Expert Manufacturing reported the following:
What is Expert’s operating income?
A) $346,400
B) $218,200
C) $204,200
D) $200,200
Which of the following is another term for required rate of return?
A) hurdle rate
B) total cost rate
C) variance rate
D) predetermined overhead rate
A cost system determines the cost of a cost object by ________.
A) accumulating and then assigning costs
B) accumulating costs
C) assigning and then accumulating costs
D) assigning costs
Columbus Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of the total cost will be assigned to the Plowing Department?
A) $564,000
B) $311,600
C) $188,000
D) $173,600
The time from which a machine setup begins for an order until the product is delivered
to the customer is the ________.
A) delivery time only
B) manufacturing time plus the waiting time
C) manufacturing time plus the delivery time
D) customer-response time minus the receipt time
Which of the following focuses on these five factors: competitors, potential entrants to
the market, equivalent products, bargaining power of customers, and bargaining power
of suppliers?
A) balanced scorecard
B) product differentiation analysis
C) industry analysis
D) business process reengineering
Toy City Inc., manufactures a product and is considering raising the price by $40 a unit
for the coming year. With a $40 price increase, demand is expected to fall by 2800
units.
Bright Inc., has a capacity to produce 28,800 units. Due to an increase in the electricity
costs, there is a sudden spike in demand by 2800 units. If the company adopts peak-load
pricing policy and charges a premium of 20% over the current sales price, what is the total
contribution on the sale of additional units?
A) $257,600
B) $280,000
C) $537,600
D) $526,400
The Venoid Corporation has an annual cash inflow from operations from its investment
in a capital asset of $23,000 (excluding depreciation) each year for five years. The
corporation’s income tax rate is 30%. Calculate the total after-tax cash inflow from
operations for five years.
A) $115,000
B) $80,500
C) $34,500
D) $23,000
Trusted Products Company makes a household appliance with model number L800.
The goal for 2018 is to reduce direct materials usage per unit. No defective units are
currently produced. Manufacturing conversion costs depend on production capacity
defined in terms of L800 units that can be produced. The industry market size for
appliances increased 15% from 2017 to 2018. The following additional data are
available for 2017 and 2018:
What is the cost effect of the growth component for conversion costs?
A) $1600 U
B) $0
C) $40,000 U
D) $40,000 F
Which of the following is one of the methods of allocating support department costs to
operating departments that partially recognizes mutual service provided among all
support departments?
A) dual-cost allocation method
B) direct method
C) sequential allocation method
D) single-rate cost allocation method
Grandy’s Beer was to manufacture 600 cases of ale next week. The accountant provided
the following analysis of total manufacturing costs.
Variable Coefficient Standard Error t-Value
Constant 150 82.39 1.29
Independent variable 245 103.25 2.19
r2 = 0.83
What is the estimated cost of producing the 600 cases of ale?
A) $147,150
B) $90,245
C) $61,950
D) $49,434
Price discounts are influenced by ________.
A) the volume of product purchased
B) the prime cost of production
C) the operational budget
D) the contribution -margin per unit
Which of the following statements is true of costing systems?
A) Single-indirect cost pool systems always result in overcosting of products.
B) Single-indirect cost pool systems classify some direct costs as indirect costs.
C) ABC systems always result in overcosting of products.
D) ABC systems classify some indirect costs as direct costs helping to improve
processes
When the cost pools are homogeneous which of the following will be true?
A) the number of needed cost pools will be more
B) the costs in the cost pool have a similar cause-and-effect or benefits-received
relationship with the cost-allocation base
C) managers should not allocate both variable costs and costs that are fixed in the
short-run
D) there will be a greater variety of cause-and-effect, benefits-received, or
fair-and-equitable relationship with the cost-allocation base
What is the cost of goods manufactured for 2018?
A) $248,000
B) $369,000
C) $270,000
D) $259,000
Taunton Company uses the high-low method to estimate its cost function. The
information for 2017 is provided below:
Machine-hours Costs
Highest observation of cost driver 4,000 $332,000
Lowest observation of cost driver 3,000 $312,000
What is the estimated total cost when 1,900 machine-hours are used?
A) $509,600
B) $290,000
C) $489,700
D) $157,700
The focus in capital budgeting should be on ________.
A) favorable and unfavorable variance
B) expenses under accrual accounting
C) expected future cash flows that differ between alternatives
D) allocation of overheads
Captain Carl’s Seascapes produces sea pictures for sale through catalogs. The company
has two workstations, photo production and framing. The photo production station is
limited by the speed of operating the photo development machine. Framing is limited
by the speed of the employees. Framing normally waits for work from photo
production. Each department works an eight-hour day. If Captain Carl’s Seascapes adds
an earlier half shift so that photo production begins work four hours earlier than
framing each day, the two departments generally finish their work at about the same
time. Not only does this eliminate the bottleneck, but it also increases finished units
produced each day by 220 units. All units produced can be sold. The cost of operating
the photo production department four more hours each day is $1250. The contribution
margin of the finished products is $20 each.
