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1) If one of five distribution channels is discontinued, corporate-sustaining costs such as
general administration costs will most likely be reduced by 20%.
2) Management accountants must promote fact-based analysis and make tough-minded,
critical judgments
without being adversarial.
3) For a company operating in a perfectly competitive market, cost information affects
the pricing decisions of the company.
4) Kaizen budgeting can be applied to activities such as setups with the goal of reducing
setup time and setup costs.
5) An advantage of the reciprocal method is that it highlights the complete reciprocated
costs of support departments and how these costs differ from budgeted or actual costs of
the departments.
6) Effectiveness is the degree to which a predetermined objective or target is met.
7) Contribution margin per unit is a useful tool for calculating contribution margin and
operating income.
8) Warranty costs is an example of external failure costs.
9) Peanut-butter costing system is a more refined costing system compared to
activity-based costing system.
10) An effective activity-based cost system always ignores facility-sustaining cost
drivers.
11) Companies use safety stock as a buffer against unexpected decreases in demand.
12) COQ measures such as measures of customer satisfaction and employee satisfaction
are useful indicators of long-run performance.
13) Budgetary slack provides management with a hedge against planned adverse
circumstances.
14) Compared to variable overhead costs planning, fixed overhead costs planning have
an additional strategic issue of ________.
A) eliminating activities that do not add value
B) increasing the linearity between total costs and volume of production
C) choosing the appropriate level of investment
D) identifying essential value-adding activities
15) Operating income reported on the end-of-period financial statements is changed
when ________ is used to handle the production-volume variance at the end of the
accounting period.
A) the adjusted allocation-rate approach
B) the proration approach
C) the write-off variances to cost of goods sold approach
D) the reinstatement approach
16) The actual information pertains to the third quarter. As part of the budgeting
process, the Duck Decoy Department of Paralith Incorporated had developed the
following static budget for the third quarter. Duck Decoy is in the process of preparing
the flexible budget and understanding the results.
The flexible budget will report ________ for variable costs.
A) $136,364
B) $198,000
C) $30,000
D) $13,583
17) Esther Baskets Company expects to manufacture and sell 20,000 baskets in 2016
for $5 each. There are 4,000 baskets in beginning finished goods inventory with target
ending inventory of 5,000 baskets. The company keeps no work-in-process inventory.
What amount of sales revenue will be reported on the 2016 budgeted income statement?
A) $105,000
B) $100,000
C) $95,000
D) $55,000
18) The employee turnover rates is an example of the ________ measure of a
balanced-scorecard.
A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective
19) In making the decision to invest in the model 230 machine, the opportunity cost
was:
A) $278,000
B) $305,000
C) $207,000
D) $266,000
20) In joint costing, the ________ assumes that all the markup is attributable to the joint
process costs.
A) sales value at splitoff method
B) NRV method
C) constant gross-margin percentage method
D) physical measures method
21) The contribution margin for April was:
A) $1,017,600
B) $1,465,600
C) $600,400
D) $3,512,400
22) Financial planning models ________.
A) are not used in the budgeting process
B) are not useful for sensitivity analysis
C) are mathematical representations of the relationships affecting the budget process
D) are used for nonfinancial aspects of budgeting
23) The following data pertains to activity and maintenance cost for two recent periods:
Maintenance cost is a mixed cost with both fixed and variable components. Using the
high-low method, the cost formula for maintenance cost is:
A) Y = $8,000 + $1.75 X
B) Y = $3.75 X
C) Y = $1,750 + $3.35 X
D) Y = $3.35 X
24) Wallace Company provides the following data for next year:
The gross profit rate is 35% of sales. Inventory at the end of December is $21,600 and
target ending inventory levels are 20% of next month's sales, stated at cost.
What is the amount of purchases budgeted for January?
A) $63,960
B) $70,440
C) $78,000
D) $92,040
25) The time required to get equipment, tools, and materials ready to start production is
referred to as ________.
A) setup time
B) delivery time
C) manufacturing-cycle time
D) product design time
26) Which of the following statements is true of strategic analysis of operating income?
A) Change in operating income from one period to any future period can be subdivided
into product differentiation, cost leadership, and growth components.
B) Subdividing the change in operating income to evaluate the success of a strategy has
no similarity to the variance analysis.
C) Management accountants compare actual and budgeted operating performance over
the same time periods.
D) It focuses on differences in individual categories of costs (direct materials, direct
manufacturing labor, and overheads).
27) For 2014, Thomas Manufacturing uses machine-hours as the only overhead
cost-allocation base. The estimated manufacturing overhead costs are $300,000 and
estimated machine hours are 50,000. The actual manufacturing overhead costs are
$420,000 and actual machine hours are 70,000.
What is the difference between the budgeted and the actual manufacturing overhead
using job costing?
A) $0.20
B) $0.50
C) $1.00
D) $1.20
28) The best estimate of the total cost to manufacture 1,200 units is closest to:
A) $68,520
B) $100,920
C) $111,720
D) $90,120
29) The top management at Amore Corp, a manufacturer of computer games, is
attempting to recover from a flood that destroyed some of their accounting records. The
main computer system was also severely damaged. The following information was
salvaged:
Alpha Division Beta Division Gamma Division
Sales $5,500,000 (a) $2,500,000
Net operating income $3,500,000 $1,100,000 $1,200,000
Operating assets (b) (c) $1,600,000
Return on investment 0.25 0.15 (d)
Return on sales (e) 0.1 0.5
Investment turnover (f) (g) 1.5
What were the sales for the Beta Division (a)?
A) $8,666,667
B) $11,904,760
C) $11,000,000
D) $14,303,600
30) Which of the following statements is true?
A) Product costs and design costs are interchangeable terms.
B) Inventoriable costs are assigned to inventories under GAAP.
C) Manufacturing costs are a special case of period costs.
D) Intangible costs refer to a particular cost of a product.
31) Average number of repeat visits in a spa unit is a ________ measure on a balanced
scorecard.
A) customer perspective
B) financial perspective
C) learning-and-growth perspective
D) internal-business-process perspective
