A process map
a. should indicate only value-added activities.
b. is also known as a detailed flowchart.
c. should indicate only those steps/processes that are obvious in the production of
goods/services.
d. is also known as a value chart.
Austin Company
Austin Company has established a target rate of return of 15% for all divisions. For the
most recent year, Waterloo Division generated sales of $12,000,000 and expenses of
$9,000,000. Total assets at the beginning of the year were $7,000,000 and total assets at
the end of the year were $9,000,000.
Refer to Austin Company. In the most recent year, what was Waterloo Division’s
residual income?
a. $1,200,000
b. $1,650,000
c. $1,800,000
d. $1,950,000
Production of Product 101 has been budgeted at 300,000 units for June. One unit of
Product 101 requires 3 lbs. of raw material. The projected beginning and ending
materials inventory for June are:
Beginning inventory: 4,000 lbs.
Ending inventory: 16,000 lbs.
How many lbs. of material should be purchased during June?
a. 288,000
b. 312,000
c. 912,000
d. 936,000
Delta, Epilson, and Sigma Companies
Three new companies (Delta, Epilson, and Sigma) began operations on January 1 of the
current year. Consider the following operating costs that were incurred by these
companies during the complete calendar year:
Refer to Delta, Epilson, and Sigma Companies. Based on sales of 10,000 units, which
company will report the greater income before income taxes if variable costing is used?
a. Delta Company
b. Epsilon Company
c. Sigma Company
d. All of the companies will report the same income before income taxes.
Product costing systems in use over the last 40 years
a. concentrated on using multiple cost pools and cost drivers.
b. were often technologically incapable of handling activity-based costing information.
c. have generally been responsive to changes in the manufacturing environment.
d. have been appropriate for managerial decision purposes as long as they met the
requirements of generally accepted accounting principles.
The connection of two or more flexible manufacturing systems via a host computer and
a networking information system is known as
a. yes yes
b. yes no
c. no no
d. no yes
Stillwater Corporation
The following information is available for Stillwater Corporation for the current year:
All materials are added at the start of production.
Refer to Stillwater Corporation. Using weighted average, what are equivalent units for
conversion costs?
a. 80,600
b. 78,100
c. 83,100
d. 75,600
Substantial reductions in product cost can be obtained by
a. decreasing capacity utilization.
b. using focused factory arrangements.
c. using tried and true manufacturing techniques.
d. using product life cycle accounting.
Vincent Manufacturing employs a weighted average process costing system for its
products. One product passes through three departments (Molding, Assembly, and
Finishing) during production. The following activity took place in the Finishing
Department during April:.
The costs per equivalent unit of production for each cost failure area as follows:
Raw material is added at the beginning of the Finishing process without changing the
number of units being processed. Work in process inventory was 40 percent complete as
to conversion on April 30. All spoilage was discovered at final inspection. Of the total
units spoiled, 1,680 were within normal limits. Spoilage is considered discrete.
Required:
a. Calculate the equivalent units of production
b. Determine the cost of units transferred out of Finishing
c. Determine the cost of ending Work in Process Inventory
d. The portion of the total transferred in cost associated with beginning Work in Process
Inventory amounted to $18,900. What is the current period cost that was transferred in
from Assembly to Finishing?
e. Determine the cost associated with abnormal spoilage for the month.
Stocks Corporation
Stocks Corporation has the following information available for June of the current year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Stocks Corporation. Prepare an equivalent units schedule using the (a) FIFO
and (b) weighted average method.
A company has a favorable variable overhead spending variance, an
unfavorablevariable overhead efficiency variance, and underapplied variable overhead
at the end of a period. The journal entry to record these variances and close the variable
overhead control account will show which of the following?
a. debit credit credit
b. credit debit credit
c. debit credit debit
d. credit debit debit
Scrap is defined as a
a. finished unit of product that has no sales value.
b. residual of the production process that has limited sales value.
c. residual of the production process that can be reworked for sale as an irregular unit of
product.
d. residual of the production process that has no sales value.
Recalls are fairly common events for automobile manufacturers. The costs of recalling
and repairing a car create
a. yes yes no
b. yes yes yes
c. no yes no
d. yes no yes
Spears Manufacturing Company
Spears Manufacturing Company produces beach chairs. Chair frames are all the same
size, but can be made from plastic, wood, or aluminum. Regardless of frame choice, the
same sailcloth is used for the seat on all chairs. Spears has set a standard for sailcloth of
$9.90 per square yard and each chair requires 1 square yard of material. Spears
produced 500 plastic chairs, 100 wooden chairs, and 250 aluminum chairs during June.
The total cost for 1,000 square yards of sailcloth during the month was $10,000. At the
end of the month, 50 square yards of sailcloth remained in inventory.
Refer to Spears Manufacturing Company. Assuming that there was no sailcloth in
inventory at the beginning of June, the unfavorablematerial quantity variance for the
month was
a. $ 495.
b. $ 500.
c. $ 990.
d. $1,000.
An effective control system functions before, during, and after an event. However, little
control is possible during the event for most
a. variable manufacturing costs.
b. variable period costs.
c. discretionary fixed costs.
d. committed fixed costs.
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 conversion
using FIFO.
a. 30,125
b. 34,325
c. 37,125
d. 39,000
Which of the following always has a direct cause-effect relationship to a cost?
a. yes yes
b. yes no
c. no yes
d. no no
Compliance costs include
a. yes no no
b. no yes yes
c. yes yes no
d. yes yes yes
A(n) ____ cost increases or decreases in intervals as activity changes.
a. historical cost
b. fixed cost
c. step cost
d. budgeted cost
Painter Corporation
Painter Corporation has the following information for the current month:
Refer to Painter Corporation. What are equivalent units of production for material
assuming weighted average is used?
a. 107,000
b. 116,500
c. 120,000
d. 115,000
The Awesome Automobile Corporation is contemplating the acquisition of an automatic
car wash. The following information is relevant:
Ignore income taxes.
