Brewer Corporation would like to institute an activity-based costing system to allocate
overhead to its products. The company’s Shipping Department incurs costs of $750,000
per year and has nine employees. The Shipping Department has determined that three
major activities that occur during the year.
During the year, 60,000 phone calls were made in the department; 25,000 sales invoices
were reviewed; and 15,000 shipments were initiated. Product 101 required 300 phone
calls, 225 sales invoice reviews, and 175 shipping orders. Product 102 required 400
phone calls, 500 sales invoice reviews, and 350 shipping orders.
Jackson Company.
Jackson Company manufactures wood file cabinets. The following information is
available for June of the current year.
The direct labor rate is $9.60 per hour and overhead for the month was $9,600.
Refer to Jackson Company. If there were 1,500 direct labor hours and $21,000 of raw
material purchased, how much is Cost of Goods Sold?
a. $64,500.
b. $59,800.
c. $38,800.
d. $53,800.
In a job-order costing system, the net cost of normal spoilage is equal to
a. estimated disposal value plus the cost of spoiled work.
b. the cost of spoiled work minus estimated spoilage cost.
c. the units of spoiled work times the predetermined overhead rate.
d. the cost of spoiled work minus the estimated disposal value.
Traditionally, managers have focused cost reduction efforts on
a. activities.
b. processes.
c. departments.
d. costs.
Which of the following is/are synonyms for joint products?
a. no no
b. yes yes
c. yes no
d. no yes
In a global economy,
a. the trade of goods and services is focused on trade between or among countries on
the same continent.
b. the international movement of labor is prohibited except for multilingual persons.
c. the international flows of capital and information are common.
d. all of the above happen in a global economy.
A process costing system is used by a company that
a. produces heterogeneous products.
b. produces items by special request of customers.
c. produces homogeneous products.
d. accumulates costs by job.
Budgeted sales for the first six months for Stone Corporation are listed below:
Stone Corporation has a policy of maintaining an inventory of finished goods equal to
40 percent of the next month’s budgeted sales. If Stone Corporation plans to produce
6,000 units in June, what are budgeted sales for July?
a. 3,600 units
b. 1,000 units
c. 9,000 units
d. 8,000 units
Awesome Wood Products manufactures two types of wooden bookends: plain and
hand-carved. The following information about the production process is available:
Total factory overhead is $1,200,000. Of this overhead, $500,000 is related to utilities
and the remainder is related to quality control.
a. Determine the total overhead cost assigned to each type of bookend using machine
hours as the allocation base. Calculate the gross profit per unit for each product.
b. Determine the total overhead cost assigned to each type of bookend if overhead is
assigned using allocation bases appropriate to the overhead costs. Calculate the gross
profit per unit of each product.
c. Explain why the unit cost for each model is different between the two methods of
allocation.
An ad hoc sales discount is
a. an allowance for an inferior quality of marketed goods.
b. a discount that an ad hoc committee must decide on.
c. brought about by competitive pressures.
d. none of the above.
Management is considering replacing an existing sales commission compensation plan
with a fixed salary plan. If the change is adopted, the company’s
a. break-even point must increase.
b. margin of safety must decrease.
c. operating leverage must increase.
d. profit must increase.
Which of the following steps in the performance reward plan model comes before the
others listed?
a. set performance rewards
b. identify performance measures
c. determine reward
d. identify critical success factors
A primary characteristic of a performance management system is
a. consistency at all levels in the organization.
b. adaptability to differing situations in the organization.
c. efficiency of application to all individuals in the organization.
d. flexibility to delay rewards although performance objectives have been met.
A sub-unit of an organization is evaluated on the basis of its ROI. If this sub-unit’s sales
and expenses both increase by $30,000, how will the following measures be affected?
a. increase increase
increase
b. indeterminate increase
decrease
c. no change increase
decrease
d. no change decrease no
change
Irrelevant costs generally include
a. yes yes no
b. yes no no
c. no no yes
d. yes yes yes
When a company is labor-intensive, the cost driver that is probably leastsignificant
would be
a. direct labor hours.
b. direct labor dollars.
c. machine hours.
d. cost of materials used.
Which of the following statements is true?
a. The more customers a company has, the better off the company is.
b. A company should spare no expense to provide customer satisfaction.
c. Most customers make quality determinations by comparing a product or service to a
comparable product.
d. Cost-benefit analysis can help identify customers that cost more than they are worth
to the company.
