1) Rework labor time is considered an overhead cost and not a direct labor cost.
2) As a company reduces its inventory levels, operating income differences between
absorption costing and variable costing become immaterial.
3) A company usually prepares a budget for nonmanufacturing costs after preparing all
operating budgets.
4) Complete reciprocated costs is the support department’s own costs plus any
interdepartmental cost allocations.
5) The production volume variance arises only for variable overhead costs.
6) In case of pricing for special orders, managers include all future costs, variable costs,
and costs that are fixed in the short run.
7) y = a + bX, y = a, and y = bX are the three basic types of linear cost functions.
8) Which of the following statements is true about analyzing a single variance?
A) It should be overemphasized to take proper decision.
B) It should be evaluated in isolation from other variances.
C) It can lead to different other variances.
D) It should be used for quality evaluation.
9) Managers use ________ to ensure employees’ intrinsic motivation, the desire to
achieve self-satisfaction for performing well regardless of external rewards such as
bonuses or promotion.
A) diagnostic control systems
B) boundary systems
C) belief systems
D) interactive control systems
10) For Divaxo Company, labor-hours are 30,000 and wages $130,000 at the high point
of the relevant range, and labor-hours are 18,000 and wages $85,000 at the low point of
the relevant range.
What is the constant?
A) $17,500
B) $45,000
C) $7,000
D) $4,375
11) Under standard costing, ________.
A) fixed overhead costs are treated as if they are a variable cost
B) fixed overhead costs are treated as if they are a fixed cost
C) variable overhead costs are treated as if they are a fixed cost
D) fixed overhead costs are treated as if they are a sunk cost
12) Which of the following is an assumption under FIFO process-costing method?
A) It assumes some of the higher-cost units are placed in ending work in process.
B) It assumes that all the lower-cost units from the previous period in beginning work
in process are the first to be completed and transferred out of the process.
C) It assumes that unit inputs costs are constant and do not fluctuate in the short run.
D) It assumes that the ending work in process consists of only the lower-cost
current-period units.
13) Bekits Corporation manufactured 37,500 grooming kits for horses during March.
The following fixed overhead data relates to March:
What is the amount of fixed overhead allocated to production?
A) $134,375.50
B) $124,740.00
C) $133,000.00
D) $129,937.50
14) Which of the following is true of planning in decision making?
A) It helps an organization to select goals and strategies.
B) It improves the quality of products.
C) It helps in evaluating performance.
D) It helps in the analysis of actual performance.
15) A master budget ________.
A) is the initial plan of what the company intends to accomplish in the period and
evolves from
both the operating and financing decisions
B) is a substitute for the management functions of planning and coordination
C) improves companies’ market capitalization and evolves from both the investing and
financing decisions
D) provides an ethical framework for decision making
16) Shamokin Manufacturing produces a Tourbillon watch movement called OM362.
Shamokin expects to sell 10,000 units of OM362 and to have an ending finished
inventory of 2,000 units. Currently, it has a beginning finished inventory of 800 units.
Each unit of OM362 requires two labor operations, one labor hour of assembling and
two labor hours of polishing. The direct labor rate for assembling is $10 per assembling
hour and the direct labor rate for polishing is $12.50 per polishing hour.
The expected cost of direct labor for OM362 is ________.
A) $350,000
B) $378,000
C) $392,000
D) $420,000
17) Longer manufacturing cycle times results in ________.
A) lower revenues and higher inventory carrying costs
B) higher opportunity costs and low profit margins
C) lower opportunity costs and high profit margins
D) higher revenues and lower inventory carrying costs
18) Place the following steps in order for estimating a cost function using quantitative
analysis.
A = Plot the data
B = Collect data on the dependent variable and the cost driver.
C = Choose the dependent variable
D = Identify the independent variable, or cost driver
E = Estimate the cost function
A) D C E A B
B) C D B A E
C) A D C E B
D) E D C B A
19) Which of the following costs is inventoried when using absorption costing?
A) variable selling costs
B) fixed administrative costs
C) variable manufacturing costs
D) fixed selling costs
20) Which of the following is true of budgets when they are administered thoughtfully?
A) They eliminate subjectivity in performance evaluation.
B) They can eliminate the uncertainty faced by a company.
C) They promote coordination within the subunits of a company.
D) They are a substitute the planning and coordination functions of management.