A company would be reducing its discretionary costs if it
a. fired a production supervisor.
b. closed its research and development department.
c. successfully negotiated a reduction in its factory rent.
d. reduced its direct labor costs by hiring temporary workers.
Which of the following would be considered a non-financial performance
measurement?
a. increase in market share
b. variances from standards
c. number of customer complaints
d. cost of engineering changes
Process quality yield reflects the proportion of
a. good units to bad units.
b. time required to produce a good unit.
c. total units manufactured that are good.
d. total time spent to time available.
Williams Company
Williams Company has a job-order costing system and an overhead application rate of
120 percent of direct labor cost. Job #63 is charged with direct material of $12,000 and
overhead of $7,200. Job #64 has direct material of $2,000 and direct labor of $9,000.
Refer to Williams Company. What is the total cost of Job #64?
a. $10,800
b. $11,000
c. $21,800
d. $30,200
Joint costs are useful for
a. setting the selling price of a product.
b. determining whether to continue producing an item.
c. evaluating management by means of a responsibility reporting system.
d. determining inventory cost for accounting purposes.
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. Assume that the costs per EUP for material and
conversion are $2.00 and $2.25, respectively. What is the amount of the period cost for
July using FIFO?
a. $0
b. $12,750
c. $14,750
d. $17,000
Reed Company
Reed Company produces 50,000 units of Product Q and 6,000 units of Product Z during
a period. In that period, four set-ups were required for color changes. All units of
Product Q are black, which is the color in the process at the beginning of the period. A
set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red
units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was
then made to return the process to its standard black coloration and the units of Product
Q were run. Each set-up costs $500.
Refer to Reed Company. If set-up cost is assigned on a volume basis for the department,
what is the approximate per-unit set-up cost for the red units of Product Z?
a. $.036.
b. $.111.
c. $.250.
d. None of the responses are correct.
The material purchases budget tells a manager all of the following exceptthe
a. quantity of material to be purchased each period.
b. quantity of material to be consumed each period.
c. cost of material to be purchased each period.
d. cash payment for material each period.
If performance measures are perfect proxies for organizational goals,
a. sub-optimization will be enhanced.
b. sub-unit managers will strive to achieve organizational goals.
c. sub-units can all be decentralized.
d. residual income will rise.
An all-inclusive definition of quality views it as the ability of products/services to
a. only meet internal design specifications.
b. meet the customer’s stated or implied needs.
c. be produced using all value-added production activities.
d. be produced with no rework costs.
Vidal Corporation produces a single product. The following is a cost structure applied
to its first year of operations.
During the first year, Vidal Corporation manufactured 5,000 units and sold 3,800. There
was no beginning or ending work-in-process inventory.
Which of the following topics is of more concern to management accounting than to
cost accounting?
a. generally accepted accounting principles
b. inventory valuation
c. cost of goods sold valuation
d. impact of economic conditions on company operations
Not-for-profit organizations are required by the ____ to allocate joint costs.
a. AICPA
b. FASB
c. CASB
d. GASB
Houston National Bank
Houston National Bank had the following activities, traceable costs, and physical flow
of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. What is the cost per driver unit for the withdrawal
activity?
a. $0.09
b. $0.075
c. $30.00
d. $50.00
One of the obstacles to implementing open-book management is reluctance of an
organization to release sensitive financial data.
Webber Corporation is interested in purchasing a state-of-the-art stamping machine for
its manufacturing plant. The new machine has been designed to basically eliminate all
errors and defects in the production process. The new machine will cost $180,000, and
have a salvage value of $80,000 at the end of its eight-year useful life. Stone has
determined that cash inflows for years 1 through 8 will be as follows: $33,000;
$58,000; $28,000; $39,000; $27,000; $22,000, $27,000 and $29,000, respectively.
Maintenance will be required in years 3 and 6 at $14,000 and $9,000 respectively.
Webber uses a discount rate of 12 percent and wants projects to have a payback period
of no longer than six years.
Present value tables or a financial calculator are required.
Industrial Solutions Company
Industrial Solutions Company manufactures a cleaning solvent. The company employs
both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires
Materials A and B as well as skilled labor and unskilled labor. The standard and actual
material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ $1.25 per gallon
Material B: 24.75 gallons @ $2.00 per gallon
Skilled Labor: 4 hours @ $12 per hour
Unskilled Labor: 2 hours @ $ 7 per hour
Actual:
Material A: 10,716 gallons purchased and used @ $1.50 per gallon
Material B: 17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours: 1,950 @ $11.90 per hour
Unskilled labor hours: 1,300 @ $7.15 per hour
During the current month Industrial Solutions Company manufactured 500 55-gallon
drums.
Round all answers to the nearest whole dollar.
Refer to Industrial Solutions Company. What is the total material yield variance?
a. $1,111 U
b. $1,111 F
c. $2,670 U
d. $2,670 F
Averaging the total cost of completed beginning work-in-process inventory and units
started and completed over all units transferred out is known as
a. strict FIFO.
b. modified FIFO.
c. weighted average costing.
d. normal costing.
