Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client
services for the business consulting division.
∙ Estate Planning, a new service, incurred $150,000 in development costs and employee
training.
∙ The direct costs of providing this service, which is all labor, averages $31 per hour.
∙ Other costs for this service are estimated at $440,000 per year.
∙ The current program for estate planning is expected to last for two years. At that time,
a new law will be in place that will require new operating guidelines for the tax
consulting.
∙ Customer service expenses average $99 per client, with each job lasting an average of
450 hours. The current staff expects to bill 54,000 hours for each of the two years the
program is in effect. Billing averages $46 per hour.
What are estimated life-cycle revenues?
A) $2,484,000
B) $208,120
C) $4,968,000
D) $416,240
Which of the following is an advantage of a dual-rate method?
A) It is the most widely used method in practice.
B) It is less costly to implement.
C) It avoids the expensive analysis for categorizing costs as either fixed or variable.
D) It allocates fixed cost as per the budgeted usage that helps in short and long-run
planning.
The Cybertronics Corporation reported the following information for its Cyclotron
Division:
Revenues $2,400,000
Operating costs 1,300,000
Operating assets 1,200,000
Income is defined as operating income.
What is the Cyclotron Division’s return on sales?
A) 91.7%
B) 45.8%
C) 50.0%
D) 92.3%
The weighted-average process-costing method calculates the equivalent units by
________.
A) considering only the work done during the current period
B) the units started during the current period minus the units in ending inventory
C) the units started during the current period plus the units in ending inventory
D) the equivalent units completed during the current period plus the equivalent units in
ending inventory
A recent college graduate has the choice of buying a new car for $33,500 or investing
the money for four years with an 11% expected annual rate of return. He has an
investment of $41,000 in equities and bonds which yields 8% expected annual rate of
return. If the graduate decides to purchase the car, the best estimate of the opportunity
cost of that decision is ________.
A) $3,280
B) $14,740
C) $41,000
D) $18,040
The best way to avoid misidentification of relevant costs is to focus on ________.
A) expected future costs that differ among the alternatives
B) historical costs
C) unit fixed costs
D) total unit costs
Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide
rate for allocating manufacturing overhead. The plant manager is considering
switching-over to ABC costing system and has asked the accounting department to
identify the primary production activities and their cost drivers which are as follows:
The current traditional cost method allocates overhead based on direct manufacturing labor
hours using a rate of $20 per labor hour.
What are the indirect manufacturing costs per remote control assuming an
activity-based-costing method is used and a batch of 10 remote controls are produced? The
batch requires 100 parts, 5 direct manufacturing labor hours, and 3 minutes of inspection
time.
A) $2.00 per remote control
B) $63.00 per remote control
C) $35.00 per remote control
D) $630.00 per remote control
Schooner Corporation used the following data to evaluate its current operating system.
The company sells items for $23 each and used a budgeted selling price of $23 per unit.
What is the static-budget variance of revenues?
A) $368,000 favorable
B) $368,000 unfavorable
C) $16,000 favorable
D) $16,000 unfavorable
Job-cost records for Boucher Company contained the following data:
Required:
a. Compute WIP inventory at June 30.
b. Compute finished goods inventory at June 30.
c. Compute cost of goods sold for June.
The galaxy Corporation disposes a capital asset with an original cost of $180,000 and
accumulated depreciation of $91,000 for $47,000. The company’s tax rate is 40%.
Calculate the after-tax cash inflow from the disposal of the capital asset.
A) $16,800
B) ($16,800)
C) $63,800
D) $89,000
How does the net realizable value method allocate joint costs?
A) allocates joint costs to joint products on the basis of a comparable physical measure
at the split-off point
B) allocates joint costs to joint products on the basis of the relative sales value at the
split-off point
C) allocates joint costs to joint products in a way that each product has an identical
gross-margin percentage
D) allocates joint costs to joint products on the basis of relative NRV
Classify each cost item into one of the business functions of the value chain, either (1)
R&D, (2) design, (3) production, (4) marketing, (5) distribution, or (6) customer
service.
Item:
a. cost of samples mailed to promote sales of a new product
b. labor cost of workers in the manufacturing plant
c. bonus paid to a person with a 90% satisfaction rating in handling customers with
complaints
d. transportation costs for shipping products to retail outlets
A controllable cost is any cost that can be ________ by a responsibility center manager
for a period of time.
A) controlled
B) influenced
C) segregated
D) excluded
A company produces three products from a joint production process:: A, B, and C. As a
percentage of total sales value, a represents 50%, B 49.5%, and C .5%. Product C could
be considered a ________.
A) primary product
B) main product
C) byproduct
D) waste product
Mayberry Company had the following journal entries recorded for the end of June.
Unfortunately, the company’s only accountant quit on July 10 and the president is at a
loss as to the company’s performance for the month of June.
Required:
a. What kind of performance did the company have for June? Explain each variance.
b. Why is Direct Materials given in two entries?
________ is the level of capacity based on producing at full efficiency all the time.
A) Practical capacity
B) Theoretical capacity
C) Normal capacity
D) Demand capacity
Cost accounting ________.
