A locked-in cost is a(n) ________.
A) opportunity cost that is fixed in the short run
B) cost that can be changed in the short run
C) cost that has not yet been incurred, but based on decisions that have already been
made, will be incurred in the future
D) cost that has been incurred, but based on decisions that have already been made, will
be not incurred in the future
Which of the following statements is true of a backflush costing system?
A) All costs are tracked sequentially as products pass through each stage of production.
B) When inventories are minimal, as in JIT production systems, backflush costing
complicates costing systems.
C) Usage of a backflush costing system does not satisfy the absorption costing rules of
GAAP
D) Backflush costing increases the ability of the accounting system to pinpoint the uses
of resources at each step in the production process.
Freetown Corporation incurred fixed manufacturing costs of $26,000 during 2017.
Other information for 2017 includes:
The budgeted denominator level is 2,600 units.
Units produced total 1,800 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
The production-volume variance is ________. (Round any intermediary calculations to
the nearest cent and your final answer to the nearest dollar.)
A) $6,000
B) $8,000
C) $14,000
D) $0
Which of the following is an advantage of COQ measures?
A) They help managers aggregate costs to evaluate the tradeoffs of incurring prevention
costs and appraisal costs to eliminate internal and external failure costs.
B) They detect and provide immediate short-run feedback on whether
quality-improvement efforts are succeeding.
C) They forecast customer satisfaction and employee satisfaction, which are useful
indicators of long-run performance.
D) They direct attention to financial processes that help managers identify the precise
problem areas that need improvement.
Rubium Micro Devices currently manufactures a subassembly for its main product. The
costs per unit are as follows:
Direct materials $54.00
Direct labor 35.00
Variable overhead 40.00
Fixed overhead 34.00
Total $163.00
Crayola Technologies Inc. has contacted Rubium with an offer to sell 6,000 of the
subassemblies for $144.00 each. Rubium will eliminate $89,000 of fixed overhead if it
accepts the proposal. Should Rubium make or buy the subassemblies? What is the
difference between the two alternatives?
A) Buy; savings = $89,000
B) Buy; savings = $7,000
C) Make; savings = $1,000
D) Make; savings = $203,000
The selling price per unit less the variable cost per unit is the ________.
A) fixed cost per unit
B) gross margin
C) margin of safety
D) contribution margin per unit
An unfavorable fixed overhead spending variance indicates that ________.
A) there was more excess capacity than planned
B) the price of fixed overhead items cost more than budgeted
C) the fixed overhead cost-allocation base was not used efficiently
D) the denominator level was more than planned
When $10,0000 direct materials are requisitioned, which of the following would be the
correct journal entry?
A) Manufacturing Overhead Control $10,000
Materials Control $10,000
B) Work-in-Process Control $10,000
Materials Control $10,000
C) Materials Control $10,000
Work-in-Process Control $10,000
D) Accounts Payable Control $10,000
Materials Control $10,000
Bouchard Company manufactures a product that currently has a full cost of $700. Its
target operating income per unit is $50 and management’s budgets assume that same
target operating income per unit for the foreseeable future. To stay competitive,
Bouchard management believes it must cut its price by 15%. What will be its new target
price?
A) $700
B) $587.50
C) $637.50
D) $50
Which of the following is a responsibility center to measure the revenues and costs of
subunits in centralized or decentralized companies?
A) investment center
B) environmental center
C) exchange policy center
D) taxation rebate center
Demand for refinements to the costing system has accelerated due to ________.
A) increase in direct costs
B) decrease in product diversity
C) decrease in indirect costs
D) competition in product markets
M & G TV and Appliance Store is a small company that has hired you to perform some
management advisory services. The following information pertains to 2017 operations.
Sales (1,200 televisions) $1,200,000
Cost of goods sold 540,000
Store manager’s salary per year 108,000
Operating costs per year 216,000
Advertising and promotion per year 24,000
Commissions (3.0% of sales) 36,000
What was the variable cost per unit sold for 2017?
A) $30
B) $480
C) $770
D) $450
A step cost functions indicates that there are
A) costs that remain the same over various ranges of activity but increases by discrete
amounts as the level of activity increases
B) greater proportions of fixed costs than variable costs at lower levels of activities
C) increases in the number of units produced during the each month of the period
D) strong relationships between fixed costs and variable costs
Which of the following is true of management accounting information?
A) It focuses on documenting past business actions of a firm.
B) It is prepared based on SEC rules and FASB accounting principles.
C) It is prepared for shareholders.
D) It helps with the coordination of elements of the value chain.
Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $1,760,000
for an annual production capacity of 16 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
Assuming activity-cost pools are used, what are the activity-cost driver rates for design
changes, setups, and inspections cost pools?
A) $800.00 per change, $306.00 per setup, $10.00 per inspection
B) $800.00 per change, $14.00 per setup, $218.57 per inspection
C) $32.00 per change, $10.00 per setup, $306.00 per inspection
D) $22.86 per change, $306.00 per setup, $350 per inspection
Verer Custom Carpentry manufactures chairs in its Processing Department. Direct
materials are included at the inception of the production cycle and must be bundled in
single kits for each unit. Conversion costs are incurred evenly throughout the
production cycle. Inspection takes place as units are placed into production. After
inspection, some units are spoiled due to undetectable material defects. Spoiled units
generally constitute 5% of the good units. Data provided for March 2017 are as follows:
What costs are allocated to the ending work-in-process inventory for direct materials and
conversion costs, respectively, using the FIFO method of process costing? (Round any cost
per unit calculations to the nearest cent.)
