1) Implementing activity-based costing system involves use of different cost rates for
different activities to compute indirect costs of a product.
2) Fixed costs for the period are by definition a lump sum of costs that remain
unchanged and therefore the fixed overhead spending variance is always zero.
3) For management accounting, internal measurement and reporting are based on
cost-benefit analysis.
4) When considering customer needs and wants, only financial measures can be used,
since they are easily measured.
5) Effective management control systems should also motivate managers and other
employees.
6) In joint costing, the sales value at splitoff method is typically used in preference to
the NRV method only when net realizable value for one or more products at splitoff do
not exist.
7) Companies often use costing systems that have features of ABC systems but that do
not emphasize individual activities.
8) Using practical capacity is best for evaluating the marketing manager’s performance
for a particular year.
9) Purchasing costs arise in preparing and issuing purchase orders, receiving and
inspecting the items included in the orders, and matching invoices received, purchase
orders, and delivery records to make payments.
10) Ken’s Beer Emporium sells beer and ale in both pint and quart sizes. If Ken’s sells
twice as many pints as it sells quarts, and sells 2,400 items total, it will sell 800 quarts
of ale.
11) Once a cost pool has been established, it should NOT need to be revisited or
revised.
12) Total assets employed is the total assets available minus the sum of idle assets and
assets purchased for future expansion.
13) Activity-based costing systems use the quantitative analysis method exclusively for
cost estimation because of its accuracy.
14) Sutton Hot Dog Stand sells hot dogs for $1.35. Variable costs are $1.05 per unit
with fixed production costs of $90,000 per month at a level of 400,000 units. Fixed
administrative costs total $30,000. Sales average 400,000 units per month, with planned
production of 400,000 hot dogs.
Required:
a.What are breakeven unit sales under variable costing?
b.What are breakeven unit sales under absorption costing if she sells everything she
prepares?
c.What are breakeven unit sales under absorption costing if average sales are 498,000
and planned production is changed to 500,000?
15) Shaw Supply Company sells a single product and has the following average costs at
a sales level of 15,000 units:
Required:
Determine the following amounts at a sales level of 18,000 units:
a. Total variable cost
b. Total fixed cost
c. Variable cost per unit
d. Fixed cost per unit
e. Total cost per unit
16) Which of the following includes both traced direct costs and allocated indirect
costs?
A) cost tracing
B) cost pools
C) cost assignments
D) cost allocations
17) Management accounting ________.
A) focuses on estimating future revenues, costs, and other measures to forecast
activities and their results
B) provides information about the company as a whole
C) reports information that has occurred in the past that is verifiable and reliable
D) provides information that is generally available only on a quarterly or annual basis
18) Pederson Company reported the following:
What is the average manufacturing cost per unit?
A) $40.00
B) $42.00
C) $30.00
D) $32.00
19) ________ aims to improve operations throughout the value chain and to deliver
products
and services that exceed customer expectations.
A) Total Quality Management
B) Innovation
C) Customer response time
D) Cost and efficiency
20) A nonprofit organization aids the unemployed by supplementing their incomes by
$5,000 annually, while they seek new employment skills. The organization has fixed
costs of $200,000 and the budgeted appropriation for the year totals $700,000. How
many individuals can receive financial assistance this year?
A) 115 people
B) 110 people
C) 100 people
D) 95 people
21) At an activity level of 4,000 machine-hours in a month, Curt Corporations total
variable production engineering cost is $154,200 and its total fixed production
engineering cost is $129,000. What would be the total production engineering cost per
unit, both fixed and variable, at an activity level of 4,300 machine-hours in a month?
Assume that this level of activity is within the relevant range.
A) $68.33
B) $68.55
C) $70.80
D) $65.86
22) Apple Valley Corporation uses a job cost system and has two production
departments, A and B. Budgeted manufacturing costs for the year are:
The actual material and labor costs charged to Job #432 were as follows:
Apple Valley applies manufacturing overhead costs to jobs on the basis of direct
manufacturing labor cost using departmental rates determined at the beginning of the
year.
For Department B, the manufacturing overhead allocation rate is ________.
A) 50%
B) 100%
C) 200%
D) 300%
23) What is operating income for 2015?
A) $1,045,000
B) $726,000
C) $486,000
D) $476,000
24) What is the fixed overhead spending variance?
A) $14,400 favorable
B) $9,000 favorable
C) $9,000 unfavorable
D) $14,400 unfavorable
25) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be allocated to the Small Plane Department? Assume budgeted usage is used to
allocate materials laboratory costs and actual usage is used to allocate variable materials
laboratory costs.
A) $8,225,000
B) $8,050,000
C) $8,483,333
D) $8,783,333
26) Timekeeper Corporation has two divisions, Distribution and Manufacturing. The
company’s primary product is high-end watches. Each division’s costs are provided
below:
The Distribution Division has been operating at a capacity of 4,000,000 units a week
and usually purchases 2,000,000 units from the Manufacturing Division and 2,000,000
units from other suppliers at $9.00 per unit.
Axelia Corporation has two divisions, Refining and Extraction. The company’s primary
product is Luboil Oil. Each division’s costs are provided below:
The Refining Division has been operating at a capacity of 40,000 barrels a day and
usually purchases 25,000 barrels of oil from the Extraction Division and 15,000 barrels
from other suppliers at $60 per barrel.
What is the transfer price per watch from the Manufacturing Division to the
Distribution Division, assuming the method used to place a value on each pound of
fertilizer is 160% of variable costs?
A) $1.00
B) $1.60
C) $2.20
D) $8.00
27) A benefit of using a market-based transfer price is that the ________.
A) profits of the transferring division are sacrificed for the overall good of the
corporation
B) profits of the division receiving the products are sacrificed for the overall good of
the corporation
C) economic viability and profitability of each division can be evaluated individually
D) transferring division can be assured of recovering its full costs in all scenarios
28) The sales-quantity variance can be decomposed into ________.
A) sales-mix variance and sales-volume variance
B) static-budget variance and flexible-budget variance
C) flexible-budget variance and sales-volume variance
D) market-share variance and market-size variance