A) measures the costs of acquiring or using resources in an organization
B) measures the financial and nonfinancial information that helps managers make
decisions to fulfill the goals of an organization
C) coordinates product design, production, and marketing decisions and evaluate a
company’s performance
D) communicates information to investors, banks, regulators, and other outside parties
Archoid’s Flowering Plants provides the following information for the month of May:
For May, the company will report a(n) ________. (Round any intermediary calculations
two decimal places.)
A) favorable sales-mix variance
B) unfavorable sales-mix variance
C) favorable market-share variance
D) unfavorable market-share variance
A job-cost record uses information from ________.
A) a materials-requisition record to record raw material purchases from suppliers
B) a materials-requisition report to record the type and quantity of item received in an
order from a supplier
C) a labor-time card to record an employee’s wage rate and hours spent on a particular
job
D) the bill of materials to ensure the goods are of the prescribed quality
Sales-mix variance = $300,000 (F), sales-volume variance = $470,000 (U),
flexible-budget variance = $230,000 (F), market-size variance = $34,000 (U), calculate
the sales-quantity variance.
A) $770,000 (U)
B) $804,000 (U)
C) $136,000 (U)
D) $170,000 (U)
Which of the following is an opportunity cost?
A) lost sales
B) cost of production
C) marginal cost
D) cost of sales
Which of the following is true of master-budget capacity utilization?
A) It hides the amount of unused capacity.
B) It represents the maximum units of production intended for current capacity.
C) It provides the best cost estimate for benchmarking purposes.
D) It is an average that provides no meaningful feedback to a firm’s marketing manager
for a particular year.
When a Bakery transfers goods from the Mixing Department to the Baking Department,
the accounting entry would be ________.
A) Debit: Work in Process — Mixing Department
Credit: Work in Process — Baking Department
B) Debit: Work in Process — Baking Department
Credit: Accounts Payable
C) Debt: Work in Process — Baking Department
Credit: Work in Process — Mixing Department
D) Debt: Work in Process — Mixing Department
Credit: Accounts Payable
Which of the following is true of staff management?
A) It plans income taxes, sales taxes, and international taxes.
B) It is directly responsible for achieving the goals of the organization.
C) It provides advice, support, and assistance to line management.
D) It controls the main business functions such as production and marketing.
Coast to Coast Bus Lines acquired the following data about the operating cost of three
of its top competitors.
Operating cost per seat per mile
Competitor A $.11
Competitor B $.15
Competitor C $.16
Management decides to use the average operating cost per seat per mile as a mark.
Coast to Coast per seat is 12.5 cents per mile.
A) It is equal to the mark
B) It compares favorably
C) It compares unfavorably
D) It compares favorably to the best performing competitor
While allocating corporate costs to divisions ________.
A) only fixed costs should be allocated
B) no homogeneous cost pools should be constructed
C) all the costs in the cost pool should not have the same or a similar cause-and-effect
or benefits-received relationship with the cost-allocation base
D) allocate both variable and fixed costs to divisions and then to customers
The method that allocates each department’s budgeted costs to operating departments
only is called ________.
A) direct method
B) step-down method
C) reciprocal method
D) sequential method
Violet Sales Corp, reports the year-end information from 2019 as follows:
Violet is developing the 2019 budget. In 2019 the company would like to increase selling
prices by 3.5%, and as a result expects a decrease in sales volume of 14%. All other
operating expenses are expected to remain constant. Assume that cost of goods sold is a
variable cost and that operating expenses are a fixed cost.
What is budgeted cost of goods sold for 2019?
A) $91,160
B) $109,710
C) $14,840
D) $253,679
Cysco Corp has a budget of $1,207,000 in 2017 for prevention costs. If it decides to
automate a portion of its prevention activities, it will save $106,000 in variable costs.
The new method will require $50,200 in training costs and $143,000 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 201,000 units.
Appraisal costs for the year are budgeted at $503,000. The new prevention procedures
will save appraisal costs of $50,600. Internal failure costs average $34 per failed unit of
finished goods. The internal failure rate is expected to be 6% of all completed items.
The proposed changes will cut the internal failure rate by one-half. Internal failure units
are destroyed. External failure costs average $58 per failed unit. The company’s average
external failures average 2.5% of units sold. The new proposal will reduce this rate to
2%. Assume all units produced are sold and there are no ending inventories.
How much will appraisal costs change assuming that the new prevention methods
reduce material failures by 40% in the appraisal phase?
A) $156,200 decrease
B) $307,545 decrease
C) $50,600 increase
D) $50,600 decrease
For a manufacturing-sector company, the cost of factory depreciation is classified as a
________.
A) direct material cost
B) direct manufacturing labor cost
C) manufacturing overhead cost
D) period cost
Fixed costs equal $16,000, unit contribution margin equals $35, and the number of units
sold equal 1,300. Operating income is ________.
A) $45,500
B) $29,500
C) $16,000
D) $61,500
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) $101,933
B) $250,909
C) $45,000
D) $184,000