Intrinsic motivation comes from being given greater responsibility, doing interesting
and creative work, and having pride in doing that work.
Successful implementation of a JIT production system and effective accomplishments
of its goals should result in a decrease in the inventory turnover ratio and a decrease in
the number of days of inventory on hand.
The accrual accounting rate-of-return method is similar to the internal rate-of-return
method because both methods calculate a rate-of-return percentage.
It is possible that the smallest customer in terms of revenue is the most profitable
customer.
Competitive information serves as a benchmark that managers use to continuously
improve their operations.
There are alternative ways of measuring the cost base when applying a cost-plus
method to pricing but research shows that many managers prefer to use full cost as the
cost base.
A favorable sales-mix variance arises when the actual sales-mix percentage exceeds the
budgeted sales-mix percentage.
If internal rate of return is less than required rate of return, the net present value is
positive.
Evaluating actual performance, receiving feedback and learning from that feedback
helps in the future decision-making process.
The production-volume variance only exists under variable costing and not under
absorption costing.
A budget generally includes only the financial aspects of management’s plan.
Dual pricing insulates managers from the realities of the marketplace because costs, not
market prices, affect the revenues of the supplying division.
Department costing systems always properly recognize how resources are used by
products as they require the creation of multiple indirect cost pools.
Revenue allocation is required to determine the profitability of individual items within a
bundled product.
identifying unused capacity for R&D costs is relatively easy once the impact of
downsizing is estimated for engineered costs.
Sensitivity analysis is a simple approach to recognizing uncertainty.
As part of the Sarbanes-Oxley Act, internal auditors are solely responsible for the fair
representation of the business operations in the financial statements.
The sales department in any organization is usually a profit center.
Cost-leadership strategy usually focuses productivity and efficiency improvements ,
elimination of waste along with effective cost control systems.
Step fixed-cost functions are variable over the long run.
Byproducts are recognized in the general ledger either at the time production is
completed or at the time of sale.
The cumulative average-time learning model with a 85% learning curve indicates that if
it takes 200 minutes to manufacture the first unit of a new model, then the second unit
will take only 170 minutes to manufacture.
The following overhead variances would result in a total-overhead variance of $15,000
favorable: spending variance $5,000 U, efficiency variance $20,000 F, and
production-volume variance $30,000 U.
When capacity is constrained, the relevant revenues and costs of any alternative equal
the incremental future revenues and costs plus the opportunity cost.
The major advantages of quantitative methods are that they are objective, so managers
can use them to evaluate different cost drivers.
A favorable fixed overhead flexible-budget variance indicates that actual fixed costs
exceeded the lump-sum amount budgeted.
The treasurer (also called the chief accounting officer) is the financial executive
primarily responsible for both management accounting and financial accounting.
Absorption-costing income statements usually do not differentiate between variable and
fixed costs.
One of the five forces of industry analysis is understand the bargaining power of
customers.
When the selling prices at the split-off are unavailable, the NRV method is the best
alternative.
To prepare budgets based on actual data from past periods is preferred since past
inefficiencies are EXCLUDED.
An incremental product cost is generally a fixed cost.
Peak-load pricing is the practice of charging a lower price for the same product or
service when the demand for it approaches the physical limit of the capacity to produce
that product or service.
It is appropriate for service organizations such as public accounting firms to use job
costing.
A company operating in a perfectly competitive market has more leeway to set higher
prices than a firm that is a monopolist.
Unlike the net present value method and the internal rate-of-return method, the payback
method does NOT distinguish between the origins of the cash flows.
When normal spoilage is common to all jobs, the budgeted manufacturing overhead rate
includes a provision for the normal spoilage cost.
The supply chain refers to the sequence of business functions in which customer
usefulness is added to products or services.
For each of the following activities identify an appropriate activity-cost driver.
a. machine maintenance
b. machine setup
c. quality control
d. material ordering
e. production scheduling
f. warehouse expense
g. engineering design
Relevant total costs in the economic order quantity decision model equal relevant
ordering costs plus which of the following costs?
A) carrying costs
B) stockout costs
C) quality costs
D) purchasing costs
FIFO Aluminum processes a single type of aluminum. During the current period the
following information was given:
All materials are added at the beginning of the production process. The beginning
inventory was 35% complete as to conversion, while the ending inventory was 40%
completed for conversion purposes.
FIFO Aluminum uses the first-in, first-out system of process costing.
