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1) Roberson Corporation manufactured 30,000 ice chests during September. The
variable overhead cost-allocation base is $11.25 per machine-hour. The following
variable overhead data pertain to September:
What is the flexible-budget amount?
A) $121,500
B) $151,875
C) $165,000
D) $168,750
2) Under economic-order-quantity decision model, it is assumed that ________.
A) the quantity ordered can vary at each reorder point
B) demand, ordering costs, and carrying costs are uncertain
C) the purchasing cost per unit is affected by the order quantity
D) no inventory stockouts occur
3) Block Island TV currently sells large televisions for $360. It has costs of $280. A
competitor is bringing a new large television to market that will sell for $300.
Management believes it must lower the price to $300 to compete in the market for large
televisions. Marketing believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Block Island TV sales are currently 100,000
televisions per year.
What is the change in operating income if marketing is correct and only the sales price
is changed?
A) $2,200,000
B) $600,000
C) $(2,200,000)
D) $(5,800,000)
4) ABC systems ________.
A) highlight the different levels of activities
B) limit cost drivers to units of output
C) allocate costs based on the overall level of activity
D) generally undercost complex products
5) Following a strategy of product differentiation, Arseniq Company makes a high-end
Appliance, XT15. Arseniq presents the following data for the years 2014 and 2015:
Arseniq produces no defective units but it wants to reduce direct materials usage per
unit of XT15. Manufacturing conversion costs in each year depend on production
capacity defined in terms of XT15 units that can be produced. Selling and
customer-service costs depend on the number of customers that the customer and
service functions are designed to support. Arseniq had 140 customers in 2014 and 145
customers in 2015.
What is the revenue effect of the price-recovery component?
A) $2,625,000 U
B) $1,250,000 U
C) $1,250,000 F
D) $2,625,000 F
6) Which of the following entries is correct to record depreciation expense of Assembly
Department?
A) Work in ProcessAssembly
Finished Goods
B) Work in ProcessAssembly
Accumulated Depreciation
C) Finished Goods
Work in ProcessAssembly
D) Accumulated Depreciation
Work in ProcessAssembly
7) Among different types of costs associated with inventory, the costs of obtaining
purchase approvals are ________.
A) purchasing costs
B) ordering costs
C) stockout costs
D) carrying costs
8) Comparing budgeted costs to actual costs helps managers to improve ________.
A) coordination
B) control
C) implementation
D) planning
9) Which of the following statements is true of ABC systems?
A) ABC systems are time-driven cost systems.
B) ABC systems classify some direct costs as indirect costs and some indirect costs as
direct costs.
C) ABC systems provide valuable information to managers beyond accurate product
costs.
D) ABC systems assume all costs are variable costs.
10) Under GAAP, only ________ can be assigned to inventories in the financial
statements.
A) manufacturing costs
B) period costs
C) cost of goods sold
D) historical costs
11) For a manufacturing company, indirect manufacturing costs may be included in
________.
A) direct materials inventory only
B) merchandise inventory only
C) both work-in-process inventory and finished goods inventory
D) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
12) Following a strategy of product differentiation, Sting Corporation makes a high-end
computer monitor, CM7. Sting Corporation presents the following data for the years
2012 and 2013:
Sting Corporation produces no defective units but it wants to reduce direct materials
usage per unit of CM7 in 2012. Manufacturing conversion costs in each year depend on
production capacity defined in terms of CM7 units that can be produced. Selling and
customer-service costs depend on the number of customers that the customer and
service functions are designed to support. Ernsting Corporation has 100 customers in
2012 and 115 customers in 2013. The industry market size for high-end computer
monitors increased 5% from 2012 to 2013.
Required:
a.What is the revenue effect of the price-recovery component?
b.What is the cost effect of the price-recovery component?
c.What is the net effect on operating income as a result of the price-recovery
component?
d.What is the net effect on operating income as a result of the productivity component?
13) Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal
allocation method. The following data from operations were collected for analysis:
What is the complete reciprocated cost of the Personnel Department?
A) $185,000
B) $187,606
C) $160,000
D) $210,000
14) What is the total amount of the costs listed above that are direct costs of the
Cosmetics Department?
A) $83,000
B) $94,000
C) $90,000
D) $127,000
