The numerator in the formula for equivalent units includes all beginning inventory
costs when using the FIFO costing assumption.
The balanced scorecard approach complements measures of past performance with
measures of the drivers of future performance.
Economic order quantity (EOQ) is compatible with just-in-time systems.
The difference between the actual wages paid to employees and the standard wages for
all hours worked is the labor efficiency variance.
When budgeting for discretionary costs, less is always better.
A credit to the Factory Overhead account represents actual overhead costs.
Practical capacity does not adjust for routine downtime in a production process.
Hourly compensation provides a definite link between performance and reward.
When using the high-low method, the variable component is computed before
computing the fixed component.
Fixed costs per unit remain constant with levels of production.
One of the main factors to consider when using a cost-based transfer price is whether to
use actual or standard costs.
When using a negotiated transfer price, a decision must be made which market price to
use.
When computing profit on an after-tax basis, it is necessary to divide the pretax profit
by the effective tax rate.
Glassman Company
Glassman Company produces two products: A and B. The company has three overhead
functions that are required for both products.
Below is production information for Products A and B:
The company produces 800 units of Product A and 8,000 units of Product B each
period.
The overhead functions have the following hourly costs:
Refer to Glassman Company If total overhead is assigned to A and B on the basis of
overhead activity hours used, the total product cost per unit assigned to Product A will
be
A. $86.32.
B. $95.00.
C. $115.50.
D. None of the responses are correct.
At the end of the last fiscal year, Sheraton Company had the following account
balances:
If the most common treatment of assigning overapplied overhead were used, the final
balance in Cost of Goods Sold is:
A. $974,000.
B. $974,660.
C. $985,340.
D. $986,000.
Treasures Company manufactures picture frames of all sizes and shapes and uses a
job-order costing system. There is always some spoilage in each production run. The
following costs relate to the current run:
The actual cost of a spoiled picture frame is $7.00. During the year 170 frames are
considered spoiled. Each spoiled frame can be sold for $4. The spoilage is considered a
part of all jobs.
Required:
a. Labor hours are used to determine the predetermined overhead rate. What is the
predetermined overhead rate per direct labor hour?
b. Prepare the journal entry needed to record the spoilage.
c. Prepare the journal entry if the spoilage relates only to Job #12 rather than being a
part of all production runs.
An implication of the demand-pull nature of the JIT production process is that
A. finished goods inventories must be available to meet customer demand, although
raw material is delivered on an as-needed basis.
B. more storage space for inventories is necessary.
C. finished products are packaged and shipped to customers immediately, thus requiring
minimal finished goods inventories.
D. problem areas become less visible as inventories are reduced.
Charleston Company
Charleston Company has two departments (Processing and Packaging) and uses a
job-order costing system. Charleston applies overhead in Processing based on machine
hours and on direct labor cost in Packaging. The following information is available for
July:
Refer to Charleston Company. What is the overhead application rate per machine hour
for Processing?
A. $ 0.81
B. $ 1.24
C. $17.80
D. $22.00
Control of engineered costs is frequently achieved through the use of
A. zero-base budgeting.
B. program budgeting.
C. standards.
D. cash budgeting.
Stillwater Corporation
The following information is available for Stillwater Corporation for the current year:
All materials are added at the start of production.
Refer to Stillwater Corporation. Using FIFO, what is the cost per equivalent unit for
material?
A. $1.42
B. $1.66
C. $1.71
D. $1.60
____ places the primary responsibility for quality on the maker or producer.
A. Pareto analysis
B. Quality control
C. Benchmarking
D. Activity analysis
A cost management system
A. is finalized when the information currently being produced is the same as the
information currently desired.
B. can be generically designed to fit the information needs of the majority of domestic
(but not global) organizations.
C. must be continuously improved to adapt to changes in an organization’s internal and
external environment.
D. that has been appropriately designed from gap analysis, does not need to be changed
unless there is a change in organizational management or culture.
The opportunity cost of making a component part in a factory with excess capacity for
which there is no alternative use is
A. the total manufacturing cost of the component.
B. the total variable cost of the component.
C. the fixed manufacturing cost of the component.
D. zero.
The balanced scorecard perspective that addresses how well the organization is
meeting specific customer-based criteria is the:
A. learning and growth perspective
B. internal business perspective
C. customer value perspective
D. financial perspective
Traditional overhead allocations result in which of the following situations?
A. Overhead costs are assigned as period costs to manufacturing operations.
B. High-volume products are assigned too much overhead, and low-volume products
are assigned too little overhead.
C. Low-volume products are assigned too much, and high-volume products are
assigned too little overhead.
D. The resulting allocations cannot be used for financial reports.
The reward system for subunit managers of mature businesses should emphasize
A. long-term competitive prospects.
B. near-term profit and cash flow.
C. success in product design and development.
D. exceeding last year’s subunit profit.
Which of the following capital budgeting techniques has been criticized because it fails
to consider investment profitability?
A. payback method
B. accounting rate of return
C. net present value method
D. internal rate of return
In the variable costing income statement, which line separates the variable and fixed
costs?
A. selling expenses
B. general and administrative expense
C. product contribution margin
D. total contribution margin
A firm producing one product has a budgeted overhead of $100,000, of which $20,000
is variable. The budgeted direct labor is 10,000 hours.
Required: Fill in the blanks.
The pre-tax and after-tax cash flows would be the same for all of the following items
except
A. the liquidation of working capital at the end of a project’s life.
B. the initial (outlay) cost of an investment.
C. the sale of an asset at its book value.
D. a cash payment for salaries and wages.
For workers in a multiprocess handling situation, which of the following happens?
A. no no
B. no yes
C. yes yes
D. yes no
A cost management system should provide information to
A. all functional areas of the organization.
B. only the accounting area of the organization.
C. only the production area of the organization.
D. organizational managers, but not to staff personnel.
Mobile Corporation
Mobile Corporation is a manufacturer of electronic blood pressure monitors for
home use. The following is a summary of quality costs for the first year of operations.
Refer to Mobile Corporation. What is the total failure cost?
Why will there frequently be a difference between the budgeted cost of material in the
material purchases budget and the budgeted cash disbursement for material in the cash
budget?
The relationship between a company’s variable costs and fixed costs is referred to as its
______________________________.
What are the principal characteristics of the Internet business model?
A cost that varies inversely with the level of production is known as a
____________________ cost.
A search for various feasible combinations of resources and methods that will increase
functionality and reduce costs is referred to as ______________________________.
The process costing system that computes equivalent units on beginning work in
process inventory as well as work done in the current period is known as a
_________________________________________________________________.
When can a discretionary fixed cost be subjected to control methods that are used for
engineered costs?
List and explain three types of quality costs.
Underapplied factory overhead that is material in amount is closed to
______________________________, ______________________________, and
______________________________ at year end.