An outlier is
a. something that happens outside the organization that does not affect production.
b. always used in analyzing a mixed cost.
c. something that happens inside the organization that does not affect production.
d. typically not used in analyzing a mixed cost.
Which of the following organizations would be most likely to use a job-order costing
system?
a. the loan department of a bank
b. the check clearing department of a bank
c. a manufacturer of processed cheese food
d. a manufacturer of video cassette tapes
An actual cost system differs from a normal cost system in that an actual cost system
a. assigns overhead as it occurs during the manufacturing cycle.
b. assigns overhead at the end of the manufacturing process.
c. does not assign overhead at all.
d. does not use an Overhead Control account.
Ryan Corporation is relocating its facilities. The company estimates that it will take
three trucks to move office contents. If the per truck rental charge is $1,000 plus 25
cents per mile, what is the expected cost to move 800 miles?
a. $1,000
b. $1,200
c. $2,400
d. $3,600
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 two-variance approach, what is the
noncontrollablevariance?
a. $3,125 F
b. $3,875 U
c. $3,875 F
d. $6,062 U
Conversion cost does not include
a. direct labor.
b. direct material.
c. factory depreciation.
d. supervisors’ salaries.
ERP systems should help a company
a. improve quality.
b. improve service.
c. reduce overhead.
d. all of the above.
In the formula y = a + bX, a represents
a. mixed cost.
b. variable cost.
c. total cost.
d. fixed cost.
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. What is the cost per driver unit for the loan
application activity?
a. $0.09
b. $0.075
c. $30.00
d. $50.00
The method of cost accounting that lends itself to break-even analysis is
a. variable.
b. standard.
c. absolute.
d. absorption.
Tuscaloosa Company applies overhead to jobs at the rate of 40 percent of direct labor
cost. Direct material of $1,250 and direct labor of $1,400 were expended on Job #145
during September. On August 31, the balance of Job #145 was $2,800. The balance on
September 30 is:
a. $3,210.
b. $4,760.
c. $5,450.
d. $6,010.
Use of activity-based costing and activity-based management requires
a. the creation of an environment for change in an organization.
b. elimination of all non-value-added activities in an organization.
c. that company processes be automated and the use of direct labor be minimal.
d. each process be fully mapped and all activities be identified as value-added or
non-value-added.
The theory of constraints can
a. identify what limitations exist with raw material suppliers.
b. follows a methodology similar to linear programming.
c. be ignored since it assumes too many estimates in the production cycle.
d. show where bottlenecks exist and sets the limit of output to these bottlenecks.
Which performance plan is most motivating?
a. health insurance
b. piece rate
c. hourly wages
d. pensions
Teague Company uses a two-way analysis of overhead variances. Selected data for the
March production activity are as follows:
Assuming that budgeted fixed overhead costs are equal to actual fixed costs, the
controllable variance for March is
a. $2,000 F.
b. $4,000 U.
c. $4,000 F.
d. $6,000 F.
McDonald Company
The following information relates to financial projections of McDonald Company:
Refer to McDonald Company. How many units would McDonald Company need to sell
to earn a profit before taxes of $15,000?
a. 9,375
b. 12,000
c. 15,000
d. 37,500
Pearce Company
Pearce Company uses a standard cost system for its production process. Pearce
Company applies overhead based on direct labor hours. The following information is
available for July:
Refer to Pearce Company Using the one-variance approach, what is the total variance?
a. $19,010 U
b. $6,305 U
c. $12,705 U
d. $4,730 U
Which of the following statements about an organization’s mission statement is true?
a. The mission statement should express an organization’s purpose.
b. The mission statement should identify how an organization will meet the needs of its
targeted customers.
c. The mission statement must be communicated throughout the organization.
d. All of the statements are true.
Industrial Solutions Company
Industrial Solutions Company produces three products from the same process that has
joint processing costs of $4,100. Products R, S, and T are produced in the following
quantities: 250 gallons, 400 gallons, and 750 gallons. Industrial Solutions Company
also incurred advertising costs of $60,000. The ad was used to run sales for all three
products. The three products occupy floor space in the following ratio: 5:4:9. (Round all
answers to the nearest dollar.)
