In a push system of production control, inventory is produced in anticipation of
customer or work center demand.
Feedback is another name for an effector.
Ideal standards generally yield favorable variances.
Management should strive to reduce or eliminate non-value added activities from a
production process.
The FIFO costing method assumes that units in beginning inventory are the first units
transferred.
Daybreak Corporation
Daybreak Corporation manufactures and sells two products: A and B. The operating
results of the company are as follows:
In addition, the company incurred total fixed costs in the amount of $10,000.
Refer to Daybreak Corporation. How many units would the company need to sell to
produce a before-tax profit of $20,000?
A. 6,000
B. 6,250
C. 6,923
D. 7,000
All costs that are incurred between the split-off point and the point of sale are known
as
A. sunk costs.
B. incremental separate costs.
C. joint cost.
D. committed costs.
Value engineering seeks to obtain increased
A. product life-cycle and reduced direct labor inputs.
B. planning team membership and reduced time-to-market.
C. product performance ratio and reduced substitute goods.
D. product functionality and reduced costs.
Under activity-based costing, benchmarks for product cost should contain an allowance
for
A. idle time.
B. idle time and scrap materials.
C. spoilage.
D. None of the responses are correct.
The maximum of the transfer price negotiation range is
A. determined by the buying division.
B. set by the selling division.
C. influenced only by internal cost factors.
D. negotiated by the buying and selling division.
You are asked to bring the following incomplete accounts of Parrish Printing
Corporation up to date through January 31 of the current year. Consider the data that
appear in the T-accounts as well as additional information given in items (a) through (i).
Parrish’s job-order costing system has two direct cost categories (direct material and
direct manufacturing labor) and one indirect cost pool (manufacturing overhead, which
is allocated using direct manufacturing labor costs).
Additional Information:
a. Manufacturing department overhead is allocated using a budgeted rate set every
December. Management forecasts next year’s overhead and next year’s direct
manufacturing labor costs. The budget for the current year is $400,000 of direct
manufacturing labor and $600,000 of manufacturing overhead.
b. The only job unfinished on January 31 is No. 419, on which direct manufacturing
labor costs are $2,000 (125 direct manufacturing labor hours) and direct material costs
are $8,000.
c. Total material placed into production during January is $90,000.
d. Cost of goods completed during January is $180,000.
e. Material inventory as of January 31 is $20,000.
f. Finished goods inventory as of January 31 is $15,000.
g. All plant workers earn the same wage rate. Direct manufacturing labor hours for
January total 2,500. Other labor and supervision totals $10,000.
h. The gross plant payroll for January pay periods totals $52,000. Ignore withholdings.
All personnel are paid on a weekly basis.
i. All “actual” manufacturing department overhead incurred during January has already
been posted. Required:
a. Material purchased during January
b. Cost of Goods Sold during January
c. Direct Manufacturing Labor Costs incurred during January
d. Manufacturing Overhead Allocated during January
e. Balance, Wages Payable Control, December 31, prior year
f. Balance, Work in Process Inventory Control, January 31, current year
g. Balance, Work in Process Inventory Control, December 31, prior year
h. Balance, Finished Goods Inventory Control, January 31, current year
i. Manufacturing Overhead underapplied or overapplied for January
Dawson Corporation has a sales goal of $500,000 for the coming year. Based on this
level of activity, Dawson budgets its total expenses at $450,000. Actual sales are
$480,000 and actual costs are $460,000. Dawson Corporation’s operations were
A. both efficient and effective.
B. neither efficient nor effective.
C. efficient but not effective.
D. effective but not efficient.
Beasley Company
Beasley Company prepared a cash budget by quarters for the upcoming year. Missing
data amounts are indicated with question marks or lower case letters; these lower case
letters will be referred to in the questions that follow.
Beasley requires a minimum balance of $10,000 to start a quarter.
All data are in thousands.
Beasley Corporation
Cash Budget
Refer to Beasley Company. The collections from customers during the first quarter
(item a) are:
A. $50
B. $60
C. $57
D. $73
Which of the following factors is involved in studying cost-volume-profit
relationships?
