Which of the following capital budgeting techniques has been criticized because it fails
to consider investment profitability?
a. payback method
b. accounting rate of return
c. net present value method
d. internal rate of return
Wimberley Company
Wimberley Company has the following information available for December when 3,500
units were produced (round answers to the nearest dollar).
Refer to Wimberley Company. Assume that the company computes the material price
variance on the basis of material issued to production. What is the total material
variance?
a. $2,850 U
b. $2,850 F
c. $5,188 U
d. $5,188 F
In a discounted cash flow analysis, which of the following would not be consistent with
adjusting a project’s cash flows to account for higher-than-normal risk?
a. increasing the expected amount for cash outflows
b. increasing the discounting period for expected cash inflows
c. increasing the discount rate for cash outflows
d. decreasing the amount for expected cash inflows
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. Assume that Industrial Solutions chooses to
allocate its advertising cost among the three products. What amount of advertising cost
is allocated to Product S using the floor space ratio?
a. $911
b. $14,244
c. $13,333
d. $30,000
Continental Publishing Company
The Magazine Division of Continental Publishing Company had the following financial
data for the year:
Refer to Continental Publishing Company. What was the target rate of return for
Continental Publishing Company?
a. 10%
b. 15%
c. 25%
d. 5%
Cibolo Company
Cibolo Company has the following information available for March when 4,200 units
were produced (round answers to the nearest dollar).
Refer to Cibolo Company. What is the labor rate variance?
a. $3,780 F
b. $3,780 U
c. $3,825 F
d. $3,825 U
Hunnicutt Company is a construction company that builds greenhouses on special
request. What is the proper classification of the cost of the cement building slab used?
a. no no
b. no
yes
c. yes
yes
d. yes
no
Which approaches to costing should be associated with each of the following life-cycle
stages?
a. Kaizen Target Standard
b. Target Standard Kaizen
c. Target Kaizen Standard
d. Kaizen Standard Target
Total actual overhead minus total budgeted overhead at the actual input production level
equals the
a. variable overhead spending variance.
b. total overhead efficiency variance.
c. total overhead spending variance.
d. total overhead volume variance.
An increase in productive processing time will increase
a. throughput.
b. process yield.
c. return on investment.
d. productive capacity.
If a firm uses absorption costing, fixed manufacturing overhead will be included
a. only on the balance sheet.
b. only on the income statement.
c. on both the balance sheet and income statement.
d. on neither the balance sheet nor income statement.
Which is the best cost accumulation procedure to use for continuous mass production of
like units?
a. actual
b. standard
c. job order
d. process
Davis Company manufactures desks. The beginning balance of Raw Material Inventory
was $4,500; raw material purchases of $29,600 were made during the month. At month
end, $7,700 of raw material was on hand. Raw material used during the month was
a. $26,400.
b. $34,100.
c. $37,300.
d. $29,600.
____ is a philosophy of increasing a firm’s performance by involving all workers.
a. Open-book management
b. Data mining
c. Diversity
d. Strategic alliance
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 R?
a. $2,196
b. $1,171
c. $1,367
d. $ 732
Kilpatrick Company manufactures products A and B from a joint process. Sales value at
split-off was $700,000 for 10,000 units of A, and $300,000 for 15,000 units of B. Using
the sales value at split-off approach, joint costs that Kilpatrick allocated to A were
$140,000. Total joint costs were
a. $ 98,000.
b. $200,000.
c. $233,333.
d. $350,000.
Avoidable costs are usually
a. committed.
b. common.
c. discretionary.
d. joint.
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 two-variance approach, what is the
noncontrollablevariance?
a. $ 750 F
b. $ 750 U
c. $1,000 F
d. $1,000 U
Moore Company.
Moore Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #6, #9, and #13.
Direct material was requisitioned as follows for each job respectively: 30 percent, 25
percent, and 25 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000.
Other actual overhead costs totaled $36,000.Refer to Moore Company. How much
overhead is applied to Work in Process?
a. $ 69,000
b. $ 99,960
c. $132,960
d. $144,000
The Meyer Company has been operating a small lunch counter for the convenience of
employees. The counter occupies space that is not needed for any other business
purpose. The lunch counter has been managed by a part-time employee whose annual
salary is $3,000. Yearly operations have consistently shown a loss as follows:
A company has offered to sell Meyer Company automatic vending machines for a total
cost of $12,000. Sales terms are cash on delivery. The old equipment has zero disposal
value.
