One way that computing an average cost per unit facilitates management decision
making is that managers are provided more timely and more relevant cost information.
A manager believes that the number of units sold drives the company’s selling costs.
The number of units sold would be referred to as the cost driver.
The credit to the finished goods account is referred to as the cost of goods
manufactured.
Risk refers to the possibility that sacrifices may exceed benefits.
The direct method of allocating service department costs allocates those costs to
operating departments only.
One advantage of participatory budgeting is that it frees up upper management for more
important tasks.
As activity increases, the fixed cost per unit increases while the variable cost per unit
remains constant.
The time value of money concept recognizes the fact that the present value of a dollar
to be received in the future is worth more than a dollar.
Process costing is used for products produced in mass quantities through a continuous
process that provides similar inputs to each unit produced.
The selection of the most appropriate cost driver often requires considerable judgment
in the absence of a strong cause-and-effect relationship.
Many automated processes generate costs that have no cause and effect relationship
with volume-based cost drivers.
The variable cost per unit increases in direct proportion to the activity base.
Average costs are used for internal decision-making, but actual costs are required for
calculating cost of goods sold.
The BRC Company is considering the introduction of a new line of high end
electronics. Because there is considerable uncertainty with regard to the demand for the
products, the company would probably be served better by a variable cost structure.
To find the break-even point for a company that sells several products, the analyst must
make an assumption about what the sales mix will be and calculate a weighted average
contribution margin based on that sales mix.
Upstream costs are relevant for deciding whether to discontinue a product line.
Investment projects A and B offer equal cash inflows over their lives, but the cash
inflows for project A occur sooner than those for project B. The two projects are
otherwise identical (the cost is the same, for example) Based on this information, the
internal rate of return for A is lower than for B.
Which of the following is a potential limitation of financial statement analysis?
A. Lack of comparability of firms in different industries
B. The impact of changing economic conditions
C. The impact of having more than one acceptable alternative accounting principle for
accounting for a given transaction or economic event
D. All of these answers are correct.
The Neptune Corporation uses a process cost system. The company started March with
2,300 units in work in process-Dept. A. During the month 4,000 units were started. At
the end of the month there were 3,200 units in ending work in process-Dept. A
inventory that were 30% complete. The beginning work in process balance was
$120,270 and total manufacturing cost for the period was $304,000. Based on this
information, the amount of cost transferred from work in process-Dept. A to work in
process-Dept. B was:
A. $323,950.
B. $127,281.
C. $271,667.
D. $100,320.
The following information was drawn from Empire’s 2012 and 2011 year-end balance
sheets.
Empire incurred a $1,500 loss on the sale of investment securities during 2014. Based
on this information alone, what is the amount of cash that was collected from the sale of
securities?
A. $7,500
B. $6,000
C. $9,000
D. $1,500
Which of the following statements is false?
A. Under variable costing, the income statement is prepared using a contribution margin
approach.
B. Variable costing is not allowed for external financial reporting, but many companies
find it useful for internal managerial reports.
C. Under variable costing, an increase in production increases the amount of profit
reported on the income statement, even if the additional units are not sold.
D. Under variable costing, fixed manufacturing costs are expensed in the period
incurred.
The Poole Company reported the following income for 2014:
What is the company’s net margin?
A. 73%
B. 40%
C. 18%
D. 27%
Which of the following is not a step in allocating indirect costs to cost objects?
A. Multiply the allocation rate by the weight of the cost driver.
B. Trace direct costs to individual cost pools.
C. Compute an allocation rate by dividing the total cost to be allocated by the total cost
driver volume.
D. All of these answers are steps in allocating indirect costs.
Which of the following statements is false regarding upstream and downstream costs?
A. Both upstream and downstream costs are unnecessary and, should be minimized if
not eliminated.
B. Upstream costs occur before and downstream costs occur after goods are
manufactured.
C. Product design is an example of an upstream cost.
D. Customer service is an example of a downstream cost.
Hickam Company makes one product, for which it has developed the following
standard for labor: each unit should require 1.50 hours at $12/hour. In April, Hickam
made 10,000 units, using 1.65 hours per unit at a cost of $11.50 per hour.Required:
(a) Determine the total labor variance and indicate whether it is favorable or
unfavorable.
(b) Determine the labor price variance and indicate whether it is favorable or
unfavorable.
(c) Determine the labor usage variance and indicate whether it is favorable or
unfavorable.
