First Class, Inc., expects to sell 26,000 pool cues for $14 each. Direct materials costs
are $2, direct manufacturing labor is $4, and manufacturing overhead is $0.89 per pool
cue. The following inventory levels apply to 2019:
On the 2019 budgeted income statement, what amount will be reported for cost of goods
sold?
A) $189,475
B) $179,140
C) $168,805
D) $201,877
Traditional normal and standard costing systems usually use 4 trigger points to record
the flow of costs through the production system. Such costing is called ________.
A) backflush costing
B) delayed costing
C) variable tracking
D) sequential tracking
Which of the following statements is true in the case of budgeting for multinational
companies?
A) While budgeting for multinational companies, managers consider difference in tax
statutes as an uncontrollable factor.
B) While budgeting for multinational companies, managers do not account for foreign
exchange fluctuations as the operating profits are reported in different currencies.
C) While budgeting for multinational companies, managers must be aware that budgets
will not be used for evaluating performance.
D) While budgeting for multinational companies, managers are not concerned about the
domestic factors of the different countries in which they operate.
Plish Company manufactures only one type of washing machine and has two divisions,
the Compressor Division, and the Fabrication Division. The Compressor Division
manufactures compressors for the Fabrication Division, which completes the washing
machine and sells it to retailers. The Compressor Division “sells” compressors to the
Fabrication Division. The market price for the Fabrication Division to purchase a
compressor is $60.00. (Ignore changes in inventory.) The fixed costs for the
Compressor Division are assumed to be the same over the range of 13,000-18,000 units.
The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 18,000
units.
Compressor’s costs per compressor are:
Direct materials $17
Direct labor $13.00
Variable overhead $3.50
Division fixed costs $10.50
Fabrication‘s costs per completed air conditioner are:
Direct materials $164.00
Direct labor $66.00
Variable overhead $20.00
Division fixed costs $10.50
What is the market-based transfer price per compressor from the Compressor Division
to the Fabrication Division?
A) $16.50
B) $33.00
C) $40.50
D) $60.00
Which of the following describes appraisal costs?
A) they are incurred to prevent the production of products that do not conform to
specifications
B) they are incurred to detect which of the individual units of products do not conform
to specifications
C) they are incurred on defective products before they are shipped to customers
D) they are incurred on defective products after they have been shipped to customers
Which of the following is a guideline used by management accountants to assist in
strategic and operational decision making?
A) employing a cost-benefit approach
B) employing a supply chain approach
C) employing a six sigma approach
D) employing a regression approach
Columbus Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of invoice cost will be assigned to the Bush Department?
A) $7,200
B) $141,600
C) $31,200
D) $180,000
Which of the following best describes the internal rate-of-return (IRR) method?
A) it calculates the discount rate at which an investment’s present value of the total of
all expected cash inflows equals the present value of its expected cash outflows.
B) it calculates the discount rate at which an investment’s future value of all expected
cash inflows equals the present value of its expected cash outflows.
C) it calculates the discount rate at which an investment’s total of all expected cash
inflows equals the present value of its expected cash outflows.
D) it calculates the discount rate at which sum of an investment’s present value of all
expected cash inflows equals the present value of its expected cash outflows.
Biden Company sells two items, product A and product B. The company is considering
dropping product B. It is expected that sales of product A will increase by 40% as a
result. Dropping product B will allow the company to cancel its monthly equipment
rental costing $200 per month. The other existing equipment will be used for additional
production of product A. One employee earning $500 per month can be terminated if
product B production is dropped. Biden’s other fixed costs are allocated and will
continue regardless of the decision made. A condensed, budgeted monthly income
statement with both products follows:
Product A Product B Total
Sales $10,000 $ 8,000 $18,000
Direct materials 2,500 2,000 4,500
Direct labor 2,000 1,200 3,200
Equipment rental 300 2,600 2,900
Other allocated overhead 1,000 2,100 3,100
Operating income $4,200 $ 100 $ 4,300
Required:
Prepare an incremental analysis to determine the financial effect of dropping product B.
Without financial quality measures, ________.
A) customer satisfaction and employee satisfaction cannot be measured
B) the short-run effectiveness of nonfinancial quality measures is questionable
C) cost-benefit analysis is not possible
D) quality problems might not be identified until it is too late
Relevant costs for target pricing are ________.
A) variable manufacturing costs
B) variable manufacturing and variable nonmanufacturing costs
C) all fixed costs
D) all future costs, both variable and fixed
The fixed overhead cost variance can be further subdivided into the ________.
A) price variance and the efficiency variance
B) spending variance and flexible-budget variance
C) production-volume variance and the efficiency variance
D) flexible-budget variance and the production-volume variance
The static-budget variance will be favorable, when ________.
A) budgeted unit sales are more than actual unit sales
B) the actual contribution margin is less than the static-budget contribution margin
C) the actual sales mix shifts toward the less profitable units
D) the flexible-budget and the sales-volume variance are favorable
Which of the following statements is true?
A) Product costs and design costs are interchangeable terms.
B) Inventoriable costs are assigned to inventories under GAAP.
