The fundamental cost objects of ABC are ________.
A) activities
B) cost drivers
C) products
D) services
Which of the following is a direct manufacturing cost?
A) plant maintenance
B) plant rent
C) fringe benefits paid to machine operators
D) property taxes on plant
Management by exception is a practice whereby managers focus more closely on
________.
A) variances in the larger departments
B) areas not operating as anticipated and less closely on areas that are operating as
anticipated
C) activity-based budgeting
D) unfavorable variances
Outdoor Gear Corporation manufactured 1,000 coolers during October. The following
variable overhead data relates to October:
Calculate the variable overhead flexible-budget variance.
A) $1,118 unfavorable
B) $1,118 favorable
C) $1,482 unfavorable
D) $1,482 favorable
Lobster Liquidators will make $550,000 if the fishing season weather is good, $240,000
if the weather is fair, and would actually lose $40,000 if the weather is poor during the
season. If the weather service gives a 45% probability of good weather, a 25%
probability of fair weather, and a 30% probability of poor weather, what is the expected
monetary value for Lobster Liquidators?
A) $247,500
B) $295,500
C) $750,000
D) $250,000
To discourage unnecessary use of a support department, management might ________.
A) allocate user department costs based upon support department usage
B) allocate support department costs based upon user department usage
C) allocate a fixed amount of support department costs to each and every department
D) allocate a fixed amount of user department costs to each and every department
The Charmatz Corporation has a central copying facility. The copying facility has only
two users, the Marketing Department and the Operations 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 Marketing Department was 120,000 copies and by the
Operations Department was 380,000 copies. If a dual-rate cost-allocation method is used,
what amount of copying facility costs will be budgeted for the Operations Department?
A) $65,100
B) $68,600
C) $64,140
D) $67,640
Universal Specialty Group produces a sports theme chair. The following information
has been provided by management:
Required:
a. What is the cost per statue if absorption costing is used?
b. What is the cost per statue if “super-variable costing” is used?
c. What is the total throughput contribution?
The Conity Corporation has an Electric Mixer Division and an Electric Lamp Division.
Of a $15,000,000 bond issuance, the Electric Mixer Division used $9,400,000 and the
Electric Lamp Division used $5,600,000 for expansion. Interest costs on the bond
totaled $980,000 for the year.
The above interest costs would be considered a(n) ________.
A) output unit-level cost
B) facility-sustaining cost
C) product-sustaining cost
D) batch-level cost
If the total cost function is y = 6,500 + 9X, calculate the variable cost for 4,400 units.
A) $46,100
B) $39,600
C) $58,500
D) $6,500
Which of the following factors would NOT be one of the reasons why the sales value at
the split-off would be used to allocate joint costs?
A) the sales value method is a good measure of benefits received
B) it helps determine manager compensation and performance evaluation
C) it is a method that is independent of further processing decisions
D) it provides a common allocation basis
The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed: 31,500 gallons
The costs of purchasing the of unprocessed milk and processing it up to the split-off point
to yield a total of 31,500 gallons of saleable product was $109,025.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production. If separable costs of Butter Cream was $19,000 and constant gross
margin was 30%, what would have been the total allocated joint costs of production?
A) $109,025
B) $35,600
C) $97,400
D) $163,625
When analyzing the change in operating income, the strategy component of growth
________.
A) calculations are similar to the selling-price variance calculations
B) isolates the change attributed solely to an increase in market share
C) isolates the change attributed solely to an increase in industry growth
D) isolates the change attributed solely to an increase in the quantity of units sold
The tool crib at a large manufacturing company is responsible for providing tools to the
factory workers on demand. The tool crib has a variable demand. Historically, its
demand has ranged from 340 to 600 small tools per day with an average of 470. Diane,
the tool crib attendant, works eight hours a day, five days a week. Each order is for one
small tool and each small tool takes Diane 1 minute to retrieve from the bins.
What is the cycle time for an order? (Round the final answer to the first decimal place.)
