Which of the following is the appropriate procedure to apply overhead to production
using normal costing?
A.Assign actual direct material and direct labor costs plus an amount representing
“normal” manufacturing overhead to products.
B.Assign “normal” direct material and direct labor costs plus an amount representing
“normal” manufacturing overhead to products.
C.Assign actual direct material and direct labor costs plus an amount representing
actual manufacturing overhead to products.
D.All of the answers are correct.
The formula used in performing cost-volume-profit (CVP) analysis for the “before-tax
target”, where t is the tax rate, is
A.(Total Fixed Costs x t) / Unit Contribution Margin.
B.(Total Fixed Costs + (Target Profit x t)) / Unit Contribution Margin.
C.(Total Fixed Costs + Target Profit) / Contribution Margin Ratio.
D.After-Tax Profit / (1-t).
Calculate margin of safety using the following assumptions:
A.2,000 units
B.10,000 units
C.7,500 units
D.8,000 units
Why do companies allocate joint-process costs?
A.Performance evaluation
B.Reporting purposes
C.Establishing regulated rates
D.All of the answers are correct.
The agency theory of motivation deals with relationships between supervisors and
workers where the principals assign responsibility to the workers and the workers work
on behalf of the supervisors. Examples of principals and agents includes
A.shareholders and the board of directors.
B.board of directors and top management.
C.top management and division managers.
D.All of the answers are correct.
Lean production strives to do all of the following except:
A.flexibility in changing quickly from one product to another
B.make the quality and efficiency of production the highest priority
C.eliminate inventory between production departments
D.emphasize upper management control of decision making
Which of the following is the performance evaluation tool that measures performance
by integrating financial measures, internal business process measures, learning and
growth measures, and customer measures?
A.PERT chart.
B.balanced scorecard.
C.Pareto chart.
D.control chart.
In what type of responsibility centers are the managers responsible for costs, only?
A.Cost.
B.Revenue.
C.Profit.
D.Investment.
To support total quality management, firms should base rewards more on which
measures of performance?
A.Efficiency and effectiveness
B.Economy and efficiency
C.Productivity and effectiveness
D.Quality and customer satisfaction
Which of the following is an activity that when eliminated reduces cost without
reducing the product’s service to the customer?
A.direct activity.
B.indirect activity.
C.value-added activity.
D.non-value-added activity.
Which of the following is(are) the transfer price that would leave the buying division no
worse off if an input is purchased from an internal division.
A.The negotiated transfer price.
B.The minimum transfer price.
C.The maximum transfer price.
D.Both a. and c.
Spreadsheets are used in financial modeling. Once you have set up the basic formula it
is easy to determine the effect of changing price, costs, volume amounts, or any other
variable deemed important to the analysis. This analysis is called which of the
following?
A.’single substitution” analysis
B.”variable substitution” analysis
C.”multiple substitution” analysis
D.”what-if” analysis.
Which of the following is not an example of appraisalcosts?
A.End-process sampling
B.Field testing
C.Procurement inspection
D.All of the answers are appraisal costs.
Gem Systems
Gem Systems uses an activity-based costing system. The company has gathered the
following information concerning various cost pools and activity drivers;
The following data was collected and is specific to Job 150.
Refer to Gem Systems. Calculate the unit cost for the Electricity Costs activity cost
pool.
A.$15.00
B.$ 3.50
C.$ 3.00
D.$ 5.00
Why do companies allocate common costs to departments and products?
A.to develop product cost information for purposes of pricing and bidding.
B.contract cost reimbursement.
C.motivation.
D.All of the answers are correct.
Which of the following is a deficiency of process costing?
A.In process costing, decision makers are informed about the average cost of the units,
but not the actual cost of each particular unit or job.
B.In process costing, firms accumulate costs in a department or production process
during the accounting period, then spread those costs evenly over the units produced
that period, computing an average unit cost.
C.Process costing does not require as much record keeping as job costing system
because it does not require keeping track of the cost of each job.
D.None of the answers is a deficiency.
Shenandoah Company
Shenandoah Company is considering the introduction of a new product with the
following price and cost characteristics
The company expects to sell 2,000 units for the year.
Refer Shenandoah Company. How many units must be sold to break even?
A. 900
B.2,250
C. 2,000
D.1,500
Sun Devil, Inc.
Sun Devil, Inc. is considering the introduction of a new product with the following
price and cost characteristics
It expects to sell 70,000 units for the year.
Refer to Sun Devil, Inc; what would be the break-even point in units if fixed costs were
increased by $50,000?
A. 7,000
B. 4,667
C.14,000
D. 3,500
In the short run, the practice of setting price so that it must at least equal the differential
cost of producing and selling the product will result in which of the following?
A.predatory pricing violation.
B.anti-trust violation.
C.dumping.
D.positive contribution to covering fixed costs and generating profit.