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1) One way to increase capacity is to reduce the time it takes for setups and processing.
2) Direct costs are traced the same way for actual costing and normal costing.
3) All inventory costs are available in financial accounting systems.
4) Value chain refers to its value to the employee.
5) Cost behavior is considered linear whenever a straight line is a reasonable
approximation for the relation between cost and activity.
6) Advertising cost is an example of a discretionary cost.
7) The weighted-average cost is the total of all costs entering the Work-in-Process
account (whether they are from beginning work-in-process or from work started during
the current period) divided by total equivalent units of work done to date.
8) As changes in unit costs and inventory levels across periods decrease, the difference
in the costs of units completed under the weighted-average and FIFO methods also
decreases.
9) Cash received from the disposal of old equipment is NOT relevant to a decision to
buy a replacement.
10) Management accountants work closely with managers in various departments to
formulate strategies by providing information about the sources of competitive
advantage.
11) A increase in the tax rate will increase the net present value (NPV) for a given
capital budgeting project.
12) When administered wisely, budgets promote communication and coordination
among the various subunits of the organization.
13) When the allocated amount of indirect costs are less than the actual amount, indirect
costs have been ________.
A) within budget
B) overallocated
C) underallocated
D) perfectly allocated
14) Which of the following statements is true of implementing an ABC system?
A) Managers should never compromise on the cause-and-effect relationship of cost
drivers and costs.
B) The three guidelines for refining costing systems should be ignored while
implementing an ABC costing system.
C) The heterogeneous cost pools give managers greater confidence in the activity and
product cost numbers from the ABC system.
D) Identifying the cost-allocation bases defines the number of activity pools into which
costs must be grouped in an ABC system.
15) Assume that the cafeteria expects to serve 1,850 meals during Week 8. Using the
high-low method, the expected total cost of the cafeteria would be:
A) $5,340
B) $5,180
C) $5,300
D) $4,375
16) Difend Cleaners has been considering the purchase of an industrial dry-cleaning
machine. The existing machine is operable for three more years and will have a zero
disposal price. If the machine is disposed now, it may be sold for $100,000. The new
machine will cost $350,000 and an additional cash investment in working capital of
$100,000 will be required. The new machine will reduce the average amount of time
required to wash clothing and will decrease labor costs. The investment is expected to
net $110,000 in additional cash inflows during the first year of acquisition and $250,000
each additional year of use. The new machine has a three-year life, and zero disposal
value. These cash flows will generally occur throughout the year and are recognized at
the end of each year. Income taxes are not considered in this problem. The working
capital investment will not be recovered at the end of the asset's life.
What is the net present value of the investment, assuming the required rate of return is
20%? Would the company want to purchase the new machine?
A) $(62,600); yes
B) $(59,880); no
C) $59,880; yes
D) $62,600; no
17) Which of the following is considered a cost of quality?
A) external failure costs
B) opportunity costs
C) sunk costs
D) contingent liabilities
18) A graph of a series of successive observations of a particular step, procedure, or
operation taken at regular intervals of time is a ________.
A) control chart
B) Pareto diagram
C) cause-and-effect diagram
D) fishbone diagrams
19) When using the dual-rate method, the fixed cost allocation is based on ________.
A) indirect usage
B) budgeted usage
C) incremental cost allocation
D) prime cost allocation
20) Northern Star sells several products. Information of average revenue and costs is as
follows:
The company sells 12,000 units at the end of the year.
The contribution margin per unit is ________.
A) $11.00
B) $12.00
C) $4.00
D) $14.00
21) A disadvantage of the weighted-average method compared to the FIFO
process-costing method is that ________.
A) FIFO is computationally simpler
B) FIFO provides better management information for planning and control purposes
C) when unit cost per input prices fluctuate markedly from month to month, its per unit
cost is less representative than FIFO
D) the information it provides about changes in unit prices from one period to the next
is less useful than the information provided by FIFO
22) The Corata Appliance Manufacturing Corporation manufactures two vacuum
cleaners, the Standard and the Super. The following information was gathered about the
two products:
What is the budgeted sales-mix percentage for the Standard and the Super vacuum
cleaners, respectively?
A) 0.80 and 0.20
B) 0.70 and 0.30
C) 0.20 and 0.80
D) 0.30 and 0.70
23) During the month of April, direct labor cost totaled $15,000 and direct labor cost
was 30% of prime cost. If total manufacturing costs during April were $79,000, the
manufacturing overhead was:
A) $35,000
B) $29,000
C) $50,000
D) $129,000
24) Data collection problems arise when ________.
A) data are recorded electronically rather than manually
B) accrual-basis costs are used rather than cash-basis costs
C) fixed and variable costs are not separately identified and both are allocated to
products on a per unit basis
D) purely inflationary price effects are removed
25) In a process-costing system when goods move from department to department, the
accounting for such transfers is relatively simple under ________.
A) standard costing
B) FIFO costing
C) weighted-average costing
D) operations costing
