Pauter Company
Pauter Company had the following historical accounting data per unit:
The units are normally transferred internally from Division A to Division B. The units
also may be sold externally for $210 per unit. The minimum profit level accepted by the
company is a markup of 30 percent. There were no beginning or ending inventories.
Refer to Pauter Company. If variable manufacturing costs without a fixed fee are used
as the transfer price, Division A’s transfer price would be
A.$60.
B.$90.
C.$105.
D.$144.
Short-run decisions include pricing for which of the following?
A.a special order with no long-term implications.
B.a special order with long-term implications.
C.a main product in a major market.
D.a period greater than six months.
Activity-based reporting. The Sampson Corporation manufactures oxygen tanks
for industrial environments. Information regarding resources for the month of March
follows.
In addition, $23,000 was spent on 700 quality inspections with a cost driver rate of $30,
and $8,000 was spent on 200 customer-service cost driver units with a cost driver rate
of $35. Sales for March were $335,000. Management has requested the following
statements be prepared.
Required:
a. Prepare a traditional income statement.
b. Prepare an activity-based income statement.
c. Write a short report explaining why the activity-based income statement provides
better information to managers.
Doug’s Delivery Company
Doug’s Delivery Company reports the following information for 2010:
Actual:
Standard:
Refer to Doug’s Delivery Company. What is the variable overhead price variance for
fuel costs?
A.$20.00 U
B.$20.00 F
C.$2.00 U
D.$2.00 F
How do decentralized companies that have many divisions doing diverse activities tend
to weight the performance evaluation?
A.more on each division’s performance and less on company-wide performance.
B.less on each division’s performance and more on company-wide performance.
C.on the stock market performance of the company’s shares, only.
D.equally between each division’s performance and company-wide performance.
Which of the following would be considered a capacity-sustaining activityin the
product cost hierarchy?
A.Plant management, building depreciation, rent, heating and lighting, market research,
and customer records.
B.Market research, customer records, and promotion.
C.Machine setups and quality inspections.
D.Energy to run machines and direct materials.
Pine Tar Forest Products has two production departments (Planting and Harvesting) and
two service departments (Cafeteria and Repairs). The service department costs must be
allocated to production departments. Management has decided to allocate the cost of the
cafeteria to other departments based upon the average number of employees and the
cost of the Repairs Department based upon the number of machine hours used.
Regardless of the allocation method used, Pine Tar Forest Products always starts the
allocation process with the Cafeteria Department.
If Pine Tar Forest Products distributes costs directly (direct method) from service
departments to productions departments, what additional overhead costs should be
allocated from the service departments to the Planting Department?
A.$56,800
B.$54,400
C.$35,940
D.$67,200
In profit planning and budgeting, which statement is true concerning an unfavorable
variance?
A.An unfavorable variance would decrease operating profit, holding all other things
constant.
B.An unfavorable variance is always negative (bad), holding all other things constant.
C.both “a” and “b”
D.none of the above.
The quality based view states that the firm should
A.always attempt to improve quality and that such attempts will succeed without limit.
B.not wait for inspections of finished products to reveal defects and then rework
defective goods.
C.establish quality goals and procedures at the beginning of the process and aim for
zero defects.
D.All of the answers are correct.
Activity-based management can reduce customer response time by
A.identifying the activities that consume the most resources.
B.making the activities more efficient.
C.identifying non-value-added activities which the firm can eliminate.
D.All of the answers are correct.
The steps of the net present value method for making long-term decisions include
A.estimate the amounts of future cash inflows and future cash outflows in each period
for each alternative under consideration.
B.requiring the use of the applicable treasury rate as the discount rate in computing the
present value of future cash flows.
C.if the present value of the future cash inflows exceeds the present value of the future
cash outflows for a proposal, reject the alternative.
D.ignore depreciation because it is not a cash flow and does not affects the after-tax
cash flow.
Which statement is true concerning the fixed overhead production efficiency variance?
A.The production efficiency variance exists as fixed costs are assumed to vary inversely
with volume.
B.The production efficiency variance exists as fixed costs are assumed to vary along
with volume.
C.The production efficiency variance exists as fixed costs are assumed to vary
exponentially with volume.
D.The production efficiency variance does not exist as fixed costs are assumed not to
vary with volume.
Which of the following is not an example of prevention costs?
A.Quality training
B.End-process sampling
C.Statistical process control
D.Designing production processes
What is the law which makes it illegal for any U.S. citizen or company to bribe foreign
government officials in the course of business?
A.Foreign Anti-bribery Practices Act.
B.Foreign Corruption Act.
C.Foreign Corrupt Practices Act.
D.Foreign Bribery and Corruption Act.
Which statement is true concerning integrated information systems?
A.Integrated information systems measure a company’s products, services, and
activities against other more efficient and effective divisions or businesses.
B.Integrated information systems tie together various databases and applications.
C.Integrated information systems focus on increasing quality as perceived and defined
by the customer.
D.Integrated information systems emphasize strengthening the weakest link (or
constraint) of the company to improve operations.
In the short run, which element is critical to product choice decisions?
A.Contribution margin per unit
B.Fixed costs per unit
C.Fixed costs associated with product lines
D.Contribution margin per unit of scarce resource
The cost hierarchy can be used to organize cost information for decision-making.
Which cost isnot part of the product cost hierarchy of expenses?
A.Capacity-sustaining.
B.Product-sustaining.
C.Customer-sustaining.
D.Vendor-sustaining.