Which of the following statements about management or financial accounting is false?
a. Financial accounting must follow GAAP.
b. Management accounting is not subject to regulatory reporting standards.
c. Both management and financial accounting are subject to mandatory recordkeeping
requirements.
d. Management accounting should be flexible.
Which of the following couldnotbe used in job-order costing?
a. standards
b. an average cost per unit for all jobs
c. normal costing
d. overhead allocation based on the job’s direct labor hours
A cost accumulation system should most likely be reevaluated when a company has
a. automated one or more production processes.
b. introduced new products to its customers.
c. had its industry deregulated.
d. all of the above.
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a FIFO method of process costing, compute the
average cost per EUP for conversion.
a. $45.50
b. $45.00
c. $43.03
d. $47.59
Costs that are incurred when customers complain are:
a. prevention costs
b. detection costs
c. appraisal costs
d. failure costs
The ISO 9000 standards
a. indicate which companies’ products are better than those of competitors.
b. allow management to decide how to meet the standards for quality assurance.
c. include specific directives about product design, material procurement, and
environmental responsibilities.
d. compose a program of quality assurance under which companies are registered by the
International Organizational for Standardization.
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.
A process costing system
a. cannot use standard costs.
b. restates Work in Process Inventory in terms of completed units.
c. accumulates costs by job rather than by department.
d. assigns direct labor and manufacturing overhead costs separately to units of
production.
A major benefit of cost-based transfers is that
a. it is easy to agree on a definition of cost.
b. costs can be measured accurately.
c. opportunity costs can be included.
d. they provide incentives to control costs.
By-products are
a. items resulting from a joint process that have no further value.
b. not sufficient alone, in terms of sales value, for management to justify undertaking
the joint process.
c. also known as scrap.
d. the primary reason management undertook the production process.
Crosby Corporation
Crosby Corporation has two service departments: Data Processing and
Administration/Personnel. The company also has three divisions: X, Y, and Z. Data
Processing costs are allocated based on hours of use and Administration/Personnel costs
are allocated based on number of employees.
Assume that Data Processing provides more service than Administration/Personnel.
Refer to Crosby Corporation. Assume that Data Processing costs have been allocated
and the balance in Administration is $600,000. Using the step method, what amount is
allocated to Y?
a. $225,000
b. $128,571
c. $187,500
d. $200,000
Merit pay is
a. a contingent amount of pay that is earned by managers whose subunits meet a target
rate of return.
b. always for a limited period of time and must be re-earned each period.
c. any pay earned when the company is profitable.
d. a pay increment received when a specific performance level is achieved.
When using one of the discounted cash flow methods to evaluate the desirability of a
capital budgeting project, which of the following factors is generallynotimportant?
a. method of financing the project under consideration
b. timing of cash flows relating to the project
c. impact of the project on income taxes to be paid
d. amounts of cash flows relating to the project
Refer to Stillwater Corporation. Assume that the FIFO EUP cost for material and
conversion are $1.50 and $4.75, respectively. Using FIFO what is the total cost assigned
to the units transferred out?
a. $414,194
b. $339,094
c. $445,444
d. $396,975
Product quality includes all of the following except
a. appeal.
b. performance.
c. durability.
d. price.
Engel Company has 3 divisions: A, B, and C. Division A’s income statement shows the
following for the year ended December 31:
Cost of goods sold is 80 percent variable and 20 percent fixed. Of the fixed costs, 50
percent are avoidable if the division is closed. All of the selling expenses relate to the
division and would be eliminated if Division A were eliminated. Of the administrative
expenses, 85 percent are applied from corporate costs. If Division A were eliminated,
Engel’s income would
a. increase by $100,000.
b. decrease by $197,500.
c. decrease by $310,000.
d. decrease by $422,500.
If investment A has a payback period of three years and investment B has a payback
period of four years, then
a. A is more profitable than B.
b. A is less profitable than B.
c. A and B are equally profitable.
d. the relative profitability of A and B cannot be determined from the information given.
