1) Companies implementing kaizen budgeting believe that employees who actually do
the job have the best knowledge of how the job can be done better.
2) Proration is the spreading of underallocated or overallocated overhead among ending
work in process, finished goods, and costs of goods sold.
3) The accuracy of the completion estimate of conversion costs depends on the care,
skill, and experience of the estimator and also the nature of the conversion process.
4) An “economy of scale” function is an example of a linear cost function.
5) Strategic financial management describes cost management that specifically focuses
on strategic issues.
6) A favorable sales-mix variance arises when the actual sales-mix percentage exceeds
the budgeted sales-mix percentage.
7) Costs of displays at customer sites is an example of customer batch-level costs.
8) In estimating a cost function using quantitative analysis, the dependent variable is the
factor used to predict the independent variable.
9) A fixed cost is fixed only in relation to a given wide range of total activity or volume
and only for a given time span, usually a particular budget period.
10) Because costs that are inventoried are not expensed until the units associated with
them are sold, a manager can produce more units than are expected to be sold in a
period without reducing a firm’s net income.
11) Higher inflation will lead to higher prices for goods or services, which will increase
a company’s operating income and lead to a higher ROI.
12) One market-based pricing method is called the time and materials method.
13) Managers use cost accumulation data to make decisions and implement them.
14) Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the stand-alone method with stand-alone product revenues as the weight for
revenue allocation, what amount will be allocated to the refrigerator?
A) $628.50
B) $600.00
C) $627.00
D) $625.00
15) XIAN Manufacturing produces a unique valve, and has the capacity to produce
50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about
increasing production to 45,000 valves next year. What is the most likely behavior of
total manufacturing costs and unit manufacturing costs given this change?
A) Total manufacturing costs will increase and unit manufacturing costs will stay the
same.
B) Total manufacturing costs will increase and unit manufacturing costs will decrease.
C) Total manufacturing costs will stay the same and unit manufacturing costs will stay
the same.
D) Total manufacturing costs will increase and unit manufacturing costs will also
increase.
16) Which of the following statements is true of the methods for allocating joint costs?
A) Constant gross-margin percentage method results in same joint production cost per
unit for all products.
B) Estimated net realizable value method results in same gross margin percentage for
all products.
C) Present value allocation method is the least preferred method due to its complex
calculations.
D) Sales value at splitoff method uses the sales value of the entire production of the
accounting period to allocate costs.
17) Morgan Clay Products manufactures clay molded pottery on an assembly line. Its
standard costing system uses two cost categories, direct materials and conversion costs.
Each product must pass through the Molding Department and the Finishing
Department. Direct materials are added at the beginning of the production process.
Conversion costs are allocated evenly throughout production.
Which of the following journal entries records the Molding Department’s conversion
costs for the month, assuming conversion costs are 10% higher than expected?
A) Molding Department Conversion Cost Control 3,341.25
Various accounts 3,341.25
B) Materials Inventory 33,412.50
Molding Department Conversion Cost Control 33,412.50
C) Molding Department Conversion Cost Control 36,753.75
Various accounts 36,753.75
D) Materials Inventory 36,753.75
Work in Process Molding 36,753.75
18) An efficiency variance reflects the difference between ________.
A) actual input quantities used last period and current period
B) an actual input quantity and a budgeted input quantity
C) an actual input quantity used in a company and its main competitor’s
D) a standard input quantity in a company and its main competitor’s
19) Archoid’s Flowering Plants provides the following information for the month of
May:
ActualBudget
What is the budgeted contribution margin per composite unit for the budgeted mix?
A) $13.80
B) $15.00
C) $15.36
D) $15.80
20) Which of the following statements is true of performance reports?
A) The performance report shows actual performance as compared to the budget.
B) The performance report depicts the performance of a firm’s competitors.
C) The performance report compares only the budgeted performance over the years.
D) The performance report contains no actual results due to confidentiality.
21) Which of the following is true of target costing?
A) In target costing, all future costs are considered for long-run pricing.
B) In target costing, cost is the starting point for determining the price of the product.
C) In target costing, input from suppliers and distributors are not relevant.
D) In target costing, a key goal is to minimize value added activities of a product.
22) The following information pertains to Hepburn Company:
Cash is collected from customers in the following manner:
Month of sale30%
Month following the sale70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
Labor costs are 20% of sales. Other operating costs are $30,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required
at the end of the month. Money can be borrowed in multiples of $1,000.
What is the ending cash balance for March?
A) ($50,000)
B) $6,000
C) $5,600
D) $6,600
23) An example of a business which would have no beginning or ending inventory but
which could use process costing to compute unit costs would be a ________.
A) clothing manufacturer
B) corporation whose sole business activity is processing the customer deposits of
several banks
C) manufacturer of custom houses
D) manufacturer of large TVs
24) A revenue driver is defined as ________.
A) any factor that affects costs and revenues
B) any factor that affects revenues
C) the only factor that can influence a change in selling price
D) the only factor that can influence a change in demand
25) 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 single-rate cost-allocation method is used, what is the allocation rate per hour used?
A) $97.33
B) $123.33
C) $146.67
D) $113.33
26) The best estimate of the total variable manufacturing cost per unit is:
A) $39.10
B) $27.70
C) $11.40
D) $13.20
27) At breakeven point, ________.
A) operating income is equal to zero
B) contribution margin minus fixed costs is equal to profits earned
C) revenues equal fixed costs minus variable costs
D) breakeven revenues equal fixed costs divided by the variable cost per unit
28) The static-budget variance is the difference between ________.
A) an actual result and the corresponding budgeted amount in the static budget
B) the budget amount in the static budget and the amount in the flexible budget
C) an actual result and the flexible budget amount
D) the static budget amount and the sales-volume variance
29) What is gross margin for 2015?
A) $243,000
B) $238,000
C) $318,000
D) $228,000
30) Book & Bible Bookstore desires to buy a new coding machine to help control book
inventories. The machine sells for $36,586 and requires working capital of $4,000. Its
estimated useful life is five years and will have a salvage value of $4,000. Recovery of
working capital will be $4,000 at the end of its useful life. Annual cash savings from the
purchase of the machine will be $10,000.
Required:
a.Compute the net present value at a 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.
31) Management accountants use the cost hierarchy to first calculate the ________.
A) labor costs of each product and then they compute material costs
B) overhead costs of each product and then they compute prime costs
C) factory costs of each product and then they compute labor costs
D) total costs of each product and then they compute per-unit costs
32) Bosely Corporation is reviewing its business strategy. The first step for Bosely is to
perform an industry analysis. You have been hired to help the company go through the
strategy formulation process.
Required:
To perform the industry analysis, what areas should Bosely focus on and give at least
one example of how Bosely can effectively deal with each area.