1) When actual cost-allocation rates are used, managers of the supplier division are
motivated to improve efficiency.
2) Activity -based costing plays a more significant role in job costing as compared to
process costing as companies using process costing have homogeneous products.
3) JIT production system always uses a master production schedule to organize the
production.
4) Customer-profitability analysis is the reporting and assessment of revenues earned
from customers and the costs incurred to earn those revenues.
5) An example of a bundled product is when a computer software manufacturer charges
a single price for the spreadsheet, word processing, and presentation software on the
same CD.
6) The unit cost of a product is always higher in variable costing than in absorption
costing.
7) Absorption costing is also referred to as super-variable costing.
8) Inventory management is the planning, organizing, and controlling activities that
focus on the flow of materials into, through, and out of the organization.
9) In each period, job costing divides the total cost of producing an identical or similar
product produced in batches by the total number of units produced to obtain a per-unit
cost.
10) For optimal planning success it is best if each business function within the value
chain is performed one at a time in sequence.
11) The Bover Company has provided the following information:
Using the high-low method and the information provided above,
a.identify the linear cost function equation and
b.estimate the total cost at 38,000 units of output.
12) A flexible budget ________.
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
13) Manufacturing overhead costs in an automobile manufacturing plant most likely
include ________.
A) labor costs of the painting department
B) indirect material costs such as lubricants
C) leather seat costs
D) tyre costs
14) Spoilage is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
15) Wallace Company provides the following data for next year:
The gross profit rate is 35% of sales. Inventory at the end of December is $21,600 and
target ending inventory levels are 20% of next month’s sales, stated at cost.
What is the amount of purchases budgeted for February?
A) $32,214
B) $70,200
C) $73,320
D) $95,160
16) Which of the following is an example of value added cost?
A) cost of machine breakdown
B) cost of defective products
C) rework costs
D) direct machining costs
17) In 2015, Craylon Company has sales of $1,000,000, variable costs of $250,000, and
fixed costs of $200,000. In 2016, the company expects annual property taxes to
decrease by $15,000.
Required:
a.Calculate operating income and the breakeven point for 2015.
b.Calculate the breakeven point for 2016.
18) a.Explain the difference between the variable and absorption costing methods.
b.Which method(s) are required for external reporting? For internal reporting?
19) In which order are the following developed? First to last:
A = Production budget
B = Direct materials costs budget
C = Budgeted income statement
D = Revenues budget
A) ABDC
B) DABC
C) DCAB
D) CABD
20) When the purpose of cost allocation is to provide information for economic
decisions or to motivate managers and employees, the best criteria are ________.
A) the cause-and-effect and the ability-to bear criteria
B) the cause-and-effect and the benefits-received criteria
C) the benefits-received and the fairness criteria
D) the fairness and the ability-to-bear criteria
21) In a perfectly competitive market, which of the following is a primary factor
influencing pricing decisions?
A) cost of production
B) availability of raw materials in the market
C) information on competitor’s cost structure
D) value customers place on product
22) In CVP analysis, focusing on target net income rather than operating income
________.
A) will increase the breakeven point
B) will decrease the breakeven point
C) will not change the breakeven point
D) will help managers construct a better capital policy
23) For 2014, Bakers Manufacturing uses machine-hours as the only overhead
cost-allocation base. The direct cost rate is $3.00 per unit. The selling price of the
product is $20.00. The estimated manufacturing overhead costs are $240,000 and
estimated 40,000 machine hours. The actual manufacturing overhead costs are
$300,000 and actual machine hours are 50,000.
Using job costing, the 2014 actual indirect-cost rate is ________.
A) $6.00 per machine-hour
B) $5.80 per machine-hour
C) $6.50 per machine-hour
D) $6.75 per machine-hour
24) In the context of transfer pricing, which of the following represents the maximum
contribution margin forgone by the selling subunit if the product or service is
transferred internally?
A) sub-optimal transfer price
B) notional loss
C) compromise sale
D) opportunity cost
25) ________ are the acquisition costs of all materials that eventually become part of
the cost object and can be traced to the cost object.
A) Sales taxes paid to acquire materials
B) Wages paid to assembly-line workers
C) Plant depreciation incurred
D) Property taxes on plant
26) Which of the following statements is true of process costing?
A) In the period of rising prices, weighted-average process-costing method will result in
higher operating income as compared to FIFO process-costing method.
B) The operating income and the tax payments of a company are not affected by the
method of process-costing being followed by the company.
C) In the period of rising prices, weighted-average process-costing method will result in
lower cost of goods sold as compared to FIFO process-costing method.
D) In a period of falling prices, weighted-average process-costing method will increase
tax payments as compared to FIFO process-costing method.
27) Genend’s Good Value Appliance Store is a small company that has hired you to
perform some management advisory services. The following information pertains to
2015 operations.
Which cost estimation method is being used by Genend’s Good Value Appliance Store?
A) the account analysis method
B) the operating costing method
C) the marginal costing method
D) the cost-volume-profit analysis method
28) What are joint costs, separable costs, and a splitoff point?
29) Discuss the cost-benefit approach guideline management accountants use to provide
value in strategic decision making.
30) Stony Electronics Corporation manufactures a portable radio designed for mounting
on the wall of the bathroom. The following list represents some of the different types of
costs incurred in the manufacture of these radios:
1> The plant managers salary.
2> The cost of heating the plant.
3> The cost of heating executive offices.
4> The cost of printed circuit boards used in the radios.
5> Salaries and commissions of company salespersons.
6> Depreciation on office equipment used in the executive offices.
7> Depreciation on production equipment used in the plant.
8> Wages of janitorial personnel who clean the plant.
9> The cost of insurance on the plant building.
10> The cost of electricity to light the plant.
11> The cost of electricity to power plant equipment.
12> The cost of maintaining and repairing equipment in the plant.
13> The cost of printing promotional materials for trade shows.
14> The cost of solder used in assembling the radios.
15> The cost of telephone service for the executive offices.
Required:
Classify each of the items above as product (inventoriable) cost or period
(noninventoriable) cost for the purpose of preparing external financial statements.
31) Briefly describe the four criteria used to guide cost-allocation decisions.
32) Lean accounting is much simpler than traditional product costing. Why?
33) Ford Motor Company is said to use a hybrid costing system. What is a hybrid
costing system, and what would be the advantage to Ford of such a system?
34) The president of Silicon Company has just returned from a week of professional
development courses and is very excited that she will not have to change the
organization from a centralized structure to a decentralized structure just to have
responsibility centers. However, she is somewhat confused about how responsibility
centers relate to centralized organizations where a few managers have most of the
authority.
Required:
Explain how a centralized organization might allow for responsibility centers.
35) Waddell Productions makes separate journal entries for all cost accounting-related
activities. It uses a standard cost system for all manufacturing items. For the month of
June, the following activities have taken place:
Required:
Record the necessary journal entries to close the accounts for the month.