1) Companies that only record the invoice price can usually track the magnitude of
price discounting.
2) Economic value added, unlike residual income, charges managers for the costs of
their investments in long-term assets and working capital.
3) Cost accounting and cost management include calculating various costs, obtaining
financial and nonfinancial information, and analyzing relevant information for decision
making.
4) The more owners have access to sensitive performance measures, the more they can
rely on incentive compensation for their managers.
5) The static-budget variance is the difference between an actual result and the
corresponding budgeted amount in the static budget.
6) Which of the following is included in an explicit written contract for cost allocation?
A) resource allocation for the budgeted costs
B) the rate at which the company should be taxed upon
C) permissible cost-allocation bases
D) profit that the company must earn
7) Which of the following is a benefit of keeping inventory levels low?
A) It reduces setup costs.
B) It reduces shrinkage costs.
C) It reduces the loss from lost sales.
D) It reduces inventory turnover.
8) Fixed overhead costs include ________.
A) the cost of sales commissions
B) property taxes paid on plant facilities
C) energy costs
D) indirect materials
9) Corporate-sustaining costs should be allocated to ________.
A) motivate changes in customer behavior
B) evaluate distribution-channel managers
C) determine the selling price that will cover all costs
D) find the cause-and-effect relationship
10) Craylon Manufacturing produces a single product that sells for $100. Variable costs
per unit equal $25. The company expects total fixed costs to be $60,000 for the next
month at the projected sales level of 1,000 units. In an attempt to improve performance,
management is considering a number of alternative actions. Each situation is to be
evaluated separately. Suppose that management believes that a $10,000 increase in the
monthly advertising expense will result in a considerable increase in sales. Sales must
increase by ________ to justify this additional expenditure.
A) 123 units
B) 134 units
C) 243 units
D) 143 units
11) Which of the following is a problem related to cost analysis?
A) fixed costs are allocated as if they are variable costs
B) extreme observations are adjusted or removed
C) a company keeps accounting records on the accrual basis
D) inflationary effects are removed
12) In situations where the required rate of return is not constant for each year of the
project, it is advantageous to use ________.
A) the nominal rate-of-return method
B) the internal rate-of-return method
C) the net present value method
D) the projected income method
13) Cross-sectional data analysis includes ________.
A) using a variety of time periods to measure the dependent variable
B) using the highest and lowest observation
C) observing different entities during the same time period
D) comparing information in different cost pools
14) What is the breakeven point in units, assuming a product’s selling price is $100,
fixed costs are $16,000, unit variable costs are $20, and operating income is $5,200?
A) 100 units
B) 300 units
C) 400 units
D) 200 units
15) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be budgeted for the Large Plane Department?
A) $9,866,667
B) $8,226,667
C) $9,781,333
D) $9,881,333
16) Teecorp Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of the labor cost will be assigned to the Bush Department?
A) $42,000
B) $48,000
C) $40,000
D) $50,000
17) The difference between budgeted contribution margin per composite unit for the
actual mix and the budgeted contribution margin per composite unit for the budgeted
mix is the ________.
A) material-mix variance
B) flexible-budget variance
C) sales-mix variance
D) sales-volume variance
18) Plish Company manufactures only one type of washing machine and has two
divisions, the Compressor Division, and the Fabrication Division. The Compressor
Division manufactures compressors for the Fabrication Division, which completes the
washing machine and sells it to retailers. The Compressor Division ‘sells” compressors
to the Fabrication Division. The market price for the Fabrication Division to purchase a
compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the
Compressor Division are assumed to be the same over the range of 5,000-10,000 units.
The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000
units.
Compressor’s costs per compressor are:
Fabrication’s costs per completed air conditioner are:
What is the transfer price per compressor from the Compressor Division to the
Fabrication Division if the transfer price per compressor is 110% of full costs?
A) $16.50
B) $24.50
C) $28.18
D) $36.03
19) Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product
profitability is analyzed as follows:
Under the revised ABC system, supervision costs allocated to Sweatshirts will be
________.
A) $48,720
B) $100,800
C) $100,920
D) None of these answers are correct.
20) What are the strengths and weaknesses of the accrual accounting rate-of-return
(AARR) method for evaluating long-term projects?
21) Define the terms main product, joint product, and byproduct. Give at least one
example of each type of product.
22) EIF Manufacturing Company needs to overhaul its drill press or buy a new one. The
facts have been gathered, and they are as follows:
Required:
Which alternative is the most desirable with a current required rate of return of 20%?
Show computations, and assume no taxes.
23) Describe the major differences between management accounting and financial
accounting for the following:
1. Primary users
2. Focus and emphasis
3. Rules of measurement and reporting
24) Describe the value chain and how it can help organizations become more effective.
25) Describe the purpose of variance analysis.