Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the machine maintenance cost allocated to projection TVs
would be:
a. $ 72,000
b. $108,000
c. $110,769
d. $124,615
Business process reengineering (BPR) is not associated with
a. employee layoffs.
b. outsourcing initiatives.
c. technology acquisition.
d. plant expansion.
Comparing the way a “best-in-class” company performs a specific activity (such as
distribution) is called
a. process benchmarking.
b. results benchmarking.
c. total quality management benchmarking.
d. SPC benchmarking.
All of the following objectives are reasons that service department allocations can
motivate managers except to
a. instill a consideration of support costs in production managers.
b. encourage production managers to help service departments control costs.
c. encourage the usage of certain services.
d. determine divisional profitability.
When a firm redesigns a product to reduce the number of component parts, the firm is
a. increasing consumer value.
b. increasing the value added to the product.
c. decreasing product variety.
d. decreasing non-value-added costs.
On the variable costing income statement, the difference between the “contribution
margin” and “income before income taxes” is equal to
a. the total variable costs.
b. the Cost of Goods Sold.
c. total fixed costs.
d. the gross margin.
Which of the following is not a primary goal of a cost management system?
a. use cost drivers to develop product costs
b. improve understanding of activities
c. develop organizational strategies
d. measure performance
Benchmarking does which of the following activities relative to a “best-in-class” (BIC)
company?
a. yes yes yes
b. yes no no
c. no no yes
d. yes no yes
Given the following information for Gregg Corporation, prepare the necessary journal
entries, assuming that the Raw Material Inventory account contains both direct and
indirect material.
a. Purchased raw material on account $45,500.
b. Put material into production: $28,000 of direct material and $5,000 of indirect
material.
c. Accrued payroll of $95,000, of which 65 percent was direct and the remainder was
indirect.
d. Incurred and paid other overhead items of $42,000.
e. Transferred items costing $92,500 to finished goods.
f. Sold goods costing $79,900 on account for $134,200.
A budget is
a. a planning tool.
b. a control tool.
c. a means of communicating goals to the firm’s divisions.
d. all of the above.
Productivity is measured by the
a. total quantity of output generated from a limited amount of input during a time
period.
b. quantity of good output generated from a specific amount of input during a time
period.
c. quantity of good output generated from the quantity of good input used during a time
period.
d. total quantity of input used to generate total quantity of output for a time period.
To avoid waste and maximize efficiency when transferring products among divisions in
a competitive economy, a large diversified corporation should base transfer prices on
a. variable cost.
b. market price.
c. full cost.
d. production cost.
Asset turnover equals
a. income divided by average assets.
b. sales divided by assets.
c. sales divided by average assets.
d. assets divided by sales.
____ allows a company to accomplish a technology swap.
a. Data mining
b. Strategic alliance
c. Diversity
d. BPR
Wimberley Company
Wimberley Company has the following information available for December when 3,500
units were produced (round answers to the nearest dollar).
Refer to Wimberley Company. What is the labor efficiency variance?
a. $2,050 F
b. $2,050 U
c. $2,040 U
d. $2,040 F
An increase in a corporation’s target rate would result in a(n)
a. increase in residual income.
b. decrease in return on investment.
c. decrease in residual income.
d. decrease in both residual income and return on investment.
A commonly recognized critical success factor for most organizations is
a. yes yes yes
no
b. yes no yes
yes
c. no yes no
yes
d. no no yes
no
A cost of quality report compares current period quality costs in specified categories to
a. last year’s quality costs.
b. current period budgeted quality costs.
c. total quality costs for the period.
d. both a and b.
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.
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
When cost driver analysis is used, organizational profit or loss can be determined by
subtracting
a. organizational costs from total margin provided by products.
b. organizational costs from total product revenue.
c. total product costs from total product revenue.
d. total unit, batch, product/process, and organizational level costs incurred for a period
from total product revenue.
Stocks Corporation
Stocks Corporation has the following information available for June of the current year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Stocks Corporation. Prepare a schedule showing the computation for cost per
equivalent unit assuming the (a) FIFO and (b) weighted average method.
In a just-in-time inventory system,
a. practical standards become ideal standards.
b. ideal standards become expected standards.
c. variances will not occur because of the zero-defects basis of JIT.
d. standard costing cannot be used.