A) 1.0 minutes per tool
B) 22.5 minutes per tool
C) 23.5 minutes per tool
D) 24.5 minutes per tool
Majestic Corporation manufactures wheel barrows and uses budgeted machine hours to
allocate variable manufacturing overhead. The following information relates to the
company’s manufacturing overhead data:
What is the flexible-budget amount for variable manufacturing overhead?
A) $358,785
B) $409,185
C) $384,060
D) $336,755
Outose Concept manufactures small tables in its Processing Department. Direct
materials are added at the initiation of the production cycle and must be bundled in
single kits for each unit. Conversion costs are incurred evenly throughout the
production cycle. Before inspection, some units are spoiled due to undetectable
materials defects. Spoiled units generally constitute 3% of the good units. Data for
December 2017 are as follows:
What is the total cost per equivalent unit using the weighted-average method of process
costing? (Round any cost per unit calculations to the nearest cent.)
A) $3.86
B) $3.69
C) $7.90
D) $4.04
The budgeted indirect-cost rate is calculated ________.
A) at the beginning of the year
B) during the year
C) at the end of each quarter
D) at the end of the year
Manufacturing overhead costs in an automobile manufacturing plant most likely
include ________.
A) labor costs of the painting department
B) indirect material costs such as lubricants
C) leather seat costs
D) tire costs
Bristol Fabricators, Inc., produces air purifiers in batches. To manufacture a batch of the
purifiers, Bristol Fabricators, Inc., must set up the machines and assembly line tooling.
Setup costs are batch-level costs because they are associated with batches rather than
individual units of products. A separate Setup Department is responsible for setting up
machines and tooling for different models of the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are
fixed with respect to the number of setup-hours. The following information pertains to
June 2015:
Calculate the spending variance for fixed overhead setup costs.
A) $100 unfavorable
B) $220 unfavorable
C) $100 favorable
D) $220 favorable
Glossier Images Inc., produces decorative statues. Management has provided the
following information:
What is the cost per statue if throughput costing is used?
A) $21.75
B) $16.95
C) $11.10
D) $7.50
With traditional costing systems, products manufactured in small batches and in small
annual volumes may be ________ because batch-related and product-sustaining costs
are assigned using unit-related drivers.
A) overcosted
B) fairly costed
C) undercosted
D) ignored
Difend Cleaners has been considering the purchase of an industrial dry-cleaning
machine. The existing machine is operable for three more years and will have a zero
disposal price. If the machine is disposed now, it may be sold for $100,000. The new
machine will cost $430,000 and an additional cash investment in working capital of
$100,000 will be required. The new machine will reduce the average amount of time
required to wash clothing and will decrease labor costs. The investment is expected to
net $140,000 in additional cash inflows during the first year of acquisition and
$270,000 each additional year of use. The new machine has a three-year life, and zero
disposal value. These cash flows will generally occur throughout the year and are
recognized at the end of each year. Income taxes are not considered in this problem.
The working capital investment will not be recovered at the end of the asset’s life.
What is the net present value of the investment, assuming the required rate of return is
9%? Would the company want to purchase the new machine?
A) $(208,440); yes
B) $(134,160); no
C) $134,160; yes
D) $208,440; no
Accrual accounting rate of return is calculated by dividing ________.
A) net initial investment by an increase in expected average annual after-tax operating
income
B) an increase in expected average annual after-tax operating income by the net initial
investment
C) an increase in expected average annual cash flow by the net initial investment
D) net initial investment by an increase in expected average annual cash flow
Dental Comfort Services provides dental cleanings to its patients. The selling price of a
cleaning is $150 and the variable costs associated are $85. The monthly relevant fixed
costs are $10,000.
Required:
a. What is the breakeven point in cleanings?
b. What is the margin of safety in dollars, assuming sales total $30,000?
c. What is the breakeven level in cleanings, assuming variable costs decrease by 20%?
d. What is the breakeven level in dollars, assuming the selling price goes down by 10%
and fixed costs
increase $1,000 per month?
