Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What is the cost assigned to abnormal spoilage using
FIFO?
A. $1,350
B. $3,906
C. $5,256
D. $6,424
Under absorption costing, if sales remain constant from period 1 to period 2, the
company will report a larger income in period 2 when
A. period 2 production exceeds period 1 production.
B. period 1 production exceeds period 2 production.
C. variable production costs are larger in period 2 than period 1.
D. fixed production costs are larger in period 2 than period 1.
Whitney Corporation
Whitney Corporation, a reseller of women’s fashions, has budgeted its activity for
March. The budget information is presented below:
Refer to Whitney Corporation. The budgeted cash disbursements for March are:
A. $382,500
B. $442,500
C. $472,500
D. $477,500
The measure of production that considers historical and estimated future production
levels and cyclical fluctuations is referred to as:
A. theoretical capacity
B. practical capacity
C. normal capacity
D. expected capacity
The costs of non-quality work do not include
A. the cost of handling complaints.
B. the cost of scrap.
C. warranty costs.
D. original design costs.
The Institute of Management Accountants’ Code of Ethics
A. is a legally enforceable contract with all management accountants.
B. should be viewed as a goal for professional behavior.
C. is a legally enforceable contract with all CPAs.
D. provides ways to measure departures from ethical behavior.
Cost and management accounting
A. require an entirely separate group of accounts than financial accounting uses.
B. focus solely on determining how much it costs to manufacture a product or provide a
service.
C. provide product/service cost information as well as information for internal decision
making.
D. are required for business recordkeeping as are financial and tax accounting.
A variance represents the difference between a budgeted and an actual cost. Thus, the
variance measures
A. only controllable cost differences.
B. only uncontrollable cost differences.
C. both uncontrollable and controllable cost differences.
D. the effectiveness of management.
The fixed overhead application rate is a function of a predetermined activity level. If
standard hours allowed for good output equal the predetermined activity level for a
given period, the volume variance will be
A. zero.
B. favorable.
C. unfavorable.
D. either favorable or unfavorable, depending on the budgeted overhead.
Financial accounting and cost accounting are both highly concerned with
A. preparing budgets.
B. determining product cost.
C. providing managers with information necessary for control purposes.
D. determining performance standards.
Continental Publishing Company
The Magazine Division of Continental Publishing Company had the following financial
data for the year:
Refer to Continental Publishing Company. If the manager of the Magazine 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 $50,000?
A. $ 50,000
B. $ 333,333
C. $1,000,000
D. $ 500,000
Texoma Trucking Company is exploring different prediction models that can be used to
forecast indirect labor costs. One independent variable under consideration is machine
hours. Following are matching observations on indirect labor costs and machine hours
for the past six months:
In a high-low model, which months’ observations would be used to compute the model’s
parameters?
A. 2 and 5
B. 1 and 6
C. 2 and 6
D. 4 and 5
Provide the correct term for each of the following definitions:
a. a cost that fluctuates with large changes in level of activity
b. a range of activity over which costs behave as predicted
c. the capacity level at which a firm believes it will operate at during the coming
production cycle
d. the difference between actual variable overhead and budgeted variable overhead
based on inputs
e. the difference between total actual overhead and total applied overhead
f. the difference between total budgeted overhead based on inputs and applied overhead
g. the difference between actual variable overhead and budgeted variable overhead
based on output
h. the difference between actual fixed overhead and budgeted fixed overhead
The preparation of an organization’s budget
A. forces management to look ahead and try to see the future of the organization.
B. requires that the entire management team work together to make and carry out the
yearly plan.
C. makes performance review possible at all levels of management.
D. all of the above.
The trend in job-order costing is to
A. eliminate the data entry function for the accounting system.
B. automate the data collection and data entry functions.
C. use accounting software to change the focal point of the job-order system.
D. create an Intranet to share information between competitors.
Ellis Company
Ellis Company uses activity-based costing. The company produces two products: IPods
and MP3 players. The annual production and sales volume of IPods is 8,000 units and
of MP3 players is 6,000 units. There are three activity cost pools with the following
expected activities and estimated total costs:
Refer to Ellis Company. Using ABC, the cost per unit of MP3 players is approximately:
A. $ 2.40
B. $ 3.90
C. $12.00
D. $15.90