Julie Collins recently invested in a project that promised an internal rate of return of 15
percent. If the project has an expected annual cash inflow of $12,000 for six years, with
no salvage value, how much did Julie pay for the project?
Present value tables or a financial calculator are required.
a. $35,000
b. $45,414
c. $72,000
d. $31,708
Which of the following can be used to indicate factors that slow down or cause
unnecessary work in a process?
a. activity analysis
b. total quality management
c. cost of quality
d. all of the above
Which of the following is more characteristic of a decentralized than a centralized
business structure?
a. The firm’s environment is stable.
b. There is little confidence in lower-level management to make decisions.
c. The firm grows very quickly.
d. The firm is relatively small.
Davis Corporation has developed the following flexible budget formula for monthly
overhead:
How much overhead should Davis expect if the firm plans to produce 200,000 units?
a. $52,600
b. $59,000
c. $196,600
d. $203,000
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 for Packaging?
a. $ 0.44
b. $ 2.25
c. $23.00
d. $51.75
The time value of money is explicitly recognized through the process of
a. interpolating.
b. discounting.
c. annuitizing.
d. budgeting.
If a firm’s net income doesnotchange as its volume changes, the firm(‘s)
a. must be in the service industry.
b. must have no fixed costs.
c. sales price must equal $0.
d. sales price must equal its variable costs.
If an analyst desires a conservative net present value estimate, he/she will assume that
all cash inflows occur at
a. mid year.
b. the beginning of the year.
c. year end.
d. irregular intervals.
A project has an initial cost of $125,000 and generates a present value of net cash
inflows of $150,000. What is the project’s profitability index?
a. .20
b. 1.20
c. .83
d. 5.00
Approximated net realizable value at split-off for joint products is computed as
a. selling price at split-off minus further processing and disposal costs.
b. final selling price minus further processing and disposal costs.
c. selling price at split-off minus allocated joint processing costs.
d. final selling price minus a normal profit margin.
The Jewelry Division of Genuine Gems Company is considering an investment in a
new project. The project has an estimated cost of $1,000,000. If Genuine Gems
Company has a target rate of return of 12%, how large does the return on investment on
this project need to be to generate $150,000 of residual income?
a. 15%
b. 12%
c. 25%
d. 27%
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What are equivalent units of production for conversion
costs using weighted average?
a. 83,600
b. 82,700
c. 82,500
d. 81,600
Cost and management accounting
a. require an entirely separate group of accounts than financial accounting uses.
b. focus solely on determining how much it costs to manufacture a product or provide a
service.
c. provide product/service cost information as well as information for internal decision
making.
d. are required for business recordkeeping as are financial and tax accounting.
A cost that remains constant in total but varies on a per-unit basis with changes in
activity is called a(n)
a. expired cost.
b. fixed cost.
c. variable cost.
d. mixed cost.
A coefficient of determination has a value between -1 and +1.
The Sarbanes-Oxley Act of 2002 provides legal protection for individuals who report
illegal organizational activities to appropriate persons or agencies.
What are four criteria that a valid base for allocating costs should consider?
The operating budget is expressed both in units and dollars.
In a just-in-time (JIT) environment, end-of-period variance analysis and reporting does
notoccur.
Depreciation expense provides a tax shield against the payment of taxes.
The process costing system that computes equivalent units only on work done in the
current period is known as a
__________________________________________________.
What are some factors that a company must consider when deciding to raise or lower
sales prices on products?
The effect of capital expenditures on the master budget is reflected through cash
payments made for acquisition of capital assets.
An organization’s discount rate should be less than the organization’s cost of capital.
When multiple labor categories are used, the financial effect of using a different mix of
workers in a production process is referred to as a _________________________
variance.
Three types of products that result from a joint process are
_________________________, ____________________, and
____________________.
The journal entry to record normal spoilage specifically identified with a particular job
includes a credit to Work in Process.
The internal business perspective of the balanced scorecard focuses on using an
organization’s intellectual capital to adapt to or influence customer needs and
expectations.