Which of the following is a measure of the balanced scorecard’s customer perspective?
A) Number of client complaints
B) Defect rates
C) Number of process improvements
D) Revenue growth
Which of the following is an internal-business-process measure to study the output
during bottleneck situations?
A) manufacturing cycle efficiency for key processes
B) carrying cost of inventories
C) number of employees trained to manage bottlenecks
D) customer-response time
To reduce the excessive focus of subunit managers on their own subunits, many
companies compensate subunit managers on the basis of ________.
A) both the operating income earned by their respective subunits and the company as a
whole
B) both the investing income earned by their respective subunits and the company as a
whole
C) only the investing income earned by their respective subunits
D) both the net income and earned by their respective subunits and the company as a
whole
Employee morale at Dos Santos, Inc., is very high. This type of information is an
example of ________.
A) qualitative factors
B) quantitative factors
C) irrelevant factors
D) financial factors
The Berkel Corporation manufactures Widgets, Gizmos, and Turnbols from a joint
process. June production is 9000 widgets; 12,500 gizmos; and 14,500 turnbols.
Respective per unit selling prices at split-off are $75, $50, and $25. Joint costs up to the
split-off point are $188,000. What amount of joint costs will be allocated to the
Gizmos? (Do not round any intermediary calculations.)
A) $40,992
B) $21,260
C) $70,677
D) $76,331
In a long-run, it is worthwhile to sell a product only if the selling price exceeds
________.
A) the total of all the direct costs of the product
B) the total manufacturing costs of the product
C) the total of the fixed costs of the value chain
D) full cost of the product and a markup that provides an adequate return on capital
Companies that attempt to achieve zero defects in the manufacturing process treat
spoilage as ________.
A) scrap
B) reworked units
C) abnormal spoilage
D) indirect spoilage
The constant gross-margin percentage NRV method of joint cost allocation ________.
A) involves allocating costs in such a way that maintaining the same gross margin
percentage for each product that was obtained in prior years
B) computes gross margin before allocating the costs to the products
C) is the same as the estimated NRV method
D) is the same as the sales-value at split-off method
Beta Corporation uses a job cost system and has two production departments, A and B.
Budgeted manufacturing costs for the year are:
The actual material and labor costs charged to Job #432 were as follows:
Beta applies manufacturing overhead costs to jobs on the basis of direct manufacturing
labor cost using departmental rates determined at the beginning of the year.
Proportion of manufacturing overhead with respect to the total cost of the job is ________.
A) 39.74%
B) 32.05%
C) 28.21%
D) 42.68%
Which of the following statements is true of ABC systems?
A) ABC system will always result in higher product costs.
B) ABC system employs multiple activity-cost drivers.
C) ABC system is least suited for service companies.
D) ABC system is simpler compared to traditional systems.
Which of the following could be a reason for a favorable material price variance?
A) the purchasing manager bargaining effectively with suppliers
B) the purchasing manager giving orders for small quantity to reduce storage cost
C) the purchasing manager accepting a bid from the highest-priced supplier to ensure
the quality of material
D) the personnel manager hiring underskilled workers
Sparkle Jewelry sells 600 units resulting in $75,000 of sales revenue, $32,000 of
variable costs, and $26,000 of fixed costs.
Breakeven point in units is ________. (Round to the nearest whole unit.)
A) 447 units
B) 684 units
C) 810 units
D) 363 units
Flash City Inc. manufactures small flash drives and is considering raising the price by
75 cents a unit for the coming year. With a 75-cent price increase, demand is expected
to fall by 7,000 units.
Current Projected
Demand 79,000 units 72,000 units
Selling price $8.50 $9.25
Incremental cost per unit $5.80 $5.80
If the price increase is implemented, operating profit is projected to ________.
A) increase by $35,100
B) decrease by $5,250
C) increase by $5,250
D) decrease by $7,000
Julian Pharma manufactures hospital beds. Its most popular model, Deluxe, sells for
$5,000. It has variable costs totaling $2,650 and fixed costs of $1,200 per unit, based on
an average production run of 5,000 units. It normally has four production runs a year,
with $400,000 in setup costs each time. Plant capacity can handle up to six runs a year
for a total of 30,000 beds.
A competitor is introducing a new hospital bed similar to Deluxe that will sell for
$3,800. Management believes it must lower the price to compete. The marketing
department believes that the new price will increase sales by 25% a year. The plant
manager thinks that production can increase by 25% with the same level of fixed costs.
The company currently sells all the Deluxe beds it can produce.
Required:
a. What is the annual operating income from Deluxe at the current price of $5,000?
b. What is the annual operating income from Deluxe if the price is reduced to $3,800
and sales in units increase by 25%?
c. What is the target cost per unit for the new price if target operating income is 30% of
sales?
Which of the following is a component of net-initial-investment cash flows?
A) original cost of an old equipment
B) initial working capital investment
C) depreciation cost
D) after-tax cash flow from operations
Outdoor Gear Corporation manufactured 5,000 coolers during October. The following
variable overhead data relates to October:
Calculate the actual machine hours used by Stark during October.
A) 623 hours
B) 615 hours
C) 607 hours
D) 622 hours
Which of the following is a disadvantage of using negotiated transfer price?
A) It requires each division manager to put forth effort to increase division operating
income.
B) Negotiated transfer prices take away the divisional autonomy as prices depend on
bargaining strength.
C) Negotiations usually require much time and energy thereby consuming precious
managerial time.
D) It may lead to divisional enmity because negotiation process may cause frictions
among departments.