A. product mix
B. variable costs
C. fixed costs
D. all of the above
Denver Boot Corporation has been asked to submit a bid on supplying 1,000 pairs of
military combat boots to the Armed Forces Training Center. The company’s costs per
pair of boots are as follows:
Assuming that there would be no commission on this potential sale, the lowest price the
firm can bid is some price greater than
A. $23.
B. $20.
C. $17.
D. $14.
An income statement is prepared as an internal report. Under which of the following
methods would the term contribution margin appear?
A. no no
B. no yes
C. yes no
D. yes yes
Which of the following is not a critical element in a total quality management system?
A. employee involvement
B. activity-based costing
C. continuous improvement
D. problem prevention emphasis
Product profit margins are typically judged on a
A. yes yes
B. yes no
C. no yes
D. no no
Commodore Company
Commodore Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
September when Commodore produced 5,000 units:
Refer to Commodore Company. Using the two-variance approach, what is the
noncontrollable variance?
A. $ 750 F
B. $ 750 U
C. $1,000 F
D. $1,000 U
A management decision may be beneficial for a given profit center, but not for the
entire company. From the overall company viewpoint, this decision would lead to
A. goal congruence.
B. centralization.
C. suboptimization.
D. maximization.
Customer measures on the balanced scorecard should be
A. yes no no yes
B. no yes yes no
C. no yes no yes
D. yes yes yes yes
If abnormal spoilage occurs in a job-order costing system, has a material dollar value,
and is related to a specific job, the recovery value of the spoiled goods should be
A. a scrap inventory account the specific job in process
B. the specific job in process overhead
C. a loss account the specific job in process
D. factory overhead sales
Superior Armored Car Co. is considering the acquisition of a new armored truck. The
truck is expected to cost $300,000. The company’s discount rate is 12 percent. The firm
has determined that the truck generates a positive net present value of $17,022.
However, the firm is uncertain as to whether it has determined a reasonable estimate of
the salvage value of the truck. In computing the net present value, the company
assumed that the truck would be salvaged at the end of the fifth year for $60,000. What
expected salvage value for the truck would cause the investment to generate a net
present value of $0? Ignore taxes. Present value tables or a financial calculator are
required.
A. $30,000
B. $0
C. $55,278
D. $42,978
An organizational unit whose manager is solely responsible for generating revenues is
referred to as a ______________________________.
Lamar Company
Lamar Company produces only two products and incurs joint processing costs that total
$3,750. Products Alpha and Beta are produced in the following quantities during each
month: 4,500 and 6,000 gallons, respectively. Lamar Company also runs one ad each
month that advertises both products at a cost of $1,500. The selling price per gallon for
the two products are $20 and $17.50, respectively.
Refer to Lamar Company. What amount of advertising cost is allocated to each product
based on sales value?
Compare and contrast job-order and process costing systems.
Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of
residential grade carpeting. The division has the capacity to produce 500,000 square
yards of carpet each year. Its current costs and revenues are shown here:
The Housing Division currently purchases 40,000 yards of carpeting (of the grade
produced by the Carpet Division) each year at a cost of $6.50 per square yard from an
outside vendor.
Refer to Castle Homes Corporation. If the Housing and Carpet Divisions agree on the
internal transfer of 40,000 square yards of carpet at a price of $4.00 per square yard,
how will overall corporate profits be affected?
Roberts Company
Roberts Company has the following information available for the current year:
Refer to Roberts Company. Compute the material purchase price and quantity
variances.
What are three reasons that overhead must be allocated to products?
What factors influence the present value of the depreciation tax benefit?
Denton Company
Denton Company manufactures three products (A, B, and C) from three raw materials
(X, Y, and Z). The following table indicates the number of pounds of each material that
is required to manufacture each type of product:
The company has a policy of maintaining an inventory of finished goods on all three
products equal to 25 percent of the next month’s budgeted sales. Listed below is the
sales budget for the first quarter of the current year:
Refer to Denton Company. Assuming that the company meets its required inventory
policy, prepare a production budget for the first 2 months of the current year for each of
the three products.
A ______________________________ is a planning document that presents expected
variable and fixed overhead costs at different activity levels.
The following miscellaneous data has been collected for Sawyers Manufacturing
Company for the most recent year-end:
Required: Prepare statements of cost of goods manufactured and cost of goods sold
showing how all unknown amounts were determined.
