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1) Activity-based costing attempts to identify the most relevant cause-and-effect
relationship for each activity pool without restricting the cost driver to only units of
output or variables related to units of output.
2) Practical capacity rather than master-budget volume is a better way to price product
and avoid downward demand spiral.
3) Indirect manufacturing costs are credited to Manufacturing Overhead Control.
4) Process costing is used to assign manufacturing costs to unique batches of a product.
5) Cost accounting is the process of measuring, analyzing, and reporting financial and
nonfinancial information related to the costs of acquiring or using resources in an
organization.
6) A job that shows low profitability may be the result of ________.
A) excessive usage of direct materials
B) inefficient direct manufacturing labor
C) overpricing the job
D) insurance claim of the damaged goods
7) Sky High Company has two departments, X and Y. The following estimates are for
the coming year:
A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant
is ________.
A) $15 per direct labor-hour
B) $10 per direct labor-hour
C) $21 per direct labor-hour
D) $12 per direct labor-hour
8) It is most difficult to estimate ________ because of the need to predict demand for
the next few years.
A) practical capacity
B) theoretical capacity
C) master-budget capacity utilization
D) normal capacity utilization
9) The cost of the manager of a retail distribution channel would most likely be
classified as a ________.
A) customer-sustaining cost
B) distribution-channel cost
C) customer batch-level cost
D) corporate-sustaining cost
10) Assume you are evaluating a manufacturing company. Match the various
organizational activities and concepts with the performance measures listed. Some
items may have more than one match.
Activities:
1.Change in revenues
2.Cycle time
3.Economic order quantity
4.Manufacturing defects
5.Market share
6.New products
7.On-time delivery
8.Operating income
9.Product reliability
10.Time-to-market
Performance measure:
________a.Profitability
________b.Customer satisfaction
________c.Innovation
________d.Efficiency, quality, and time
11) How much of the account billing cost will be assigned to Department B?
A) $8,500
B) $8,250
C) $8,750
D) $8,540
12) Springfield Corporation, whose tax rate is 40%, has two sources of funds: long-term
debt with a market value of $8,000,000 and an interest rate of 8%, and equity capital
with a market value of $12,000,000 and a cost of equity of 12%. Springfield has two
operating divisions, the Blue division and the Gold division, with the following
financial measures for the current year:
What is Economic Value Added ( ) for the Blue Division?
A) -$233,400
B) $21,960
C) $188,600
D) $433,960
13) If indirect-cost rates are calculated monthly, distortions might occur because of
________.
A) rental costs paid monthly
B) property tax payments made in July and December
C) routine monthly preventive-maintenance costs that benefit future months
D) salary hikes at the beginning of the financial year
14) Southwestern College is planning to hold a fund raising banquet at one of the local
country clubs. It has two options for the banquet:
OPTION one:Crestview Country Club
a. Fixed rental cost of $1,000
b. $12 per person for food
OPTION two:Tallgrass Country Club
a. Fixed rental cost of $3,000
b. A caterer who charges $8.00 per person for food
Southwestern College has budgeted $1,800 for administrative and marketing expenses.
It plans to hire a band which will cost another $800. Tickets are expected to be $30 per
person. Local business supporters will donate any other items required for the event.
Which option provides the greatest degree of operating leverage if 600 people attend?
A) Option one
B) Option two
C) Both options provide equal degrees of operating leverage.
D) Operating leverage is indeterminable.
15) Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of
direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour.
Manufacturing overhead is applied at $25 per direct manufacturing labor hour.
Calculate the profit earned on 50 units if each unit sells for $9,000.
A) $65,000
B) $80,000
C) $75,000
D) $2,500
16) Judith Vending Company has invested $800,000 in a plant to make vending
machines. The target operating income desired from the plant is $120,000 annually. The
company plans annual sales of 1,200 vending machines at a selling price of $1,000
each.
What is the cost base of each vending machine for Judith Vending Company?
A) $1,000
B) $950
C) $900
D) $850
17) Estate Corp., has the following information:
Purchases are paid for in the following manner:
10% of the purchase amount in the month of purchase
50% of the purchase amount in the month after purchase
40% of the purchase amount in the second month after purchase
What is the expected balance in Accounts Payable as of March 31?
A) $37,250
B) $18,312
C) $2,900
D) $30,520
