Henry Chapman Manufacturing Inc. incurred the following expenses during 2017:
What will be the breakeven point in units if absorption costing is used? (Round your final
answer up to the next whole unit.)
A) 997 units
B) 934 units
C) 810 units
D) 524 units
Which of the following is true of rewarding managers on the basis of residual income?
A) Managers are paid a fixed amount for his services regardless of the risk involved.
B) Managers’ efforts are easily measured.
C) Managers taking less risk should be rewarded more since more risk can lead to huge
losses.
D) Managers’ rewards are dependent on their own efforts and other local economic
factors.
Strategic Analysis of Profitability of King Philip Company:
What is the cost effect of the growth component (a)?
A) $9500 F
B) $4500 U
C) $9500 U
D) $4500 F
Which of the following classifications would be the most appropriate for the cost of the
manager of a retail distribution channel?
A) customer-sustaining cost
B) distribution-channel cost
C) customer batch-level cost
D) corporate-sustaining cost
The Charmatz Corporation has a central copying facility. The copying facility has only
two users, the Marketing Department and the Operations 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 Marketing Department was 70,000 copies and by the
Operations Department was 330,000 copies. If a single-rate cost-allocation method is used,
what amount of copying facility costs will be allocated to the Marketing Department?
Assume actual usage is used to allocate copying costs. (Do not round interim calculations
and round the final calculation to the nearest dollar.)
A) $20,250
B) $18,000
C) $12,600
D) $2100
The margin of safety is the difference between ________.
A) budgeted expenses and breakeven expenses
B) budgeted revenues and breakeven revenues
C) actual operating income and budgeted operating income
D) actual sales margin and budgeted sales margin
Which of the following is a reason for companies adopting variable costing for internal
reporting purposes?
A) It is cost-effective to use variable costing for both internal and external reporting.
B) It reduces the incentives for undesirable buildup of inventories.
C) It measures the cost of all manufacturing resources, whether variable or fixed,
necessary to produce inventory.
D) It assists in accurate pricing decisions in case of long-run pricing.
Direct costs ________.
A) are anything for which a measurement of costs is desired
B) are costs related to a particular cost object that can be traced to that cost object in an
economically feasible manner
C) focus specifically on the costing needs of the CFO
D) are costs related to a particular cost object that cannot be traced to that cost object in
a cost-effective manner
Process engineering is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
If scrap is reused as direct material rather than sold as scrap, which of the following
would be the proper account?
A) Accounts Receivable is debited at its estimated net realizable value and then credited
when the scrap is reused
B) Materials Control is debited at its estimated net realizable value and then credited
when the scrap is
reused
C) Manufacturing Overhead Control is debited at its estimated net realizable value and
then credited when the scrap is reused
D) Work-in-Process Control is debited at its estimated net realizable value and then
credited when the scrap is reused
As a general rule of economics, companies should only produce and sell units as long
as ________.
A) there is customer demand for the product
B) there is a relatively small supply of the product when compared to past operating
periods
C) the revenue from an additional unit exceeds the cost of producing it
D) there is a generous supply of low-cost direct materials
Freetown Corporation incurred fixed manufacturing costs of $26,000 during 2017.
Other information for 2017 includes:
The budgeted denominator level is 2,800 units.
Units produced total 1,500 units.
Units sold total 1,300 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs expensed on the income statement (excluding adjustments
for variances) total ________. (Round any intermediary calculations to the nearest cent
and your final answer to the nearest dollar.)
A) $12,077
B) $22,533
C) $26,000
D) $0
Illumination Corp operates one central plant that has two divisions, the Flashlight
Division and the Night Light Division. The following data apply to the coming budget
year:
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1400 hours and by the Night
Light Division was 700 hours. If a dual-rate cost-allocation method is used, what amount
of cost will be allocated to the Night Light Division? Assume budgeted usage is used to
allocate fixed operating costs and actual usage is used to allocate variable operating costs.
A) $516,000
B) $586,000
C) $532,000
D) $602,000
A company has a policy “investigate all variances exceeding $3,000 or 15% of the
budgeted cost, whichever is lower.” There is a variance of $2,000 in repair and
maintenance costs of $12,000. What does the company do in the given situation?
A) It should be ignored as it is less than $3,000.
B) It deserves more attention as it is more than 15% of total repair cost.
C) It should be considered an in-control occurrence.
D) It should be investigated as all variances are equally important.
Which of the following customer related costs are NOT economically feasible to trace
but are related to a customer?
A) the additional cost of selling one more unit to a new customer who has never done
business with the firm before
B) the direct material costs of a product that a customer has purchased
C) the allocation of the cost of travel, lodgings, and meals that result from visiting
customers at their locations
D) the shipping costs that result from shipping a package by Fed Ex to a customer when
the technology allows a direct match of that cost to the direct material and direct labor
costs of the product
Which of the following statements is true about the step-down method?
A) it partially recognizes the services provided among support departments
B) it does not recognize the total services that support departments provide to each
other
C) it is conceptually the most precise method
D) it results in allocating only the support costs used by operating departments
Can the variable overhead efficiency variance
a. be computed the same way as the efficiency variance for direct-cost items?
b. be interpreted the same way as the efficiency variance for direct-cost items? Explain.
Which of the following is a financial measure of quality?
A) operating income growth
B) percentage of highly satisfied customers
C) number of defective units shipped to customers as a percentage of total units shipped
D) interest costs
Which of the following is not an inventoriable cost of a manufacturer?
