In a typical (conservative assumptions) after-tax discounted cash flow analysis,
depreciation expense is assumed to accrue at
a. the beginning of the period.
b. the middle of the period.
c. the end of the period.
d. irregular intervals over the life of the investment.
The amount of time between the development and the production of a product is
a. the product life cycle.
b. lead time.
c. production time.
d. value-added time.
Piece rate pay
a. is a suitable pay plan for workers engaged in repetitive and complex tasks.
b. involves a salary plus pay for each unit produced or carried out.
c. encourages quality output.
d. does not encourage workers to look at the company’s well being.
Which of the following would generally be considered a fixed factory overhead cost?
Fixed costs are ignored in allocating scarce resources because
a. they are sunk.
b. they are unaffected by the allocation of scarce resources.
c. there are no fixed costs associated with scarce resources.
d. fixed costs only apply to long-run decisions.
A value chart should include which of the following?
a. yes no yes
b. no no yes
c. yes yes no
d. yes yes yes
Freeman Corporation bought a piece of machinery. Selected data is presented below:
Present value tables or a financial calculator are required.
The initial cost of the machinery was
a. $157,392.
b. $174,992.
c. $165,812.
d. $170,303.
Buckingham Company
Buckingham Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
May when Buckingham produced 4,500 units:
Refer to Buckingham Company. Using the four-variance approach, what is the variable
overhead efficiency variance?
a. $2,187 U
b. $9,937 F
c. $2,187 F
d. $2,937 F
StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The cost of processing customer returns is
a. $9,000.
b. $2,500.
c. $22,500.
d. $2,250.
Normal spoilage is defined as unacceptableproduction that
a. arises because of a special job or process.
b. occurs in on-going operations.
c. is caused specifically by human error.
d. is in excess of that which is expected.
The following information regarding fixed production costs from a manufacturing firm
is available for the current year:
Which of the following statements is not true?
a. The maximum amount of fixed production costs that this firm could deduct using
absorption costs in the current year is $116,000.
b. The maximum difference between this firm’s the current year income based on
absorption costing and its income based on variable costing is $16,000.
c. Using variable costing, this firm will deduct no more than $16,000 for fixed
production costs.
d. If this firm produced substantially more units than it sold in the current year, variable
costing will probably yield a lower income than absorption costing.
The formula for cost of goods sold for a manufacturer is
a. beginning Finished Goods Inventory plus Cost of Goods Manufactured minus ending
Finished Goods Inventory.
b. beginning Work in Process Inventory plus Cost of Goods Manufactured minus
ending Work in Process Inventory.
c. direct material plus direct labor plus applied overhead.
d. direct material plus direct labor plus overhead incurred plus beginning Work in
Process Inventory.
With JIT manufacturing, which of the following costs would be considered an indirect
product cost?
a. cost of specific-purpose equipment
b. cost of equipment maintenance
c. property taxes on the plant
d. salary of a manufacturing cell worker
Which of the following areas offers an opportunity to eliminate waste?
a. raw material and labor
b. space and production time
c. recordkeeping and working capital
d. all of the above
Commodore Company
Commodore Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
September when Commodore produced 5,000 units:
Refer to Commodore Company. Using the one-variance approach, what is the total
overhead variance?
a. $ 275 U
b. $ 1,000 U
c. $ 4,325 U
d. $ 5,325 U
McCoy Corporation
McCoy Corporation sells a product for $21 per unit, and the standard cost card for the
product shows the following costs:
Refer to McCoy Corporation. Assume that McCoy has sufficient idle capacity to
produce the 1,200 units. If McCoy wants to increase its operating profit by $6,000,
what would it charge as a per-unit selling price?
a. $15.00
b. $17.00
c. $21.00
d. $23.00
Lincoln Corporation
Lincoln Corporation distributes its service department overhead costs directly to
producing departments without allocation to the other service departments. Information
for January is presented here.
Refer to Lincoln Corporation. The amount of Utilities Department costs distributed to
Dept. B for January should be (rounded to the nearest dollar)
a. $3,600.
b. $4,500.
c. $5,400.
d. $6,000.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume 8,000 units were transferred to
Decorating. Compute the number of equivalent units as to costs in Decorating for the
transferred-in cost component.
a. 7,400
b. 7,700
c. 8,000
d. 8,600
Financial accounting
a. is primarily concerned with internal reporting.
b. is more concerned with verifiable, historical information than is cost accounting.
c. focuses on the parts of the organization rather than the whole.
d. is specifically directed at management decision-making needs.
Which of the following statements is not true?
a. JIT manufacturing strives for zero inventories.
b. JIT manufacturing strives for zero defects.
c. JIT manufacturing uses manufacturing cells.
d. JIT manufacturing utilizes long lead time and few deliveries.
