Springer Products manufactures three different product lines, Model X, Model Y, and
Model Z. Considerable market demand exists for all models. The following per unit
data apply:
Model X Model Y Model Z
Selling price $55 $69 $78
Direct materials 10 10 10
Direct labor ($15 per hour) 15 15 30
Variable support costs ($7 per machine-hour) 7 14 14
Fixed support costs 11 11 11
If there is a machine breakdown, which model is the most profitable to produce?
A) Model X
B) Model Y
C) Model Z
D) Both Model X and Model Y have same and highest profitability
Millworks Company manufactured 100,000 units in 2018 and reported the following
costs:
Required:
a. What is the amount of direct materials used during 2018?
b. What manufacturing costs were added to WIP during 2018?
c. What is cost of goods manufactured for 2018?
d. What is cost of goods sold for 2018?
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $360,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $110,000 are allocated based on the
number of employees. The costs of operating departments A and B are $188,000 and
$282,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Production
Support Departments Departments
Using the direct method, what amount of Maintenance Department costs will be allocated
to Department B? (Do not round any intermediary calculations.)
A) $100,398
B) $128,168
C) $87,742
D) $167,330
Carriage Incorporated manufactures horse carriages. The company has two divisions,
Wheels and Assembly. Because of different accounting methods and inflation rates, the
company is considering multiple evaluation measures. The following information is
provided for 2018:
ASSETS INCOME
The company is currently using a 12% required rate of return.
What are Wheels’s and Assembly’s return on investment based on book values,
respectively?
A) 27%; 12%
B) 27%; 21%
C) 12%; 27%
D) 21%; 27%
To guide cost allocation decisions, the ability to bear criterion ________.
A) is the primary criterion used in activity-based costing
B) allocates cost among the beneficiaries in proportion to the benefits each receives.
C) results in subsidizing products that are not profitable
D) is used more frequently than any other criteria
Samantha’s Office Supplies manufactures desk organizers in its Processing Department.
Direct materials are included at the inception of the production cycle and must be
bundled in single kits for each unit. Conversion costs are incurred evenly throughout
the production cycle. Inspection takes place as units are placed into production. After
inspection, some units are spoiled due to undetectable material defects. Spoiled units
generally constitute 4% of the good units. Data provided for February 2017 are as
follows:
What is the total costs of all the units that were initially in the beginning work-in-process
inventory and were subsequently shipped? Take into account the costs related to the
completion of the conversion of the units during the month. Use the FIFO method of
process costing. (Round any cost per unit calculations to the nearest cent.)
A) $35,363
B) $360,400
C) $395,763
D) $195,016
The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Annual demand is 30,000 packages per year. The purchase price per package is $53.
Which of the following statements is true of Allianz’s EOQ system costs?
A) At EOQ, the annual relevant ordering costs is exactly the half of annual relevant
carrying costs.
B) At EOQ, the annual relevant carrying costs is higher than the annual relevant ordering
costs.
C) At EOQ, the annual relevant carrying costs is exactly the half of the annual relevant
total costs.
D) At EOQ, the annual relevant carrying costs is equal to the annual relevant total costs.
Under the incremental method of allocating common costs ________.
A) the parties are interested in being viewed as primary users
B) each party bears a proportionate share of the total costs in relation to their individual
stand-alone costs
C) the first-incremental user bears a higher proportion of the cost in comparison with
the primary user
D) the primary user bears the maximum of the total cost
A company is looking to purchase and replace a fixed asset for $245,000. It will sell the
asset that will be replaced for $46,000 but will incur a $20,000 gain upon that sale. It
must also commit $30,000 of working-capital to the investment. The firm’s tax rate is
35%. What is the amount of the relevant initial investment?
A) $245,000
B) $254,000
C) $199,000
D) $206,000
________ includes banking and short- and long-term financing, investments, and cash
management.
A) Risk management
B) Strategic planning
C) Controllership
D) Treasury management
A local accounting firm employs 28 full-time professionals. The budgeted annual
compensation per employee is $41,000. The average chargeable time is 430 hours per
client annually. All professional labor costs are included in a single direct-cost category
and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to
professional labor-hours. Budgeted indirect costs for the year are $787,000, and the
firm expects to have 95 clients during the coming year.
What is the budgeted indirect-cost rate per hour?
A) $6.86 per hour
B) $65.37 per hour
C) $28.10 per hour
D) $19.27 per hour
Which of the following deals with management accounting?
A) identifying the costs of acquiring the resources of the company
B) developing budgets
C) preparing the income statement
D) preparing the statement of cash flows
Antique Brass Company has budgeted sales volume of 122,000 units and budgeted
production of 114,000 units, while 24,000 units are in beginning finished goods
inventory. How many units are targeted for ending finished goods inventory?
A) 24,000 units
B) 32,000 units
C) 8,000 units
D) 16,000 units
Lincoln Corporation used the following data to evaluate their current operating system.
The company sells items for $19 each and used a budgeted selling price of $19 per unit.
