In a normal job-order costing system, factory overhead is applied using predetermined
rates times actual input.
Activity-based costing is appropriate for a company that manufactures a single
product.
In a service industry, direct materials are usually insignificant in amount and can not
easily be traced to a cost object.
The relevant range is valid for all levels of activity.
After the break-even point is reached, each dollar of contribution margin is a dollar of
before-tax profit.
Favorable variances are represented by debit balances in the overhead account.
A flexible budget is a planning document that presents expected variable and fixed
overhead costs at different activity levels.
Standards can be used in a job-order costing system if the products manufactured are
varied in nature.
The internal rate of return is the rate at which a project’s net present value is zero.
Financial accounting is most concerned with meeting the needs of internal users.
If a normal loss is anticipated on a specific job, the overhead application rate should
include an amount for the cost of defective units less disposal value.
A discrete loss is assumed to occur at a specific point in the production process.
The flow of goods through a production process cannot be at a faster rate than the
slowest bottleneck is the definition for
A. mass customization.
B. business process reengineering.
C. the theory of constraints.
D. the Pareto principle.
Which of the following is not an “operating” budget?
A. sales budget
B. production budget
C. purchases budget
D. capital budget
While preparing a salad, the chef removes the core from a head of lettuce. This core
would be classified as
A. defective.
B. shrinkage.
C. waste.
D. scrap.
Which of the following costing methods is the most effective in controlling a product’s
total life-cycle cost?
A. kaizen costing
B. target costing
C. standard costing
D. process costing
If life-cycle costs exceed the target cost of a product, managers will strive to reduce
A. the cost of special orders.
B. the level of activities that are non-value-added.
C. product variety.
D. period costs.
In a FIFO process costing system, which of the following are assumed to be completed
first in the current period?
A. units started this period
B. units started last period
C. units transferred out
D. units still in process
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation. Assume that Phoenix has overapplied overhead of
$25,000 and that this amount is material. What is the balance in Cost of Goods Sold
after the overapplied overhead is closed?
A. $123,267
B. $144,033
C. $158,650
D. $108,650
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 map
A. should indicate only value-added activities.
B. is also known as a detailed flowchart.
C. should indicate only those steps/processes that are obvious in the production of
goods/services.
D. is also known as a value chart.
Ellis Retail
Ellis Retail is considering an investment in a delivery truck. Ellis has found a used truck
that he can purchase for $8,000. He estimates the truck would last six years and
increase his store’s net cash revenues by $2,000 per year. At the end of six years, the
truck would have no salvage value and would be discarded. Ellis will depreciate the
truck using the straight-line method.
Refer to Ellis Retail. What is the payback period on the investment in the new truck?
A. 12 years
B. 6 years
C. 4 years
D. 2 years
The economic order quantity is not affected by the
A. estimate of the annual material consumption.
B. cost of insuring a unit of inventory for a year.
C. cost of purchase-order forms.
D. safety stock level.
The overhead allocation method that allocates service department costs without
consideration of services rendered to other service departments is the
A. step method.
B. direct method.
C. reciprocal method.
D. none of the above.
Cost of Goods Sold is an
A. unexpired product cost.
B. expired product cost.
C. unexpired period cost.
D. expired period cost.
Painter Corporation
Painter Corporation has the following information for the current month:
All materials are added at the start of the production process. Painter Corporation
inspects goods at 75 percent completion as to conversion.
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
What are the three generic strategies for dealing with environmental effects of
operations?
Two methods of accounting for cost flows in process costing are
______________________________ and ____________________.
Describe the two-step process by which costs are allocated in an ABC system.
Having sufficient cash to pay liabilities as they become due is referred to as an
organization’s ________________________.
Castle Homes Corporation
The Carpet Division of Castle Homes Corporation manufactures a single grade of
residential grade carpeting. The division has the capacity to produce 500,000 square
yards of carpet each year. Its current costs and revenues are shown here:
The Housing Division currently purchases 40,000 yards of carpeting (of the grade
produced by the Carpet Division) each year at a cost of $6.50 per square yard from an
outside vendor.
Refer to Castle Homes Corporation. If the Housing and Carpet Divisions agree on the
internal transfer of 40,000 square yards of carpet at a price of $4.50 per square yard,
how will the profits of the Housing Division be affected?