Of the following, which is the best reason for using activity-based costing?
a. to keep better track of overhead costs
b. to more accurately assign overhead costs to cost pools so that these costs are better
controlled
c. to better assign overhead costs to products
d. to assign indirect service overhead costs to direct overhead cost pools
Which of the following are categories judged for the Baldrige Award?
a. no yes no yes
yes
b. yes yes yes yes
yes
c. yes yes no yes
no
d. no no no no
no
Crosson Corporation
Crosson Corporation operates its factory 300 days per year. Its annual consumption of
Material Y is 1,200,000 gallons. It carries a 10,000 gallon safety stock of Material Y
and its lead time is 12 business days.
Refer to Crosson Corporation. What is the order point for Material Y?
a. 10,000 gallons
b. 38,000 gallons
c. 48,000 gallons
d. 58,000 gallons
In an internal transfer, the selling division records the event by crediting
a. Accounts Receivable and Cost of Goods Sold.
b. Cost of Goods Sold and Finished Goods.
c. Finished Goods and Accounts Receivable.
d. Finished Goods and Intracompany Sales.
The cost of abnormal continuous losses is
a. considered a product cost.
b. absorbed by all units in ending inventory and transferred out on an equivalent unit
basis.
c. written off as a loss on an equivalent unit basis.
d. absorbed by all units past the inspection point.
EMS stands for
a. environmental manufacturing system.
b. employee management system.
c. emergency medical services.
d. environmental management system.
Industrial Solutions Company
Industrial Solutions Company produces three products from the same process that has
joint processing costs of $4,100. Products R, S, and T are produced in the following
quantities: 250 gallons, 400 gallons, and 750 gallons. Industrial Solutions Company
also incurred advertising costs of $60,000. The ad was used to run sales for all three
products. The three products occupy floor space in the following ratio: 5:4:9. (Round all
answers to the nearest dollar.)
Refer to Industrial Solutions Company. Using gallons as the physical measurement,
what amount of joint processing cost is allocated to Product S?
a. $2,196
b. $1,171
c. $1,367
d. $ 732
Budgeted production for a period is equal to
a. the beginning inventory + sales – the ending inventory.
b. the ending inventory + sales – the beginning inventory.
c. the ending inventory + the beginning inventory – sales.
d. sales – the beginning inventory + purchases.
Return on investment (ROI) is a term most often used to express income earned on
assets invested in a business unit. A company’s return on investment would increase if
sales
a. increased by the same dollar amount as expenses and total assets increased.
b. remained the same and expenses were reduced by the same dollar amount that total
assets increased.
c. decreased by the same dollar amount that expenses increased.
d. and expenses increased by the same percentage that total assets increased.
If a project’s profitability index is less than 1, the project’s
a. discount rate is above its cost of capital.
b. internal rate of return is less than zero.
c. payback period is infinite.
d. net present value is negative.
Robertson Company.
Robertson Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #8, #12, and #15.
Direct material was requisitioned as follows for each job respectively: 25 percent, 30
percent, and 30 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,800; 3,300; and 4,000; respectively. Indirect labor is $45,000.
Other actual overhead costs totaled $50,000.
Refer to Robertson Company. Assume the balance in Work in Process Inventory was
$21,500 on April 1 and $29,520 on April 30. The balance on April 30 represents one job
that contains direct material of $12,375. How many direct labor hours have been
worked on this job (rounded to the nearest hour)?
a. 802
b. 1,381
c. 1,805
d. 3,107
Residual income is used as a performance measure in
a. profit centers.
b. cost centers.
c. investment centers.
d. revenue centers.
Which of the following statements is false concerning electronic data interchange?
a. Electronic data interchange (EDI) is essential in a pull system.
b. One of the benefits realized by EDI organizations is a faster processing of
transactions.
c. Electronic data interchange is essential in a push system.
d. Electronic data interchange refers to computer-to-computer exchange of information.
An organization’s return on assets (ROA) is an example of a lead indicator.
Which of the following statements is false concerning a management control system?
a. A management control system may be referred to as a black box.
b. A management control system should serve as a guide to organizations.
c. A management control system should help implement strategies.
d. A management control system is separate from a cost management system.
As an organization moves to decentralize its operations, an effective reporting system
will have ____ when the organization was centralized.
a. about the same importance as
b. less importance than
c. more importance than
d. a level of importance that depends on organizational size as compared to
Riggs Company uses a FIFO process costing system. The company had 5,000 units that
were 60 percent complete as to conversion costs at the beginning of the month. The
company started 22,000 units this period and had 7,000 units in ending Work in Process
Inventory that were 35 percent complete as to conversion costs. What are equivalent
units for material, if material is added at the beginning of the process?
a. 18,000
b. 22,000
c. 25,000
d. 27,000
Outsourcing and marketing worldwide enable firms to
a. develop new markets.
b. reduce input costs.
c. manage effects of peaks and valleys in local economies.
d. all of the above.
