If r is the discount rate, the formula [1/(1 + r)] refers to the
a. future value interest factor associated with r for one period.
b. present value of some future cash flow.
c. present value interest factor associated with r for one period.
d. future value interest factor for an annuity with a duration of r periods.
Which of the following standards can commonly be reached or slightly exceeded by
workers in a motivated work environment?
a. no no no
b. no yes yes
c. yes yes no
d. no yes no
Mapleton Company
Mapleton Company is considering an investment in a machine that would reduce
annual labor costs by $30,000. The machine has an expected life of 10 years with no
salvage value. The machine would be depreciated according to the straight-line method
over its useful life. The company’s marginal tax rate is 30 percent.
Refer to Mapleton Company. Assume that the company will invest in the machine if it
generates an internal rate of return of 16 percent. What is the maximum amount the
company can pay for the machine and still meet the internal rate of return criterion?
Present value tables or a financial calculator are required.
a. $144,990
b. $180,000
c. $187,500
d. $210,000
Buckingham Company
Buckingham Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
May when Buckingham produced 4,500 units:
Refer to Buckingham Company. Using the two-variance approach, what is the
controllable variance?
a. $5,813 U
b. $5,813 F
c. $4,375 U
d. $4,375 F
Thunder Sports Enterprises
The Basketball Division of Thunder Sports Enterprises reported the following financial
data for the year:
Refer to Thunder Sports Enterprises. If the manager of the Basketball Division is
evaluated based on return on investment, how much would she be willing to pay for an
investment that promises to increase net segment income by $60,000?
a. $ 108,000
b. $ 300,000
c. $ 428,572
d. $1,200,000
On a balanced scorecard, which of the following would be most appropriate to measure
customer service?
a. Rapid time-to-market of new products
b. Corporate financial profits
c. On-time delivery
d. Decrease in reworked products
____ places the primary responsibility for quality on the maker or producer.
a. Pareto analysis
b. Quality control
c. Benchmarking
d. Activity analysis
The pre-tax cost of capital is higher than the after-tax cost of capital because
a. interest expense is deductible for tax purposes.
b. principal payments on debt are deductible for tax purposes.
c. the cost of capital is a deductible expense for tax purposes.
d. dividend payments to stockholders are deductible for tax purposes.
A purchases budget
a. does not reflect early payment discounts granted by vendors.
b. is the same thing as a production budget.
c. is needed only if a firm does not pay for its merchandise in the same period as it is
purchased.
d. is affected by a firm’s inventory policy only if the firm purchases on credit.
When the organizational output is difficult to define, management may rely on ____ for
cost control.
a. qualitative measures
b. program budgeting
c. surrogate measures of output
d. all of the above
The term “relevant range” as used in cost accounting means the range over which
a. costs may fluctuate.
b. cost relationships are valid.
c. production may vary.
d. relevant costs are incurred.
Perry Company employs a job-order costing system. Only three jobs-Job #205, Job
#206, and Job #207-were worked on during January and February. Job #205 was
completed February 10; the other two jobs were still in production on February 28, the
end of the company’s operating year. Job cost sheets on the three jobs follow:
The following additional information is available:
Required:
Robert Wilson Company
Below is an income statement for Robert Wilson Company:
Refer to Robert Wilson Company. What was the company’s margin of safety?
a. $ 37,500
b. $ 75,000
c. $125,000
d. $150,000
As part of its control function, a cost management system is useful for
a. yes yes yes
b. no yes yes
c. yes no no
d. yes yes no
Austin, Brown, and Freeman Companies
Below are income statements that apply to three companies: Austin, Brown, and
Freeman:
Refer to Austin, Brown, and Freeman Companies. At sales of $100, which firm has the
highest margin of safety?
a. Austin Company
b. Brown Company
c. Freeman Company
d. They all have the same margin of safety.
In an income statement prepared as an internal report using the variable costing method,
fixed manufacturing overhead would
a. not be used.
b. be used in the computation of operating income but not in the computation of the
contribution margin.
c. be used in the computation of the contribution margin.
d. be treated the same as variable manufacturing overhead.