The predicted useful life of the equipment is 10 years, with zero scrap value. The
equipment will easily serve the same volume that the lunch counter handled. A catering
company will completely service and supply the machines. Prices and variety of food
and drink will be the same as those that prevailed at the lunch counter. The catering
company will pay 5 percent of gross receipts to the Meyer Company and will bear all
costs of food, repairs, and so forth. The part-time employee will be discharged. Thus,
Meyer Company’s only cost will be the initial outlay for the machines.
Consider only the two alternatives mentioned. Present value tables or a financial
calculator are required.
Required:
A journal entry includes a debit to Work in Process Inventory and a credit to Raw
Material Inventory. The explanation for this would be that
a. indirect material was placed into production.
b. raw material was purchased on account.
c. direct material was placed into production.
d. direct labor was used for production.
Overapplied overhead will result if
a. the plant is operated at less than expected capacity.
b. overhead costs incurred were greater than estimated overhead costs.
c. overhead costs incurred were less than overhead costs charged to production.
d. overhead costs incurred were greater than overhead charged to production.
Real Products Company
Real Products Company produces and sells a single product. Information on its costs
follow:
Refer to Real Products Company. Assume Real Products Company produced and sold
5,000 units. At this level of activity, it produced a profit of $18,000. What was Real
Products Company’s sales price per unit?
a. $15.00
b. $11.40
c. $9.60
d. $10.00
Assume that a project consists of an initial cash outlay of $100,000 followed by equal
annual cash inflows of $40,000 for 4 years. In the formula X = $100,000/$40,000, X
represents the
a. payback period for the project.
b. profitability index of the project.
c. internal rate of return for the project.
d. project’s discount rate.
Robertson Company.
Robertson Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #8, #12, and #15.
Direct material was requisitioned as follows for each job respectively: 25 percent, 30
percent, and 30 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,800; 3,300; and 4,000; respectively. Indirect labor is $45,000.
Other actual overhead costs totaled $50,000.
Refer to Robertson Company. How much overhead is applied to Work in Process?
a. $ 95,000
b. $ 119,938
c. $ 162,900
d. $ 164,938
All other factors equal, a decrease in the order quantity will
a. decrease the annual carrying costs.
b. decrease the annual ordering costs.
c. increase the lead time.
d. reduce the safety stock.
Net cash flow could be used to measure performance in
a. cost centers and investment centers.
b. revenue centers and profit centers.
c. revenue centers and investment centers.
d. profit and investment centers.
Franklin Company
Franklin Company uses a job-order costing system. Assume that Job #309 is the only
one in process. The following information is available:
Refer to Franklin Company. What is the overhead application rate if Franklin uses a
predetermined overhead application rate based on direct labor hours (rounded to the
nearest whole dollar)?
a. $ 0.20
b. $ 5.00
c. $ 5.56
d. $36.36
Consider the equation X = Sales – [(CM/Sales) x (Sales)]. What is X?
a. net income
b. fixed costs
c. contribution margin
d. variable costs
The difference between actual variable overhead and budgeted variable overhead based
upon actual hours is referred to as the variable overhead spending variance.
Using the information below, prepare a Schedule of Cost of Goods Manufactured (in
good form) for the Gleason Company for June 20y0:
Additional information: purchases of raw material were $46,700; 19,700 direct labor
hours were worked at $11.30 per hour; overhead costs were $33,300.
The regression equation y = a+ bX assumes that the function is linear in nature.
Sales less variable cost of goods sold is referred to as
________________________________________.
List and discuss the four stages in the design of a cost management system.
Direct materials are normally considered batch-level costs.
Strategic planning is focused on short-term goals of less than five years.
Compare and contrast traditional manufacturing systems with flexible manufacturing
systems on the following factors:
Discuss increased competition and improved problem solving skills as they relate to
benchmarking.
Discounting net cash inflows by using an organization’s desired rate of return and
comparing the result with the net cash outflows for a project yields
__________________________.
When is a hybrid costing system appropriate in a manufacturing setting?
What are two alternative calculations that can be used to either verify the number of
equivalent units or to obtain the number initially?
An organizational unit that is responsible for the generation of revenues and has no
control over selling prices or costs is referred to as a
______________________________.
Compare and contrast job-order and process costing systems.
The internal business perspective of the balanced scorecard addresses the things that an
organization needs to do well to meet customer needs and expectations.
What are the four tenets of total quality management (TQM)?
In an actual cost system, factory overhead is assigned to an overhead control account
and then allocated to products and services.