Delta, Epilson, and Sigma Companies
Three new companies (Delta, Epilson, and Sigma) began operations on January 1 of the
current year. Consider the following operating costs that were incurred by these
companies during the complete calendar year:
Refer to Delta, Epilson, and Sigma Companies. Based on sales of 7,000 units, which
company will report the greater income before income taxes if absorption costing is
used?
a. Delta Company
b. Epsilon Company
c. Sigma Company
d. All of the companies will report the same income.
In a make or buy decision, the opportunity cost of capacity could
a. be considered to decrease the price of units purchased from suppliers.
b. be considered to decrease the cost of units manufactured by the company.
c. be considered to increase the price of units purchased from suppliers.
d. not be considered since opportunity costs are not part of the accounting records.
Which of the following organizational characteristics critically affect the design of a
cost management system?
a. yes yes yes
yes
b. yes no yes
no
c. no yes no
yes
d. no yes yes
no
A process costing system does which of the following?
a. no no
b. no yes
c. yes yes
d. yes no
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. Using the direct method, what amount of Personnel costs
is allocated to B (round to the nearest dollar)?
a. $50,000
b. $43,750
c. $26,923
d. $58,333
The standard cost card contains quantities and costs for
a. direct material only.
b. direct labor only.
c. direct material and direct labor only.
d. direct material, direct labor, and overhead.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume that 8,000 units were transferred to
Decorating at a total cost of $16,000. What is the material cost per equivalent unit in
Decorating?
a. $8.50
b. $8.65
c. $8.80
d. $9.04
TriCities Corporation
TriCities Corporation adds material at the start to its production process and has the
following information available for August:
Refer to TriCities Corporation. Calculate equivalent units of production for material
using weighted average.
a. 32,000
b. 34,325
c. 37,125
d. 39,000
Reducing the time-to-market for a new product
a. is only possible if a company has formed strategic alliances with its suppliers.
b. generally increases long-run product costs because of the need to develop new
production processes.
c. results in the ability of a firm to pursue a cost leadership competitive strategy.
d. may result in design flaws, a need for engineering change orders, and customer “bad
will.”
Richardson Company
The following information is available for Richardson Company for its first year of
operations:
Refer to Richardson Company. What was the total amount of Selling,General and
Administrative expense incurred by Richardson Company?
a. $30,000
b. $62,500
c. $6,000
d. can’t be determined from the information given
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What is the cost of units completed using the weighted
average method?
a. $237,510
b. $266,742
c. $278,400
d. $282,576
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Boston Bakers. The $5,000 of annual operating costs that are common to both
the old and the new machine are an example of a(n)
a. sunk cost.
b. irrelevant cost.
c. future avoidable cost.
d. opportunity cost.
If a discretionary cost can be treated like an engineered cost, cost control may be
achieved through the use of
a. program budgeting.
b. zero-base budgeting.
c. capital budgeting.
d. flexible budgeting.
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 sales value at split-off, what amount of joint
processing cost is allocated to Product E?
a. $4,433
b. $1,182
c. $1,108
d. $2,276
Not-for-profit entities are required to allocate joint costs among fund-raising, program,
and administrative functions.
In an outsourcing decision, variable costs of production are relevant.
What important information is conveyed by the margin of safety calculation in CVP
analysis?
Asset turnover measures the effective use of assets relative to revenue production.
Decentralization reduces the need for effective communication among an organization’s
departments.
Managerial accounting is most concerned with addressing the needs of the firm as a
whole.
Why is it important for a company to be (geographically) close to its suppliers to
implement a JIT inventory control system?
Taylor Corporation
Taylor Corporation manufactures and sells baseball bats. For a recent period, its
production and sales objectives were each set at 20,000 units. Also, for this period the
firm had estimated costs as follows:
Refer to Taylor Corporation. For this question only, assume Taylor Corporation actually
produced and sold 19,000 baseball bats. At this level of operation, Taylor Corporation’s
total costs were $170,000. Evaluate Taylor Corporation’s success in terms of
effectiveness and efficiency.
An artificial, computer-generated environment in which the user has the impression of
being a part of the environment is referred as ______________________________.
The difference between actual and budgeted fixed factory overhead is referred to as a
__________________________________________________.
The dollar amount of overhead assigned to work-in-process inventory using a
predetermined rate is known as ____________________ overhead.
A standard cost card is prepared before developing manufacturing standards for direct
materials, direct labor, and factory overhead.
In a manufacturing organization, the cash budget is prepared immediately after the sales
budget.
A decision in which projects are ranked according to their impact on achieving
company objectives is a screening decision.
If underapplied or overapplied factory overhead is immaterial, it is charged to
______________________________.
An organization’s value chain can aid in the reduction of non-value added activities.
Briefly discuss the restrictions and requirements on service organizations and
not-for-profits that relate to joint cost allocation.
Managerial accounting is highly regulated by rules and regulations.
When indirect labor is recorded for a job in process, the work in process account is
debited.