A) $64,676; $40,067
B) $28,237; $24,740
C) $28,352; $25,353
D) $28,019; $15,091
Which of the following is a difference between a diagnostic control system and an
interactive control system?
A) A diagnostic control system focuses on meeting expectations, while an interactive
control system focuses on standards of ethical behavior.
B) A diagnostic control system focuses on standards of ethical behavior while an
interactive control system focuses on meeting expectations.
C) A diagnostic control system focuses on meeting expectations, while an interactive
control system focuses on organizational attention and learning on key strategic issues.
D) A diagnostic control system focuses on organizational attention and learning on key
strategic issues, while an interactive control system focuses on meeting expectations.
These questions refer to flexible-budget variance formulas with the following
descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. The
best label for the formula [(AP)(AQ) – (BP)(BQ)] is the ________.
A) efficiency variance.
B) price variance
C) total flexible-budget variance
D) spending variance
A local accounting firm employs 27 full-time professionals. The budgeted annual
compensation per employee is $40,500. The average chargeable time is 420 hours per
client annually. All professional labor costs are included in a single direct-cost category
and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to
professional labor-hours. Budgeted indirect costs for the year are $781,500, and the
firm expects to have 75 clients during the coming year.
If ten clients are lost and the workforce stays at 27 employees, then the direct labor cost
rate per hour:
A) $34.71 per hour
B) $24.81 per hour
C) $40.05 per hour
D) $21.89 per hour
Xylon Corp. has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $900,000 for
an annual production capacity of 10 million pages.
For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing
manufacturing overhead costs, it was determined that number of design changes,
setups, and inspections are the primary manufacturing overhead cost drivers. The
following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
If manufacturing overhead costs are considered one large cost pool and are assigned based
on 10 million pages of production capacity, what is the cost driver rate? (Round the final
answer to three decimal places.)
A) $0.078 per page
B) $0.035 per page
C) $0.055 per page
D) $0.09 per page
Campus Apparels is a clothing maker. Unit costs associated with one of its products,
Product DCT121, are as follows:
What are the period costs per unit associated with Product DCT121?
A) $33
B) $17
C) $30
D) $100
The Peric Manufacturing Shop produces motorcycle parts. Typically, 22 pieces out of a
job lot of 1800 parts are spoiled. Spoilage is considered a normal part of Peric’s
production process. Costs are assigned at the inspection point, $52.00 per unit. Spoiled
pieces may be disposed at $16.00 per unit. The spoiled goods must be inventoried
appropriately when the normal spoilage is detected. The current job requires the
production of 3600 good parts.
Which of the following journal entries properly reflects the recording of spoiled goods?
A)
B)
C)
D)
An illustration that resembles the bone structure of a fish and identifies potential
reasons why a problem exists is called ________.
A) control chart
B) Pareto diagram
C) cause-and-effect diagram
D) time-series graphs
Which of the following statements is true of costs associated with goods for sale?
A) Appraisal costs is a subcategory of shrinkage costs.
B) Special processing costs are always part of purchasing costs.
C) Opportunity costs are not recorded in the accounting system.
D) Stockout costs are costs that arise when a company runs out of a particular item for
which there is no customer demand.
Fixed costs depend on the ________.
A) amount of resources used
B) amount of unchanged costs for a given time period
C) volume of production
D) total number of units sold
Which of the following factors would guide you in classifying a product as a main
product or byproduct?
A) Number of units per processing period
B) Weight or volume of outputs per period
C) Percentage of total sales value
D) Joint costs incurred up to the split-off point
The value chain is the sequence of business functions in which ________.
A) value is deducted from the products or services of an organization
B) producing and delivering the product or service is of prime importance
C) products and services are evaluated with respect to their value to the supply chain
D) usefulness is added to the products or services of an organization
Assume you are a sophomore in college and are committed to earning an undergraduate
degree. Your current decision is whether to finish college in four consecutive years or
take a year off and work for some extra cash.
a. Identify at least two revenues or costs that are relevant to making this decision.
Explain why each is relevant.
b. Identify at least two costs that would be considered sunk costs for this decision.
c. Identify at least two opportunity costs for this decision.
d. Comment on at least one qualitative consideration for this decision.
Which of the following is a limitation of using past performance as a basis for judging
actual results?
A) It does not account for productivity increases over the periods.
B) It increases the incentive for managers to introduce budgetary slack.
C) It assumes inefficiencies of previous periods without considering possible
efficiencies of the budget period.
D) It increases the tendency of senior managers exaggerating changes in future
conditions as opposed to changes in current conditions.
Goldfarb’s Book and Music Store has two service departments, Warehouse and Data
Center. Warehouse Department costs of $370,000 are allocated on the basis of budgeted
warehouse-hours. Data Center Department costs of $200,000 are allocated based on the
number of computer log-on hours. The costs of operating departments Music and Books
are $142,500 and $171,000, respectively. Data on budgeted warehouse-hours and
number of computer log-on hours are as follows:
Production
Support Departments Departments
Using the step-down method, what amount of Data Center Department cost will be
allocated to Department Music if the service department with the highest percentage of
interdepartmental support service is allocated first? (Round intermediary calculations to
three decimal places.)
A) $144,992
B) $91,979
C) $123,487
D) $108,021
If Kenton Inc. has a safety stock of 215 units and the average weekly demand is 35
units, how many days can be covered if the shipment from the supplier is delayed by 16
days?
A) 16 days
B) 43 days
C) 59 days
D) 27 days
To reduce distribution-channel costs, a company could ________.
A) improve the efficiency of the ordering process
B) make fewer customer visits
C) eliminate distribution to retailers and only service wholesalers
D) reduce product-handling costs