1) Contribution margin = Contribution margin percentage x Revenues (in dollars).
2) It is best to rely totally on financial performance measures rather than using a
combination of financial and nonfinancial performance measures.
3) A customer cost hierarchy categorizes costs related to customers into different cost
pools on the basis of different cost drivers.
4) Just-in-time purchasing describes the flow of goods, services, and information from
the initial sources of materials and services to the delivery of products to consumers,
regardless of whether those activities occur in the same organization or in other
organizations.
5) The net present value of all cash flows over the life of an investment equals the net
present value of the
residual incomes.
6) Management accountants should have little or no role in deciding on a company’s
strategy.
7) A favorable production-volume variance arises when manufacturing capacity planned
for is NOT used.
8) In a backflush-costing system, no record of work in process appears in the
accounting records.
9) Job-costing and process-costing are mutually exclusive, hence a hybrid costing
system that combines elements of both job and process costing cannot be used.
10) Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed
costs total $9,600.
Required:
a.What is the contribution margin per lamp?
b.What is the breakeven point in lamps?
c.How many lamps must be sold to earn a pretax income of $8,000?
d.What is the margin of safety, assuming 1,500 lamps are sold?
11) Strykerz Corp expects to spend $800,000 in 2015 in appraisal costs if it does not
change its incoming materials inspection method. If it decides to implement a new
receiving method, it will save $60,000 in fixed appraisal costs and variable costs of
$0.50 per unit of finished product. The new method involves $140,000 in training costs
and an additional $150,000 in annual equipment rental.
Internal failure costs average $160 per failed unit of finished goods. During 2014, 5%
of all completed items had to be reworked. External failure costs average $400 per
failed unit. The company’s average external failures are 1% of units sold. The company
carries no ending inventories, because all jobs are on a per order basis and a just-in-time
inventory ordering method is used.
What is the net effect on appraisal costs for 2015, assuming the new receiving method
is implemented and that 800,000 material units are received?
A) $120,000 increase
B) $170,000 decrease
C) $190,000 decrease
D) $400,000 increase
12) Inventory carrying costs equal the ________.
A) opportunity costs of the investment tied up in inventory and the cost of
manufacturing of goods
B) costs of storage only
C) opportunity costs of the investment tied up in inventory and the relevant costs of
storage
D) historical costs and the relevant costs of storage
13) Which of the following is the mathematical expression of contribution margin ratio?
A) Contribution margin ratio = Contribution margin percentage x Revenues (in dollars)
B) Contribution margin ratio = Contribution margin percentage x Fixed costs (in
dollars)
C) Contribution margin ratio = Contribution margin percentage x Variable costs (in
dollars)
D) Contribution margin ratio = Contribution margin percentage x Operating leverage
14) The gross-margin format is used for ________.
A) variable costing income statement
B) mixed costing income statement
C) absorption costing income statement
D) standard costing income statement
15) Leslie Manufacturing reported the following:
What is Leslie’s cost of goods sold?
A) $103,000
B) $109,000
C) $112,000
D) $118,000
16) Which of the following is classified as a direct labor cost?
Wages of assembly-line workers Wages of a factory supervisor
A) No No
B) Yes Yes
C) No Yes
D) Yes No
17) Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products,
Product DCT121, are as follows:
What are the period costs per unit associated with Product DCT121?
A) $4
B) $16
C) $21
D) $52
18) Which of the following is an equation of a fixed cost function?
A) y = (a + b)X
B) y = a + bX
C) y = bX
D) y = a
19) Which of the following differentiates cost accounting and financial accounting?
A) The primary users of cost accounting are the investors, whereas the primary users of
financial accounting are the managers.
B) Cost accounting deals with product design, production, and marketing strategies,
whereas financial accounting deals mainly with pricing of the products.
C) Cost accounting measures only the financial information related to the costs of
acquiring fixed assets in an organization, whereas financial accounting measures
financial and nonfinancial information of a company’s business transactions.
D) Cost accounting measures information related to the costs of acquiring or using
resources in an organization, whereas financial accounting measures a financial position
of a company to investors, banks, and external parties.
20) The best estimate of the total monthly fixed cost is:
A) $692,200
B) $725,400
C) $659,000
D) $327,000
21) Assuming a constant mix of 3 units of X for every 1 unit of Y.
The breakeven point in units would be ________.
A) 6,000 units of X and 2,000 units of Y
B) 12,000 units of X and 4,000 units of Y
C) 5,200 units of X and 1,800 units of Y
D) 3,600 units of X and 1,200 units of Y
22) The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint
process. June production is 5,000 widgets; 8,750 gizmos; and 10,000 turnbols.
Respective per unit selling prices at splitoff are $75, $50, and $25. Joint costs up to the
splitoff point are $187,500.
What amount of joint costs will be allocated to the Turnbols?
A) $44,118
B) $30,882
C) $77,206
D) $66,176
23) Prime cost was:
A) $150,000
B) $190,000
C) $350,000
D) $415,000
24) Inventoriable costs are also known as:
A) variable costs.
B) conversion costs.
C) product costs.
D) fixed costs.