1) If the production planners set the budgeted machine hours standards too tight, one
could anticipate there would be a favorable variable overhead efficiency variance.
2) Possible reasons for the larger actual materials-handling labor-hours per batch
include the possibility of unmotivated, inexperienced, and underskilled employees
3) If the government wants to contract a very large scale project with significant
uncertainty about what the final cost will be; often a cost-plus contract is awarded to
attract qualified contractors who may otherwise not be willing to accept the risks
inherent in a guaranteed bid price.
4) The income taxes saved as a result of depreciation deductions are irrelevant because
they decrease cash outflows.
5) -Prices between countries vary beyond the cost of delivering the product to each
country only because of changes in exchange rates.
6) In CVP analysis, the number of output units is the only revenue driver.
7) Cost management not only helps reducing costs but also improving customer
satisfaction and the quality of a firm’s products.
8) Preparation of the budgeted statement of cash flows is the final step in preparing the
operating budget.
9) An activity-based costing system is necessary for costing services that are similar.
10) Management accounting is playing an increasingly important role by helping
managers develop and implement strategy.
11) Net present value is calculated using the ________.
A) internal rate of return
B) discount rate
C) risk-free rate
D) predetermined overhead cost rate
12) The difference between actual costing and normal costing is ________.
A) normal costing uses actual quantities of direct-costs
B) actual costing uses actual quantities of direct-costs
C) normal costing uses budgeted indirect-costs
D) actual costing uses actual quantities of cost-allocation bases
13) Total manufacturing costs equal ________.
A) direct materials plus prime costs
B) direct materials plus conversion costs
C) direct manufacturing labor costs plus sunk costs
D) direct manufacturing labor costs plus conversion costs
14) Which of the following statements is true?
A) A direct cost of one cost object will always be a direct cost of another cost object.
B) Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.
C) All fixed costs are indirect costs.
D) All direct costs are variable costs.
15) Purchasing at the EOQ recommended level, what are the relevant total costs?
A) $1,500.00
B) $1,978.60
C) $989.37
D) $3,000.00
16) Forge Company wants to purchase a new cutting machine for its sewing plant. The
investment is expected to generate annual cash inflows of $120,000. The required rate
of return is 10% and the current machine is expected to last for four years. What is the
maximum dollar amount the company would be willing to spend for the machine,
assuming its life is also four years? Income taxes are not considered.
A) $273,500
B) $460,800
C) $355,950
D) $380,280
17) The tool crib at a large manufacturing company is responsible for providing tools to
the factory workers on demand. The tool crib has a variable demand. Historically, its
demand has ranged from 300 to 500 small tools per day with an average of 400. Diane,
the tool crib attendant, works eight hours a day, five days a week. Each order is for one
small tool and each small tool takes Diane 1 minute to retrieve from the bins.
Diane has been asked to consider plans to add the retrieval of larger tooling fixtures to
her duties. She anticipates that there would be an average of 12 tooling fixtures per day
requested. Each tooling fixture would take Diane 4 minutes to retrieve.
What is the average waiting time, in minutes, if Diane continues to be the only worker
that would retrieve the small tools as well as the larger tooling fixtures?
A) 3.50 minutes
B) 7.00 minutes
C) 9.25 minutes
D) 64.00 minutes
18) How many deliveries will be required at the economic order quantity?
A) 15.50 deliveries
B) 15 deliveries
C) 19.32 deliveries
D) 21.21 deliveries
19) AARR indicates the average rate at which ________.
A) a dollar of investment generates after-tax operating income
B) a dollar of after-tax cash flow generates net income
C) a dollar of investment generates a positive cash flow
D) a dollar of after-tax non-operating income generates net income
20) The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff.
Budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor
costs. Assuming that the remaining costs are indirect and direct-labor cost is the
allocation base, calculate the budgeted indirect cost rate.
A) 38 of direct-labor cost
B) 60% of direct-labor cost
C) 63% of direct-labor cost
D) 160% of direct-labor cost
21) 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 Large Plane Department? Assume budgeted usage is used to
allocate fixed materials laboratory costs and actual usage is used to allocate variable
materials laboratory costs.
A) $9,133,333
B) $9,166,667
C) $9,466,667
D) $9,666,667
22) If selling price per unit is $40, variable costs per unit are $25, total fixed costs are
$20,000, the tax rate is 30%, and the company sells 5,000 units, net income is
________.
A) $32,158
B) $26,548
C) $28,500
D) $38,500
23) Define variable overhead spending variance. Briefly explain why a favorable
variable overhead spending variance may not always be desirable.
24) Black Pearl, Inc., sells a single product. The company’s most recent income
statement is given below.
Required:
25) Using the following information find the unknown amounts. Assume each set of
information is an independent case.
26) Dual pricing is not widely used. Explain its disadvantages.
27) What are the four parts of the cost hierarchy. Briefly explain each part, and contrast
this cost hierarchy to the fixed-variable dichotomy?
28) Cost accounting provides information for both management accounting and
financial accounting professionals. Explain.
29) Flilane Tire Company needs to overhaul its auto lift system or buy a new one. The
facts have been gathered, and they are as follows:
Required:
Which alternative is the most desirable with a current required rate of return of 15%?
Show computations, and assume no taxes.
