A value chart indicates
a. all steps in a process and the time it takes for them to be completed.
b. the value-added steps in a process and the time it takes for them to be completed.
c. the time and cost of all value-added steps in a process.
d. the time and costs of all value-added and non-value-added steps in a process.
Process quality yield reflects the proportion of
a. time it takes to make a good unit.
b. good units to defective units.
c. total time spent to total time available.
d. total units produced that are good units.
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
EUP units for Materials A and B.
a. 2,700 and 2,280, respectively
b. 2,700 and 2,450, respectively
c. 2,000 and 2,240, respectively
d. 2,450 and 2,880, respectively
The JIT philosophy does not focus on
a. standardizing parts used in products.
b. eliminating waste in the production process.
c. finding the absolute lowest price for purchased parts.
d. improving quality of output.
Which of the following attributes is a characteristic of the Internet business model?
a. many physical assets
b. complex interrelationships among members of management
c. a direct pipeline to customers
d. one-to-one relationships between a company and its principal vendors.
Costs that are common to many different activities within an organization are known as
____ costs.
a. product- or process-level
b. organizational-level
c. batch-level
d. unit-level
The overhead allocation method that allocates service department costs without
consideration of services rendered to other service departments is the
a. step method.
b. direct method.
c. reciprocal method.
d. none of the above.
Priceless Memories Company
Priceless Memories Company manufactures toy trains. Information on Priceless
Memories Company’s labor costs follow:
The following information applies to the upcoming month of July for Priceless
Memories Company:
Refer to Priceless Memories Company. What amount of budgeted labor cost would
appear in the July selling, general, and administrative expense budget?
a. $12,000
b. $21,000
c. $19,800
d. $32,800
Crosson Corporation recently sold a used machine for $40,000. The machine had a
book value of $60,000 at the time of the sale. What is the after-tax cash flow from the
sale, assuming the company’s marginal tax rate is 20 percent?
a. $40,000
b. $60,000
c. $44,000
d. $32,000
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. What is the cost per equivalent unit for material using
weighted average?
a. $1.72
b. $1.62
c. $1.77
d. $2.07
The cash budget ignoresall
a. dividend payments.
b. sales of capital assets.
c. noncash accounting accruals.
d. sales of common stock.
Ultralinear Electronics Corporation
Ultralinear Electronics Corporation manufactures and sells FM radios. Information on
the prior year’s operations (sales and production Model A1) is presented below:
Refer to Ultralinear Electronics Corporation. Assume that the remaining Model A1
radios can be sold through normal channels or to a foreign buyer for $6 per unit. If sold
through regular channels, the minimum acceptable price will be
a. $30.
b. $33.
c. $10.
d. $4.
The following information pertains to Venus Company’s cost-volume-profit
relationships:
How much will be contributed to profit before taxes by the 1,001st unit sold?
a. $650
b. $500
c. $150
d. $0
The contribution margin ratio always increases when the
a. variable costs as a percentage of net sales increase.
b. variable costs as a percentage of net sales decrease.
c. break-even point increases.
d. break-even point decreases.
Godfrey Corporation would like to institute an activity-based costing system to price
products. The company’s Purchasing Department incurs costs of $550,000 per year and
has six employees. Purchasing has determined the three major activities that occur
during the year.
During the year, 50,000 phone calls were made in the department; 15,000 purchase
orders were issued; and 10,000 shipments were received. Product A required 200 phone
calls, 150 receiving reports, and 50 purchase orders. Product B required 350 phone
calls, 400 receiving reports, and 100 purchase orders.
____ refers to avoiding competition in making a product distinct from that of
competitors by adding value or features for which consumers are willing to pay more.
a. Kaizen
b. Differentiation
c. Confrontation
d. Cost leadership
The Robbins Company manufactures special purpose machines to order. On January 1,
there were two jobs in process, #705 and #706. The following costs were applied to
these jobs in the prior year:
During January, the following transactions took place:
Actual overhead is applied to individual jobs at the end of each month using a rate
based on actual direct labor costs.
Required:
For a company that manufactures candy, how would the cost of sugar be classified?
a. Yes No
b. No Yes
c. Yes Yes
d. No No
The FASB requires which of the following to be used in preparation of external
financial statements?
a. variable costing
b. standard costing
c. activity-based costing
d. absorption costing
Contracting with vendors outside the organization to obtain or acquire goods and/or
services is called
a. target costing.
b. insourcing.
c. outsourcing.
d. product harvesting.
After the level of volume exceeds the break-even point
a. the contribution margin ratio increases.
b. the total contribution margin exceeds the total fixed costs.
c. total fixed costs per unit will remain constant.
d. the total contribution margin will turn from negative to positive.
