Which cost can be cut for a period of time because their reduction presents no serious
short-term threats to production and marketing?
A.discretionary costs.
B.committed costs.
C.sunk costs.
D.opportunity costs.
When sales dollars are used as the measure of volume in the cost-volume-profit
equation, the focus is on solving for total revenue required to break even or a target
profit rather than total units. The contribution margin ratio is defined as which of the
following?
A.total contribution margin divided by total sales.
B.unit contribution margin divided by unit sales price.
C.total contribution margin divided by total sales and unit contribution margin divided
by unit sales price.
D.the sum of fixed costs plus target profits divided by unit sales price.
A firm facing a make-or-buy decision must decide whether to meet its needs internally
or to acquire goods or services from external sources. Buying from external sources is
often called
A.down-sizing.
B.right-sizing.
C.out-sourcing.
D.in-sourcing.
What is the continuous process of measuring products, services, or activities against
competitors’ performance?
A.benchmarking.
B.competitive analysis.
C.performance evaluation
D.none of the above.
Companies do not allocate common costs to departments and products for which of the
following reasons:
A.to develop product cost information for purposes of pricing and bidding.
B.contract cost reimbursement.
C.motivation.
D.dumping excess inventories on the market.
Which is the best stage in the Value Chain to identify quality problems?
A.Research & Development
B.Production
C.Marketing
D.Customer Service
A current theme in business today is that “quality is free.” Which of the following
statements best exemplifies that theme?
A.Cost-benefit analyses is the primary focus in improving quality.
B.Quality is always free in the short-run.
C.Short-run benefits will always outweigh the costs of improving quality.
D.If quality is built into the product, the resulting benefits far outweigh the costs of
improving quality.
The Sarbanes-Oxley Act of 2002 has increased the interaction between the audit
committee of the board of directors and the which of the following?
A.controller.
B.treasurer.
C.internal auditor.
D.production manager.
Ben’s Delivery Company
Ben’s Delivery Company reports the following information for 2010:
Actual:
Standard:
Refer to Ben’s Delivery Company. What is the variable overhead efficiency variance for
fuel costs?
A.$32.00 F
B.$ 6.00 U
C.$12.00 F
D.$20.00 U
Which of the following is not a step in activity based costing?
A.Identify the departments that consume resources and assign costs to those
departments.
B.Identify the cost drivers associated with each activity.
C.Compute a cost rate per cost driver unit.
D.Assign cost to products by multiplying the cost driver rate times the volume of cost
driver consumed by the product.
Relevant costs for decisions to sell or process further include
A.joint costs.
B.additional processing costs.
C.fixed costs.
D.sunk costs.
Colorado Furniture
Colorado Furniture had the following historical accounting data, per hundred board
feet, concerning one of its products:
The shelving is normally transferred internally from the Cutting Division to the
Finishing Division. It also may be sold externally for $110 per hundred board feet. The
minimum profit level accepted by the company is a markup of 20 percent.
Refer to Colorado Furniture. If the negotiated price is used, Colorado Furniture’s
transfer price should be a
A.maximum of $100.80.
B.minimum of $84.00.
C.maximum of $110.00.
D.minimum of $80.00.
Which of these is a fundamental principle of internal control to prevent fraud?
A.Separate duties so that a single person carrying out a series of tasks could not commit
fraud and take steps to hide it.
B.Only permit top management to authorize transactions.
C.Allow cashiers to collect cash from customers and enter the receipts into the account
records.
D.Allow cashiers to collect cash from customers and deposit the cash on a daily basis
into the bank.
The Information Technology Club, Inc. is considering an investment that requires
$20,000 and promises to return $28,090 in 3 years. The company’s income tax rate is 40
percent. What is the approximate internal rate of return?
A.8 percent.
B.10 percent.
C.12 percent.
D.15 percent.
Which of the following statements is true concerning variable costs?
A.Variable costs are likely to respond to the amount of attention devoted to them by a
management.