The pre-tax and after-tax cash flows would be the same for all of the following items
except
a. the liquidation of working capital at the end of a project’s life.
b. the initial (outlay) cost of an investment.
c. the sale of an asset at its book value.
d. a cash payment for salaries and wages.
Which of the following costing methods of valuation are acceptable in a job-order
costing system?
a. yes yes no
yes
b. yes no yes
no
c. no yes yes
yes
d. yes yes yes
yes
Rosewood Corporation
Rosewood Corporation produces a single product. The following cost structure applied
to its first year of operations:
Refer to Rosewood Corporation. Assume for this question only that Rosewood
Corporation manufactured 5,000 units and sold 4,000 in the current year. If Rosewood
employs a costing system based on variable costs, the company would end the current
year with a finished goods inventory of
a. $4,000.
b. $8,000.
c. $6,000.
d. $5,000.
What is the best cost accumulation procedure to use when many batches, each differing
as to product specifications, are produced?
a. job-order
b. process
c. actual
d. standard
Jean Simmons Company
Below is an income statement for Jean Simmons Company:
Refer to Jean Simmons Company. What was the company’s margin of safety?
a. $50,000
b. $100,000
c. $150,000
d. $25,000
Nelson Corporation
Nelson Corporation has the following information available for May of the current
year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Nelson Corporation. Prepare a schedule showing the assignment of costs
assuming the (a) FIFO and (b) weighted average method.
Refer to Grant Corporation. What are equivalent units of production for conversion
costs using FIFO?
a. 79,700
b. 79,500
c. 81,100
d. 80,600
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
Which of the following is not a primary component of a control system?
a. operator
b. communications network
c. effector
d. assessor
Brazosport Pipe Corporation
The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the
possibility of replacing its old pipe-bending machine with a more advanced model.
Information on the existing machine and the new model follows:
Refer to Brazosport Pipe Corporation. If the company buys the new machine and
disposes of the existing machine, corporate profit over the five-year life of the new
machine will be ____ than the profit that would have been generated had the existing
machine been retained for five years.
a. $150,000 lower
b. $170,000 lower
c. $230,000 lower
d. $150,000 higher
Glassman Company
Glassman Company produces two products: A and B. The company has three overhead
functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each
period.
The overhead functions have the following hourly costs:
Refer to Glassman Company If total overhead is assigned to A and B on the basis of
direct labor hours, Product A will have an overhead cost per unit of
a. $51.32
b. $205.26
c. $461.88
d. None of the responses are correct.
Phelps Corporation
Phelps Corporation’s EOQ for Material A is 500 units. This EOQ is based on:
Refer to Phelps Corporation. What are Phelps Corp.’s total annual ordering costs for
Material A?
a. $6,000
b. $600
c. $125
d. $1,000
Thunder Sports Enterprises
The Basketball Division of Thunder Sports Enterprises reported the following financial
data for the year:
Refer to Thunder Sports Enterprises. What was the target rate of return for Thunder
Sports Enterprises?
a. 4%
b. 5%
c. 7%
d. 9%
In a decentralized organization, the cost objective is referred to as a
______________________________.
The following information is for the Pawnee Manufacturing Company for November.
Prepare a statement of Cost of Goods Manufactured and a statement of Cost of Goods
Sold in good form.
Practical standards are the most effective standards for controlling and motivating
workers.
If a substandard product cannot be reworked, it is known as ____________________.
Discuss differences in approach and potential usage between target and kaizen costing.
Two incidental products of a joint process are ____________________ and
____________________.
In a normal cost system, actual production overhead costs are typically accumulated in
an Overhead Control account and assigned to Work in Process at the end of the period.
Balances for Accounts Receivable and Sales Discounts are projected before the cash
collections schedule is prepared.
The effect of substituting a non-standard mix of materials during the production process
is referred to as a material yield variance.
What are the functions of a mission statement?
Grant Company.
Grant Company uses a job-order costing system and develops its predetermined
overhead rate based on machine hours. The company has two jobs in process at the end
of the cycle, Jobs #177 and #179.
Refer to Grant Company. Labor cost was split 25 percent and 70 percent, respectively,
between Jobs #177 and #179 for direct labor. The remainder was indirect labor cost.
What are the total costs of Jobs #177 and #179?
Mission statements typically remain unchanged throughout the life of an organization.
In a normal job-order costing system, factory overhead is applied using predetermined
rates times standard input.
Costs incurred in the past to acquire an asset are referred to as
_________________________.
The number of good units or quantity of services that are produced and sold by an
organization within a specified time is referred to as process quality yield.
Activity-based costing systems generally use volume-based cost drivers.