Refer to Industrial Solutions Company. Using gallons as the physical measurement,
what amount of joint processing cost is allocated to Product T?
a. $2,196
b. $732
c. $1,367
d. $1,171
The term “committed costs” refers to costs that
a. management decides to incur in the current period to enable the company to achieve
objectives other than the filling of orders placed by customers.
b. are likely to respond to the amount of attention devoted to them by a specified
manager.
c. are governed mainly by past decisions that established the present levels of operating
and organizational capacity and that only change slowly in response to small changes in
capacity.
d. fluctuate in total in response to small changes in the rate of utilization of capacity.
If management judges one project in a mutually inclusive set to be acceptable for
investment,
a. all the other projects in the set are rejected.
b. only one other project in the set can be accepted.
c. all other projects in the set are also accepted.
d. only one project in the set will be rejected.
Transferred-in cost represents the cost from
a. the last department only.
b. the last production cycle.
c. all prior departments.
d. the current period only.
A product may be processed beyond the split-off point if management believes that
a. its marketability will be enhanced.
b. the incremental cost of further processing will be less than the incremental revenue of
further processing.
c. the joint cost assigned to it is not already greater than its prospective selling price.
d. both a and b.
There is a positive relationship between value-added (VA) activities and manufacturing
cycle efficiency (MCE).
A credit to the Manufacturing Overhead control account represents the
a. actual cost of overhead incurred.
b. actual cost of overhead paid this period.
c. amount of overhead applied to production.
d. amount of indirect material and labor used during the period.
Cost control is an important function of the
a. no no yes
b. yes yes no
c. no yes yes
d. yes yes no
If the profitability index for a project exceeds 1, then the project’s
a. net present value is positive.
b. internal rate of return is less than the project’s discount rate.
c. payback period is less than 5 years.
d. accounting rate of return is greater than the project’s internal rate of return.
Kempf Corporation faces a marginal tax rate of 35 percent. One project that is currently
under evaluation has a cash flow in the fourth year of its life that has a present value of
$10,000 (after-tax). Kempf Corporation assumes that all cash flows occur at the end of
the year and the company uses 11 percent as its discount rate. What is the pre-tax
amount of the cash flow in year 4? (Round to the nearest dollar.) Present value tables
or a financial calculator are required.
a. $15,181
b. $23,356
c. $ 9,868
d. $43,375
A decrease in the lead time would reduce the
a. order point.
b. safety stock.
c. economic order quantity.
d. ordering costs.
Which of the following are relevant in a make or buy decision?
a. no yes yes
b. yes no yes
c. no no yes
d. yes yes no
Mobile Corporation
Mobile Corporation is a manufacturer of electronic blood pressure monitors for home
use. The following is a summary of quality costs for the first year of operations.
Refer to Mobile Corporation. Compute the cost of processing customer returns.
The study of the differences between a current and a proposed cost management system
is referred to as _________________________.
Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of
residential grade carpeting. The division has the capacity to produce 500,000 square
yards of carpet each year. Its current costs and revenues are shown here:
The Housing Division currently purchases 40,000 yards of carpeting (of the grade
produced by the Carpet Division) each year at a cost of $6.50 per square yard from an
outside vendor.
Refer to Castle Homes Corporation. Assume, for this question only, that the Carpet
Division is producing and selling 500,000 square yards of carpet to external buyers at a
price of $5 per square yard. What would be the effect on overall corporate profits if
Carpet Division reduces external sales of carpet by 40,000 square yards and transfers
the 40,000 square yards of carpet to the Housing Division?
Joint costs include all materials, labor and overhead that are incurred before the split-off
point.
A short-run challenge for a business is achieving profitability.
A continuous budget is prepared by adding a new budget month as each month expires.
The higher an organization’s capital costs, the greater the opportunity cost of holding
idle cash.
Under what circumstances is the sum of variable production and selling costs the
appropriate minimum price for special orders?
Underapplied factory overhead that is immaterialin amount is closed to
at year end.
When using a negotiated transfer price, a decision must be made which market price to
use.
The price variance reflects the difference between the quantity of inputs used and the
standard quantity allowed for the output of a period.
What information should be contained in a subsidiary ledger for Work in Process
Inventory in a job-order costing system?