Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a weighted average method of process costing,
compute EUP for conversion.
a. 2,600
b. 2,180
c. 2,000
d. 2,700
The algebraic method
a. considers all interrelationships of the departments and reflects these relationships in
equations.
b. does not consider interrelationships of the departments nor reflect these relationships
in equations.
c. is also referred to as the “benefits-provided” ranking method.
d. is not a service department cost allocation method.
In accounting for JIT operations, the Raw Material Inventory account
a. is used to record price variances for raw materials purchased.
b. can be expected to have a larger balance than with traditional manufacturing
methods.
c. is combined with the Work In Process Inventory account.
d. is combined with the Finished Goods Inventory account.
At its present level of operations, a small manufacturing firm has total variable costs
equal to 75 percent of sales and total fixed costs equal to 15 percent of sales. Based on
variable costing, if sales change by $1.00, income will change by
a. $0.25.
b. $0.10.
c. $0.75.
d. can’t be determined from the information given.
Broncho Lids Corporation manufactures a western-style hat that sells for $10 per unit.
This is its sole product and it has projected the break-even point at 50,000 units in the
coming period. If fixed costs are projected at $100,000, what is the projected
contribution margin ratio?
a. 80 percent
b. 20 percent
c. 40 percent
d. 60 percent
When the number of units manufactured increases, the most significant change in unit
cost will be reflected as a(n)
a. increase in the fixed element.
b. decrease in the variable element.
c. increase in the mixed element.
d. decrease in the fixed element.
A fixed cost is relevant if it is
a. uncontrollable.
b. avoidable.
c. sunk.
d. a product cost.
Mobile Company
Mobile Company is a manufacturer of electronic components. The following
manufacturing information is available for the month of May:
Refer to Mobile Company. What is the throughput per hour?
a. 1.3 units (rounded)
b. 2.0 units
c. 1.8 units
d. .8 units
A cost that is found to bear an observable and known relationship to a quantifiable
activity base is a(n)
a. discretionary cost.
b. product cost.
c. period cost.
d. engineered cost.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume that 8,000 units were transferred to
Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in
Decorating?
a. $11.32
b. $11.46
c. $12.00
d. $12.78
In a standard cost system, when production is greater than the estimated unit or
denominator level of activity, there will be a(n)
a. unfavorable capacity variance.
b. favorable material and labor usage variance.
c. favorable volume variance.
d. unfavorable manufacturing overhead variance.
Baker Company
Baker Company produces three products: A, B, and C from the same process. Joint
costs for this production run are $2,100.
If the products are processed further, Baker Company will incur the following disposal
costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
Refer to Baker Company. Using sales value at split-off, what amount of joint processing
cost is allocated to Product B (round to the nearest dollar)?
a. $700
b. $416
c. $725
d. $959
The Statement of Cash Flows may be superior to the cash budget as a performance
evaluation measure because
a. cash flows are shown on the accrual basis on the cash budget.
b. the cash budget does not include capital investments.
c. cash flows are arranged by activity.
d. of all the above reasons.
The focus of business process reengineering (BPR) is improving
a. products.
b. processes.
c. cost reduction.
d. decision making.
The master budget usually includes
a. an operating budget.
b. a capital budget.
c. pro forma financial statements.
d. all of the above.
Striving for flexibility in the number of products that can be produced in a short period
of time is characteristic of
a. EOQ systems.
b. push systems in general.
c. JIT.
d. pull systems in general.
If the total cash inflows associated with a project exceed the total cash outflows
associated with the project, the project’s
a. net present value is greater than zero.
b. internal rate of return is greater than zero.
c. profitability index is greater than 1.
d. payback period is acceptable.
Which of the following competitive strategies is least profitable?
a. differentiation
b. cost leadership
c. confrontation
d. price fixing
Cost allocation is the assignment of ____ costs to one or more products using a
reasonable basis.
a. yes yes
b. yes no
c. no no
d. no yes
The allocation of general overhead control costs to operating departments can be least
justified in determining
a. income of a product or functional unit.
b. costs for making management’s decisions.
c. costs of products sold.
d. costs for government’s “cost-plus” contracts.