What is the static-budget variance of revenues?
A) $171,000 favorable
B) $171,000 unfavorable
C) $6,000 favorable
D) $9,000 unfavorable
The sales-quantity variance results from a difference between ________.
A) the actual sales mix and the budgeted sales mix
B) the actual quantity of units sold and the budgeted quantity of unit sales in the static
budget
C) actual contribution margin and the budgeted contribution margin
D) actual market size in units and the budgeted market size in units
The White Company has assembled the following data pertaining to certain costs that
cannot be easily identified as either fixed or variable. White Company has heard about a
method of measuring cost functions called the high-low method and has decided to use
it in this situation.
Month Cost Hours
January $40,000 3,730
February $37,600 3,200
March $42,800 3,480
April $50,200 5,000
May $68,400 6,000
June $61,200 4,250
What is the estimated total cost at an operating level of 3,400 hours?
A) $70,750
B) $39,800
C) $37,400
D) $37,725
Howard Manufacturing Company had the following account balances for the quarter
ending March 31, unless otherwise noted:
Required:
a. Prepare a cost of goods manufactured schedule for the quarter.
b. Prepare a cost of goods sold schedule for the quarter.
Which of the following statements is true of the methods for allocating joint costs?
A) The sales value at split-off method lacks a common basis for allocating joint costs to
products.
B) The complexity of the sales value at split-off method increases when managers make
frequent changes to the sequence of post-split-off processing decisions.
C) The NRV method assumes that none of the markup is attributable to the separable
costs.
D) The NRV method treats the joint products as though they comprise a single product.
More insight into the static-budget variance can be gained by subdividing it into
________.
A) the sales-mix variance and the sales-quantity variance
B) the market-share variance and the market-size variance
C) the flexible-budget variance and the sales-volume variance
D) the flexible-budget variance and the sales-mix variance
Which of the following statements best relates to the balanced scorecard’s learning and
growth perspective?
A) How will we empower our employees?
B) How do we lower costs?
C) What processes will increase value to customers?
D) How can we obtain greater profits?
________ include a budgeted statement of cash flows and a budgeted balance sheet.
A) Revenue budgets
B) Financial budgets
C) Operating budgets
D) Production budgets
In using the net present value method, only projects with a zero or positive net present
value are acceptable because ________.
A) the return from these projects equals or exceeds the cost of capital
B) a positive net present value on a particular project guarantees company profitability
C) the company will be able to pay the necessary payments on any loans secured to
finance the project
D) it results in high payback period
Monticello Corp manufactures expensive tables. Its varnishing department is fully
automated and requires substantial inspection to keep the machines operating properly.
An improperly varnished table is very expensive to correct. Inspection hours for the
5800 tables varnished in September totaled 2000 hours by 12 employees. Eight quarts
of varnish were used, on average, for each table. The standard amount of varnish per
table is nine quarts. The cost of inspection for September was equal to the budgeted
amount of $40,300.
What is the inspection cost per unit? (Round the final answer to the nearest cent.)
A) $26.19
B) $6.95
C) $7.95
D) $18.99
Beta Corp reported the following:
Revenues $2,500
Variable manufacturing costs $ 300
Variable nonmanufacturing costs $ 480
Fixed manufacturing costs $ 350
Fixed nonmanufacturing costs $ 270
Required:
a. Compute contribution margin.
b. Compute gross margin.
c. Compute operating income.
Costs of abnormal spoilage are usually accounted for as ________.
A) a deduction from the cost of goods sold
B) a component of the costs of good units manufactured
C) a separate line item in an income statement
D) an asset on a balance sheet
The Ambitz Corporation has an annual cash inflow from operations from its investment
in a capital asset of $44,000 (excluding the deprecation) each year for seven years. The
corporation’s income tax rate is 35%. Calculate the total after-tax cash inflow from
operations for seven years.
A) $308,000
B) $308,002
C) $200,200
D) $44,000
If management experiences an unfavorable direct materials efficiency variance, which
of the following would not be the possible corrective action?
A) Improve the design of the product
B) Provide additional training for the direct laborers
C) Purchase higher quality materials
D) Negotiate lower prices for material acquisition
Which option provides the greatest degree of operating leverage if 600 people attend?
A) Option one
B) Option two
C) Both options provide equal degrees of operating leverage.
D) Operating leverage is indeterminable.
It is important that the product costs reflect as much of the diversity and complexity of
the manufacturing process so that ________.
A) total costs reflect market price
B) value-added costs can be eliminated
C) there is high likelihood of cross-subsidizing of product costs
D) product-pricing errors are minimal
The Fortise Corporation manufactures two types of vacuum cleaners, the Victor for
commercial building use and the House-Mate for residences. Budgeted and actual
operating data for the year 2017 were as follows:
What is the total sales-quantity variance in terms of the contribution margin? (Round any
intermediary calculations two decimal places.)
A) $1,606,800 unfavorable
B) $535,600 favorable
C) $1,071,200 unfavorable
D) $1,606,800 favorable
