A top-down budget approach is also referred to as
a. Participative budgeting.
b. Imposed budgeting.
c. Responsibility budgeting.
d. None of these answer choices are correct.
Which of the following is the simplest method for estimating the fixed and variable
components of a mixed cost?
a.Regression analysis
b.Scattergraphs
c.The high-low method
d.Break-even analysis
Which of the following is not a measure that relates to the customer perspective?
a. Customer satisfaction
b. Customer loyalty index
c. Customer profitability
d. Response time to customer request
Assume a company wishes to maintain a markup of 35% on a product with a unit cost
of $25 ($14 variable and $11 fixed). What amount will the company set as the selling
price?
a. $30.00
b. $33.75
c. $38.46
d. $43.90
Which of the following is not included in the profit equation?
a. Sales revenue
b. Variable costs
c. Cost of goods sold
d. Fixed costs
To balance the scorecard, organizations should select all of the following except
a. Leading measures.
b. Dashboard measures.
c. Lagging measures.
d. Qualitative measures.
Lorman Manufacturing purchases equipment with an expected life of 10 years for
$50,000. The equipment has an estimated salvage value of $2,000. Lorman expects the
new equipment to generate cost savings of $8,000. What is the payback period for the
equipment?
a. 6 years
b. 6.25 years
c. 6.50 years
d. 10 years
A performance measure is measurable if it
a. Measures only one activity.
b. Relates clearly and directly to the process it measures.
c. Relates to a corporate strategic objective.
d. Is complete and accurate.
Numerous resources are available to assist in developing an understanding of a
company’s competitive environment. The U.S. Census Bureau collects a wide array of
statistics and makes them available through which of the following cites?
a. http://www.census.gov/
b. http://www.stats.com/
c. http://www.census.com/
d. http://www.statistics.gov/
Ignatenko Company estimates it will incur $2,400,000 in manufacturing overhead
during the coming year. Additionally, it is estimated the company will operate at a level
requiring 200,000 direct labor hours and 500,000 machine hours. At the end of the year
Ignatenko had worked 203,000 direct labor hours, used 450,000 machine hours, and
incurred 2,510,000 in manufacturing overhead. Required
a. If Ignatenko Company used direct labor hours as its manufacturing overhead
application base, how much overhead was applied to jobs during the year?
b. Using direct labor hours as the application base, was manufacturing overhead
under-or overapplied for the year? By how much? c. If Ignatenko Company used
machine hours as its manufacturing overhead application base, how much overhead was
applied to jobs during the year?
d. Using machine hours as the application base, was manufacturing overhead under-or
overapplied for the year? By how much?
Georgiana operates a nail salon. She is trying to plan her costs for the next month and is
uncertain as to how to estimate those costs. Help her estimate next month’s costs given
the following information she collected, based on number of customers per month.
If Georgiana believes next month is going to be busier than the last few months and she
expects 1,850 customers (relevant range is 1,000 – 2,000 customers per month), what is
the expected cost for electricity?
a.$390
b.$378
c.$410
d.$373
If the cost of goods sold is less than the cost of goods manufactured, then
a. Finished Goods Inventory increased during the period.
b. Finished Goods Inventory decreased during the period.
c. Overhead was overapplied.
d. None of these answer choices are correct.
If a company that applies variable overhead on the basis of direct labor hours records an
unfavorable direct labor efficiency variance, the variable overhead efficiency variance
will be
a. Unfavorable.
b. Favorable.
c. Zero.
d. Undeterminable.
If a customer cannot be returned to profitability and the customer is dropped,
a. The company’s overall profit will increase.
b. The company’s revenue will decrease in the short-run.
c. The managers will have more resources to serve profitable customers
d. All of these answer choices are correct.
The underlying principle that absorption costing satisfies is the
a. Matching principle
b. Relevance principle
c. Historical cost principle
d. Understandability principle
Overhead is typically divided into which of the following components?
a. Direct and indirect
b. Fixed and variable
c. Product and period
d. Controllable and non-controllable.
Deviations from the budget may occur because of
a. Bad decisions.
b. Events beyond the company ‘s control.
c. Good decisions.
d. All of these answer choices are correct.
Prepare a flexible budget and explain its use in evaluating performance.
Assume you have recently accepted a position as cost accountant for a large
manufacturing company. The sales manager approaches you immediately about a
particular product the company sells and expresses his belief that the product is
overpriced and impossible to sell unless you do something to make it more marketable.
You are not aware of any environmental or technology issues with the product that
would inhibit its sales. Discuss four things you would do to investigate the concern
expressed by the sales manager. Include more than just cost issues in your discussion.
The acid-test is calculated as:
The following data has been taken from the accounting records of Curtis Manufacturing
Company for the current year:
a. Compute the amount of raw materials moved into production during the period.
b. Compute the amount transferred to finished goods during the period.
c. Compute the amount of goods sold during the period.
Midstate Industries is a retail clothing store. Marilyn Mounds knows that customer
satisfaction is key to the success of her store. Indicate by placing an “X ” in the
appropriate column whether the following measures are leading or lagging and
qualitative or quantitative. Each item may classify as more than one measure.
The following data pertain to an investment proposal:
What is the present value of the proposed investment?
Management by exception focuses only on those variances management considers
important. List three factors that managers use in deciding whether or not to investigate
a variance and give an example of each.
Power Tools, Inc. produces gas-powered leaf blowers. The company is currently not
operating at full capacity. The plant manager is considering making the rewind
assembly for the pull cord which is now being purchased from a supplier at $22 each.
Power Tools already has the equipment to produce the assembly. The plant manager has
analyzed the cost of producing the assemblies and determined that each assembly will
require $8 of direct material, $6 of direct labor, and $12 of manufacturing overhead.
Two-thirds of the manufacturing overhead is a fixed cost that would not be affected by
the decision to manufacture the brackets. Should Paper Moon continue to purchase the
brackets or produce them internally?
Readers Room Bookstore has a chain of stores that sell used and new books. The
company has recently hired a controller who used activity-based costing at her last job.
At her suggestion, the store is in the beginning stages of implementing activity-based
costing for its operations. The following activity pools have been identified:
1> Inspection of used books before shelving
2> Costs of human resources department
3> Costs of computer department
4> Salaries of sales clerks
5> Costs of cleaning service
Required:
Identify at least one possible cost driver for each activity cost pool.
Purple Bear, Inc. produces boat motors. Janice Smyth, the company’s controller has
provided you with the following information.
Using the above cost information, prepare a cost of goods manufactured schedule.