The after-tax net present value of a project is affected by
a. tax-deductible cash flows.
b. non-tax-deductible cash flows.
c. accounting accruals.
d. all of the above.
The margin of safety is a key concept of CVP analysis. The margin of safety is the
a. contribution margin rate.
b. difference between budgeted contribution margin and actual contribution margin.
c. difference between budgeted contribution margin and break-even contribution
margin.
d. difference between budgeted sales and break-even sales.
The process that determines an allowable product cost while setting market price and
allowing for an acceptable profit margin is known as
a. target costing.
b. product life cycle costing.
c. activity-based costing.
d. responsibility costing.
Bridges Corporation
The following information has been taken from the cost records of Bridges Corporation
for the past year:
Refer to Bridges Company. Cost of Goods Sold was
a. $711
b. $746
c. $796
d. $816
Painter Corporation
Painter Corporation has the following information for the current month:
Refer to Painter Corporation. Assume that the costs per EUP for material and
conversion are $1.00 and $1.50, respectively. What is the amount of the period cost for
July using FIFO?
a. $0
b. $9,375
c. $10,625
d. $12,500
An item or event that has a cause-effect relationship with the incurrence of a variable
cost is called a
a. mixed cost.
b. predictor.
c. direct cost.
d. cost driver.
Riedel Company started 8,600 units in April. The company transferred out 6,400
finished units and ended the period with 3,200 units that were 40 percent complete as to
both material and conversion costs. Beginning Work in Process Inventory units were
a. 400.
b. 1,000.
c. 1,280.
d. 2,200.
The Du Pont model measures
a. residual income.
b. return on investment.
c. throughput.
d. profit.
Consider the following three product costing alternatives: process costing, job order
costing, and standard costing. Which of these can be used in conjunction with
absorption costing?
a. job order costing
b. standard costing
c. process costing
d. all of the above
Management and financial accounting are used for which of the following purposes?
Lincoln Corporation
Lincoln Corporation distributes its service department overhead costs directly to
producing departments without allocation to the other service departments. Information
for January is presented here.
Refer to Lincoln Corporation. Using the step method, how much of Lincoln
Corporation’s Utilities Department cost is allocated between Departments A and B?
a. $9,900
b. $10,800
c. $12,740
d. $27,700
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 B will have an overhead cost per unit of
a. $76.97
b. $87.75
c. $88.64
d. None of the responses are correct.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume 8,000 units were transferred to
Decorating. Compute the number of equivalent units in Decorating for material.
a. 7,970
b. 8,000
c. 8,330
d. 8,450
What are the characteristics of firms best-suited to open-book management?
An activity-based costing system should be evaluated with regard to the benefits it can
provide an organization versus the costs of implementing it.
Capital budgeting uses both financial and non-financial criteria when evaluating
projects.
Taylor Corporation
Taylor Corporation manufactures and sells baseball bats. For a recent period, its
production and sales objectives were each set at 20,000 units. Also, for this period the
firm had estimated costs as follows:
Refer to Taylor Corporation. Note that the budget for discretionary fixed costs is
$40,000. If actual discretionary fixed costs were $50,000, could cost control have still
been effective? Explain.
A participatory budget is developed by both top management and operating personnel.
Costs that cannotbe conveniently traced to a cost object are known as
____________________ costs.
The financial budget is prepared after the operating budget.
Data that reflects future financial and non-financial outcomes is referred to as
____________________ indicators.
Denton Company
Denton Company manufactures three products (A, B, and C) from three raw materials
(X, Y, and Z). The following table indicates the number of pounds of each material that
is required to manufacture each type of product:
The company has a policy of maintaining an inventory of finished goods on all three
products equal to 25 percent of the next month’s budgeted sales. Listed below is the
sales budget for the first quarter of the current year:
Refer to Denton Company. Assuming that the company meets its required inventory
policy, prepare a production budget for the first 2 months of the current year for each of
the three products.
A fixed overhead volume variance is a noncontrollable variance.
Total units produced during the period divided by the value-added processing time is
referred to as process productivity.
Storage of unneeded inventory is a non-value added item.
When indirect labor is recorded for a job in process,
is debited.
Project funding is a financing decision.