The most theoretically correct method of allocating service department costs is the
algebraic method.
A decision in which projects are ranked according to their impact on achieving
company objectives is a preference decision.
Decentralization reduces the need for effective communication among an
organization’s departments.
Cost-based transfer prices are most effective for common high-cost and high-volume
standardized services.
Information provided by financial reporting systems provides the most useful
information to cost managers.
When indirect labor is applied to a job in process, the manufacturing overhead account
is debited.
Building depreciation is generally considered an organizational or facility cost.
An organization typically develops a values statement before developing a mission
statement.
Benchmarks for performance measures may be monetary or non-monetary.
A debit to the Factory Overhead account represents actual overhead costs.
The slope of a regression line is determined by dividing the change in total cost by the
change in activity level.
The primary distinction between by-products and scrap is the difference in volume
produced.
The management of Freeman Industries has been evaluating whether the company
should continue manufacturing a component or buy it from an outside supplier. A $100
cost per component was determined as follows:
Freeman Industries uses 4,000 components per year. After Noel Corporation submitted
a bid of $80 per component, some members of management felt they could reduce costs
by buying from outside and discontinuing production of the component. If the
component is obtained from Noel Corporation, Freeman Industries’ unused production
facilities could be leased to another company for $50,000 per year.
Required:
Which of the following is not one of the three objectives of a quality program?
A. Product quality should be consistent to always meet the purchaser’s need(s).
B. A quality program should give management confidence that the quality is and will be
at a constant level.
C. A quality program should give customers confidence that the intended quality will be
achieved in products.
D. Product quality should always vary because customers change their wants and needs
over time.
Activity analysis allows managers to
A. classify activities so that processes can be eliminated.
B. devise ways to minimize or eliminate non-value-added activities.
C. evaluate process performance to gain competitive advantages.
D. all of the above.
Surfside Corporation
Surfside Corporation manufactures and sells two products: A and B. The operating
results of the company are as follows:
In addition, the company incurred total fixed costs in the amount of $9,000.
Refer to Surfside Corporation. How many total units would the company have needed
to sell to break even?
A. 3,750
B. 750
C. 3,600
D. 1,800
Fixed costs are ignored in allocating scarce resources because
A. they are sunk.
B. they are unaffected by the allocation of scarce resources.
C. there are no fixed costs associated with scarce resources.
D. fixed costs only apply to long-run decisions.
Mercy Medical Center has provided you with the following budget information for
April:
Mercy has a policy of maintaining a minimum cash balance of $20,000 and borrows
only in $1,000 increments. How much will Mercy borrow in April?
A. $80,000
B. $79,600
C. $99,000
D. $100,000
Which of the following is not true about an imposed budget?
A. It reduces the budgeting process time frame.
B. It uses the knowledge of top management as it relates to resource availability.
C. It enhances coordination.
D. It increases the feeling of teamwork.
A pro forma financial statement is
A. a financial statement for past periods.
B. a projected or budgeted financial statement.
C. presented for the form but contains no dollar amounts.
D. a statement of planned production.
Patterson Publishers is considering an investment that would require an initial cash
outlay of $400,000 and would have no salvage value. The project would generate
annual cash inflows of $75,000. The firm’s discount rate is 8 percent. How many years
must the annual cash flows be generated for the project to generate a net present value
of $0? Present value tables or a financial calculator are required.
A. between 5 and 6 years
B. between 6 and 7 years
C. between 7 and 8 years
D. between 8 and 9 years
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Boston Bakers. The incremental cost to purchase the new machine is
A. $15,000.
B. $17,500.
C. $22,500.
D. $25,000.
If sales and expenses both rise by $100,000
A. residual income will increase.
B. return on investment will increase.
C. return on investment will be unchanged.
D. asset turnover will decrease
In conjunction with a cost management system, gap analysis refers to comparing
A. the information being received by competitors’ managers to the information being
received by in-house managers.
B. the information needed to what is available.
C. current cost information to projected cost information.
D. budget figures to actual spending.
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
If A and C are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Riley Company. Using a physical measure, what amount of joint processing
cost is allocated to Product A (round to the nearest dollar)?
A. $2,938
B. $3,682
C. $4,500
D. $5,318
Which of the following statements is true?
A. The more customers a company has, the better off the company is.
B. A company should spare no expense to provide customer satisfaction.
C. Most customers make quality determinations by comparing a product or service to a
comparable product.
D. Cost-benefit analysis can help identify customers that cost more than they are worth
to the company.
The process of ____ occurs when equipment is programmed to stop when a certain
situation arises.
A. throughput
B. automation
C. backflushing
D. information sharing
A(n) _________________________ measures the resources consumed by a
manufacturing process.
Sales revenue at split-off less disposal costs equals
______________________________.
Ecology Solutions Corporation
The Green Division of Ecology Solutions Co. has developed a wind generator that
requires a special “S” ball bearing. The Ball Bearing Division of Ecology Solutions Co.
has the capability to produce such a ball bearing.
Unfortunately, the Ball Bearing Division is operating at capacity and will need to
reduce production of another existing product, the “T” bearing, by 1,000 units per
month to provide the 600 “S” bearings needed each month by the Green Division. The
“T” bearing currently sells for $50 per unit. Variable costs incurred to produce the “T”
bearing are $30 per unit; variable costs to produce the new “S” bearing would be $60
per unit.
The Green Division has found an external supplier that would furnish the needed “S”
bearings at $100 per unit. Assume that both the Green Division and Ball Bearing
Division are independent, autonomous investment centers.
Refer to Ecology Solutions Co. What factors besides price would Green Division want
to consider in deciding where it will purchase the bearing?
Discuss how activity-based costing and activity based management support continuous
improvement in an organization.
The branch of accounting that serves as a bridge between financial and managerial
accounting is ____________________ accounting.
Seminole Wire Corporation
The Wire Products Division of Seminole Wire Corporation produces “bales” of steel
wire that are used in various commercial applications. The bales sell for an average of
$20 each and The Wire Products Division has the capacity to produce 10,000 bales per
month. The Consumer Products Division of Seminole Wire Corporation uses
approximately 2,000 bales of steel wire each month in its production of various
appliances. The operating information for the Wire Products Division at its present level
of operations (8,000 bales per month) follows:
The Consumer Products Division currently pays $15 per bale for wire obtained from its
external supplier.
Refer to Seminole Wire Corporation. If 2,000 bales are transferred in one month to the
Consumer Products Division at $10 per bale, what would be the profit/loss of the Wire
Products Division? Assume that only variable production will be incurred by the Wire
Products Division.