A company that manufactures large quantities of homogenous goods will use a
job-order costing system.
When computing profit on an after-tax basis, it is necessary to multiply the pretax profit
by (1 – effective tax rate).
An organization’s bond rating may cause the organization to hold larger levels of cash
than are necessary for operations.
The regression equation y = a+ bX assumes that the function is linear in nature.
Net realizable value equals product sales revenue at split-off minus any costs necessary
to prepare and dispose of the product.
The balanced scorecard can be used to provide information on quality in an
organization.
Continuous production losses are assumed to occur at the end of a process.
Cost control should be viewed as a short-term process.
In a special order decision, the sales price should be sufficient to cover a job’s variable
costs, incremental fixed costs, and generate a profit.
Managerial accounting is most concerned with meeting the needs of internal users.
In an open-book management setting, financial information is often shared with
employees who have little knowledge of accounting concepts.
A cost object is anything for which management wants to collect or accumulate costs.
Top management should be directly involved in strategic planning for an organization.
Traditionally, overhead has been assigned based on direct labor hours or machine
hours. What effect does this have on the cost of a high-volume item?
A. over-costs the product
B. under-costs the product
C. has no effect the product cost
D. cost per unit is unaffected by product volume
Distinguishing a product by adding additional features or value is part of which of the
following competitive strategies?
A. yes no yes
B. yes yes yes
C. yes no no
D. no yes yes
The presence of idle capacity in the selling division may increase
A. the incremental costs of production in the selling division.
B. the market price for the good.
C. the price that a buying division is willing to pay on an internal transfer.
D. a negotiated transfer price.
Which of the following capacity levels has traditionally been used to compute the fixed
overhead application rate?
A. expected annual
B. normal
C. theoretical
D. prior year
Historically, the cost of quality has been
A. included in account balances for items such as Work in Process Inventory and
marketing expenses.
B. detailed in various “cost of quality” account balances on the Income Statement.
C. immaterial because no accounts were developed to detail these amounts.
D. generally spent in the prevention rather than the appraisal category.
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. What is the cost per driver unit for the loan
application activity?
A. $0.09
B. $0.075
C. $30.00
D. $50.00
The costing system that classifies costs by functional group only is
A. standard costing.
B. job order costing.
C. variable costing.
D. absorption costing.
Cost control is an important function of the
A. no no yes
B. yes yes no
C. no yes yes
D. yes yes no
Incremental separate costs are defined as all costs incurred between ____ and the point
of sale.
A. inception
B. split-off point
C. transfer to finished goods inventory
D. point of addition of disposal costs
The formula for a chemical compound requires one pound of Chemical X and one
pound of Chemical Y. One pound of Chemical X is processed in Department A and
transferred to Department B for further processing where one pound of Chemical Y is
added when the process is 50 percent complete. When the processing is complete in
Department B, the finished compound is transferred to finished goods. The process is
continuous, operating 24 hours a day.
Normal spoilage occurs in Department A. Five percent of material is lost in the first few
seconds of processing. No spoilage occurs in Department B.
The following data are available for the month of October:
Required:
a. Prepare a schedule showing finished equivalents for Chemical X and conversion for
Department A using the FIFO method.
b. Determine for Department B the number of units of good product completed during
October and the number of units in process on October 31.
c. Prepare a schedule for Department B showing finished equivalents for preceding
department cost, cost of Chemical Y, and conversion cost using the FIFO method.
Cost accounting is directed toward the needs of
A. regulatory agencies.
B. external users.
C. internal users.
D. stockholders.
On a break-even chart, the break-even point is located at the point where the total
A. revenue line crosses the total fixed cost line.
B. revenue line crosses the total contribution margin line.
C. fixed cost line intersects the total variable cost line.
D. revenue line crosses the total cost line.
The four categories of product quality costs are
A. external failure, internal failure, prevention, and carrying.
B. external failure, internal failure, prevention, and appraisal.
C. external failure, internal failure, training, and appraisal.
D. warranty, product liability, training, and appraisal.
One reason annual overhead application rates are used is
A. because of seasonal variability of overhead costs.
B. to help budget overhead costs.
C. to minimize the overhead cost assigned to products.
D. to maximize the overhead cost assigned to products.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume the material cost per EUP is $8.00
and the conversion cost per EUP is $15 in Decorating. What is the cost of completing
the units in beginning inventory?
A. $ 960
B. $ 1,380
C. $ 1,860
D. $11,940
If a division is set up as an autonomous profit center, then goods should not be
transferred
A. in at a cost-based transfer price.
B. out at a cost-based transfer price.
C. in or out at cost-based transfer price.
D. to other divisions in the same company.
A service department provides specific functional tasks for other internal units. Which
of the following activities would not be engaged in by a service department?
A. purchasing
B. warehousing
C. distributing
D. manufacturing
What are four criteria that a valid base for allocating costs should consider?
Define the following terms: standard cost system, total variance, material price
variance, and labor efficiency variance.
Radtke Company has provided the following information for the month of November:
Assume that Radtke Company hires full-time employees who are paid a total of $6,500
per month.
Compute the spending and volume variances.
A single process in which one product cannot be manufactured without producing
others is referred to as a _________________________.
Define residual income. Evaluate residual income as a measure of performance.
Cooper Industries has the following data for the current year:
What is the amount of under- or overapplied overhead? Prepare the necessary journal
entry to dispose of under- or overapplied overhead.
When multiple materials are used, the difference between the total quantity and the
standard quantity of output when a nonstandard mix of materials is used is known as the
_________________________ variance.