What were the costs assigned to the units transferred out this period (Round intermediary
calculations to the nearest cent)?
A) $114,391
B) $118,203
C) $246,250
D) $153,004
Which of the following statements best defines lean accounting?
A) an accounting system that comprises a single database that collects data and feeds it
into software applications supporting all of a company’s business activities
B) a costing method that supports creating value for the customer by costing the entire
value stream thereby eliminating waste in the accounting process
C) an accounting system that omits recording some of the journal entries relating to the
stages from the purchase of direct materials to the sale of finished goods
D) an integrated costing system covering a company’s accounting, distribution,
manufacturing, purchasing, human resources, and other functions
Which variance is calculated using the formula (AQ – BQ) BP is the ________.
A) efficiency variance
B) price variance
C) total flexible-budget variance
D) spending variance
Which of the following is true of locked-in costs?
A) Locked-in costs are the same as sunk costs.
B) Locked-in costs are always fixed costs.
C) Locked-in costs are incurred costs.
D) Locked-in costs are also called designed-in costs.
Gas Supply Corporation uses the investment center concept for the gasoline stations
that it manages in the city. Consolidated has a 15% required rate of return on investment
in order for a branch station to be viable. Select operating data for three of its stations
for 2015 are as follows:
Required:
a. Compute the return on investment for each station.
b. Which station manager is doing best based only on ROI? Why?
c. Are any of the stations in danger of being closed due to lack of performance?
d. What other factors should be included when evaluating the managers?
Craylon Manufacturing produces a single product that sells for $140. Variable costs per
unit equal $35. The company expects total fixed costs to be $60,000 for the next month
at the projected sales level of 1,500 units. In an attempt to improve performance,
management is considering a number of alternative actions. Each situation is to be
evaluated separately. One alternative is to increase advertising expenses by $11,000.
What is the effect on operating income with the increase of advertising expenses?
A) Operating income will decrease by $11,000.
B) Operating income will increase by $11,000.
C) Operating income will decrease by $86,500.
D) Operating income will increase by $86,500.
Mountain Manufacturing Inc. ran its machines in March, a slow month, for 410 hours
for a total cost of $63,000. In July, a peak month, the freezer ran for 756 hours for a
total cost of $92,800.
Required:
a. What is the cost estimating equation for the department if hours of freezer use are
used as the cost driver?
b. What is the estimated total cost at an operating level of 600 hours?
In situations where the required rate of return is not constant for each year of the
project, it is advantageous to use ________.
A) the nominal rate-of-return method
B) the internal rate-of-return method
C) the net present value method
D) the projected income method
Goodard Inc. planned to use $156 of material per unit but actually used $141 of
material per unit, and planned to make 1,150 units but actually made 920 units.
The flexible-budget variance for materials is ________.
A) $13,800 favorable
B) $13,800 unfavorable
C) $17,250 unfavorable
D) $17,250 favorable
Which of the following is a stage of the capital budgeting process that forecasts all
potential cash flows attributable to the alternative projects?
A) identify projects stage
B) make decisions by choosing among alternatives stage
C) implement the decision, evaluate performance, and learn stage
D) make predictions stage
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $350,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $110,000 are allocated based on the
number of employees. The costs of operating departments A and B are $184,000 and
$276,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Production
Support Departments Departments
Using the step-down method, what amount of Maintenance Department cost will be
allocated to Department A if the service department with the highest percentage of
interdepartmental support service is allocated first? (Do not round any intermediary
calculations.)
A) $231,452
B) $121,677
C) $50,111
D) $159,444
When the amount of scrap is immaterial, which of the following is the easiest
accounting entry when recording scrap sold for cash?
A) Sales of Scrap
Cash
B) Manufacturing Overhead Control
Cash
C) Cash
Scrap Revenues
D) Sales of scrap
Accounts Receivable
Really Great Corporation manufactures industrial-sized landscaping trailers and uses
budgeted machine-hours to allocate variable manufacturing overhead. The following
information pertains to the company’s manufacturing overhead data:
What is the budgeted variable overhead cost rate per output unit?
A) $9.60
B) $12.40
C) $7.75
D) $31.00
Fluty Corporation manufactures a product that has two parts, A and B. It is currently
considering two alternative proposals related to these parts.
