1) The contribution-margin format of the income statement distinguishes manufacturing
costs from nonmanufacturing costs.
2) An organization’s strategy matches its capabilities with the opportunities in the
marketplace to accomplish its objectives.
3) Separable costs include manufacturing costs only.
4) In long-run pricing, costs include all manufacturing and non-manufacturing costs but
exclude all future direct and indirect costs.
5) A budget generally includes both financial and nonfinancial aspects of the plan.
6) When calculating the costs to be transferred using the FIFO method, we should not
include costs assigned in the previous period to units that were in process at the
beginning of the current period but are now included in the units transferred.
7) Normal costing is a method of job costing that allocates an indirect cost based on the
actual indirect-cost rate times the actual quantity of the cost-allocation base.
8) Department stores, such as Target, are examples of a merchandising company.
9) The reorder point is the quantity level of inventory at which a new purchase order is
made.
10) Companies with a greater proportion of direct costs have a greater risk of loss than
companies with a greater proportion of indirect costs.
11) The Finished Goods Control account consists of actual manufacturing overhead
costs rather than allocated manufacturing overhead costs.
12) If contribution margin decreases by $1 per unit, then operating profits will increase
by $1 per unit.
13) The weighted average method of process costing assigns the cost of equivalent units
worked on during the current period first to complete beginning inventory, next to start
and complete new units, and finally to units in ending work-in-process inventory.
14) The only difference between the static budget and flexible budget is that the static
budget is prepared using planned output.
15) Partial productivity multiplied by the quantity of input used results in ________.
A) expected production
B) budgeted output
C) actual output
D) a ratio
16) Stephanie’s Bridal Shoppe sells wedding dresses. The average selling price of each
dress is $1,000, variable costs are $400, and fixed costs are $90,000.
What is the Bridal Shoppe’s operating income when 200 dresses are sold?
A) $30,000
B) $80,000
C) $200,000
D) $100,000
17) Time-series data analysis includes ________.
A) using a variety of time periods to measure the dependent variable
B) using the highest and lowest observation
C) observing different entities during the same time period
D) comparing information in different cost pools
18) The Green Company processes unprocessed goat milk up to the splitoff point where
two products, condensed goat milk and skim goat milk result. The following
information was collected for the month of October:
The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff
point to yield a total of 98,000 gallons of saleable product was $184,480. There were no
inventory balances of either product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is
shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4
per usable gallon. Xyla can be sold for $20 per gallon.
Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream,
for an additional processing cost per usable gallon of $4. The product can be sold for $9
per gallon.
There are no beginning and ending inventory balances.
How much (if any) extra income would Green earn if it produced and sold skim milk
ice cream from goats rather than goat skim milk? Allocate joint processing costs based
upon the relative sales value at the splitoff point.
A) $132,250
B) $576,552
C) $523,250
D) $181,968
19) If the total cost function is y = 5,000 + 7X, calculate the variable cost for 4,000
units.
A) $33,000
B) $28,000
C) $20,000
D) $5,000
20) In relation to target costing, which of the following best describes target cost per
unit?
A) It is the targeted cost of producing one unit to achieve the current year’s budgeted
profit.
B) It is the estimated long-run cost of a product that enables the company to achieve its
target operating income.
C) It is the cost that can be achieved by ensuring that the company produced its
products at maximum efficiency.
D) It is the budgeted cost that the company estimates in producing a unit in the current
budget period.
21) The following information was gathered for Zeba Company for the year ended
December 31, 2014
BudgetedActual
Direct labor-hours50,000dlh60,000dlh
Factory overhead$550,000$600,000
Assume that direct labor-hours are the cost-allocation base.
Required:
a.Compute the budgeted factory overhead rate.
b.Compute the factory overhead applied.
c.Compute the amount of over/underapplied overhead.
22) The following information pertains to the January operating budget for Casey
Corporation.
Budgeted sales for January $200,000 and February $100,000.
Collections for sales are 60% in the month of sale and 40% the next month.
Gross margin is 30% of sales.
Administrative costs are $10,000 each month.
Beginning accounts receivable is $20,000.
Beginning inventory is $14,000.
Beginning accounts payable is $65,000. (All from inventory purchases.)
Purchases are paid in full the following month.
Desired ending inventory is 20% of next month’s cost of goods sold (COGS).
For January, budgeted cost of goods sold is ________.
A) $200,000
B) $140,000
C) $126,000
D) $112,000
23) Alex Furniture sells a table for $850. His fixed costs are $25,000, while his variable
costs are $500 per table. He currently plans to sell 175 tables this month.
What is the budgeted revenue for the month assuming that Alex sells 175 tables?
A) $145,750
B) $148,750
C) $150,000
D) $142,250
24) Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015.
Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 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.
Operating income using absorption costing will be ________ than operating income if
using variable costing.
A) $9,600 higher
B) $4,800 lower
C) $3,600 higher
D) $14,400 lower
25) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a single-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Flashlight Division?
A) $1,850,000
B) $1,560,000
C) $1,740,000
D) $1,950,000
26) To reduce budgetary slack management may ________.
A) incorporate stretch or challenge targets
B) use external benchmark performance measures
C) award bonuses for achieving budgeted amounts
D) reduce projected cost targets by 10% across all areas
27) Put the following steps in order for using the high-low method of estimating a cost
function:
A = Identify the cost function
B = Calculate the constant
C = Calculate the slope coefficient
D = Identify the highest and lowest observed values
A) D C A B
B) C D A B
C) A D C B
D) D C B A
28) Which of the following differentiates job costing from process costing?
A) Job costing is used when each unit of output is identical, and process costing deals
with unique products.
B) Job costing is used when each unit of output is identical and not produced in batches,
and process costing deals with unique products produced on large scale.
C) Process costing is used when each unit of output is identical, and job costing deals
with unique products not produced in batches.
D) Job costing is used by manufacturing industries, and process costing is used by
service industries.
29) Zolas’ Heaters is approached by Ms. Leila, a new customer, to fulfill a large
one-time-only special order for a product similar to one offered to regular customers.
Zolas’ Heaters has excess capacity. The following per unit data apply for sales to regular
customers:
For Zolas’ Heaters, what is the minimum acceptable price of this one-time-only special
order?
A) $580
B) $780
C) $520
D) $1,014
30) Which of the following is an example of a cost that is variable with respect to the
number of units produced?
A) Rent on the administrative office building.
B) Rent on the factory building.
C) Direct labor cost, where the direct labor workforce is adjusted to the actual
production of the period.
D) Salaries of top marketing executives.