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1) Customer life-cycle costs focus on the total costs incurred by a customer to acquire,
use, maintain, and dispose of a product or service.
2) Inflation and fluctuations in foreign-currency exchange rates affect performance
measurement.
3) The actual indirect-cost rate is calculated by dividing actual total indirect costs by the
budgeted total quantity of the cost-allocation base.
4) The labels profit center and cost center are dependent on the degree of centralization
or decentralization in a company.
5) The square root in the EOQ model diminishes the effect of estimation errors because
it results in the effects of the incorrect numbers becoming smaller.
6) Cost behavior refers to ________.
A) how costs react to a change in the level of activity
B) whether a cost is incurred in a manufacturing, merchandising, or service company
C) classifying costs as either perpetual or period costs
D) whether a particular expense is expensed in the same or the following period
7) Trintal Corporation manufactures two models of motorized go-carts, a standard and a
deluxe model. The following activity and cost information has been compiled:
Number of setups and number of components are identified as activity-cost drivers for
overhead. Assuming an activity-based costing system is used, what is the total amount
of overhead cost assigned to the deluxe model?
A) $25,650
B) $24,350
C) $26,550
D) $25,350
8) Place the four business functions in the order they appear along the value chain:
Customer service
Design
Marketing
Production
A) Customer Service, Design, Production, Marketing
B) Customer Service, Marketing, Production, Design
C) Design, Production, Marketing, Customer Service
D) Design, Customer Service, Production, Marketing
9) Bekits Corporation manufactured 37,500 grooming kits for horses during March. The
following fixed overhead data relates to March:
What is the fixed overhead spending variance?
A) $3,062.5 unfavorable
B) $8,260 favorable
C) $8,260 unfavorable
D) $3,062.5 favorable
10) The best estimate of the total monthly fixed manufacturing cost is:
A) $65,400
B) $88,200
C) $93,100
D) $54,000
11) Silas has been recently promoted to head his department. He is responsible for
maximizing the profits of the department and to ensure that the earnings are ploughed
back into the business. Silas is most likely to head a (n) ________.
A) revenue center
B) investment center
C) cost center
D) profit center
12) Shiffon Electronics manufactures music player. Its costing system uses two cost
categories, direct materials and conversion costs. Each product must pass through the
Assembly Department, the Programming department, and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Shiffon Electronics uses weighted-average
costing.
The following information is available for the month of March 2015 for the Assembly
department.
The cost details for the month of March are as follows:
What is the total amount debited to the Work-in-Process account during the month of
March?
A) $2,525,000
B) $2,180,000
C) $1,820,000
D) $700,000
13) Stefan Ceramics is in the business of selling ceramic vases. It has two departments
molding and finishing. Molding department purchases tungsten carbide and produces
ceramic vases out of it. Ceramic Vases are then transferred to finishing department,
which designs it as per the requirement of the customers.
During the month of July, molding department purchased 500 kgs of tungsten carbide at
$60 per kg. It started manufacture of 4,000 vases and completed and transferred 3,200
vases during the month. It has 800 vases in the process at the end of the month. It
incurred direct labor charges of $1,000 and other manufacturing costs of $500, which
included electricity costs of $200. Stefan had no inventory of tungsten carbide at the
end of the month. It also had no beginning inventory of vases. The ending inventory
was 50% complete in respect of conversion costs.
What is the cost of tungsten carbide that will be assigned to vases finished and
transferred to the finishing department for the month of July?
A) $30,000
B) $28,000
C) $26,000
D) $24,000
14) For inventory carrying costs, which of the following statements is true of the
relevant opportunity cost of capital of inventory?
A) It is the return received by investing capital in inventory rather than elsewhere.
B) It is calculated as the per-unit costs of carrying inventory divided by the required
rate of return .
C) It is the return foregone by investing capital elsewhere rather than in inventory.
D) It is calculated as the required rate of return multiplied by the per-unit costs of
acquiring inventory.
15) Customer-satisfaction measures are an example of the ________.
A) goal-congruence approach
B) balanced scorecard approach
C) financial report scorecard approach
D) investment success approach
16) What are the four methods of allocating joint costs to individual products? Which of
these methods is preferred, and what are two advantages of this method?
17) What are the three types of manufacturing cost?
18) New York Liberty Corporation makes miniature statues of the Empire State
Building from cast iron. Sales total 50,000 units a year. The statues are finished either
rough or polished, with an average demand of 60% rough and 40% polished. Iron
ingots, the direct material, costs $6 per pound. Processing costs are $300 to convert 30
pounds into 60 statues. Rough statues are sold for $15 each, and polished statues can be
sold for $18 or engraved for an additional cost of $5. Polished statues can then be sold
for $30.
Required:
Determine whether New York Liberty Company should sell the engraved statutes.
Why?
19) Give at least three good reasons why an unfavorable efficiency variance for direct
manufacturing labor might be reported.
20) Allscott Company is developing its budgets for 2016 and, for the first time, will use
the kaizen approach. The initial 2016 income statement, based on static data from 2015,
is as follows:
Selling prices for 2016 are expected to increase by 8%, and sales volume in units will
decrease by 10%. The cost of goods sold as estimated by the kaizen approach will
decline by 10% per unit. Other than depreciation, all other operating costs are expected
to decline by 5%.
Required:
Prepare a kaizen-based budgeted income statement for 2016.