The first proposal is for buying Part A. This would free up some of the plant space for
the manufacture of more of Part B and assembly of the final product. The product vice
president believes the additional production of the final product can be sold at the
current market price. No other changes in manufacturing would be needed.
The second proposal is for buying new equipment for the production of Part B. The new
equipment requires fewer workers and uses less power to operate. The old equipment
has a net disposal value of zero.
Required:
Tell whether the following items are relevant or irrelevant for each proposal. Treat each
proposal independently.
a. Total variable manufacturing overhead, Part A
b. Total variable manufacturing overhead, Part B
c. Cost of old equipment for manufacturing Part B
d. Cost of new equipment for manufacturing Part B
e. Total variable selling and administrative costs
f. Sales revenue of the product
g. Total variable costs of assembling final products
h. Total direct manufacturing materials, Part A
i. Total direct manufacturing materials, Part B
j. Total direct manufacturing labor, Part A
k. Total direct manufacturing labor, Part B
For each of the following Balanced Scorecard measures, identify which of the four
perspectives (Financial, Customer, Internal Business Process, or Learning and Growth)
the measure best represents.
________ a. On-time delivery of gasoline from refineries to retail stations
________ b. Customer satisfaction
________ c. Common stock price
________ d. Return on investment
________ e. Market share
________ f. Number of days lost to accidents
________ g. Employee satisfaction
________ h. Friendliness of employees
________ i. Repeat purchases
________ j. Cash flow from operations
A quality control manager of a golf ball maker is most likely to be responsible for a(n)
________.
A) revenue center
B) investment center
C) cost center
D) profit center
Rework is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
The following data for the Prender Company pertain to the production of 800 urns
during August.
Direct Materials (all materials purchased were used):
Standard cost: $4.80 per pound of urn.
Total actual cost: $4,480.
Standard cost allowed for units produced was $4,800.
Materials efficiency variance was $96 unfavorable.
Direct Manufacturing Labor:
Standard cost is 2 urns per hour at $19.20 per hour.
Actual cost per hour was $19.60.
Labor efficiency variance was $288 favorable.
Required:
a. What is standard direct material amount per urn?
b. What is the direct material price variance?
c. What is the total actual cost of direct manufacturing labor?
d. What is the labor price variance for direct manufacturing labor?
For a manufacturing company, direct material costs may be included in ________.
A) only the direct materials inventory account
B) only in the merchandise inventory account reflecting the inventory on hand
C) only in both work-in-process inventory and finished goods inventory
D) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the incremental method for revenue allocation, what amount of revenue will be
allocated to Reading Fun in the first package (Reading Fun & Math Fun)? Assume
Reading Fun is the primary product, followed by Math Fun, and then Analysis. (Do not
round any intermediary calculations.)
A) $20.07
B) $30.93
C) $27.00
D) $24.00
Managers identify the relevant costs and benefits for each solution by focusing on
________.
A) the alternative solution that will derive maximum customer satisfaction
B) how total costs and total revenues will change under each alternative solution
C) how the employees of a company would be able to implement a change
D) how long it will take for the improved program to be fully functional
Swansea Manufacturing currently produces 3,000 tires per month. The following per
unit data for 3,000 tires apply for sales to regular customers:
The plant has capacity for 5,000 tires and is considering expanding production to 4,000
tires. What is the total cost of producing 4,000 tires?
A) $364,000
B) $344,000
C) $209,000
D) $288,000
Which of the following is an advantage of decentralization?
A) leads to gains from rapid decision making by subunit managers
B) focuses manager’s attention on the organization as a whole
C) does not result in a duplication of activities
D) reduces the cost of gathering information
Milan Manufacturing Company has identified three cost pools to allocate overhead
costs. The following estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 300
Machine-hours 1,675
Square feet of area 70
If direct labor-hours are considered the only overhead cost driver, what is the single cost
driver rate for Milan?
A) $1.05 per direct labor-hour
B) $0.59 per direct labor-hour
C) $0.95 per direct labor-hour
D) $1.71 per direct labor-hour
Plish Company manufactures only one type of washing machine and has two divisions,
the Compressor Division, and the Fabrication Division. The Compressor Division
manufactures compressors for the Fabrication Division, which completes the washing
machine and sells it to retailers. The Compressor Division “sells” compressors to the
Fabrication Division. The market price for the Fabrication Division to purchase a
compressor is $60.00. (Ignore changes in inventory.) The fixed costs for the
Compressor Division are assumed to be the same over the range of 13,000-18,000 units.
