In a mutually inclusive project situation, if one project is chosen, all related projects are
also chosen.
A company that manufactures custom bridal gowns will use a process costing system
to track costs.
The total variance can provide useful information about the source of cost differences.
An advance pricing agreement can eliminate the possibility of double taxation on
multinational exchanges of goods.
Expected standards tend to yield favorable variances.
External performance measures focus on the efficiency and effectiveness of an
organization’s production process.
Depreciation of fixed assets is considered to be a discretionary cost.
If the net present value is positive, the actual return on a project exceeds the required
rate of return.
The direct method of service department cost allocation allows a partial recognition of
reciprocal relationships among service departments before assigning costs to
revenue-producing areas.
Garfield Company had beginning Work in Process Inventory of 5,000 units that were
40 percent complete as to conversion costs. Garfield Company started and completed
42,000 units this period and had ending Work in Process Inventory of 12,000 units.
How many units were started this period?
A. 42,000
B. 47,000
C. 54,000
D. 59,000
Porter Company’s cost of compliance is $58,000. Appraisal cost is $21,000 and failure
cost is $32,000. The company’s total quality cost is
A. $53,000.
B. $79,000.
C. $90,000.
D. $111,000.
For a company that manufactures candy, how would the cost of sugar be classified?
A. Yes No
B. No Yes
C. Yes Yes
D. No No
Which of the following is not a balanced scorecard category?
A. financial measures
B. environmental measures
C. business process measures
D. personnel measures
Overhead is applied to jobs in a job-order costing system
A. at the end of a period.
B. as jobs are completed.
C. at the end of a period or as jobs are completed, whichever is earlier.
D. at the end of a period or as jobs are completed, whichever is later.
Jackson Company.
Jackson Company manufactures wood file cabinets. The following information is
available for June of the current year.
The direct labor rate is $9.60 per hour and overhead for the month was $9,600.
Refer to Jackson Company. If there were 1,500 direct labor hours and $21,000 of raw
material purchased, how much is Cost of Goods Sold?
A. $64,500.
B. $59,800.
C. $38,800.
D. $53,800.
Lincoln Corporation
Lincoln Corporation distributes its service department overhead costs directly to
producing departments without allocation to the other service departments. Information
for January is presented here.
Refer to Lincoln Corporation. Using the step method, how much of Lincoln
Corporation’s Utilities Department cost is allocated between Departments A and B?
A. $9,900
B. $10,800
C. $12,740
D. $27,700
The value chain
A. reflects the production of goods within an organizational context.
B. is concerned with upstream suppliers, but not downstream customers.
C. results when all non-value-added activities are eliminated from a production process.
D. is the foundation of strategic resource management.
Which of the following is an argument against the use of direct (variable) costing?
A. Absorption costing overstates the balance sheet value of inventories.
B. Variable factory overhead is a period cost.
C. Fixed manufacturing overhead is difficult to allocate properly.
D. Fixed manufacturing overhead is necessary for the production of a product.
Reactions to information provided by the management control system are
A. formulated in the organization’s strategic plan.
B. judgmental, and are based on interpretations and circumstances.
C. assessed by the communications network of the MCS.
D. determined as those activities that will be most efficient and effective given the
organization’s available technology.
Becker Company makes fabric-covered storage totes. The company began July with
600 totes in process that were 100 percent complete as to cardboard, 75 percent
complete as to cloth, and 65 percent complete as to conversion costs. During the month,
3,600 totes were started. On April 30, 450 totes were in process (100 percent complete
as to cardboard, 60 percent complete as to cloth, and 50 percent complete as to
conversion costs). Using the FIFO method, what are equivalent units for cloth?
A. 3,570
B. 3,750
C. 3,870
D. 4,020
Merit pay is
A. a contingent amount of pay that is earned by managers whose subunits meet a target
rate of return.
B. always for a limited period of time and must be re-earned each period.
C. any pay earned when the company is profitable.
D. a pay increment received when a specific performance level is achieved.
A pay plan that gives an employee cash or stock equal to the difference between some
specified stock price and the quoted market price at some future time period is
A. stock appreciation rights.
B. an ESOP.
C. profit sharing.
D. merit pay.
In a discounted cash flow analysis, which of the following would not be consistent
with adjusting a project’s cash flows to account for higher-than-normal risk?
A. increasing the expected amount for cash outflows
B. increasing the discounting period for expected cash inflows
C. increasing the discount rate for cash outflows
D. decreasing the amount for expected cash inflows
Engel Company has 3 divisions: A, B, and C. Division A’s income statement shows the
following for the year ended December 31:
Cost of goods sold is 80 percent variable and 20 percent fixed. Of the fixed costs, 50
percent are avoidable if the division is closed. All of the selling expenses relate to the
division and would be eliminated if Division A were eliminated. Of the administrative
expenses, 85 percent are applied from corporate costs. If Division A were eliminated,
Engel’s income would
A. increase by $100,000.
B. decrease by $197,500.
C. decrease by $310,000.
D. decrease by $422,500.
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a weighted average method of process costing,
compute the average cost per EUP for Material B.
A. $20.00
B. $31.25
C. $20.10
D. $31.00
At the end of a period, a significant material quantity variance should be
A. closed to Cost of Goods Sold.
B. allocated among Raw Material, Work in Process, Finished Goods, and Cost of Goods
Sold.
C. allocated among Work in Process, Finished Goods, and Cost of Goods Sold.
D. carried forward as a balance sheet account to the next period.
A budget that includes a 12-month planning period at all times is called a ____ budget.
A. pro forma
B. flexible
C. master
D. continuous
Flexible manufacturing systems are
A. designed to provide more flexibility in a firm’s manufacturing process by using
computer-aided machinery.
B. the same as computer-aided design systems.
C. commonly used by firms that need to make large quantities of one product.
D. are very complicated and cause increased defect rates in output.
The overhead variance calculated as total budgeted overhead at the actual input
production level minus total budgeted overhead at the standard hours allowed for actual
output is the
A. efficiency variance.
B. spending variance.
C. volume variance.
D. budget variance.
Why is ‘standard cost” a better measure for a transfer price than “actual cost”?
List and discuss briefly the three standards of attainability.
Tri-Cities Savings and Loan
Tri-Cities Savings and Loan has three departments that generate revenue: loans,
checking accounts, and savings accounts. Tri-Cities Savings and Loan has two service
departments: Administration/Personnel and Maintenance. The service departments
provide service in the order of their listing. The following information is available for
direct costs. Administration/ Personnel costs are best allocated based on number of
employees while Maintenance costs are best allocated based on square footage
occupied.
Refer to Tri-Cities Savings and Loan. Using the step method, compute the amount
allocated to each department from Maintenance.
What are the three classes of activities defined by activity-based management. What is
customer response to each of these activities? What is management’s reaction to each
of these activities?
Discuss the various elements of the cost control process.
In a decentralized organization, the cost objective is referred to as a
______________________________.
Profit margin x Asset Turnover is often referred to as the
_________________________.
What major assumption do multi-product firms need to make in using CVP analysis
that single-product firms need not make?