If underapplied overhead is considered to be immaterial, it is closed to which of the
following accounts?
a. yes yes yes
b. no yes yes
c. yes no no
d. no no yes
Texas Company
Texas Company has established a target rate of return of 16% for all divisions. For the
most recent year, San Marcos Division generated sales of $10,000,000 and expenses of
$7,500,000. Total assets at the beginning of the year were $5,000,000 and total assets at
the end of the year were $7,000,000.
Refer to Texas Company. For the most recent year, what was San Marcos Division’s
return on investment?
a. 20.83%
b. 35.71%
c. 41.67%
d. 50.00%
Peoria Company
Peoria Company has two departments (Processing and Packaging) and uses a job-order
costing system. Peoria applies overhead in Processing based on machine hours and on
direct labor cost in Packaging. The following information is available for August:
Refer to Peoria Company. What is the overhead application rate per machine hour for
Processing?
a. $ 0.79
b. $ 1.27
c. $13.22
d. $16.81
Equivalent units of production are equal to the
a. units completed by a production department in the period.
b. number of units worked on during the period by a production department.
c. number of whole units that could have been completed if all work of the period had
been used to produce whole units.
d. identifiable units existing at the end of the period in a production department.
Discretionary costs are often difficult to control because
a. it is difficult to measure the cost.
b. they cannot be changed in the short run.
c. they cannot be changed from period to period.
d. it is difficult to measure the benefits of discretionary activities.
A control chart graphs
a. actual process results relative to a range of acceptable variation.
b. expected process results relative to upper and lower control limits.
c. actual process results relative to value-added and non-value-added activities.
d. the cost of process malfunctions relative to the cost of reducing process variations.
A company that maintains a raw material inventory, which is based on the following
month’s production needs, will purchase less material than it uses in a month where
a. sales exceed production.
b. production exceeds sales.
c. planned production exceeds the next month’s planned production.
d. planned production is less than the next month’s planned production.
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit. Standard
capacity is 100,000 units per year; 100,000 units were produced and 80,000 units were
sold during the year. Manufacturing costs and selling and administrative expenses are
presented below.
There were no variances from the standard variable costs. Any under- or overapplied
overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation. What is the net income under absorption costing?
a. $50,000
b. $80,000
c. $90,000
d. $120,000
Which of the following is considered a value-added activity?
a. yes yes no
b. no no no
c. yes no yes
d. no yes yes
Which of the following capital budgeting techniques may potentially ignore part of a
project’s relevant cash flows?
a. net present value
b. internal rate of return
c. payback period
d. profitability index
A budget that includes a 12-month planning period at all times is called a ____ budget.
a. pro forma
b. flexible
c. master
d. continuous
The sum of the non-value-added time and the value-added time equals
a. inspection time.
b. production time.
c. the product life cycle.
d. cycle time.
Net realizable value equals product sales revenue at split-off minus any costs necessary
to prepare and dispose of the product.
The balanced scorecard approach complements measures of past performance with
measures of the drivers of future performance.
The net realizable value approach requires that the net realizable value of by-products
and scrap be treated as a reduction in joint costs allocated to primary products.
Lincoln Company
Lincoln Company applies overhead based on direct labor hours and has the following
available for the current month:
Refer to Lincoln Company. Compute all the appropriate variances using the
four-variance approach.
The difference between the actual wages paid to employees and the standard wages for
all hours worked is the labor rate variance.
What are four common methods used to allocate service department costs?
Business value-added activities increase the value of a product without increasing
production time.
Customer satisfaction is an example of a quantitative performance measure.
What are the major assumptions of CVP analysis?
The FIFO costing method assumes that units in beginning inventory are the first units
transferred.
Diversity among employees leads to increased employee turnover.
Using the information below, prepare a Schedule of Cost of Goods Manufactured (in
good form) for the Cayton Company for June 20y0:
Additional information: purchases of raw material were $51,900; 21,560 direct labor
hours were worked at $12.50 per hour; overhead costs were $39,800.
The financial perspective of the balanced scorecard focuses on using an organization’s
intellectual capital to adapt to or influence customer needs and expectations.
A service department provides services that benefit other internal units of an
organization.
The formula for price/rate variance is (AP – SP)x SQ.
In order for cost information to be effective, a meaningful baseline performance
measure should be available for comparison.
The costing method that includes beginning work-in-process inventory in the
computation of equivalent units is the ________ method.
How are capital budgeting models affected by potential investments in automated
equipment investment decisions?
Fixed cost per unit varies directly with production.