Feedback is reflected in which component of a management control system?
a. sensor
b. assessor
c. effector
d. detector
Which of the following statements istrue?
a. Management accounting is a subset of cost accounting.
b. Cost accounting is a subset of both management and financial accounting.
c. Management accounting is a subset of both cost and financial accounting.
d. Financial accounting is a subset of cost accounting.
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Using the step method, what amount of Administration
costs is allocated to C (round to the nearest dollar)?
a. $389,189
b. $145,946
c. $291,892
d. $72,973
Prime cost consists of
a. no yes no
b. yes yes no
c. yes no yes
d. no yes yes
Reed Company
Reed Company produces 50,000 units of Product Q and 6,000 units of Product Z during
a period. In that period, four set-ups were required for color changes. All units of
Product Q are black, which is the color in the process at the beginning of the period. A
set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red
units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was
then made to return the process to its standard black coloration and the units of Product
Q were run. Each set-up costs $500.
Refer to Reed Company. Assume that Reed Company has decided to allocate overhead
costs using levels of cost drivers. What would be the approximate per-unit set-up cost
for the blue units of Product Z?
a. $.04.
b. $.25.
c. $.50.
d. None of the responses are correct.
Profit margin equals
a. income divided by sales.
b. incomes divided by average inventory.
c. income divided by average assets.
d. income divided by average stockholder’s equity.
The most useful information derived from a cost-volume-profit chart is the
a. amount of sales revenue needed to cover enterprise variable costs.
b. amount of sales revenue needed to cover enterprise fixed costs.
c. relationship among revenues, variable costs, and fixed costs at various levels of
activity.
d. volume or output level at which the enterprise breaks even.
The payback method typically assumes that all cash inflows are reinvested to yield a
return equal to
a. the discount rate.
b. the hurdle rate.
c. the internal rate of return.
d. zero.
Debt in the capital structure could be treated as if it were common equity in computing
the weighted average cost of capital if the debt were
a. callable.
b. participating.
c. cumulative.
d. convertible.
In a responsibility accounting system, costs are classified into categories on the basis of
a. fixed and variable costs.
b. prime and overhead costs.
c. administrative and nonadministrative costs.
d. controllable and noncontrollable costs.
The trend in job-order costing is to
a. eliminate the data entry function for the accounting system.
b. automate the data collection and data entry functions.
c. use accounting software to change the focal point of the job-order system.
d. create an Intranet to share information between competitors.
Debits to Cost of Goods Sold typically represent the
a. transfer of completed items to Finished Goods Inventory.
b. costs of items sold.
c. selling price of items sold.
d. the cost of goods manufactured.
Harrah Manufacturing Company uses a standard cost system and prepared the
following budget at normal capacity for October:
Using the two-way analysis of overhead variances, what is the controllable variance for
October?
a. $ 3,000 F
b. $ 5,000 F
c. $ 9,000 F
d. $10,500 U
A job-order costing system is likely to provide better
a. yes no no
b. no yes yes
c. no no no
d. yes yes yes
Danner Company makes ten different styles of inexpensive feather masks. Which of the
following is this company most likely to have?
a. Product complexity
b. Process complexity
c. Product variety
d. Process customization
Porter Company’s cost of compliance is $58,000. Appraisal cost is $21,000 and failure
cost is $32,000. The company’s total quality cost is
a. $53,000.
b. $79,000.
c. $90,000.
d. $111,000.
JIT seeks to
a. reduce production cost while increasing quality.
b. radically redesign the production process for effectiveness.
c. modify all non-value-added activities.
d. all of the above.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product E?
a. $1,017
b. $1,550
c. $2,170
d. $4,263
A company using very tight (high) standards in a standard cost system should expect
that
a. no incentive bonus will be paid.
b. most variances will be unfavorable.
c. employees will be strongly motivated to attain the standards.
d. costs will be controlled better than if lower standards were used.
Painter Corporation
Painter Corporation has the following information for the current month:
All materials are added at the start of the production process. Painter Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Painter Corporation. What are equivalent units of production for conversion
costs, assuming FIFO?
a. 108,900
b. 103,900
c. 108,650
d. 106,525
Sterling Vision Corporation
Sterling Vision Corporation manufactures various glass products including a car
window. The setup cost to produce the car window is $1,200. The cost to carry a
window in inventory is $3 per year. Annual demand for the car window is 12,000 units.
