1) In a cost center, a manager is responsible for investments, revenues, and costs.
2) Tightly budgeted machine time standards can lead to unfavorable variable overhead
efficiency variance.
3) When using the cause-and-effect criterion, cost drivers are selected as the cost
allocation bases.
4) The balanced scorecard uses financial and nonfinancial performance measures to
evaluate short-run and long-run performance in a single report.
5) In a just-in-time system, suppliers are selected primarily on the basis of their ability
to provide materials and products at the lowest possible price.
6) Lump-sum fixed costs of acquiring capacity decrease automatically if the capacity
needed turns out to be less than the capacity acquired.
7) The transfer price creates revenues for the selling subunit and costs for the buying
subunit affecting each subunit’s operating income.
8) Transferred-in costs are always 100 percent complete at the beginning of the process
in the new department.
9) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted
machine-hours to allocate variable manufacturing overhead. The following information
pertains to the company’s manufacturing overhead data:
What is the budgeted variable overhead cost rate per output unit?
A) $11.70
B) $11.75
C) $11.20
D) $11.00
10) Predatory pricing is a type of price discrimination that ________.
A) allows prices to be cut to the level of variable costs
B) is required when a company declares bankruptcy so that it can sell its remaining
goods quickly
C) is used in the food industry for perishable goods
D) deliberately sets prices very low, sometimes even below costs, to minimize
competition
11) The contribution income statement highlights ________.
A) gross margin
B) the segregation of costs into period costs and inventoriable costs
C) different product lines
D) variable and fixed costs
12) When making pricing decisions managers should include fixed cost per unit in the
cost because ________.
A) it leads to reporting higher operating income for the period
B) it allows managers to report positive contribution as long as prices are above
variable costs
C) in the long run, the price of a product must exceed the full cost of the product
D) it requires the management accountant to perform a detailed analysis of
cost-behavior patterns to separate product costs into variable and fixed components
13) A plot of data that results in bunched points with little slope generally indicates
________.
A) a strong relationship
B) a weak relationship
C) a positive relationship
D) a negative relationship
14) A maintenance manager of a theatre is most likely to be responsible for a(n)
________.
A) revenue center
B) investment center
C) cost center
D) profit center
15) Product-cost cross-subsidization ________.
A) exists when one overcosted product results in more than one other product being
overcosted
B) means that if a company undercosts more than one of its products, it will overcost
more than one of its other products
C) means that if a company undercosts one of its products, it will overcost at least one
of its other products
D) exists only when one overcosted product results in all other products being
overcosted
16) Gas Supply Corporation uses the investment center concept for the gasoline stations
that it manages in the city. Consolidated has a 15% required rate of return on investment
in order for a branch station to be viable. Select operating data for three of its stations
for 2015 are as follows:
Required:
a.Compute the return on investment for each station.
b.Which station manager is doing best based only on ROI? Why?
c.Are any of the stations in danger of being closed due to lack of performance?
d.What other factors should be included when evaluating the managers?
17) For a manufacturing company, direct labor costs may be included in ________.
A) direct materials inventory only
B) merchandise inventory only
C) both work-in-process inventory and finished goods inventory
D) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
18) Which of the following is a learning-and-growth measure to study the output during
bottleneck situations?
A) manufacturing cycle efficiency for key processes
B) carrying cost of inventories
C) number of employees trained to manage bottlenecks
D) improve customer-response time during bottlenecks
19) Which of the following can be used to arrive at the target rate of return on
investment?
A) dividing target annual operating income by invested capital
B) multiplying target annual operating income by the rate of fixed preference dividend
C) dividing invested capital by estimated dividend rate
D) multiplying earnings available to equity stakeholders by price-equity ratio
20) The unique feature of an ABC system is the emphasis on ________.
A) costing individual jobs
B) department indirect-cost rates
C) multiple-cost pools
D) individual activities
21) Butler Hospital wants to estimate the cost for each patient stay. It is a general health
care facility offering only basic services and not specialized services such as organ
transplants.
Required:
a.Classify each of the following costs as either direct or indirect with respect to each
patient.
b.Classify each of the following costs as either fixed or variable with respect to hospital
costs per day.
22) Budgets are used to ________.
A) increase the book value of its assets
B) communicate with external stakeholders
C) calculate the income tax liability
D) formulate company strategies
23) Which of the following statements is true of conversion costs?
A) In process costing, they include all the factors of production.
B) They include all manufacturing costs including direct materials, direct labor, and
other direct and indirect manufacturing costs.
C) In process costing, they are usually considered to be added evenly throughout the
production process.
D) They include only direct materials and excludes all other manufacturing and
non-manufacturing costs.
24) Bosely Manufacturing Co. wants to classify costs for the product produced at its
facility. The company produces only one product at the facility and operates
continually. The cost categories are:
Product cost
Prime cost
Conversion cost
Period cost
The following costs are found in the accounting records:
a.Quality control inspection wages
b.Raw material purchases
c.Sales commissions
d.Factory depreciation
e.Assembly wages
Required:
Assign each of the above costs to the most appropriate cost categories.