Fred Hammond recently invested in a project that has an expected annual cash inflow
of $7,000 for 10 years, and an expected payback period of 3.6 years. How much did
Fred invest in the project?
a. $19,444
b. $36,000
c. $25,200
d. $40,000
Bradley Corporation
Bradley Corporation has three production departments A, B, and C. Bradley
Corporation also has two service departments, Administration and Personnel.
Administration costs are allocated based on value of assets employed, and Personnel
costs are allocated based on number of employees. Assume that Administration
provides more service to the other departments than does the Personnel Department.
Refer to Bradley Corporation. Assume that Administration costs have been allocated
and the balance in Personnel is $860,000. What amount is allocated to C (round to the
nearest dollar)?
a. $213,964
b. $430,000
c. $286,667
d. $143,333
Cost tables are databases that provide information on which of the following?
a. design specifications
b. manufacturing processes
c. impact on product costs when different inputs resources are used
d. all of the above
Which of the following would typically be viewed as non-value-added activities?
a. yes yes yes no
b. no no no yes
c. no yes no yes
d. yes yes no yes
Which of the following defines variable cost behavior when activity increases within its
relevant range?
Whitney Corporation
Whitney Corporation, a reseller of women’s fashions, has budgeted its activity for
March. The budget information is presented below:
Refer to Whitney Corporation. The budgeted cash receipts for March are:
a. $412,500
b. $137,500
c. $585,000
d. $550,000
Sunderland Wood Creations
Sunderland Wood Creations is considering a proposal to sell an existing lathe and
purchase a new computer-operated lathe. Information on the existing lathe and the
computer-operated lathe follow:
Refer to Sunderland Wood Creations. What is the payback period for the
computer-operated lathe?
a. 1.87 years
b. 2.00 years
c. 3.53 years
d. 3.29 years
McDonald Company
The following information relates to financial projections of McDonald Company:
Refer to McDonald Company. If McDonald Company achieves its projections, what
will be its degree of operating leverage?
a. 6.25
b. 1.19
c. 1.68
d. 3.00
Which of the following is/are part of activity-based management?
a. yes yes
b. no yes
c. no no
d. yes no
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
______________________________ refers to the number of different processes
through which a product flows.
When non-value added time is greater, manufacturing cycle efficiency is higher.
The following are forecasts of sales and purchases for Savannah Company:
All sales are on credit. Records show that 70 percent of the customers pay the month of
the sale, 20 percent pay the month after the sale, and the remaining 10 percent pay the
second month after the sale. Purchases are all paid the following month at a 2 percent
discount. Cash disbursements for operating expenses in June were $5,000.
Required: Prepare a schedule of cash receipts and disbursements for June.
In a standard job-order costing system, factory overhead is applied using actual rates
times standard input.
Mobile Corporation
Mobile Corporation is a manufacturer of electronic blood pressure monitors for home
use. The following is a summary of quality costs for the first year of operations.
Refer to Mobile Corporation. Determine the total quality cost.
Allocating joint costs based upon a physical measure ignores the revenue-generating
ability of individual products.
A cost that must be reviewed periodically to determine if it is still appropriate and
necessary is referred to as a __________________________________________.
The difference between actual and budgeted fixed factory overhead is referred to as a
fixed overhead volume variance.
The first step in performing activity analysis is to prepare a process map.
A system of producing inventory where goods are produced only when needed by a
customer or work center is referred to as a _________________________.
What are three significant cost drivers that have been disregardedby traditional product
costing system?
Expired costs are reflected on the balance sheet.
Cost-based transfer prices are most effective for common high-cost and high-volume
standardized services.
Texoma Corporation
Texoma Corporation is comprised of two divisions: X and Y. X currently produces and
sells a gear assembly used by the automotive industry in electric window assemblies. X
is currently selling all of the units it can produce (25,000 per year) to external
customers for $25 per unit. At this level of activity, X’s per unit costs are:
Y Division wants to purchase 5,000 gear assemblies per year from X Division. Y
Division currently purchases these units from an outside vendor at $22 each.
Refer to Texoma Corporation. What is the minimum price per unit that X Division
could accept from Y Division for 5,000 units of the gear assembly and be no worse off
than currently?
Dividing total fixed costs by the contribution margin ratio yields break-even point in
units.
Product complexity refers to the number of processes through which a product flows.
Discuss actual costing, normal costing, and standard costing.