Indirect material:
A. Is an overhead cost.
B. Is a product cost.
C. May be accounted for using a periodic method.
D. All of these.
Tisdale Company started the accounting period with the following beginning balances
in 2014:
raw materials, $42,000; work in process, $90,000; finished goods, $20,000.
During the accounting period, the company purchased $60,000 of raw materials and
ended the period with $16,000 in raw material inventory. Direct labor costs for the
period were $120,000 and $36,000 of manufacturing overhead costs was allocated to
work in process. There was no over or underapplied overhead. Ending work in process
was $82,000 and ending finished goods inventory was $35,000. Goods were sold during
the period for revenue of $360,000. How much gross margin would be reported in
2014?
A. $110,000
B. $145,000
C. $125,000
D. $171,000
When sales price, fixed cost, variable cost, and production volume are changing
simultaneously, the best approach to determining profitability is:
A. contribution margin.
B. contribution ratio.
C. sensitivity analysis.
D. equation.
The following are Acme’s production costs for the quarter ended September 30th:
What amount of costs should be traced to specific products in the process?
A. $150,000
B. $175,000
C. $225,000
D. $325,000
Yankee Tours provide seven-day guided tours along the New England coast. The
company pays its guides a total of $100,000 per year. The average cost of supplies,
lodging and food per customer is $500. The company expects a total of 500 customers
during the period January – June, and a total of 1,500 customers from July through
December. Yankee wants to earn $100 income per customer. For promotional reasons
the company desires to charge the same price throughout the year. Based on this
information, what is the correct price per customer? (round to nearest dollar)
A. $450
B. $500
C. $650
D. $700
Great Outdoors Company makes two types of camping tents. Making a standard
camping tent requires 4 hours of labor while making a deluxe camping tent requires 10
hours of labor. During the most recent accounting period the company made 2,000
standard camping tents and 500 deluxe camping tents. Indirect manufacturing costs
amounted to $52,000 and are allocated based on labor hours. Based on this information:
A. $4 of overhead cost should be allocated to each camping tent regardless of the type
of tent made.
B. $20.80 of overhead cost should be allocated to each camping tent regardless of the
type of tent made.
C. $16 of overhead cost should be assigned to each standard camping tent and $40 of
overhead cost should be assigned to each deluxe tent.
D. None of these answers is correct.
Select the correct statement regarding fixed costs.
A. Because they do not change, fixed costs should be ignored in decision making.
B. The fixed cost per unit decreases when volume increases.
C. The fixed cost per unit increases when volume increases.
D. The fixed cost per unit does not change when volume decreases.
Relevant costs are often referred to as:
A. Unavoidable costs
B. Differential costs
C. Sunk costs
D. All of these
Moyers Company reported the following in 2014: property, plant and equipment
account increased by $25,000; accumulated depreciation account increased by $2,000.
During the year, the company sold equipment that originally cost $12,000, and had
$9,000 of accumulated depreciation for $4,500.
What will Moyers Company report as additions to property, plant, and equipment on its
2014 statement of cash flows?
A. $25,000
B. $37,000
C. $29,500
D. $13,000
The following income statement is provided for Grant, Inc.
What is this company’s magnitude of operating leverage?
A. 0.33
B. 1.31
C. 2.00
D. 3.00
Why is calculating the cost of services provided to customers important for a service
business?
What kinds of cash flows are reported as financing activities on the statement of cash
flows?
Montana Company reported the following operating results for 2013 and 2014:
Required:Express each income statement component for each year as a percentage of
sales. Round your answer to one decimal place (i.e. 22.5%)
Select the term from the list provided that best matches each of the following
descriptions. Put the number of the term in the column for Your Answer.
Indicate whether each of the following statements is true or false.
Joint costs include materials, labor and overhead costs.
Joint costs are incurred in making two or more joint products.
The split-off point is the point in production at which joint products are complete and
ready to be sold.
For financial reporting, joint costs must be allocated to the separate joint products.
The allocation of joint costs to the individual products affects cost of goods sold on the
income statement but does not affect the balance sheet.
Wetzel Manufacturing Company has two departments, assembly and finishing. The
following data for the Assembly Department for June 2014 is provided:
Required:
1) Prepare a cost of production report for the Assembly Department.
2) How much cost should be transferred to the Finishing Department?
How is weighted average contribution margin calculated, and how can it be used in
cost-volume-profit analysis?
List and discuss changes in business practices adopted in recent years by world-class
companies.