What is the total production per day if the change is made?
A) 55 units
B) 220 units
C) 440 units
D) 660 units
Variable costs ________.
A) are always indirect costs
B) increase in total when the actual level of activity increases
C) include most personnel costs and depreciation on machinery
D) are never considered a part of prime cost
Skizone Company’s 4-Variance Analysis:
Which of the following statements is true of Skizone’s overhead variances?
A) Budgeted variable overhead rate is higher than actual variable overhead rate.
B) Static fixed overhead amount is higher than flexible fixed overhead amount.
C) Budgeted variable overhead rate is lower than actual variable overhead rate.
D) Static fixed overhead amount is lower than flexible fixed overhead amount.
Managers use ________ to ensure employees’ intrinsic motivation, the desire to achieve
self-satisfaction for performing well regardless of external rewards such as bonuses or
promotion.
A) diagnostic control systems
B) boundary systems
C) belief systems
D) interactive control systems
Which of the following is a reason that has accelerated the demand for refinements to
the costing system?
A) The declining demand for customized products has led managers to decrease the
variety of products and services their companies offer.
B) The use of product and process technology has led to an increase in indirect costs
and a decrease in direct costs.
C) The increased of automated processes has led to the increase in direct manufacturing
cost leading to a decrease in break even point.
D) The increasing competition in product markets has led to an increase in contribution
margin resulting in a decrease of break even point.
Which of the following is a disadvantage of a dual-rate method?
A) It allocates fixed costs on the basis of budgeted long-run usage, which may tempt
some managers to underestimate their planned usage.
B) It may lead operating department managers to make sub-optimal decisions that are in
their own best interest.
C) It allocates fixed and variable-cost pool using the same cost-allocation base, which
will mislead managers in making decisions.
D) It does not guide department managers to make decisions that benefit both the
organization as a whole and each department.
Excellent Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $840,000 for
an annual production capacity of 12 million pages.
For 2018 Excellent Printers has decided to evaluate the use of additional cost pools.
After analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
When costs are assigned using the single cost driver, number of pages printed, then
________.
A) Excellent Printers will want to retain this highly profitable customer
B) Money Managers will likely seek to do business with competitors
C) Money Managers is unfairly over billed for its use of printing resources
D) Money Managers is grossly under billed for the job, while other jobs will be unfairly
over billed
Following a strategy of product differentiation, Izzy’s Limited Company makes a
high-end Appliance, XT15. Izzy’s Limited presents the following data for the years
2017 and 2018:
Izzy’s Limited produces no defective units but it wants to reduce direct materials usage per
unit of XT15. Manufacturing conversion costs in each year depend on production capacity
defined in terms of XT15 units that can be produced. Selling and customer-service costs
depend on the number of customers that the customer and service functions are designed to
support. Izzy’s Limited had 135 customers in 2017 and 140 customers in 2018.
What is operating income for 2017?
A) $4,974,000
B) $7,860,000
C) $7,269,000
D) $5,203,500
________ is a strategy that integrates people and technology in all business functions to
enhance relationships with customers, partners, and distributors.
A) Supply-chain analysis
B) Customer relationship management
C) Value-chain analysis
D) Continuous quality improvement
Fixed overhead costs ________.
A) never have any unused capacity
B) have no spending variance
C) have no efficiency variance
D) have no production-volume variance
Throughput is a variation of which of the following systems?
A) absorption costing
B) variable costing
C) job costing
D) standard costing
Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $1,800,000
for an annual production capacity of 20 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
Using the three cost pools to allocate overhead costs, what is the total manufacturing
overhead cost estimate for Money Managers during 2018? (Do not round interim
calculations. Round the final answer to the nearest cent.)
A) $23,856.82
B) $6,240.91
C) $20,581.82
D) $11,036.36
High Tech Manufacturing Inc., incurred total indirect manufacturing labor costs of
$480,000. The company is labor intensive. Total labor hours during the period were
4,400. Using qualitative analysis, the manager and the management accountant
determine that over the period the indirect manufacturing labor costs are mixed costs
with only one cost driver–labor-hours. They separated the total indirect manufacturing
labor costs into costs that are fixed ($130,000 based on 8,100 hours of labor) and costs
that are variable based on the number of labor-hours used. The company has
estimated 7,700 labor hours during the next period.
What will be the total cost for the estimated 7,700 hours? (Round any intermediary
calculations to the nearest cent and your final answer to the nearest dollar.)
A) $462,716
B) $586,296
C) $840,000
D) $742,535
The emphasis on variance analysis and its use in performance evaluation must be such
that:
A) managers focus on setting easy to attain targets
B) larger unfavorable variances should result in negative consequences for personnel
held accountable
C) management should set targets that challenge but are reasonably achievable and
require creativity and resourcefulness by personnel held accountable
D) Management should stretch resources to meet goals even if continuous improvement
and quality suffers