C) Manufacturing costs are a special case of period costs.
D) Intangible costs refer to a particular cost of a product.
What might explain why some managers advocate fully allocating all costs, including
corporate costs to distribution channels and to customers?
A) all costs are incurred to support sales of products to customers
B) division managers can influence and control corporate costs
C) distribution channel managers can control corporate costs
D) all costs need to be considered to conduct adequate variance analysis
In a management control system, which of the following is described as the extent to
which managers strive or endeavor in order to achieve a goal?
A) Efficiency
B) Effectiveness
C) Effort
D) Variance
For each cost pool listed select an appropriate allocation base from the list below. An
allocation base may be used only once. Assume a manufacturing company.
Allocation bases for which the information system can provide data:
1. Number of employees per department
2. Employee wages and salaries per department
3. Number of sales orders
4. Hours of operation of each production department
5. Machine hours by department
6. Operations costs of each department
7. Hours of computer use per month per department
8. Number of units sold
Cost pools:
________ a. Vice President of Finance’s office expenses
________ b. Computer operations used in conjunction with manufacturing
________ c. Personnel Department
________ d. Sales-order costs
________ e. Energy costs
________ would be an uncontrollable factor that a firm would need to consider when
evaluating the return on investment of an international division.
A) Manager’s experience
B) Manager’s compensation
C) Pricing decisions
D) Custom duties
A favorable efficiency variance for direct manufacturing labor indicates that ________.
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than planned for
actual output
D) more direct manufacturing labor-hours were used during production than planned
for actual output
The following information pertains to Monroe Company:
∙ Cash is collected from customers in the following manner:
Month of sale 30%
Month following the sale 70%
∙ 45% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
∙ Labor costs are 20% of sales. Other operating costs are $32,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
∙ The cash balance on March 1 is $8,900. A minimum cash balance of $6,000 is required at
the end of the month. Money can be borrowed in multiples of $1,000.
What is the ending cash balance for March?
A) $8,900
B) $5,200
C) $5,000
D) $6,000
Which of the following is a step to overcome problems related to data collection for
estimating cost function?
A) The analyst should remove the inflationary effects.
B) The analyst should consider fixed costs as variable.
C) The analyst should also use extreme values while calculating cost functions.
D) The analyst should not use accrual accounting.
Nichols Inc. manufactures remote controls. Currently the company uses a plant-wide
rate for allocating manufacturing overhead. The plant manager is considering
switching-over to ABC costing system and has asked the accounting department to
identify the primary production activities and their cost drivers which are as follows:
The current traditional cost method allocates overhead based on direct manufacturing labor
hours using a rate of $600 per labor hour.
What are the indirect manufacturing costs per remote control assuming an
activity-based-costing method is used and a batch of 100 remote controls are produced?
The batch requires 460 parts, 5 direct manufacturing labor hours, and 18 minutes of
inspection time.
A) $6.00 per remote control
B) $13.30 per remote control
C) $32.00 per remote control
D) $1,330.00 per remote control
Pederson Company reported the following:
What is the manufacturing cost for the ending finished goods inventory?
A) $238,000
B) $37,400
C) $93,500
D) $130,900
In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to
estimate the ________ allocated to a job.
A) direct materials
B) direct labor
C) manufacturing overhead costs
D) total costs
Which of the following capacity levels do proponents of activity-based costing
recommend to be used as the denominator level to calculate activity cost rates?
A) practical capacity
B) normal capacity utilization
C) theoretical capacity
D) master-budget capacity utilization
Team incentives encourage cooperation by ________.
A) identifying an efficient and a nonefficient employee
B) enhancing the incentives of individual employees leading to overall positive
performance
C) letting individuals help one another as they strive toward a common goal
D) rewarding all teams by the same margin
Which of the following statements about customer value is true?
A) Customer value is shown in a corporation’s balance sheet.
B) Creating value for customers is an important part of planning and implementing
strategy.
C) Customer value is the only focus that helps managers to formulate strategies.
D) Customer value is lost with increase in costs of the product.
For 2018, Winters Manufacturing uses machine-hours as the only overhead
cost-allocation base. The direct cost rate is $2.00 per unit. The selling price of the
product is $27.00. The estimated manufacturing overhead costs are $220,000 and
estimated 20,000 machine hours. The actual manufacturing overhead costs are
$225,000 and actual machine hours are 25,000. What is the profit margin earned if each
unit requires two machine-hours?
A) 45.00%
B) 25.93%
C) 50.00%
D) 90.00%
Which of the following is the correct mathematical expression to calculate annual
relevant ordering costs?
A) Demand in units for a specified period / (Relevant ordering cost per purchase order
× Size of each order)
B) Size of each order × Relevant ordering cost per purchase order / Demand in units
for a specified period
C) (Demand in units for a specified period / Size of each order) × Relevant ordering
cost per purchase order
D) (Demand in units for a specified period – Size of each order) × Relevant ordering
cost per purchase order
All of the following are typical results of value engineering except:
A) assembling and analyzing competitor’s product.
B) setting the target cost and then designing the product.
C) changes in material specifications to reduce costs
D) modifications in process methods