B.Variable costs are associated with marketing, shipping, warehousing, and billing
activities.
C.Variable costs do not change in total for a given period but decrease on a per unit
basis.
D.Variable costs change in total with changes in production activity.
What is important to recognize when comparing the cost-benefit considerations of job
versus process costing?
A.Job costing provides less detailed information than process costing and job costing
costs more to implement than process costing.
B.Job costing provides less detailed information than process costing and job costing
costs less to implement than process costing.
C.Job costing provides more detailed information than process costing and job costing
costs less to implement than process costing.
D.Job costing provides more detailed information than process costing and job costing
costs more to implement than process costing.
Ben’s Delivery Company
Ben’s Delivery Company reports the following information for 2010:
Actual:
Standard:
Refer to Ben’s Delivery Company. What is the variable overhead price variance for fuel
costs?
A.$32.00 F
B.$ 6.00 U
C.$12.00 F
D.$20.00 U
Explain the use of financial modeling in a multiple product setting.
Solving for budgeted manufacturing costs. Cooke Company expects to sell 5 million
cases of paper towels during the current year. Budgeted costs per case are $20 for direct
materials, $16 for direct labor, and $4 (all variable) for manufacturing overhead. Cooke
began the period with 50,000 cases of finished goods on hand and wants to end the
period with 30,000 cases of finished goods on hand.
Required:
Compute the budgeted manufacturing costs of the Cooke Company for the current
period. Assume no beginning or ending inventory of work-in-process.
Why aren’t fixed costs relevant for most short-term decisions?
For the month of May, Straight & Narrow, CPAs, worked 300 hours for client A and
400 hours for client B. Straight & Narrow bills clients at the rate of $120 per hour. The
accounting staff is paid $75 per hour. The accounting staff worked a total of 800 hours
during the month, but 100 of these hours were unbillable. Service overhead costs paid
during the month totaled $5,600. Service overhead is assigned to clients based
proportionally on direct labor hours. The company also spent $3,000 in marketing and
administrative costs. Calculate the overhead rate and the amounts allocated to clients A
& B.
Why is time important in a competitive environment?
Describe the internal rate of return method of assessing investment alternatives.
Explain how to base target costs on target prices.
Ronald’s Refrigeration Repair located in Tampa, Florida provides service to restaurant
customers. He has always had the policy of letting his employees have 6 holidays off
each year (New Year’s Day, Memorial Day, July 4th, Labor Day, Thanksgiving, and
Christmas). However, he has also discovered that these are the days when restaurants
seem to be the busiest and have refrigeration breakdowns. As a result he is considering
paying an emergency skeletal crew time and a half overtime rather than giving them the
days off.
Ronald estimates that if he does this, he can generate $5,000 revenue for each of these 6
days. The incremental cost for 2 repair personnel will be $60 per hour for 8 hours per
day plus daily costs of: $500 for parts, $300 for transportation costs, and $200 for
dispatcher staff. These costs do not include a share of monthly rent or depreciation
related to equipment.
Although Ronald would like to maintain his current holidays off policy, he would like
to know the opportunity cost of this. Present Ronald with an estimate of the opportunity
cost and explain whey you do not have to consider rent or depreciation in the estimate.
Describe the cost accumulation process for a manufacturer. Is it different for a service
organization?
Feed the Hungry Foundation
Feed the Hungry Foundation is a non-profit organization that has a cost of capital of 10
percent. The foundation is considering the replacement of a piece of equipment. The old
machine has a book value of $3,000 and a remaining estimated life of 5 years with no
salvage value at that time. The salvage value of the old machine is currently $1,500.
The new equipment will cost $10,000. It has an estimated life of 5 years with no
salvage value then. Annual cash operating costs are $4,000 for the old machine and
$2,000 for the new machine.
Refer to Feed the Hungry Foundation. What is the present value of the operating cash
outflows for the new machine?