1) In joint costing, outputs with no sales value are always excluded when costs are
allocated using physical measures.
2) A capital budgeting project is accepted if the required rate of return equals or exceeds
the internal rate of return.
3) When considered in isolation, a favorable variance decreases operating income
relative to the budgeted amount.
4) The direct allocation method provides key information for outsourcing decisions
regarding support services.
5) The flexible budget enables to highlight the differences between budgeted costs and
budgeted quantities versus actual costs and actual quantities for the budgeted output
level.
6) A budget can only be used as a planning tool.
7) Lean accounting takes in to consideration all costs associated with inventories.
8) The degree of operating leverage at a specific level of sales helps the managers
calculate the effect that potential changes in sales will have on operating income.
9) Cost of goods sold refers to the products brought to completion, whether they were
started before or during the current accounting period.
10) In hybrid-costing systems, managers use process costing to account for the
conversion costs and job costing for the material and customizable components.
11) Production is the ________.
A) generation of, and experimentation with, ideas related to new products, services, or
processes
B) processing orders and shipping products or services to customers
C) acquisition, coordination, and assembly of resources to produce a product or deliver
a service
D) detailed planning and engineering of products, services, or processes
12) The following information pertains to the January operating budget for Casey
Corporation.
Budgeted sales for January $200,000 and February $100,000.
Collections for sales are 60% in the month of sale and 40% the next month.
Gross margin is 30% of sales.
Administrative costs are $10,000 each month.
Beginning accounts receivable is $20,000.
Beginning inventory is $14,000.
Beginning accounts payable is $65,000. (All from inventory purchases.)
Purchases are paid in full the following month.
Desired ending inventory is 20% of next month’s cost of goods sold (COGS).
For January, budgeted cash payments for purchases are ________.
A) $100,000
B) $70,000
C) $65,000
D) $50,000
13) Radon Corporation manufactured 33,000 grooming kits for horses during March.
The following fixed overhead data pertain to March:
What is the fixed overhead production-volume variance?
A) $9,000 unfavorable
B) $14,400 favorable
C) $14,400 unfavorable
D) $9,000 favorable
14) In multiple regression, when two or more independent variables are highly
correlated with one another, the situation is known as ________.
A) heteroscedasticity
B) homoscedasticity
C) multicollinearity
D) autocorrelation
15) Among different types of costs associated with inventory, the costs that result when
features and characteristics of a product or service are not in conformance with the
customer specifications are ________.
A) EOQ estimation costs
B) costs of quality
C) purchasing costs
D) shrinkage costs
16) Teecorp Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of the gas cost will be assigned to the Lawn Department?
A) $12,000
B) $10,200
C) $10,020
D) $10,000
17) The following information pertains to Hepburn Company:
Cash is collected from customers in the following manner:
Month of sale30%
Month following the sale70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
Labor costs are 20% of sales. Other operating costs are $30,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required
at the end of the month. Money can be borrowed in multiples of $1,000.
How much cash will be disbursed in total in March?
A) $42,000
B) $50,000
C) $88,400
D) $96,400
18) Kramer Enterprises reports year-end information from 2015 as follows:
Kramer is developing the 2016 budget. In 2016 the company would like to increase
selling prices by 12.5%, and as a result expects a decrease in sales volume of 9%. All
other operating expenses are expected to remain constant. Assume that cost of goods
sold is a variable cost and that operating expenses are a fixed cost.
Should Kramer increase the selling price in 2016?
A) Yes, because operating income increases for 2016
B) Yes, because sales revenue increases for 2016
C) No, because sales volume decreases for 2016
D) No, because gross margin decreases for 2016
19) Each indirect-cost pool of a manufacturing firm ________.
A) utilizes a separate cost-allocation rate
B) is a subset of total direct costs
C) relates to multiple cost centres
D) utilizes the same cost-allocation rate for all costs incurred
20) Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product
profitability is analyzed as follows:
Under the revised ABC system, the activity-cost driver rate for the supervision activity
is ________.
A) $2.58
B) $2.40
C) $2.24
D) $1.16
21) Salary of top management and general-administration costs is an example of
________.
A) customer output unit-level costs
B) customer batch-level costs
C) distribution-channel costs
D) corporate-sustaining costs
22) Bovous Stores, Inc., sells several products. Information of average revenue and
costs is as follows:
What is the contribution margin percentage?
A) 60%
B) 66%
C) 33%
D) 55%
23) A budget is an end product of negotiations among senior and subordinate mangers
because ________.
A) budgeting is their mutual responsibility
B) senior managers alone cannot spare the time required for the budgeting process
C) senior managers are responsible for providing information on competitors
performance and subordinate managers are responsible for information on external
market conditions
D) senior managers want stiffer targets and subordinates want relatively easy targets
24) Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells
blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD;
DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart
does not inspect the DVDs due to Globe’s reputation for high quality. Annual demand is
312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
Relevant ordering costs per purchase order$114.50
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 4.50
What are the relevant total costs?
A) $14,279
B) $18,114
C) $16,531
D) $14,278
25) Zealz Manufacturing produces a single product that sells for $80. Variable costs per
unit equal $30. The company expects total fixed costs to be $70,000 for the next month
at the projected sales level of 2,000 units. In an attempt to improve performance,
management is considering a number of alternative actions. Each situation is to be
evaluated separately. What is the current breakeven point in terms of number of units?
A) 1,400 units
B) 2,250 units
C) 3,333 units
D) 1725 units
26) ABC systems create ________.
A) one large cost pool
B) homogenous activity-related cost pools
C) activity-cost pools with a broad focus
D) activity-cost pools containing many direct costs
27) Ruby Corp is bidding on a design project for a new client. The total budgeted
direct-labor costs for the firm are $400,000. The total budgeted indirect costs are
$800,000. It is estimated that there are 10,000 billable hours in total.
Required:
a.What is the budgeted direct-labor cost rate?
b.What is the budgeted indirect-cost rate assuming direct-labor cost is the allocation
base?
c.What should be the engineering firm bid on the project if the direct labor hours are
estimated at 300 hours?
28) Charlassier Corporation manufactures and sells laptop computers and uses standard
costing. For the month of September there was no beginning inventory, there were
3,000 units produced and 2,500 units sold. The manufacturing variable cost per unit is
$385 and the variable operating cost per unit was $312.50. The fixed manufacturing
cost is $450,000 and the fixed operating cost is $75,000. The selling price per unit is
$925.
Required:
Prepare the income statement for Charlassier Corporation for September under variable
costing.
29) What actions might be taken with an unprofitable customer?
30) What is sales mix? How do companies choose their sales mix?
31) What competitive advantage could a company obtain from a successful cost
management program?
32) Suppose a company decided to automate a production line. Explain what effects this
would have on a company’s cost structure using CVP terminology. Could these changes
have any possible negative effect on the firm?
33) Explain the difference between a static budget and a flexible budget. Explain what
is meant by a static budget variance and a flexible budget variance.