A company producing which of the following would be most likely to use a time
standard for labor?
a. mattresses
b. custom-made picture frames
c. floral arrangements
d. stained-glass windows
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using approximated net realizable value at split-off, what
amount of joint processing cost is allocated to Product Z (round to the nearest dollar)?
a. $2,796
b. $4,910
c. $4,000
d. $2,390
In which life-cycle stage are product quality improvements and stable selling prices
likely to occur?
a. introduction
b. growth
c. maturity
d. decline
Horner Company
Horner Company manufactures a single product. Each unit sells for $15. The firm’s
projected costs are listed below:
Refer to Horner Company. What is Horner’s projected margin of safety for the current
year?
a. $133,333
b. $150,000
c. $80,000
d. $100,000
A company would most likely have an unfavorablelabor rate variance and a favorable
labor efficiency variance if
a. the mix of workers used in the production process was more experienced than the
normal mix.
b. the mix of workers used in the production process was less experienced than the
normal mix.
c. workers from another part of the plant were used due to an extra heavy production
schedule.
d. the purchasing agent acquired very high quality material that resulted in less
spoilage.
Which of the following activities within an organization would be least likely to be
outsourced?
a. accounting
b. data processing
c. transportation
d. product design
Which of the following is not a valid method for determining product cost?
a. arbitrary assignment
b. direct measurement
c. systematic allocation
d. cost-benefit measurement
Which of the following is not a product cost component?
a. rent on a factory building
b. indirect production labor wages
c. janitorial supplies used in a factory
d. commission on the sale of a product
A company has estimated its economic order quantity for Part A at 2,400 units for the
coming year. If ordering costs are $200 and carrying costs are $.50 per unit per year,
what is the estimated total annual usage?
a. 6,000 units
b. 28,800 units
c. 7,200 units
d. 2,400 units
Which of the following is an example of a committed fixed cost?
a. investment in production facilities
b. advertising
c. preventive maintenance
d. employee training programs
A primary purpose of a balanced scorecard is to give
a. managers a way to judge past performance.
b. stockholders a way to judge current performance.
c. managers a way to forecast future performance.
d. stockholders a way to tie strategy to profitability.
Who is not involved in the successful implementation of business process
reengineering (BPR)?
a. investors
b. customers
c. suppliers
d. top management
The Appliance Division
The Appliance Division of Electrotech Corporation reported the following results for a
recent year
Refer to the Appliance Division
What was the asset turnover ratio of The Appliance Division?
a. 1.475
b. 3.48
c. 0.680
d. 1.23
Continental Publishing Company
The Magazine Division of Continental Publishing Company had the following financial
data for the year:
Refer to Continental Publishing Company. If the manager of the Magazine Division is
evaluated based on return on investment, how much would she be willing to pay for an
investment that promises to increase net segment income by $50,000?
a. $ 50,000
b. $ 333,333
c. $1,000,000
d. $ 500,000
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What is the cost of all units transferred out using the FIFO
method?
a. $204,624
b. $191,289
c. $287,004
d. $298,029
Historically, the cost of quality has been
a. included in account balances for items such as Work in Process Inventory and
marketing expenses.
b. detailed in various “cost of quality” account balances on the Income Statement.
c. immaterial because no accounts were developed to detail these amounts.
d. generally spent in the prevention rather than the appraisal category.
To evaluate the performance of individual departments, interdepartmental transfers of a
product should preferably be made at prices
a. equal to the market price of the product.
b. set by the receiving department.
c. equal to fully-allocated costs of the producing department.
d. equal to variable costs to the producing department.
A credit to the Factory Overhead account represents applied overhead costs.
The net realizable value approach is used to account for scrap and by-products when the
net realizable value is insignificant.
Grade refers to a product meeting the highest number of a customer’s needs at the
lowest possible cost.
Three groups of elements affecting the design of a cost management system are
____________________, ____________________, and ____________________.
What are four generic strategies that may be used in cost management to deal with
uncertainty?
What forms can strategic alliances take?
The amount of raw materials that must be purchased can be computed by the following
formula: Beginning inventory + Materials required – Ending inventory.
Any management action that reduces employment opportunities upon restructuring is
known as ____________________.
If underapplied factory overhead is immaterial, the account is closed by a debit to Cost
of Goods Sold.
Direct materials are normally considered unit-level costs.
Costs that are necessary to sustain an organization’s operations are referred to as
____________________________.
Kennedy Company
The following information is available for Kennedy Company for March of the current
year. All materials are added at the start of production.
Refer to Kennedy Company. Prepare the cost of production report assuming the
weighted average method.
Joint costs may be allocated to main products, but notto by-products.
The expression of what an organization wishes to accomplish and how it will serve its
customers is contained in the ______________________________.