reciprocal relationships among service departments before assigning costs to
revenue-producing areas.
In computing a transfer price, the maximum price should be no higher than the highest
market price at which the buying segment can obtain the good or service externally.
Spoilage occurring on specific jobs should be considered in computing predetermined
factory overhead rates.