A) Sales commissions paid to sales representatives who sell the products made by the
manufacturer
B) Wages paid to assembly-line workers
C) Plant depreciation incurred
D) Property taxes on plant
Ruben is a travel agent. He intends to sell his customers a special round-trip airline
ticket package. He is able to purchase the package from the airline for $170 each. The
round-trip tickets will be sold for $200 each and the airline intends to reimburse Ruben
for any unsold ticket packages. Fixed costs include $5,500 in advertising costs. What is
the contribution margin per ticket package?
A) $30
B) $370
C) $170
D) $200
Coffey Company maintains a very large direct materials inventory because of critical
demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get
material Y. Currently, the standard cost of material Y is $4.25 per gram. During
February, 22,000 grams were purchased for $4.40 per gram, while only 20,000 grams
were used in production. There was no beginning inventory of material Y.
Required:
a. Determine the direct materials price variance, assuming that all materials costs are
the responsibility of the materials purchasing manager.
b. Determine the direct materials price variance, assuming that all materials costs are
the responsibility of the production manager.
c. Discuss the issues involved in determining the price variance at the point of purchase
versus the point of consumption.
Vision Company manufactures digital cameras. For May, there were no beginning
inventories of direct materials and no beginning or ending work-in -process.
Conversion costs is the only indirect manufacturing cost category currently used.
Journal entries are recorded when materials are purchased and when units are sold.
Which of the following journal entries properly reflects the purchase of materials under
backflush costing?
A)
B)
C)
D)
Kennywood Inc., a manufacturing firm, is able to produce 1,300 pairs of pants per hour,
at maximum efficiency. There are three eight-hour shifts each day. Due to unavoidable
operating interruptions, production averages 850 units per hour. The plant actually
operates only 28 days per month. Based on the current budget, Kennywood estimates
that it will be able to sell only 500,000 units due to the entry of a competitor with
aggressive marketing capabilities. But the demand is unlikely to be affected in future
and will be around 519,000. Assume the month has 30 days. What is the master-budget
capacity utilization level for this budget period?
A) 500,000 units
B) 519,000 units
C) 523,800 units
D) 555,400 units
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then
prepares the frozen fish fillets for distribution to its retail sales department. Direct
materials are added at the initiation of the cycle. Conversion costs are incurred evenly
throughout the production cycle. Before inspection, some fillets are spoiled due to
undetectable defects. Inspection occurs when units are 45% converted. Spoiled fillets
generally constitute 6% of the good fillets. Data for April 2017 are as follows:
What is the number of total spoiled units?
A) 32,000 units
B) 74,420 units
C) 7000 units
D) 13,000 units
Which of the following best describes how the constant gross-margin percentage NRV
method allocates joint costs?
A) a gross margin is calculated and for each product and then the gross margin is
deducted along with separable costs from the final sales value of a product to derive the
joint cost allocation for a product
B) an overall gross margin is calculated and for each product and then the gross margin
is deducted along with separable costs from the final sales value of a all the products
produced in the joint processing and the allocations are then made based on physical
volume measures
C) an overall gross margin is calculated and for each product the gross margin is
deducted along with separable costs from the final sales value of a product to derive the
joint cost allocation for the product
D) a gross margin is calculated and for each product and then gross margin is deducted
along from the final sales value of a product to derive the joint cost allocation for a
product.
The total amount of indirect costs assigned to product SR6 using the traditional method
is ________ the total amount assigned using ABC.
A) more than
B) less than
C) equal to
D) more accurate than
Which of the following is not reported on the income statement of a manufacturing
firm?
A) cost of goods sold
B) administrative and selling expenses
C) work in progress
D) marketing and distribution costs
Classic Products Company manufactures colonial style desks. Some of the company’s
data was misplaced. Use the following information to replace the lost data:
What is the total sales-volume variance (E)?
A) $11,530 unfavorable
B) $7,290 unfavorable
C) $4,240 favorable
D) $11,530 favorable
Which of the following is true of normal capacity utilization?
A) It will almost always show results that are very close to that of practical capacity
utilization
B) It can result in setting selling prices that are not competitive.
C) It results in the lowest cost estimate of the four capacity options when used for
product costing.
D) It is also called master-budget capacity utilization
If the breakeven point is 1,300 units and each unit sells for $50, then ________.
A) selling 1,340 units will result in a loss
B) selling $85,000 will result in a loss
C) selling $65,000 will result in zero profit
D) selling $58,000 will result in profit
Financial Planning Partners Inc., employs 12 full-time CPAs and 10 paraprofessionals.
Direct and indirect costs are applied on a professional labor-hour basis that includes
both attorney and paraprofessional hours. Following is information for 2018:
When using a normal costing system, year-end accounting records will show that indirect
costs are ________.
A) perfectly allocated
B) underallocated
C) within budget
D) overallocated
Which of the following influences the make or buy decision to the company?
A) opportunity cost
B) sunk cost
C) historical cost
D) plant depreciation
Advanced Enterprises reports year-end information from 2018 as follows:
Advanced is developing the 2019 budget. In 2019 the company would like to increase
selling prices by 13.5%, 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.
What is budgeted sales for 2019?
A) $1,090,735
B) $961,000
C) $992,569
D) $874,510
In evaluating different alternatives, it is useful to concentrate on ________.
A) variable costs
B) fixed costs
C) total costs
D) relevant costs
Which of the following criteria has the presumption that the more-profitable divisions
have a greater ability to absorb corporate administration costs?
A) the fairness or equity criterion
B) the ability to bear criterion
C) the cause-and-effect criterion
D) the benefits-received criterion