The journal entry to record normal spoilage specifically identified with a particular job
includes a debit to Work in Process.
When using the high-low method, fixed costs are computed before the variable
component is computed.
Financial measures are lagging indicators.
A company’s break-even point is the level where total revenues equal total costs.
The life-cycle stage of a business is an important determinant of an organization’s
activities.
Variable costing is more useful than absorption costing in determining a company’s
break-even point.
Process benchmarking is concerned with how top-ranked companies achieve their
results.
Tax deferral is the most desirable form of tax treatment for employee compensation
elements.
The tax benefit from depreciation expense is the depreciation amount multiplied by the
tax rate.
For cost control purposes, actual costs should be compared to prior period costs.
If sales exceed production, absorption costing net income is less than variable costing
net income.
A cost leadership strategy emphasizes
A. product features.
B. low prices.
C. just-in-time production capabilities.
D. short-run opportunities for cost minimization.
If the chief accountant of a firm has to prepare an operating budget for the coming
year, the first budget to be prepared is the
A. sales budget.
B. cash budget.
C. purchases budget.
D. capital budget.
Which of the following accounts is credited when abnormal spoilage is written off in
an actual cost system?
A. Miscellaneous Revenue
B. Loss from Spoilage
C. Finished Goods
D. Work in Process
Information concerning Thompson Corporation’s Product A follows:
Assuming that Thompson increased sales of Product A by 20 percent, what should the
profit from Product A be?
A. $20,000
B. $24,000
C. $32,000
D. $80,000
Which of the following is not an objective for computing full cost?
A. to reflect production’s “fair share” of costs
B. to instill a consideration of support costs
C. to reflect usage of services on a fair and equitable basis
D. to provide for cost recovery
Smith Corporation
Smith Corporation is involved in the evaluation of a new computer-integrated
manufacturing system. The system has a projected initial cost of $1,000,000. It has an
expected life of six years, with no salvage value, and is expected to generate annual cost
savings of $250,000. Based on Smith Corporation’s analysis, the project has a net
present value of $57,625.
Refer to Smith Corporation. What is the project’s profitability index?
A. 1.058
B. .058
C. .945
D. 1.000
A variable overhead spending variance is caused by
A. using more or fewer actual hours than the standard hours allowed for the production
achieved.
B. paying a higher/lower average actual overhead price per unit of the activity base than
the standard price allowed per unit of the activity base.
C. larger/smaller waste and shrinkage associated with the resources involved than
expected.
D. both b and c are causes.
A purchases budget
A. does not reflect early payment discounts granted by vendors.
B. is the same thing as a production budget.
C. is needed only if a firm does not pay for its merchandise in the same period as it is
purchased.
D. is affected by a firm’s inventory policy only if the firm purchases on credit.
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. How many units must be accounted for?
A. 118,200
B. 128,200
C. 130,000
D. 138,200
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the machine maintenance cost allocated to projection TVs
would be:
A. $ 72,000
B. $108,000
C. $110,769
D. $124,615
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Using the direct method, what amount of Administration
costs is allocated to C (round to the nearest dollar)?
A. $576,000
B. $ 54,000
C. $108,000
D. $150,000
In allocating variable costs to products,
A. a volume-based cost driver should be used.
B. direct labor hours should always be used as the allocation base.
C. a company should use the same allocation base that it uses for fixed costs.
D. a company should never use more than one cost driver.
Which of the following strategies is used to deal with uncertainty related to price risk?
A. Statistical analysis
B. Cost restructuring
C. Hedging
D. Insurance
Albuquerque Corporation makes and sells the “Desert Icon’, a wall hanging depicting a
magical cactus plant. The Desert Icons are sold at specialty shops for $50 each. The
capacity of the plant is 15,000 Icons. Costs to manufacture and sell each wall hanging
are as follows:
Albuquerque Corporation has been approached by a Utah company about purchasing
2,500 Desert Icons. The company is currently making and selling 15,000 per year. The
Utah company wants to attach its own state label, which increases costs by $.50 each.
No selling expenses would be incurred on this order. The corporation believes that it
must make an additional $1 on each Desert Icon to accept this offer.
When a job is begun, the first document in the job-order process is the
___________________________________.
The following information is for the Pawnee Manufacturing Company for November.
Prepare a statement of Cost of Goods Manufactured and a statement of Cost of Goods
Sold in good form.
Outdoor Oasis, Inc.
Outdoor Oasis, Inc. has just finished its first year of business. Outdoor Oasis, Inc.
makes decorative outdoor furniture. The firm manufactured 2,500 pieces of furniture
during the year: 2,400 were sold at garden centers for $456,000; 100 pieces were
defective and could only be sold as scrap metal (25 pounds each and can be sold for
$2.50 per pound). No defective units could be reworked. During the year the following
costs were incurred:
Refer to Outdoor Oasis, Inc. Compute the total quality cost incurred by the company
during the first year of operations.
Briefly discuss the net realizable value at split-off point method of allocating joint
costs.
In activity-based costing, how are cost drivers selected?
The number of completed units that could have been produced from the inputs applied
is referred to as ______________________________.