Advocates of throughput costing argue that ________.
A) fixed manufacturing costs must be included as inventoriable costs and provide less
incentive than absorption costing to build-up inventory to increase profits
B) direct manufacturing labor is relatively fixed and therefore should not be included in
inventory costs
C) direct materials costs are a cost of the period and therefore should not be included in
inventoriable costs
D) including only direct materials as inventoriable costs provides less incentive than
absorption costing to produce a build-up of inventory merely to increase profits
Spoilage that is an inherent result of the particular production process and arises even
under efficient operating conditions is referred to as ________.
A) incremental spoilage
B) normal spoilage
C) irregular spoilage
D) direct spoilage
The relevant terminal disposal price of a machine equals the ________.
A) difference between the salvage value of the old machine and the ultimate salvage
value of the new machine
B) total of the salvage values of the old machine and the new machine
C) salvage value of the old machine
D) salvage value of the new machine
Marcon Tech Corp., currently sells radios for $7,000. It has costs of $5,400. A
competitor is bringing a new radio to market that will sell for $6,850. Management
believes it must lower the price to $6,850 to compete in the market for radios. The
marketing department believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Marcon’s sales are currently 1,000 radios per
year.
Required:
a. What is the target cost for the new target price if target operating income is 20% of
sales?
b. What is the change in operating income if marketing department is correct and only
the sales price is changed?
c. What is the target cost if the company wants to maintain its same income level, and
marketing department is correct in its estimation?
Within the relevant range, if there is a change in the level of the cost driver, then
________.
A) total fixed costs and total variable costs will change
B) total fixed costs and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
D) total fixed costs will change and total variable costs will remain the same
Electro Corp sells a refrigerator and a freezer as a single package for $1120. Other data
are in the chart below.
Using the stand-alone method with stand-alone product revenues as the weight for revenue
allocation, what amount will be allocated to the refrigerator? (Do not round any
intermediary calculations.)
A) $503.03
B) $647.58
C) $472.42
D) $560.00
If unit outputs exceed the breakeven point ________.
A) there will be an increase in fixed costs
B) total sales revenue will exceed fixed costs
C) total sales revenue will exceed variable costs
D) there will be a profit
Division A sells ground veal internally to Division B, which in turn, produces veal
burgers that sell for $12 per pound. Division A incurs costs of $5.25 per pound while
Division B incurs additional costs of $11.50 per pound.
What is Division A’s operating income per burger, assuming the transfer price of the
ground veal is set at $7.00 per burger?
A) $1.75
B) $2.25
C) $8.75
D) $4.50
For each of the following statements regarding the satisfaction of transfer pricing
criteria, identify whether you would expect the transfer pricing method to meet the
criteria. Provide a yes, no, or sometimes for each situation.
________ a. Market-Based transfer pricing achieves goal congruence.
________ b. Cost-Based transfer pricing achieves goal congruence.
________ c. Negotiated transfer pricing achieves goal congruence.
________ d. Market-Based transfer pricing motivates management effort.
________ e. Cost-Based transfer pricing motivates management effort.
________ f. Negotiated transfer pricing motivates management effort.
________ g. Market-Based transfer pricing is useful for evaluating subunit
performance.
________ h. Cost-Based transfer pricing is useful for evaluating subunit performance.
________ i. Negotiated transfer pricing is useful for evaluating subunit performance.
________ j. Market-Based transfer pricing preserves subunit autonomy.
________ k. Cost-Based transfer pricing preserves subunit autonomy.
________ l. Negotiated transfer pricing preserves subunit autonomy.
X-Industries manufactures 3-D printers. For each unit, $3,400 of direct material is used
and there is $2,600 of direct manufacturing labor at $16 per hour. Manufacturing
overhead is applied at $20 per direct manufacturing labor hour. Calculate the profit
earned on 46 units if each unit sells for $9,500.
A) $65,320
B) $35,880
C) $11,500
D) $3,250
The Connors Company has assembled the following data pertaining to certain costs that
cannot be easily identified as either fixed or variable. Connors Company has heard
about a method of measuring cost functions called the high-low method and has
decided to use it in this situation.
Cost Hours
$23,000 5,000
$26,000 6,450
$34,600 7,650
$42,000 10,000
$38,000 9,350
What is the estimated total cost at an operating level of 9,000 hours?
A) $34,200
B) $38,200
C) $41,400
D) $37,800
Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system
utilizes two cost categories, direct materials and conversion costs. Each product must
pass through Department A and Department B. Direct materials are added at the
beginning of production. Conversion costs are allocated evenly throughout production.
What is the unit cost per equivalent unit of beginning inventory in Department A? (Round
the final answer to the nearest whole dollar.)
A) $750
B) $2717
C) $3735
D) $4217
Healthy Earth Products Inc. produces fertilizer and distributes the product by using
company trucks. The controller of the company uses budgeted fleet hours to allocate
variable manufacturing overhead. The following information relates to the company’s
manufacturing overhead data:
What is the budgeted variable overhead cost rate per output unit?
A) $114.00
B) $117.00
C) $123.16
D) $120.00
In relation to target costing, which of the following best describes target cost per unit?
A) It is the targeted cost of producing one unit to achieve the current year’s budgeted
profit.
