As projected net income increases the
a. degree of operating leverage declines.
b. margin of safety stays constant.
c. break-even point goes down.
d. contribution margin ratio goes up.
A cost management system
a. is finalized when the information currently being produced is the same as the
information currently desired.
b. can be generically designed to fit the information needs of the majority of domestic
(but not global) organizations.
c. must be continuously improved to adapt to changes in an organization’s internal and
external environment.
d. that has been appropriately designed from gap analysis, does not need to be changed
unless there is a change in organizational management or culture.
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
Refer to Riley Company. Using sales value at split-off, what amount of joint processing
cost is allocated to Product A (round to the nearest dollar)?
a. $2,938
b. $3,682
c. $4,500
d. $6,062
Sullivan Company
Sullivan Company is preparing its Manufacturing Overhead budget for the second
quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced;
budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount
being factory depreciation.
Refer to Sullivan Company. If the budgeted cash disbursements for factory overhead for
June are $80,000, then the budgeted production for June must be:
a. 7,400 units
b. 6,200 units
c. 6,500 units
d. 7,000 units
An internal reconciliation account is not required for internal transfers based on
a. market value.
b. dual prices.
c. negotiated prices.
d. cost.
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Boston Bakers. The incremental cost to purchase the new machine is
a. $15,000.
b. $17,500.
c. $22,500.
d. $25,000.
Economic value added (EVA) applies the target rate of return to the market value of the
capital invested in a division.
In analyzing production flow, a bottleneck is
a. an intermediate inventory.
b. always off the critical path.
c. a capacity constraint.
d. related to a non-value-adding activity.
Activity-based costing and generally accepted accounting principles differ in that ABC
a. does not define product costs in the same manner as GAAP.
b. cannot be used to compute an income statement, but GAAP can.
c. is concerned only with costs generated from automated processes, but GAAP is
concerned with costs generated from both manual and automated processes.
d. information is useful only to managers, while GAAP information is useful to all
organizational stakeholders.
A company producing which of the following would be most likely to use a price
standard for material?
a. furniture
b. NFL-logo jackets
c. custom-made picture frames
d. none of the above
As the internal transfer price is increased,
a. overall corporate profits increase.
b. profits in the buying division increase.
c. profits in the selling division increase.
d. profits in the selling division and the overall corporation increase.
The method of pricing by-products/scrap where no value is assigned to these items until
they are sold is known as the
a. net realizable value at split-off point method.
b. sales value at split-off method.
c. realized value approach.
d. approximated net realizable value at split-off method.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. What was the cost transferred out of Forming
during the month?
a. $5,341
b. $6,419
c. $8,245
d. $8,330
The logical explanation for an entry that includes a debit to Manufacturing Overhead
control and a credit to Prepaid Insurance is
a. the insurance company sent the company a refund of its policy premium.
b. overhead for insurance was applied to production.
c. insurance for production equipment expired.
d. insurance was paid on production equipment.
When actual performance varies from the budgeted performance, managers will be
more likely to revise future budgets if the variances were
a. controllable rather than uncontrollable.
b. uncontrollable rather than controllable.
c. favorable rather than unfavorable.
d. small.
BPR stands for
a. business product reengineering.
b. business purchase reengineering.
c. business process reengineering.
d. business process reduction.
Reducing setup time is a major aspect of
a. all push inventory systems.
b. the determination of safety stock quantities.
c. a JIT system.
d. an EOQ system.
Which of the following best represents a screening decision?
a. determining which project has the highest net present value
b. determining if a project’s internal rate of return exceeds the firm’s cost of capital
c. determining which projects are mutually exclusive
d. determining which are the best projects
Kanban is the Japanese word for
a. production.
b. just-in-time.
c. card.
d. target costing.
Ongoing efforts to reduce costs, increase product quality, and/or improve production
process once manufacturing has begun is known as
a. cost management.
b. kaizen costing.
c. target costing.
d. life-cycle costing.
Budgeted sales for Parker Corporation for the second quarter the year are shown below:
The company has a policy that requires the ending inventory in each period to be 15
percent of the following period’s sales. Assuming that the company follows this policy,
what quantity of production should be scheduled for May?
a. 28,800 units
b. 29,700 units
c. 25,000 units
d. 31,200 units
Putnam Company
Below is an income statement for Putnam Company:
Refer to Putnam Company. Based on the cost and revenue structure on the income
statement, what was Putnam’s break-even point in dollars?
a. $300,000
b. $400,000
c. $425,000
d. $450,000
After service department costs have been allocated, what is the final step in determining
full product cost?
a. determine direct material cost
b. determine overhead application rates for revenue-producing areas
c. determine direct labor cost
d. determine total service department costs
A variable overhead spending variance is caused by
a. using more or fewer actual hours than the standard hours allowed for the production
achieved.
b. paying a higher/lower average actual overhead price per unit of the activity base than
the standard price allowed per unit of the activity base.
c. larger/smaller waste and shrinkage associated with the resources involved than
expected.
d. both b and c are causes.
StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The total rework cost is
a. $7,500.
b. $15,000.
c. $2,500.
d. $3,750.
A committed fixed cost can
a. never be eliminated.
b. be eliminated in the short term and in the long term.
c. be eliminated in the long term but not in the short term.
d. be eliminated in the short term but not in the long term.
Painter Corporation
Painter Corporation has the following information for the current month:
Refer to Painter Corporation. Assume that the costs per EUP for material and
conversion are $1.00 and $1.50, respectively. What is the cost assigned to normal
spoilage, using weighted average, and where is it assigned?
a. $7,438 Units transferred out and Ending Inventory
b. $7,438 Units transferred out
c. $8,750 Units transferred out and Ending Inventory
d. $8,750 Units transferred out
Another name for variable costing is
a. full costing.
b. direct costing.
c. standard costing.
d. adjustable costing.
Cost accounting standards
a. are legal standards set by the Institute of Management Accountants for use in all
manufacturing and professional businesses.
b. are set by the Cost Accounting Standards Board and are legally binding on all
manufacturers, but not service organizations.
c. do not exist except for those legal pronouncements for companies bidding or pricing
cost-related contracts with the government.
d. are developed by the Cost Accounting Standards Board, issued by the Institute of
Management Accountants, and are legally binding on CMAs.
Production of Product B has been budgeted at 200,000 units for Novenber. One unit of
Product B requires 2 lbs. of raw material. The projected beginning and ending materials
inventory for Novenber are:
Beginning inventory: 2,000 lbs.
Ending inventory: 10,000 lbs.
How many lbs. of material should be purchased during Novenber?
a. 192,000
b. 208,000
c. 408,000
d. 416,000
Crafton Corporation applies overhead at the rate of 70 percent of direct labor. Crafton
incurred $450,000 of direct labor during the current year. Crafton incurred actual
overhead of $367,000.
(a) Compute the amount of under- or overapplied overhead for Crafton Corporation for
the current year
(b) Prepare the necessary journal entry to dispose of the under- or overapplied overhead
(assuming that the amount is immaterial).
The cost of normal discrete losses is
a. absorbed by all units past the inspection point on an equivalent unit basis.
b. absorbed by all units in ending inventory.
c. considered a period cost.
d. written off as a loss on an equivalent unit basis.
Which of the following costing systems allows management to quickly recognize
materials, labor, and overhead variances and take measures to correct them?
a. yes yes
b. yes no
c. no yes
d. no no
The following costs were accumulated by Department 2 of Joplin Company during
November:
Production for November in Department 2 (in units):
Materials are not added in Department 2 until the very end of processing Department 2.
Required:Compute the cost of units completed and the value of ending WIP for:
Which of the following statements about business-value-added activities (BVAs) is
true?
a. BVAs reflect the same processes in all organizations.
b. A process map will not reflect BVAs because such activities are not essential to
process performance.
c. BVAs are actually value-added activities of an organization that relate to
administrative processes.
d. It is impossible to eliminate all BVAs in an organization.
Define the relevant range and explain its significance.
Negotiated transfer prices are most appropriate for low cost and low volume services.
Tastee Ice Cream Company produces ice cream in two departments-Mixing and
Finishing. In Mixing, all ingredients except fruit are added at the start of production. In
Finishing, fruit is added and then the mixture is placed into containers. Adding the fruit
to the basic ice cream mixture increases the volume transferred in by the number of
gallons of fruit added. Any spoilage that occurs is in the Finishing Department.
Spoilage is detected just before the ice cream is placed into containers or at the 98
percent completion point. All spoilage is abnormal.
Finishing Department
BWIP Costs:
Current Costs:
Prepare a cost of production report for October 20XY. The company uses weighted
average.
Non-financial measures are generally more appropriate for gauging teamwork than are
financial performance measures.
Underapplied factory overhead that is material in amount is closed to
and
at year end.
A long-run challenge for a business is maintaining a competitive position.
A structure of interrelated elements that enables management to plan, control, and
evaluate performance is referred to as a
_____________________________________________.
A budget that is expressed in terms of both units and dollars is referred to a(n)
______________________________.
Suboptimization occurs when a manager of a cost center focuses on the goals of the
cost center rather than on the goals of the organization as a whole.
A loss that occurs uniformly throughout a production process is referred to as a
__________________ loss.
Replacing a product after it has been sold is an external failure cost.
Capital budgeting uses financial criteria exclusively when evaluating projects.
What is the purpose of the EOQ model?
The starting point for any master budget is the _________________________.