Which of the following is an advantage of decentralization?
A) It assists management development and learning.
B) It focuses managers’ attention on the organization as a whole.
C) It does not result in a duplication of activities.
D) It encourages suboptimal decision making.
Write a linear cost function equation for each of the following conditions. Use y for
estimated costs and X for activity of the cost driver.
a. Direct materials cost is $2.70 per pound
b. Total cost is fixed at $800 per month regardless of the number of units produced.
c. Auto rental has a fixed fee of $90.00 per day plus $1.75 per mile driven.
d. Machine operating costs include $1,000 of maintenance per month, and $15.00 of
coolant usage costs for each day the machinery is in operation.
Samantha’s Office Supplies manufactures desk organizers in its Processing Department.
Direct materials are included at the inception of the production cycle and must be
bundled in single kits for each unit. Conversion costs are incurred evenly throughout
the production cycle. Inspection takes place as units are placed into production. After
inspection, some units are spoiled due to undetectable material defects. Spoiled units
generally constitute 5% of the good units. Data provided for February 2017 are as
follows:
What costs are allocated to the ending work-in-process inventory for direct materials and
conversion costs, respectively, using the FIFO method of process costing? (Round any cost
per unit calculations to the nearest cent.)
A) $1,285,820; $8124
B) $62,816; $32,980
C) $64,291; $8124
D) $40,619; $12,552
Relevant costs are ________.
A) sunk costs
B) expected future costs
C) actual present costs
D) historical costs
Raposa, Inc., produces a special line of plastic toy racing cars. Raposa, Inc., produces
the cars in batches. To manufacture a batch of the cars, Raposa, Inc., must set up the
machines and molds. Setup costs are batch-level costs because they are associated with
batches rather than individual units of products. A separate Setup Department is
responsible for setting up machines and molds for different styles of car.
Setup overhead costs consist of some costs that are variable and some costs that are
fixed with respect to the number of setup-hours. The following information pertains to
June 2015:
Calculate the spending variance for fixed setup overhead costs.
A) $15,548 unfavorable
B) $2,200 unfavorable
C) $3,100 unfavorable
D) $2,200 favorable
________ aims to improve operations throughout the value chain and to deliver
products and services that exceed customer expectations.
A) Total Quality Management
B) Innovation
C) Customer response time
D) Cost and efficiency
Which of the following is true of hybrid transfer prices?
A) The cost used in hybrid transfer prices is always the actual cost.
B) The cost used in hybrid transfer prices is always the budgeted cost.
C) They take into account both cost and market information.
D) They are less popular in manufacturing industry.
Which of the following sentences is true of classification of spoilage as normal or
abnormal when inventories are present?
A) Classifying spoilage as normal rather than abnormal results in same current
operating income.
B) Classifying spoilage as normal rather than abnormal results in an decrease in current
operating income.
C) Classifying spoilage as abnormal rather than normal results in an increase in current
operating income.
D) Classifying spoilage as normal rather than abnormal results in an increase in current
operating income.
Swansea Finishing produces and sells a decorative pillow for $103.00 per unit. In the
first month of operation, 2,300 units were produced and 1,800 units were sold. Actual
fixed costs are the same as the amount budgeted for the month. Other information for
the month includes:
What is cost of goods sold per unit using variable costing?
A) $23.00
B) $45.00
C) $65.00
D) $31.00
Frazer Corp sells several products. Information of average revenue and costs is as
follows:
What is the operating income earned if the company sells 20,000 units?
A) $279,000
B) $296,000
C) $325,000
D) $227,000
Effective planning of variable overhead costs means that managers must
A) increase the expenditures in the variable overhead budgets
B) focus on activities that add value for the customer and eliminate nonvalue-added
activities
C) increase the linearity between total costs and volume of production
D) identify the product advertising requirements and factor those into the variable
overhead budget