The fixed costs for the Fabrication Division are assumed to be $11.00 per unit at 18,000
units.
Compressor’s costs per compressor are:
Direct materials $17
Direct labor $14.50
Variable overhead $3.50
Division fixed costs $11.50
Fabrication‘s costs per completed air conditioner are:
Direct materials $154.00
Direct labor $67.50
Variable overhead $26.00
Division fixed costs $11.50
If the Fabrication Division sells 1000 air conditioners at a price of $475.00 per washing
machine to customers, what is the operating income of both divisions together?
A) $167,500
B) $169,500
C) $151,000
D) $147,000
Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is
currently operating at 100% capacity, and variable manufacturing overhead is charged
to production at the rate of 30% of direct labor cost. The direct materials and direct
labor cost per unit to make the wheels are $3.00 and $3.60 respectively. Normal
production is 200,000 wheels per year.
A supplier offers to make the wheels at a price of $8 each. If the bicycle company
accepts this offer, all variable manufacturing costs will be eliminated, but the $84,000
of fixed manufacturing overhead currently being charged to the wheels will have to be
absorbed by other products.
Required:
a. Prepare an incremental analysis for the decision to make or buy the wheels.
b. Should Sarasota Bicycles buy the wheels from the outside supplier? Justify your
answer.
Wilde Corporation budgeted the following costs for the production of its one and only
product for the next fiscal year:
Wilde has an annual target operating income of $920,000.
The markup percentage for setting prices as a percentage of total manufacturing costs is
________.
A) 52.8%
B) 78.5%
C) 214.2%
D) 41.7%
If machine maintenance is scheduled at a time when production is at a low level, then
________.
A) low production is the cost driver of high repair costs
B) an understanding of operations is needed to determine an appropriate cost driver
C) low production should be avoided since it is the cause of machine maintenance
D) machine maintenance cannot be accurately predicted
The Kenton Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 22,500 gallons (after shrinkage)
The cost of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 22,500 gallons of saleable product was $51,000.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. What is the allocated joint costs of Condensed Milk? (Round
intermediary percentages to the nearest hundredth.)
A) $34,678
B) $16,324
C) $15,000
D) $35,800
Briefly explain the meaning of the variable overhead efficiency variance and the
variable overhead spending variance.
A company pursuing cost leadership may try to further analyze the change in operating
income even when the growth component is highly favorable. Why?
Calamata Corporation processes a single material into three separate products A, B, and
C. During September, the joint costs of processing were $300,000. Production and sales
value information for the month were as follows:
Required:
Determine the amount of joint cost allocated to each product if the constant gross-margin
percentage NRV method is used.
June Lockett, controller, gathered data on overhead costs and direct labor-hours over
the past 12 months. List and discuss the different approaches June can use to estimate a
cost function for overhead costs using direct labor-hours as the cost driver.
What is a supply chain, and what are the benefits of a supply chain analysis? Provide an
example of these benefits.
What targets should companies use, and when should they give feedback to managers
regarding their performance relative to the targets?
When there are multiple support departments within an organization, it is common to
use journal entries to transfer-in costs from one department to another. What are some
of the points to remember about these costs?
Complete a performance report for the month of May, 2018, for First News Corp, a
regional newspaper showing four columns: 1) Actual Result; 2) Budgeted Amount; 3)
Difference: Actual Result minus Budgeted Amount; 4) Difference as a Percentage of
Budgeted Amount, given the following data:
Does the report indicate any cause for managerial investigation?
What are the principles of lean accounting? Are there any limitations? Discuss.
The only product of a company has an annual demand of 14,000 units. The cost of
placing an order is $70 and the cost of carrying one unit in inventory for one year is
$20.
Required:
Determine the economic order quantity.
Explain the five-step decision process that managers can use to make decisions.
Allscott Company is developing its budgets for 2019 and, for the first time, will use the
kaizen approach. The initial 2019 income statement, based on static data from 2018, is
as follows:
Selling prices for 2019 are expected to increase by 8%, and sales volume in units will
decrease by 10%. The cost of goods sold as estimated by the kaizen approach will decline
by 10% per unit. Other than depreciation, all other operating costs are expected to decline
by 5%.
Required:
Prepare a kaizen-based budgeted income statement for 2019.
Discuss the behavioral considerations that provide value to strategic decision making.
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.
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?