Whitney Corporation
Whitney Corporation, a reseller of women’s fashions, has budgeted its activity for
March. The budget information is presented below:
Refer to Whitney Corporation. The budgeted cash disbursements for March are:
a. $382,500
b. $442,500
c. $472,500
d. $477,500
Cost containment practices by a firm would not be effective for cost increases caused
by
a. inflation.
b. a reduction in the quantity of an input purchased.
c. normal seasonality.
d. a reduction in the number of suppliers.
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the materials handing cost allocated to LCD TVs would be:
a. $23,077
b. $28,125
c. $30,000
d. $45,000
A firm has fixed costs of $200,000 and variable costs per unit of $6. It plans on selling
40,000 units in the coming year. To realize a profit of $20,000, the firm must have a
sales price per unit of at least
a. $11.00.
b. $11.50.
c. $10.00.
d. $10.50.
Ultralinear Electronics Corporation
Ultralinear Electronics Corporation manufactures and sells FM radios. Information on
the prior year’s operations (sales and production Model A1) is presented below:
Refer to Ultralinear Electronics Corporation. The Model B2 radio is currently in
production and it renders the Model A1 radio obsolete. If the remaining 500 units of the
Model A1 radio are to be sold through regular channels, what is the minimum price the
company would accept for the radios?
a. $30
b. $27
c. $18
d. $4
The criteria that are most often used to decide on allocation bases are?
a. yes yes no
b. yes yes yes
c. no yes
yes
d. no no no
Under the two-variance approach, the volume variance is computed by subtracting ____
based on standard input allowed for the production achieved from budgeted overhead.
a. applied overhead
b. actual overhead
c. budgeted fixed overhead plus actual variable overhead
d. budgeted variable overhead
Setup time is
a. no no
yes
b. yes yes
no
c. yes no
yes
d. no yes
yes
Parker Company
Below is an income statement for Parker Company:
Refer to Parker Company. What is Parker’s degree of operating leverage?
a. 3.67
b. 5.33
c. 1.45
d. 2.67
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What are the equivalent units for material using the weighted
average method?
a. 120,000
b. 123,860
c. 128,360
d. 130,000
Moore Company.
Moore Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #6, #9, and #13.
Direct material was requisitioned as follows for each job respectively: 30 percent, 25
percent, and 25 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000.
Other actual overhead costs totaled $36,000.
Refer to Moore Company. Assume the balance in Work in Process Inventory was
$18,500 on November 1 and $25,297 on November 30. The balance on November 30
represents one job that contains direct material of $11,250. How many direct labor
hours have been worked on this job (rounded to the nearest hour)?
a. 751
b. 1,324
c. 1,653
d. 2,976
Which of the following capital budgeting techniques typically ignores the time value of
money?
a. payback period
b. net present value
c. internal rate of return
d. profitability index
What are the three classes of activities defined by activity-based management. What is
customer response to each of these activities? What is management’s reaction to each of
these activities?
Variable costing is commonly used for internal reporting.
Garfield Company
Garfield Company applies overhead based on direct labor hours and has the following
available for the current month:
Refer to Garfield Company. Compute all the appropriate variances using the
two-variance approach.
In a(n) ____________________ cost system, factory overhead is assigned directly to
products and services.
There is an inverse relationship between degree of operating leverage and the margin of
safety.
When using the high-low method, fixed costs are computed before the variable
component is computed.
Consider the following data for a cooking department for the month of February:
*Direct material, 100% complete; conversion costs, 25% complete
~Direct material, 100% complete; conversion costs, 75% complete
Inspection occurs when production is 100 percent completed. Normal spoilage is 11
percent of good units completed and transferred out during the current period.
The following cost data are available:
Required:Prepare a detailed cost of production report. Use the FIFO method.
Distinguish between normal and abnormal spoilage.
Explain the source of variable overhead spending and efficiency variances and how
these variances are computed.
Contribution margin divided by revenue is referred to as the
________________________________________.
If actual overhead is less than applied overhead, factory overhead is said to be
____________________.
A long-run challenge for a business is achieving profitability.
Research and development expenses are normally considered to be discretionary costs.
The two components of total material/labor variance are
______________________________ and ___________________________________
Testing and adjusting manufacturing equipment is a prevention cost.
External performance measures focus on the efficiency and effectiveness of an
organization’s production process.
Fixed factory overhead is typically the production cost leastlikely to be minimized in
the short run.
Increasing automation generally results in cost management becoming more long-term
in nature.
Absorption costing conforms with generally accepted accounting principles.
Briefly discuss the net realizable value at split-off point method of allocating joint costs.