1) Jacob’s Manufacturing sales is equal to production.If Jacob’s Manufacturing
presented a Financial Accounting Income Statement emphasizing gross margin showing
operating income of $180,000, a Contribution Income Statement emphasizing
contribution margin would show a different operating income.
2) A firm using a backflush costing system will always use actual costs rather than
standard costs.
3) Assigning indirect costs is easier than assigning direct costs.
4) Standard costing is a costing system that allocates overhead costs on the basis of the
standard overhead-cost rates times the standard quantities of the allocation bases
allowed for the actual outputs produced.
5) In the “obtain information” stage of capital budgeting, a company gathers
information from all parts of the value chain to evaluate alternative projects.
6) Rework is an example of a value-added cost.
7) Partial productivity and total factor productivity measures work best together
because both measures have the same kind of strengths and weaknesses.
8) Transfer prices do not affect managers whose compensation is directly dependent on
an organization’s operating income because transfer prices affect only divisional profits
and not the organization’s profit.
9) A profit-volume graph shows the impact on operating income from changes in the
output level.
10) For manufacturing firms, inventoriable costs include ________.
A) plant supervisor salaries
B) research and development costs
C) costs of dealing with customers after the sale
D) distribution costs
11) Brilliant Accents Company manufactures and sells three styles of kitchen faucets:
Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to
manufacture 1000-unit batches of brass, chrome and white faucets, respectively. The
following additional data apply:
Total overhead costs and activity levels for the year are estimated as follows:
Required:
a.Using the traditional system, determine the operating profit per unit for each style of
faucet.
b.Determine the activity-cost-driver rate for setup costs and inspection costs.
c.Using the ABC system, for each style of faucet
1.compute the estimated overhead costs per unit.
2.compute the estimated operating profit per unit.
d.Explain the differences between the profits obtained from the traditional system and
the ABC system. Which system provides a better estimate of profitability? Why?
12) With traditional costing systems, products manufactured in small batches and in
small annual volumes may be ________ because batch-related and product-sustaining
costs are assigned using unit-related drivers.
A) overcosted
B) fairly costed
C) undercosted
D) ignored
13) Axelia Corporation has two divisions, Refining and Extraction. The company’s
primary product is Luboil Oil. Each division’s costs are provided below:
The Refining Division has been operating at a capacity of 40,000 barrels a day and
usually purchases 25,000 barrels of oil from the Extraction Division and 15,000 barrels
from other suppliers at $60 per barrel.
What is the transfer price per barrel from the Extraction Division to the Refining
Division, assuming the method used to place a value on each barrel of oil is 110% of
full costs?
A) $12.00
B) $13.20
C) $44.00
D) $79.00
14) Which of the following statements best define strategy?
A) It describes how an organization can create value for its customers while
differentiating itself from
its competitors.
B) It is an organization’s ability to achieve lower costs relative to competitors through
productivity and efficiency improvements, elimination of waste, and tight cost control.
C) It is an organization’s ability to offer products or services its customers perceive to
be superior and unique relative to the products or services of its competitors.
D) It describes how an organization motivates its employees to work for more hours
without any increase in their wages.
15) Which of the following is true of weighted-average process-costing?
A) It does not represent the average cost of units when inputs prices fluctuates
markedly from month to month.
B) It facilitates period-to-period comparisons and hence is very useful in analyzing the
performances of managers for different periods.
C) It arrives at the same unit costs as arrived under FIFO method, but the computations
are easier under weighted-average process-costing.
D) It calculates the cost per equivalent unit of all work done to date, regardless of the
accounting period in which it was done.
16) The top management at Groundsource Company, a manufacturer of lawn and
garden equipment, is attempting to recover from a fire that destroyed some of their
accounting records. The main computer system was also severely damaged. The
following information was salvaged:
Tractor Division Tiller Division Digger Division
Sales $10,000,000 (a) $2,400,000
Net operating income $1,000,000 $1,440,000 $600,000
Operating assets (b) (c) $2,000,000
Return on investment 0.2 0.1 (d)
Return on sales (e) 0.12 0.25
Investment turnover (f) (g) 1.2
What is the Tractor Division’s return on sales?
A) 0.10
B) 0.12
C) 0.15
D) 0.20
17) Which of the following is a stage of the capital budgeting process in which a firm
obtains funding for the project?
A) make decisions by choosing among alternatives stage
B) identify projects stage
C) obtain information stage
D) implement the decision, evaluate performance, and learn stage
18) Which of the following statements is true of Allianz’s EOQ system costs?
A) At EOQ, the annual relevant ordering costs is exactly the half of annual relevant
carrying costs.
B) At EOQ, the annual relevant carrying costs is higher than the annual relevant
ordering costs.
C) At EOQ, the annual relevant carrying costs is exactly the half of the annual relevant
total costs.
D) At EOQ, the annual relevant carrying costs is equal to the annual relevant total costs.
19) The costs of quality ________.
A) are the costs incurred to enhance large scale production
B) are the costs incurred to prevent the production of a low quality product
C) are costs incurred to company due to defective and low quality product
D) include warranty costs, costs of normal spoilage, costs of abnormal spoilage, and
scrap costs
20) Which division has the best return on investment and which division has the best
residual income figure, respectively?
A) North, North
B) South, South
C) North, South
D) South, North