1) Some companies present financial and nonfinancial performance measures for
various organization units in a single report called the balanced scorecard.
2) If indirect-cost rates were based on actual short-term usage, periods of lower demand
would result in lower costs per unit.
3) If the incremental users are newly formed companies or subunits, the incremental
method may decrease their chances for short-run survival by assigning them a high
allocation of the common costs.
4) In variable costing, all nonmanufacturing costs are subtracted from contribution
margin.
5) Staff management, such as management accountants and information technology and
human-resources management, provides advice, support, and assistance to line
management.
6) Customer-sustaining costs is the costs of activities to support individual customers,
regardless of the number of units or batches of product delivered to the customer.
7) Of the four perspectives of the balanced scorecard the customer perspective refers to
employee satisfaction, absenteeism, information systems capabilities, and number of
processes with real-time feedback.
8) To achieve success, it is important to set nonfinancial objectives as well as financial
objectives.
9) Indirect manufacturing costs include the compensation of all manufacturing labor
that can be traced to the cost object in an economically feasible way.
10) The sales-mix variance is the difference between budgeted contribution margin for
the actual sales mix and the budgeted contribution margin for the budgeted sales mix.
11) In the net present value (NPV) method, pre-tax cash flows should be used instead of
after-tax cash flows when taxes are a consideration.
12) Integrity is to abstain from engaging in or supporting any activity that might
discredit the profession.
13) What is the total factor productivity for Nicolt Company?
A) 0.109 units of output per dollar
B) 0.250 units of output per dollar
C) 0.835 units of output per dollar
D) 1.667 units of output per dollar
14) The total of the product costs listed above for September is:
A) $59,000
B) $366,000
C) $669,000
D) $303,000
15) The costs of the Accounting Department at Central Hospital would be considered
by the Surgery Department to be:
A) direct costs.
B) indirect costs.
C) incremental costs.
D) opportunity costs.
16) Service-sector companies report ________.
A) work-in-process inventory, and finished goods inventory accounts
B) only finished goods inventory
C) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
D) no inventory accounts
17) Hitz Video Rental is evaluating rental prices. Historical data show that Friday and
Saturday have twice the rentals of other days of the week. The following information
pertains to the store’s normal operations per week:
The store manager wants to charge more for rentals on Friday and Saturday. What is the
minimum price that should be charged during peak rental days?
A) $0.60
B) $0.83
C) $0.90
D) $1.07
18) What is the economic order quantity?
A) 180 cartons
B) 273 cartons
C) 270 cartons
D) 360 cartons
19) The tool crib at a large manufacturing company is responsible for providing tools to
the factory workers on demand. The tool crib has a variable demand. Historically, its
demand has ranged from 300 to 500 small tools per day with an average of 400. Diane,
the tool crib attendant, works eight hours a day, five days a week. Each order is for one
small tool and each small tool takes Diane 1 minute to retrieve from the bins.
What is the cycle time for an order?
A) 1 minutes per tool
B) 1.5 minutes per tool
C) 2.5 minutes per tool
D) 3.5 minutes per tool
20) The Microchip Division of Silicon Computers produces computer chips that are
sold to the Personal Computer Division and to outsiders. Operating data for the
Microchip Division for 20X5 are as follows:
The Personal Computer Division has just received an offer from an outside supplier to
furnish chips at $8.90 each. The manager of Microchip Division is not willing to meet
the $8.90 price. She argues that it costs her $9.00 to produce and sell each chip. Sales to
outside customers are at a maximum of 200,000 chips.
Required:
a.Verify the Microchip Division’s $9.00 unit cost figure.
b.Should the Microchip Division meet the outside price of $8.90? Explain.
c.Could the $8.60 price be met and still show a profit for the Microchip Division sales
to the Personal Computer Division? Show computations.
21) Indirect labor is a(n):
A) Prime cost.
B) Conversion cost.
C) Period cost.
D) Opportunity cost.
22) Which one of the following items is a direct cost?
A) Customer-service costs of a multiproduct firm; Product A is the cost object.
B) Printing costs incurred for payroll check processing; payroll check processing is the
cost object.
C) The salary of a maintenance supervisor in a multiproduct manufacturing plant;
Product B is the cost object.
D) Utility costs of the administrative offices; the accounting department is the cost
object.
23) Pilgrim Corporation processes frozen turkeys. The company has not been pleased
with its profit margin per product because it appears that the high value items have too
few costs assigned to them, while the low value items have too many costs assigned to
them. The processing results in several products, the primary one of which is frozen
small turkeys. Other products include frozen parts such as wings and legs, byproducts
such as skin and bones, and unused scrap items.
Required:
What may be the cost assignment problem if a key consideration is the value of the
products being sold?
24) The executive vice president of Robotics, Inc., is concerned because the cost of
materials has not been in line with the budget for several periods, even after
implementing an EOQ model. The company has the normal direct material variance
computations of price and efficiency at the end of each month. The price variance of the
direct materials used is usually near expectations. The vice president does not
understand how the budget differences are always larger than the material price
variances.
Required:
What explanation can you give for the evaluation problems presented?
25) BIG Manufacturing Products has been using FIFO process costing for tracking the
costs of its manufacturing activities. However, in recent months, the system has become
somewhat bogged down with details. It seems that, when the company purchased
Brown Electronics last year, its product lines increased six-fold. This has caused both
the accountants and the suppliers of the information, the line managers, great difficulty
in keeping the costs of each product line separate. Likewise, the estimation of the
completion of ending work-in-process inventories and the associated costs has become
very cumbersome. The chief financial officer of the company is looking for ways to
improve the reporting system of product costs.
Required:
What can you recommend to improve the situation?
26) Duffy Corporation has prepared the following sales budget:
Collections are 40% in the month of sale, 45% in the month following the sale, and
10% two months following the sale. The remaining 5% is expected to be uncollectible.
Required:
Prepare a schedule of cash collections for July through September.
27) Gibson Manufacturing is considering buying an automated machine that costs
$600,000. It requires working capital of $60,000. Annual cash savings are anticipated to
be $280,200 for five years. The company uses straight-line depreciation. The salvage
value at the end of five years is expected to be $24,000. The working capital will be
recovered at the end of the machine’s life.
Required:
Compute the accrual accounting rate of return based on the initial investment.
28) For each of the following measures, identify which perspective of the balanced
scorecard it represents: financial, customer, internal-business-process, or learning-and
growth.
1.service response time
2.market share
3.gross margin percentage
4.defect rates
5.customer satisfaction
6.information system availability
7.new-product development time
8.revenue growth
9.employee turnover rates
10.setup time
29) In determining product cost, what concerns does a manufacturing firm have when
contracting with a government agency?
30) The Octova Corporation manufactures two types of vacuum cleaners: the ZENITH
for commercial building use and the House-Helper for residences. Budgeted and actual
operating data for the year 20X5 are as follows:
Required:
Compute the sales-mix variance and the sales-quantity variance by type of vacuum
cleaner, and in total. (in terms of the contribution margin)
31) Why is decentralization costly?
32) Retail Outlet is looking for a new location near a shopping mall. It is considering
purchasing a building rather than leasing, as it has done in the past. Three retail
buildings near a new mall are available but each has its own advantages and
disadvantages. The owner of the company has completed an analysis of each location
that includes considerations for the time value of money. The information is as follows:
The owner does not understand how the location with the highest percentage return has
the lowest net present value.
Required:
Explain to the owner what is (are) the probable cause(s) of the comparable differences.