Refer to Sterling Vision Corporation. What is the most economical production run
(rounded to the nearest unit)?
a. 6,000 units
b. 3,000 units
c. 9,295 units
d. 3,098 units
When a manufacturing company has a highly automated manufacturing plant producing
many different products, which of the following is the more appropriate basis of
applying manufacturing overhead costs to work in process?
a. direct labor hours
b. direct labor dollars
c. machine hours
d. cost of materials used
TriCities Corporation
TriCities Corporation adds material at the start to its production process and has the
following information available for August:
Refer to TriCities Corporation. Calculate equivalent units of production for material
using FIFO.
a. 32,000
b. 36,800
c. 37,125
d. 39,000
The Dessert Division of Incredible Edibles Corporation has the following segment
information:
What was Dessert Division’s return on investment?
a. 15%
b. 10%
c. 25%
d. 20%
Discretionary activities in an organization are determined based on
a. organizational policies and managerial preferences.
b. the budgeted amount from the prior period.
c. the level of long-term investment.
d. an organization’s internal control.
The payback method measures
a. how quickly investment dollars may be recovered.
b. the cash flow from an investment.
c. the economic life of an investment.
d. the profitability of an investment.
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. How much of the loan application cost will be
assigned to the Memorial branch?
a. $3,000
b. $4,800
c. $ 7,800
d. $27,000
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Using the step method, what amount of Administration
costs is allocated to B (round to the nearest dollar)?
a. $72,973
b. $291,892
c. $145,946
d. $389,189
The balanced scorecard perspective that addresses concerns about organizational
growth is the:
a. learning and growth perspective
b. internal business perspective
c. customer value perspective
d. financial perspective
Which of the following areas is not addressed by an organization’s mission statement?
a. the purpose for which the organization exists
b. what the organization wants to accomplish
c. the organization’s strategic plan for fulfilling its mission
d. how its products can uniquely meet the needs of its customers.
Magnificent Motor Corporation
The Engine Division of Magnificent Motor Corporation uses 5,000 carburetors per
month in its production of automotive engines. It presently buys all of the carburetors it
needs from two outside suppliers at an average cost of $100. The Carburetor Division
of Magnificent Motor Corporation manufactures the exact type of carburetor that the
Engine Division requires. The Carburetor Division is presently operating at its capacity
of 15,000 units per month and sells all of its output to a foreign car manufacturer at
$106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units
that are transferred internally.
Refer to Magnificent Motor Corporation. What is the minimum of the transfer price
range for a transfer between the two divisions?
a. $96
b. $90
c. $70
d. $106
In evaluating the profitability of a specific organizational segment, all ____ would be
ignored.
a. segment variable costs
b. segment fixed costs
c. costs allocated to the segment
d. period costs
JIT concepts
a. can be effectively implemented in organizations that are only partially automated.
b. are only appropriate for use with CIM systems.
c. involve shifting from a capital-intensive to a labor-intensive process.
d. require full computerization of the JIT manufacturing process.
Which of the following is an argument against the use of direct (variable) costing?
a. Absorption costing overstates the balance sheet value of inventories.
b. Variable factory overhead is a period cost.
c. Fixed manufacturing overhead is difficult to allocate properly.
d. Fixed manufacturing overhead is necessary for the production of a product.
The underlying set of assumptions about an organization and the goals, processes, and
values that its members share is referred to as ______________________________.
Allocating joint costs based upon a physical measure considers the revenue-generating
ability of individual products.
Total quality management (TQM) and just-in-time (JIT) production systems are based
on the premise of ideal production standards.
Machine setup is normally considered a unit-level cost
In a just-in-time (JIT) environment, machines and workers are often rearranged into
manufacturing cells.
Adopting a just-in-time (JIT) manufacturing process may enable a company to increase
manufacturing cycle efficiency (MCE).
When indirect labor is applied to a job in process, the manufacturing overhead account
is debited.
If it is assumed that managers act to maximize the value of the firm, what can also be
assumed about the existing mix of capital components relative to the set of all viable
alternative mixes of capital components?
Conducting a quality audit is a prevention cost.
Testing and adjusting manufacturing equipment is an appraisal cost.
Total variable product costs vary directly with levels of production.
Budgetary slack is an effective motivator for employees, because it reduces employee
frustration when goals cannotbe achieved.
The manager of a profit center has the ability to set selling prices.
In activity-based costing, how are cost drivers selected?
Why might it be necessary to make adjustments to the accounting system in a firm that
adopts JIT?
Can standard costing be used in job-order costing? If so, what conditions must exist? If
not, explain why.
Buxton Corporation produces lawn chairs. In order to produce the frames for the
furniture, special equipment must be set up. The setup cost per frame is $50. The cost
of carrying frames in inventory is $4 per frame per year. The company produces 10,000
lawn chairs per year.
1. Compute the number of frames that should be produced per setup in order to
minimize total setup and carrying costs.
2. Compute the total setup and carrying costs associated with the economic order
quantity?
The weighted average method separates beginning inventory and current production to
compute cost per unit of production.
The difference between standard quantity allowed and quantity used for a unit of output
is known as an ______________________________.