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1) Favorable overhead variances are always recorded with credits in a standard cost
system.
2) The stand-alone method of allocating determines the weights for cost allocation by
considering each user of the cost as a separate entity.
3) Return on investment, Residual income, or Economic value added measures are
more appropriate than return on sales because they consider only the investment to
measure the performance.
4) A value-added cost is a cost that, if eliminated,would increase the actual or perceived
value or utility (usefulness) customers experience from using the product or service.
5) The net realizable value (NRV) method method allocates joint costs to joint products
produced during the accounting period in such a way that each individual product
achieves an identical gross-margin percentage.
6) An annuity is ________.
A) a noncash expense
B) a series of equal cash flows at equal time intervals
C) an investment product whose funds are invested in the stock market
D) a rate at which an investment's present value of all expected cash inflows equals the
present value of project's expected cash outflows.
7) Standard cost per output unit for each variable direct cost input is calculated by
multiplying ________.
A) standard input allowed for one output unit by standard price per input unit
B) standard input allowed for one output unit by actual price per input unit
C) actual input allowed for one output unit by standard price per input unit
D) actual input allowed for one output unit by actual price per input unit
8) Leslie Manufacturing reported the following:
What is Leslie's operating income?
A) $186,000
B) $128,000
C) $177,000
D) $191,000
9) Nicholas Company manufacturers TVs. Some of the company's data was misplaced.
Use the following information to replace the lost data:
Analysis Actual Results Flexible Variances Flexible Budget Sales- Volume
Variances Static Budget
Units Sold 112,500 112,500 103,125
Revenues $42,080 $1,000 F (A) $1,400 U (B)
Variable Costs (C) $200 U $15,860 $2,340 F $18,200
Fixed Costs $8,280 $860 F $9,140 $9,140
Operating Income $17,740 (D) $16,080 (E) $15,140
Required:
a.What are the respective flexible-budget revenues (A)?
b.What are the static-budget revenues (B)?
c.What are the actual variable costs (C)?
d.What is the total flexible-budget variance (D)?
e.What is the total sales-volume variance (E)?
f.What is the total static-budget variance?
10) The Conity Corporation has an Electric Mixer Division and an Electric Lamp
Division. Of a $13,000,000 bond issuance, the Electric Mixer Division used $9,100,000
and the Electric Lamp Division used $3,900,000 for expansion. Interest costs on the
bond totaled $975,000 for the year.
What amount of interest costs should be allocated to the Electric Mixer Division?
A) $292,500
B) $682,500
C) $9,100,000
D) $2,730,000
11) In multiproduct situations, when sales mix shifts toward the product with the lowest
contribution margin then ________.
A) total revenues will increase
B) interest cost will decrease
C) total contribution margin will increase
D) operating income will decrease
12) Short Grass Incorporated is a distributor of golf balls. Martin's Golf Supplies is a
local retail outlet which sells golf balls. Martin's purchases the golf balls from Short
Grass Incorporated at $0.75 per ball; the golf balls are shipped in cartons of 72. Short
Grass Incorporated pays all incoming freight, and Martin's Golf Supplies does not
inspect the balls due to Short Grass' reputation for high quality. Annual demand is
155,520 golf balls at a rate of 2,991 balls per week. Martin's Golf Supplies earns 12%
on its cash investments. The purchase-order lead time is one week. The following cost
data are available:
Relevant ordering costs per purchase order$125.00
Carrying costs per carton per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 0.77
If Martin's makes an order (1/12 of annual demand) once per month, what are the
relevant total costs?
A) $1,500.00
B) $652.50
C) $2,152.50
D) $3,000.00
13) Which of the following areas lends themselves to the concept of decentralization?
A) dividend decisions
B) long-term financing
C) product advertising
D) strategic planning
14) How much of correspondence costs will be assigned to Department A?
A) $4,000
B) $6,250
C) $7,500
D) $10,000
15) Which component of strategy measures the reduction in costs attributable to a
reduction in the quantity of inputs used in Year 2 relative to the quantity of inputs that
would have been used in Year 1 to produce the Year 2 output?
A) the growth component
B) the price-recovery component
C) the productivity component
D) the cost leadership component
16) The Fortive Corporation disposes a capital asset with an original cost of $180,000
and accumulated depreciation of $111,000 for $56,000. Alpha betas tax rate is 40%.
Calculate the after-tax cash inflow from the disposal of the capital asset.
A) $5,200
B) ($5,200)
C) $61,200
D) $69,000
17) Coroid Corporation used the following data to evaluate their current operating
system. The company sells items for $11 each and had used a budgeted selling price of
$12 per unit.
What is the static-budget variance of revenues?
A) $55,000 favorable
B) $220,000 favorable
C) $220,000 unfavorable
D) $55,000 unfavorable
