When a scarce resource, such as space, exists in an organization, the criterion that
should be used to determine production is
A. contribution margin per unit.
B. selling price per unit.
C. contribution margin per unit of scarce resource.
D. total variable costs of production.
The most accurate method for allocating service department costs is the
A. step method.
B. direct method.
C. algebraic method.
D. none of the above.
Peoria Company
Peoria Company has two departments (Processing and Packaging) and uses a job-order
costing system. Peoria applies overhead in Processing based on machine hours and on
direct labor cost in Packaging. The following information is available for August:
Refer to Peoria Company What is the overhead application rate for Packaging?
A. $ 0.44
B. $ 2.28
C. $16.00
D. $36.50
The JIT environment has caused a reassessment of product costing techniques. Which
of the following statements is true with respect to this reassessment?
A. Traditional cost allocations based on direct labor are being questioned and criticized.
B. The federal government, through the SEC, is responsible for the reassessment.
C. The reassessment is caused by the replacement of machine hours with labor hours.
D. None of the above is true.
If the discount rate that is used to evaluate a project is equal to the project’s internal
rate of return, the project’s ____ is zero.
A. profitability index
B. internal rate of return
C. present value of the investment
D. net present value
A reasonable measure of efficiency relies on
A. qualitative measures of inputs and outputs.
B. a match of inputs in one period with outputs in subsequent periods.
C. a causal relationship between inputs and outputs.
D. a ratio of planned output to actual output.
Multiplying the depreciation deduction by the tax rate yields a measure of the
depreciation tax
A. deferral.
B. benefit.
C. payable.
D. loss.
The distinction between avoidable and unavoidable costs is similar to the distinction
between
A. variable costs and fixed costs.
B. variable costs and mixed costs.
C. step-variable costs and fixed costs.
D. discretionary costs and committed costs.
The weighted average cost of capital that is used to evaluate a specific project should
be based on the
A. mix of capital components that was used to finance a project from last year.
B. overall capital structure of the corporation.
C. cost of capital for other corporations with similar investments.
D. mix of capital components for all capital acquired in the most recent fiscal year.
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 ending inventory using FIFO?
A. $75,920
B. $58,994
C. $56,420
D. $53,144
The Awesome Automobile Corporation is contemplating the acquisition of an
automatic car wash. The following information is relevant:
Ignore income taxes.
Required:
Costs that are incurred when customers complain are:
A. prevention costs
B. detection costs
C. appraisal costs
D. failure costs
Which of the following strategies is used to deal with uncertainty related to estimating
future costs?
A. Statistical analysis
B. Cost restructuring
C. Hedging
D. Insurance
When used for performance evaluation, periodic internal reports based on a
responsibility accounting system should not
A. be related to the organization chart.
B. include allocated fixed overhead.
C. include variances between actual and budgeted controllable costs.
D. distinguish between controllable and noncontrollable costs.
Lead time minus production time is equal to
A. idle time.
B. storage time.
C. non-value-added time.
D. value-added time.
McDonald Industries is considering the purchase of a $180,000 machine that is
expected to result in a decrease of $20,000 per year in cash expenses. This machine,
which has no residual value, has an estimated useful life of 15 years and will be
depreciated on a straight-line basis. For this machine, the accounting rate of return
would be
A. 4.4 percent
B. 8.9 percent
C. 11.1 percent
D. 22.2 percent