Which of the following are undesirable from a consumer perspective but are frequently
needed?
a. value-neutral activities
b. value-added activities
c. non-value-added activities
d. none of the above
The use of separate variable and fixed overhead rates is better than a combined rate
because such a system
a. is less expensive to operate and maintain.
b. does not result in underapplied or overapplied overhead.
c. is more effective in assigning overhead costs to products.
d. is easier to develop.
Texas Company
Texas Company has established a target rate of return of 16% for all divisions. For the
most recent year, San Marcos Division generated sales of $10,000,000 and expenses of
$7,500,000. Total assets at the beginning of the year were $5,000,000 and total assets at
the end of the year were $7,000,000.
Refer to Texas Company. In the most recent year, what was San Marcos Division’s
residual income?
a. $ 960,000
b. $1,380,000
c. $1,540,000
d. $1,700,000
The number of product defects discovered by consumers is what kind of performance
indicator?
a. yes no no
yes
b. no yes no
yes
c. no yes yes
no
d. yes no no
yes
Chapman Company
Chapman Company uses a job-order costing system. At the beginning of March, the
company had two jobs in process with the following costs:
Chapman pays its workers $8.50 per hour and applies overhead on a direct labor hour
basis.
Refer to Chapman Company. What is the overhead application rate per direct labor
hour?
a. $ 0.50
b. $ 2.00
c. $ 4.25
d. $30.00
Cibolo Company
Cibolo Company has the following information available for March when 4,200 units
were produced (round answers to the nearest dollar).
Refer to Cibolo Company. Assume that the company computes the material price
variance on the basis of material issued to production. What is the total material
variance?
a. $1,050 U
b. $1,050 F
c. $3,030 U
d. $3,030 F
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using a physical measurement method, what amount
of joint processing cost is allocated to Product D?
a. $1,748
b. $2,447
c. $1,311
d. $3,495
The split-off point is the point at which
a. output is first identifiable as individual products.
b. joint costs are allocated to joint products.
c. some products may first be sold.
d. all of the above.
Cost accounting is directed toward the needs of
a. regulatory agencies.
b. external users.
c. internal users.
d. stockholders.
Which of the following costs will vary directly with the level of production?
a. total manufacturing costs
b. total period costs
c. variable period costs
d. variable product costs
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product X (round to the nearest dollar)?
a. $4,000
b. $5,610
c. $2,390
d. $5,500
Which of the following is nota question that needs to be answered with regard to
quality control?
a. What happens to the spoiled units?
b. What is the actual cost of spoilage?
c. How can spoilage be controlled?
d. Why does spoilage happen?
Benchmarking against noncompetitors is extremely important in
a. process benchmarking.
b. results benchmarking.
c. reverse engineering.
d. all of the above.
Costs that are associated with the production of a group of similar products at the same
time are referred to as ______________________________.
The capital budgeting technique that divides average annual profits from an investment
by the average investment in a project is referred to as the
_____________________________________.
For cost control purposes, actual costs should be compared to prior period costs.
A company that manufactures custom bridal gowns will use a
costing system to track production costs
The Foreign Corrupt Practices Act of 1977 provides legal protection for individuals
who report illegal organizational activities to appropriate persons or agencies.
Costs that are associated with the production of a single unit of a product are referred to
as _________________________.
The accounting rate of return considers the salvage value of an asset.
A flexible budget compares actual costs to budgeted costs at several activity levels.
Strategic planning is focused on long-range goals of five to ten years.
The three stages of production for a manufacturing firm are
_________________________, ______________________________, and
_________________________.
The FIFO method combines beginning inventory and current production to compute
cost per unit of production.
In a totally automated organization, using theoretical capacity will generally provide the
lowest fixed overhead application rate.
Grant Company.
Grant Company uses a job-order costing system and develops its predetermined
overhead rate based on machine hours. The company has two jobs in process at the end
of the cycle, Jobs #177 and #179.
Refer to Grant Company. What amount of overhead is charged to Jobs #177 and #179?
Machine hours are split between Jobs #177 and #179-65 percent and 35 percent,
respectively. Actual machine hours equal budgeted machine hours.
The rate of return required by a company that is used to determine the imputed interest
portion of future cash receipts and disbursements is referred to as the
_______________________.