1) Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for
an annual production capacity of 12 million pages.
For 2015 Velshi Printers has decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2015, two customers, Money Managers and Hospital Systems, are expected to
use the following printing services:
When costs are assigned using the single cost driver, number of pages printed, then
________.
A) Velshi Printers will want to retain this highly profitable customer
B) Money Managers will likely seek to do business with competitors
C) Money Managers is unfairly over billed for its use of printing resources
D) Money Managers is grossly under billed for the job, while other jobs will be unfairly
over billed
2) Purple Trees manufactures rustic furniture. The cost accounting system estimates
manufacturing costs to be $240 per table, consisting of 60% variable costs and 40%
fixed costs. The company has surplus capacity available. It is Purple Trees’ policy to
add a 75% markup to full costs.
Purple Trees is invited to bid on a one-time-only special order to supply 100 rustic
tables. What is the lowest price Purple Trees should bid on this special order?
A) $7,200
B) $12,000
C) $14,400
D) $42,000
3) Comfort Manufacturing is a small textile manufacturer using machine-hours as the
single indirect-cost rate to allocate manufacturing overhead costs to the various jobs
contracted during the year. The following estimates are provided for the coming year
for the company and for the Winton High School band jacket job.
What is the bid price for the Winton High School job if the company uses a 40%
markup of total manufacturing costs?
A) $2,310
B) $2,880
C) $2,058
D) $3,927
4) The following information pertains to Alleigh’s Mannequins:
What is the amount of gross margin?
A) $1,475,000
B) $1,500,000
C) $2,507,500
D) $1,032,500
5) World Statues produces a specialty statue item. The following information has been
provided by management:
Required:
a.What is the cost per statue if absorption costing is used?
b.What is the cost per statue if ‘super-variable costing” is used?
c.What is the total throughput contribution?
6) Goldfarb’s Book and Music Store has two service departments, Warehouse and Data
Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted
warehouse-hours. Data Center Department costs of $150,000 are allocated based on the
number of computer log-on hours. The costs of operating departments Music and Books
are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and
number of computer log-on hours are as follows:
Using the step-down method, what amount of Data Center Department cost will be
allocated to Department Music if the service department with the highest percentage of
interdepartmental support service is allocated first? (Round up)
A) $117,342
B) $66,667
C) $92,592
D) $83,333
7) Top management compensation cost is an example of ________ in the cost hierarchy.
A) unit-level costs
B) batch-level costs
C) product-sustaining costs
D) facility-sustaining costs
8) Variable costing regards fixed manufacturing overhead as a(n) ________.
A) administrative cost
B) inventoriable cost
C) period cost
D) product cost
9) Activity-based budgeting would separately estimate ________.
A) the cost of overhead for a department
B) a plant-wide cost-driver rate
C) the cost of a setup activity
D) All of these answers are correct.
10) Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products
has a policy of adding a 20% markup to full costs and currently has excess capacity.
The following information pertains to the company’s normal operations per month:
Grounded Coffee Products is approached by an overseas customer to fulfill a
one-time-only special order for 1,000 units. All cost relationships remain the same
except for a one-time setup charge of $20,000. No additional design, marketing, or
distribution costs will be incurred. What is the minimum acceptable bid per unit on this
one-time-only special order?
A) $146.125
B) $1346.125
C) $126.125
D) $946.125
11) Which of the following is true of cost accounting?
A) It provides financial information about cash-based transactions only.
B) It accounts only the financial information of business transactions, not the
nonfinancial information.
C) It provides financial information regarding the cost of acquiring resources.
D) It must be prepared in accordance with GAAP.
12) Craylon Corp has three divisions, which operate autonomously. Their results for
2015 were as follows:
The company’s desired rate of return is 15%.
Required:
a.Compute each division’s ROI. Round to three decimal places.
b.Compute each division’s residual income.
13) Lukehart Industries, Inc., produces air purifiers. Lukehart, Inc., produces the air
purifiers in batches. To manufacture a batch of the purifiers, Lukehart, Inc., must set up
the machines and assembly line tooling. Setup costs are batch-level costs because they
are associated with batches rather than individual units of products. A separate Setup
Department is responsible for setting up machines and tooling for different models of
the air purifiers.
Setup overhead costs consist of some costs that are variable and some costs that are
fixed with respect to the number of setup-hours. The following information pertains to
June 2015:
Calculate the flexible-budget variance for variable overhead setup costs.
A) $114 favorable
B) $264 favorable
C) $264 unfavorable
D) $114 unfavorable
14) One possible means of determining the difference between operating incomes for
absorption costing and variable costing is by ________.
A) subtracting sales of the previous period from sales of this period
B) subtracting fixed manufacturing overhead in beginning inventory from fixed
manufacturing overhead in ending inventory
C) multiplying the number of units produced by the budgeted fixed manufacturing cost
rate
D) adding fixed manufacturing costs to the production-volume variance
15) The best estimate of the total contribution margin when 5,300 units are sold is:
A) $51,940
B) $469,050
C) $109,710
D) $398,560
16) Which of the following inventory costing methods shown below is most likely to
cause undesirable incentives for managers to build up finished goods inventory?
A) absorption costing
B) variable costing
C) throughput costing
D) direct costing
17) Roberson Corporation manufactured 30,000 ice chests during September. The
variable overhead cost-allocation base is $11.25 per machine-hour. The following
variable overhead data pertain to September:
What is the variable overhead efficiency variance?
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable
18) An advantage of nonfinancial measures of quality include that they ________.
A) focus managers’ attention on how poor quality affects operating income
B) assist in problem solving by comparing costs and benefits of different
quality-improvement programs and by setting priorities for cost reduction
C) are useful indicators of future long-run performance
D) use certain statistical measures to justify their data
19) Weather Inc., manufactures single room sized air conditioners. The cost accounting
system estimates manufacturing costs to be $190 per air conditioner, consisting of 75%
variable costs and 25% fixed costs. The company has surplus capacity available. It is
Weather Inc.’s policy to add a 30% markup to full costs.
A medium sized motel chain is currently expanding and has decided to create more
rooms and air condition all of its rooms, which are currently not air conditioned.
Weather Inc. is invited to submit a bid to the motel chain. What per unit price will
Weather Inc. most likely bid for this special order of 200 units? Assume that the price is
being fixed for a long-term commitment.
A) $190.00 per unit
B) $142.50 per unit
C) $247.00 per unit
D) $230.00 per unit
20) Bismite Corporation purchases trees from Cheney lumber and processes them up to
the splitoff point where two products (paper and pencil casings) are obtained. The
products are then sold to an independent company that markets and distributes them to
retail outlets. The following information was collected for the month of October:
The cost of purchasing 250 trees and processing them up to the splitoff point to yield
180,000 sheets of paper and 180,000 pencil casings is $12,500.
Bismite’s accounting department reported no beginning inventory.
If the sales value at splitoff method is used, what is the approximate production cost for
each paper sheet?
A) $0.309
B) $0.301
C) $0.031
D) $0.039