B) It is the estimated long-run cost of a product that enables the company to achieve its
target operating income.
C) It is the cost that can be achieved by ensuring that the company produced its
products at maximum efficiency.
D) It is the budgeted cost that the company estimates in producing a unit in the current
budget period.
Stefan Ceramics is in the business of selling ceramic vases. It has two departments –
molding and finishing. Molding department purchases tungsten carbide and produces
ceramic vases out of it. Ceramic Vases are then transferred to finishing department,
which designs it as per the requirement of the customers.
During the month of July, molding department purchased 720 kgs of tungsten carbide at
$280 per kg. It started manufacture of 4200 vases and completed and transferred 3200
vases during the month. It has 1000 vases in the process at the end of the month. It
incurred direct labor charges of $1900 and other manufacturing costs of $500, which
included electricity costs of $900. Stefan had no inventory of tungsten carbide at the
end of the month. It also had no beginning inventory of vases. The ending inventory
was 45% complete in respect of conversion costs. What is the cost of tungsten carbide
that will be assigned to vases finished and transferred to the finishing department for
the month of July?
A) $201,600
B) $156,900
C) $189,280
D) $153,600
Which of the following statements is true about responsibility accounting statements?
A) Responsibility accounting excludes controllable costs.
B) Responsibility accounting segregates fixed costs and variable costs.
C) Responsibility accounting excludes fixed costs and variable costs.
D) Responsibility accounting segregates uncontrollable costs from controllable costs.
The costs that result from theft of inventory are ________.
A) shrinkage costs
B) external failure costs
C) stockout costs
D) costs of quality
Which of the following minimizes the risks of outsourcing?
A) the use of short-term contracts that specify price
B) shifting the firm’s responsibility for on-time delivery to the supplier
C) building close partnerships with the supplier
D) increasing the contract price
Which of the following is an example of a bundled product?
A) a checking account
B) A complete mechanics tool kit
C) an accounting textbook with an access code to a homework/study system
D) Microsoft Excel
Quantitative analysis methods estimate cost functions ________.
A) using the time-and-motion studies
B) based on analysis and opinions gathered from various departments
C) using a formal mathematical method to fit cost functions to past data observations
D) using the pooling of knowledge from each value chain function
Soda Manufacturing Company provides vending machines for soft-drink
manufacturers. The company has been investigating a new piece of machinery for its
production department. The old equipment has a remaining life of five years and the
new equipment will cost $99,825 with a five-year life. The expected additional cash
inflows are $25,000 per year. What is the internal rate of return?
A) 8%
B) 12%
C) 6%
D) 4%
For Heavy Manufacturing Company, labor-hours are 48,000 and wages $156,000 at the
high point of the relevant range, and labor-hours are 32,000 and wages $112,000 at the
low point of the relevant range.
What is the estimated total labor costs at Heavy Manufacturing Company when 11,400
labor-hours are used?
A) $38,190
B) $55,350
C) $39,900
D) $37,050
Which of the following is an inventoriable cost?
A) manufacturing overhead cost
B) customer service costs
C) distribution costs
D) marketing costs
Which of the following best describes a transfer price?
A) It is the price charged by an organization when it transfer goods to another
organization in lieu of services provided by it.
B) It is the price that is to be used while calculating revenue from sales to customers for
tax purposes.
C) It is the price that is charged by a department of an organization when it sells its
goods to its competitors.
D) It is the price one subunit charges for a product or service supplied to another
subunit of the same organization.
________ are subtracted from sales to calculate gross margin.
A) Variable and fixed manufacturing costs
B) Fixed administrative costs
C) Variable administrative costs
D) Fixed selling costs
Magic Corporation manufactures water toys. It plans to grow by producing high-quality
water toys that are delivered in a timely manner. There are a number of other
manufacturers who produce similar water toys. Magic believes that continuously
improving its manufacturing processes and re-engineering processes to downsize and
eliminate excess capacity are critical to implementing its strategy. Which of the
following best describes Magic’s strategy?
A) product differentiation
B) product leadership
C) cost differentiation
D) cost leadership
Zitrik Corporation manufactured 90,000 buckets during February. The variable
overhead cost-allocation base is $5.10 per machine-hour. The following variable
overhead data pertain to February:
What is the actual variable overhead cost?
A) $472,500
B) $459,000
C) $51,450
D) $49,980
The seller of a product has no idle capacity and can sell all it can produce at $40 per
unit. Outlay cost is $19. What is the opportunity cost, assuming the seller sells
internally?
A) $19
B) $21
C) $40
D) $59
All of the following are possible causes of actual machine hours exceeding budgeted
machine hours except:
A) Poor scheduling
B) Actual leasing costs for the machine were higher than expected
C) Machines were not maintained in good operating condition
D) Budgeted standards were set to tight
The variable overhead spending variance measures the difference between ________,
multiplied by the actual quantity of variable overhead cost-allocation base used.
A) the actual variable overhead cost per unit and the budgeted variable overhead cost
per unit
B) the standard variable overhead cost rate and the budgeted variable overhead cost rate
C) the actual variable overhead cost per unit and the budgeted fixed overhead cost per
unit
D) the actual quantity per unit and the budgeted quantity per unit