1) In joint costing, the physical measures are generally used for products or services
that are processed and, after splitoff, additional value is added to the product and a
selling price can be determined.
2) The Required Rate of Return (RRR) is set externally by creditors as the interest rate
on long term liabilities.
3) The direct allocation method does not allocate support department costs to other
support departments.
4) A contribution format income statement for a merchandising company organizes
costs into two categoriescost of goods sold and selling and administrative expenses.
5) Downsizing is an integrated approach of configuring processes, products, and people
to match costs to the activities that need to be performed to operate effectively and
efficiently in the present and future.
6) Today, companies are simplifying their cost systems and moving toward less-detailed
and less-complex cost allocation bases.
7) The weighted-average process-costing method calculates the equivalent units by
________.
A) considering only the work done during the current period
B) the units started during the current period minus the units in ending inventory
C) the units started during the current period plus the units in ending inventory
D) the equivalent units completed during the current period plus the equivalent units in
ending inventory
8) Coffey Company maintains a very large direct materials inventory because of critical
demands placed upon it for rush orders from large hospitals. Item A contains hard-to-get
material Y. Currently, the standard cost of material Y is $4.00 per gram. During
February, 22,000 grams were purchased for $4.10 per gram, while only 20,000 grams
were used in production. There was no beginning inventory of material Y.
Required:
a.Determine the direct materials price variance, assuming that all materials costs are the
responsibility of the materials purchasing manager.
b.Determine the direct materials price variance, assuming that all materials costs are the
responsibility of the production manager.
c.Discuss the issues involved in determining the price variance at the point of purchase
versus the point of consumption.
9) Weather Inc., manufactures single room sized air conditioners. The cost accounting
system estimates manufacturing costs to be $190 per air conditioner, consisting of 75%
variable costs and 25% fixed costs. The company has surplus capacity available. It is
Weather Inc.’s policy to add a 30% markup to full costs.
Weather Inc., is invited to bid on a one-time-only special order to supply 100 air
conditioners. What is the lowest price Weather Inc. should bid on this special order?
A) $14,250
B) $18,525
C) $25,000
D) $24,700
10) Financial accounting ________.
A) focuses on the future and includes activities such as preparing next year’s operating
budget
B) must comply with GAAP (generally accepted accounting principles)
C) is the process of measuring, analyzing, and reporting financial and nonfinancial
information related to the costs of acquiring or using resources in an organization
D) is prepared for the use of department heads and other employees
11) What is the allocated corporate costs for Division A?
A) $500,000
B) $600,000
C) $300,000
D) $200,000
12) The ________ is required to prepare the cash budget of an organization.
A) statement of shareholder’s equity
B) budgeted balance sheet
C) capital expenditures budget
D) budgeted statement of cash flow
13) The following information applies to Krynton Corp. which supplies microscopes to
laboratories throughout the country. Krynton purchases the microscopes from a
manufacturer which has a reputation for very high quality in its manufacturing
operation.
Annual demand (weekly demand= 1/52 of annual demand)13,000 units
Orders per year as per EOQ model13
Lead time in days15 days
Annual relevant carrying costs$2,600
The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
What are the annual relevant ordering costs, assuming that relevant total costs are
minimal?
A) $1,000
B) $2,253.33
C) $2,600
D) $6,000
14) A perfectly competitive market exists when ________.
A) individual buyers or sellers can affect prices by their own actions
B) market prices reach well above their historical averages due to demand outstripping
supply
C) market prices drop well below their historical averages due to supply outstripping
demand
D) there is a homogeneous product with buying prices equal to selling prices
15) The East Company manufactures several different products. Unit costs associated
with Product ORD210 are as follows:
What are the period costs per unit associated with Product ORD203?
A) $5
B) $12
C) $17
D) $18
16) NOT allocating some corporate costs to divisions and products results in ________.
A) an increase in overall corporate profitability
B) the sum of individual product profitability being less than overall company
profitability
C) the sum of individual product profitability being greater than overall company
profitability
D) a decrease in overall corporate profitability
17) What is the cost effect of the growth component for direct materials?
A) $135,000 U
B) $450,000 F
C) $450,000 U
D) $135,000 F