James Corporation gathered the following information:
Required:
a. Calculate the fixed costs, assuming breakeven revenue is $2,000,000.
b. Calculate sales volume in dollars to produce an after-tax net income of $150,000.
Which of the following is a fixed cost with respect to units produced in a factory?
A) monthly rent payment for the building
B) electricity expenses
C) utilities cost of the building
D) direct material costs
An organization that is using the product differentiation approach would most likely do
which of the following?
A) focus on tight cost control to create a reputation of saving its customers money
B) use innovative research and development and develop effective promotional
campaigns to increase customer loyalty and charge higher prices
C) provide products that are similar to competitors
D) offer products at a lower cost than competitors
Dartmouth Corporation manufactures two models of office chairs, a standard and a
deluxe model. The following activity and cost information has been compiled:
Number of setups and number of components are identified as activity-cost drivers for
overhead. Assuming an activity-based costing system is used, what is the total amount of
overhead costs assigned to the deluxe model?
A) $59,450
B) $83,800
C) $56,800
D) $62,100
Software For You encounters revenue-allocation decisions with its bundled product
sales. Here, two or more units of the software are sold as a single package. Managers at
Software For You are keenly interested in individual product-profitability figures.
Information pertaining to its three bundled products and the stand-alone selling prices
of its individual products is as follows:
Required:
a. Using the stand-alone revenue-allocation method, allocate the $380 packaged price of
“All Three” to the three software products
1. with selling prices as the weights.
2. with individual product costs as the weights.
3. based on physical units.
b. Allocate the $380 packaged price of “All Three” to the three software products using the
incremental revenue-allocation method. Assume Word Processing is the primary product,
followed by Spreadsheet, and then Accounting Software.
Which of the following would be considered in a make-or-buy decision?
A) fixed costs that will still be incurred
B) prepaid rent expense for warehousing finished goods and inventories
C) potential rental income from space occupied by the production area
D) unchanged supervisory costs
The Materials Control account is increased when ________.
A) direct materials are purchased
B) indirect materials are sold
C) materials are requisitioned for production
D) materials are converted to finished goods
Service companies, in particular, find great value from ABC because a vast majority of
their cost structure is composed of ________ costs.
A) prime
B) factory
C) indirect
D) committed
To discourage producing for inventory, management can ________.
A) discourage using nonfinancial measures such as units in ending inventory compared
to units in sales as nonfinancial measures may not be congruent with management
performance goals
B) evaluate performance over a quarterly period rather than a single year
C) develop budgeting and planning activities that reduce management’s freedom to
inappropriately build inventory through increased production
D) implement absorption costing across all departments
Which of the following best describes practical capacity?
A) It is the level of capacity that reduces theoretical capacity by considering
unavoidable operating interruptions, such as scheduled maintenance time and
shutdowns for holidays.
B) It is the level of capacity based on producing at full efficiency all the time.
C) It is the level of capacity utilization that satisfies average customer demand over a
period that includes seasonal, cyclical, and trend factors.
D) It is the level of capacity utilization that managers expect for the current budget
period, which is typically one year.
Which of the following best describes how fixed cost are treated in a variable cost
method?
A) They are part of the product cost
B) They are excluded from inventory cost and are treated as period costs
C) They are allocated to the product cost using a denominator-level capacity choice
D) They are classified as nonmanufacturing costs
The economic order quantity model completely ignores ________.
A) carrying costs
B) ordering costs
C) stockout costs
D) the size of a purchase order
Sales total $400,000 when variable costs total $300,000 and fixed costs total $80,000.
The breakeven point in sales dollars is ________. (Round interim calculations to two
decimal places and the final answer to the nearest dollar.)
A) $320,000
B) $400,000
C) $1,200,000
D) $500,000
Following a strategy of product differentiation, Americonic Corporation makes a
high-end computer monitor. Americonic Corporation presents the following data for the
years 2017 and 2018:
Somerset Corporation produces no defective units but it wants to reduce direct materials
usage per unit in 2018. Manufacturing conversion costs in each year depend on production
capacity defined in terms of units that can be produced. Selling and customer-service costs
depend on the number of customers that the customer and service functions are designed to
support. Ernsting Corporation has 100 customers in 2017 and 115 customers in 2018. The
industry market size for high-end computer monitors increased 5% from 2017 to 2018.
Required:
a. What is the revenue effect of the growth component?
b. What is the cost effect of the growth component?
c. What is the net effect on operating income as a result of the growth component?
Which of the following statements is true of activity-based costing?
A) There is a clear cause-and-effect relationship between costs and the cost driver in the
long run.
B) There is no variety of cost drivers and cost pools.
C) The system focuses on activities in together and not on individual activities.
D) A single cost driver should be identified for all the activities.
Speedy Supplies sells a product at a price of $150. It’s variable manufactured cost is
$30 and the variable marketing cost per unit is $17.50 with fixed cost per period of
$60,000. What would be the change in operating income under variable costs if sales
increase from 10,000 to 10,500 units?
A) $60,000
B) $51,250
C) $66,250
D) Loss of $8,750
A cost is considered direct if it can be traced to a particular cost object in a cost
effective way which means it can be
A) traced easily with the aid of technology
B) traced in a manner that is accurate
C) traced in an economically feasible way
D) possibly traced accurately with an investment in hardware and software
When using the high-low method, the numerator of the equation that determines the
slope is the ________.
A) difference between the positive and negative values of dependent and independent
variables
B) difference between the fixed cost and variable cost associated with the cost driver
C) difference between the high and low observations of the cost driver
D) difference between the costs associated with highest and lowest observations of the
cost driver