Yasmin Co. can further process Product B to produce Product C. Product B is currently
selling for $30 per pound and costs $28 per pound to produce. Product C would sell for
$55 per pound and would require an additional cost of $31 per pound to produce. What
is the differential cost of producing Product C?
a. $30 per pound
b. $31 per pound
c. $28 per pound
d. $55 per pound
The document that serves as the basis for recording direct labor on a job cost sheet is
the time ticket.
a. True
b. False
Which of the following is an example of a factory overhead cost?
a. repair and maintenance cost on the administrative building
b. factory heating and lighting cost
c. insurance premiums on salespersons’ automobiles
d. president’s salary
The management of Wyoming Corporation is considering the purchase of a new
machine costing $375,000. The company’s desired rate of return is 6%. The present
value factor for an annuity of $1 at interest of 6% for 5 years is 4.212. In addition to the
foregoing information, use the following data in determining the acceptability of this
investment:
The cash payback period for this investment is
a. 4 years
b. 5 years
c. 20 years
d. 3 years
If the profit margin for a division is 8% and the investment turnover is 1.20, the rate of
return on investment is 9.6%.
a. True
b. False
Lean manufacturing philosophy reduces all of the following except
a. inventory
b. setup time
c. lead time
d. conversion costs
The DuPont formula uses financial and nonfinancial information to measure the
performance of a business.
a. True
b. False
Direct materials cost that varies with the number of units produced is an example of a
fixed cost of production.
a. True
b. False
Tennessee Corporation is analyzing a capital expenditure that will involve a cash outlay
of $109,332. Estimated cash flows are expected to be $36,000 annually for 4 years. The
present value factors for an annuity of $1 for 4 years at interest of 10%, 12%, 14%, and
15% are 3.170, 3.037, 2.914, and 2.855, respectively. The internal rate of return for this
investment is
a. 9%
b. 10%
c. 12%
d. 3%
If direct materials cost per unit increases, the break-even point will decrease.
a. True
b. False
Which transfer price approach is used when the transfer price is set at the amount sold
to outside buyers?
a. market price
b. cost price
c. negotiated price
d. variable price
Christmas Express makes wreaths in batch sizes of 12. The cutting & assembly process
takes 8 minutes per wreath and the decorating process time is 10 minutes per wreath. It
takes 12 minutes to move the wreaths from the cutting & assembly process to the
decorating process.
(a) Compute the value-added, non-value-added, and the total lead time of the wreath
process.
(b) Compute the value-added ratio. Round to the nearest decimal.
By spending more in costs of controlling quality, the costs of failing to control quality
will decrease.
a. True
b. False
Number of computers in department
An activity base is used to charge service department expenses. Match the following
activity bases with the appropriate department (a-h).
a. Purchasing
b. Payroll accounting
c. Human resources
d. Maintenance
e. Information systems
f. Marketing
g. President’s Office
h. Transportation
The balanced scorecard measures four areas of financial and nonfinancial performance
of a business. Identify one of the following that is not included as a performance
measurement.
a. internal process
b. financial
c. innovation and learning
d. employees
Companies with large amounts of fixed costs will generally have a high operating
leverage.
a. True
b. False
Process cost systems use job order cost cards to accumulate cost data.
a. True
b. False
If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000,
what is the contribution margin ratio?
a. 38%
b. 26.8%
c. 11.8%
d. 62%
For a period during which the quantity of inventory at the end equals the inventory at
the beginning, income from operations reported under variable costing will equal
income from operations reported under absorption costing.
a. True
b. False
Based on the above data, what is the amount of working capital?
a. $213,000
b. $113,000
c. $153,000
d. $39,000
When a corporation discontinues a segment of its operations at a loss, the loss should be
reported as a separate item before income from continuing operations on the income
statement.
a. True
b. False
Which of the following would be most likely to use process costing?
a. a custom furniture manufacturer
b. an auto body repair shop
c. a law firm
d. a lawn fertilizer manufacturer
The Botosan Factory has determined that its budgeted factory overhead budget for the
year is $13,500,000 and budgeted direct labor hours are 10,000,000. If the actual direct
labor hours for the period are 350,000, how much overhead would be allocated to the
period?
a. $675,000
b. $470,630
c. $472,500
d. $236,250