1) Product-cost cross-subsidization is very common when costs are uniformly spread
across various products.
2) The net present value (NPV) method calculates the expected monetary gain or loss
from a project by discounting all expected future cash inflows and outflows back to the
present point in time using the required rate of return.
3) The customer perspective of the balanced scorecard evaluates the profitability of the
strategy.
4) For best results, cost management emphasizes independently coordinating supply
chain activities within your company and with other companies that act as suppliers and
customers.
5) It can be inferred that when there is a high correlation between two variables, one is
the cause of the other.
6) Outside of the relevant range, variable and fixed cost-behavior patterns remain
constant.
7) If the variable manufacturing overhead is $50 per unit for a company, the lowest
budgeted manufacturing cost per unit can be obtained by using normal capacity
utilization as the denominator level capacity.
8) If manufacturing labor costs are added to the process at a different time compared to
other conversion costs, an additional cost categorydirect manufacturing labor
costswould be needed to assign these costs to products.
9) It is assumed in CVP analysis that the unit selling price, unit variable costs, and unit
fixed costs are known and constant.
10) Stock options give executives the right to buy company stock at a specified price,
called the exercise price, within a specified period.
11) A company’s strategy specifies how an organization matches its capabilities with the
opportunities in the marketplace.
12) If internal rate of return is less than required rate of return, the net present value is
positive.
13) Practical capacity can never exceed theoretical capacity.
14) The production cost budget identifies how each product is manufactured.
15) If 800 units are produced and 1,200 units are sold, the costing method which will
result in the greatest operating income is ________.
A) throughput costing
B) variable costing
C) absorption costing
D) period costing
16) What is the cost of goods manufactured for 2015?
A) $242,000
B) $252,000
C) $245,000
D) $250,000
17) The following data pertains to activity and costs for two months:
Assuming that these activity levels are within the relevant range, the manufacturing
overhead for July was:
A) $10,000
B) $11,700
C) $19,000
D) $9,300
18) A customer cost hierarchy categorizes costs related to customers into different cost
pools on the basis of different ________.
A) contribution-margin ratios of products
B) distribution-channel costs
C) levels of cause-and-effect relationships
D) division-sustaining costs
19) The sales-mix variance will be unfavorable when ________.
A) the actual sales mix shifts toward the less profitable units
B) the contribution margin per composite unit for the actual mix is greater than the
budgeted mix
C) the actual unit sales are less than the budgeted unit sales
D) the actual contribution margin is less than the static-budget contribution margin
20) An unfavorable fixed overhead spending variance indicates that ________.
A) there was more excess capacity than planned
B) the price of fixed overhead items cost more than budgeted
C) the fixed overhead cost-allocation base was not used efficiently
D) the denominator level was more than planned
21) Finmin Company has the following sales budget for the last six months of 2015:
Sales are immediately due, however the cash collection of sales, historically, has been
as follows:
65% of sales collected in the month of sale,
25% of sales collected in the month following the sale,
8% of sales collected in the second month following the sale, and
2% of sales are uncollectible.
Cash collections for October are ________.
A) $117,000
B) $179,800
C) $194,000
D) $176,400
22) Lander Corporation used the following data to evaluate their current operating
system. The company sells items for $18 each and used a budgeted selling price of $18
per unit.
What is the static-budget variance of revenues?
A) $18,000 favorable
B) $18,000 unfavorable
C) $6,000 favorable
D) $4,000 unfavorable
23) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane 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 Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a dual-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Night Light Division?
A) $890,000
B) $900,000
C) $925,000
D) $835,000
24) In cost allocation, R&D costs are used ________.
A) to provide information for economic decisions
B) to report to external parties when using generally accepted accounting principles
C) to calculate costs of a government contract
D) to calculate prime cost of a product
25) 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
26) Russell Company has the following projected account balances for June 30, 2015:
Required:
a.Prepare a budgeted income statement for June 2015
b.Prepare a budgeted balance sheet as of June 30, 2015
27) Samuels Company is considering pricing its 10,000-gallon petroleum tanks using
either variable manufacturing or full product costs as the base. The variable cost base
provides a prospective price of $6,000 and the full cost base provides a prospective
price of $6,100. The difference between the two prices is ________.
A) the estimated amount of profit
B) that the variable cost base estimates fixed costs in the markup percentage while the
full cost base includes an amount for fixed costs
C) known as price discrimination
D) caused by the inability of most companies to estimate fixed cost per unit with any
degree of reliability
28) Harris Corporation is a wholesaler that sells a single product. Management has
provided the following cost data for two levels of monthly sales volume. The company
sells the product for $84.40 per unit.
The best estimate of the total variable cost per unit is:
A) $77.00
B) $57.00
C) $69.50
D) $78.50
29) Throughput costing is also called ________.
A) absorption costing
B) super-variable costing
C) mixed costing
D) direct costing