Required:
A hybrid costing system combines characteristics of
a. job order and standard costing systems.
b. job order and process costing systems.
c. process and standard costing systems.
d. job order and normal costing systems.
To identify costs that relate to a specific product, an allocation base should be chosen
that
a. does not have a cause-and-effect relationship.
b. has a cause-and-effect relationship.
c. considers variable costs but not fixed costs.
d. considers direct material and direct labor but not manufacturing overhead.
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Boston Bakers. The $10,000 cost of the original machine represents a(n)
a. sunk cost.
b. future relevant cost.
c. historical relevant cost.
d. opportunity cost.
Galveston Excursons Corporation
Galveston Excursons Corporation is considering the purchase of a new ocean-going
vessel that could potentially reduce labor costs of its operation by a considerable
margin. The new ship would cost $600,000 and would be fully depreciated by the
straight-line method over 15 years. At the end of 15 years, the ship will have no value
and will be scuttled. Galveston Excursons’ cost of capital is 14 percent, and its marginal
tax rate is 35 percent.
Refer to Galveston Excursons Corporation. If the ship produces equal annual labor cost
savings over its 10-year life, how much do the annual savings in labor costs need to be
to generate a net present value of $0 on the project? (Round to the nearest dollar.)
Present value tables or a financial calculator are required.
a. $ 83,685
b. $ 97,685
c. $146,906
d. $226,008
Reducing inventory to the lowest possible levels is a major focus of
a. JIT.
b. push inventory systems.
c. EOQ.
d. ABC.
A cost leadership strategy emphasizes
a. product features.
b. low prices.
c. just-in-time production capabilities.
d. short-run opportunities for cost minimization.
Most discretionary costs relate to
a. plant and equipment acquisitions.
b. long-term investments.
c. basic personnel costs.
d. service activities.
As data input functions are automated, Intranet data becomes more
a. complicated to access.
b. manufacturing, but not accounting, oriented.
c. real-time accessible.
d. expensive to install, but easier to use.
Charlotte Company
Charlotte Company is a manufacturer of electronic components. The following
manufacturing information is available for the month of February:
Refer to Charlotte Company. What is the throughput per hour?
a. .83 units
b. 1.43 units
c. 1.67 units
d. 2.00 units
All other things being equal, an increase in sales price would increase
a. asset turnover.
b. profit margin.
c. residual income.
d. all of the above.
Retailers generally have a much higher degree of conversion than do manufacturing or
professional firms.
Activity-based costing is appropriate for a company that manufactures a wide variety of
products
Backflush costing requires fewer allocations than traditional accounting methods.
Finding acceptable alternatives to higher cost items or notspending money for goods
and services is referred to as ________________________________.
Bridges Corporation
Bridges Corporation manufactures and sells two products: A and B. The projected
information on these two products for the coming year is presented below:
Total fixed costs for the company are projected at $10,000.
Refer to Bridges Corporation. How many units would the company need to sell to
produce an income before income taxes equal to 15 percent of sales?
The tax benefit from depreciation expense is the depreciation amount multiplied by the
tax rate.
Financial accounting is highly regulated by rules and regulations.
Another name for inventoriable costs is ____________________ costs.
The Internal Revenue Service allows the use of both variable and absorption costing.
The learning and growth perspective of the balanced scorecard focuses on using an
organization’s intellectual capital to adapt to or influence customer needs and
expectations.
The most straight-forward method of assigning service department costs to
revenue-producing areas is the direct method.
Weaver Corporation
Weaver Corporation is considering an investment in a new product line. The investment
would require an immediate outlay of $100,000 for equipment and an immediate
investment of $200,000 in working capital. The investment is expected to generate a net
cash inflow of $100,000 in year 1, $150,000 in year 2, and $200,000 in years 3 and 4.
The equipment would be scrapped (for no salvage) at the end of the fourth year and the
working capital would be liquidated. The equipment would be fully depreciated by the
straight-line method over its four-year life.
Refer to Weaver Corporation. If Weaver uses a discount rate of 16 percent, what is the
NPV of the proposed product line investment?
Present value tables or a financial calculator are required.
After the break-even point is reached, each dollar of contribution margin is a dollar of
after-tax profit.
A device that alters behavior if the control system indicates a need to do so is referred to
as ____________________.
Wholesome Wheat Corporation
Wholesome Wheat Corporation grows grain in rural areas of the South. The
corporation’s costs per bushel of grain (based on an average yield of 130 bushels per
acre) follow:
Wholesome Wheat Corporation defines direct material costs as seed, fertilizer, water,
and other chemicals. The variable overhead costs represent maintenance and repair
costs of machinery. The fixed overhead costs are completely comprised of depreciation
expense on machinery and real estate taxes.
Refer to Wholesome Wheat Corporation. Assume that the current date is March 15. On
this date, Wholesome Wheat Corporation must make a decision as to whether it is
financially better off to plant a certain farm to grain, leave the land idle (no income is
derived from idle land), or rent the land to another farmer for $50 per acre. Grain prices
have been severely depressed in recent years and Wholesome Wheat Corporation’s best
guess is that grain prices will be around $2.00 per bushel at the time the crop is ready
for harvest. What should the company do? Show calculations.
The relationship between a company’s variable costs and fixed costs is referred to as its
______________________________.
The numerator in the formula for equivalent units includes all beginning inventory costs
when using the weighted average costing assumption.
The difference between actual variable overhead and budgeted variable overhead based
upon actual hours is referred to as the variable overhead efficiency variance.