1) To evaluate overall aggregate performance, return on investment and residual income
measures are more appropriate than return on sales.
2) The cost driver of an indirect cost is often used as the cost-allocation base.
3) Fixed cost per unit reduces with an increase in production volume.
4) Costs of Quality (COQ) are classified into four categories: prevention costs,
appraisal costs, opportunity costs, and sales costs.
5) Just-in-time production system comprises a single database that collects data and
feeds it into software applications supporting all of a company’s business activities.
6) The planning of fixed overhead costs does not differ from the planning of variable
overhead costs.
7) Depreciation on manufacturing equipment is a product cost.
8) In costs-plus-fixed-fee contracts the allocation of a specific cost may be difficult to
defend on the basis of any cause-and-effect reasoning.
9) Service-sustaining costs are the costs of activities that managers cannot trace to
individual services but that support the organization as a whole.
10) To analyze customer profitability, corporate-sustaining costs should be allocated to
customers.
11) Throughput margin equals revenues minus all product costs.
12) Which of the following statements is true about responsibility accounting
statements?
A) Responsibility accounting excludes controllable costs.
B) Responsibility accounting segregates fixed costs and variable costs.
C) Responsibility accounting excludes fixed costs and variable costs.
D) Responsibility accounting segregates uncontrollable costs from controllable costs.
13) Inventoriable costs are costs of a product that are ________.
A) costs of a product that are considered assets in a company’s balance sheet when the
costs are incurred and that are expensed as cost of goods sold only when the product is
sold
B) considered liabilities in a company’s balance sheet when the costs are incurred and
that are expensed only when the product is sold
C) considered as assets in a company’s income statement when the costs are capitalized
and that are expensed as cost of goods sold only when the product is sold
D) considered as liabilities in a company’s income statement when the costs are
capitalized and that are expensed only when the product is sold
14) An inaccurate cost function with a constant that is estimated too high may most
likely result in ________.
A) evaluating a weak manager as providing strong performance
B) promoting a product that is actually less profitable than budgeted
C) predicting total costs that are too low
D) replicating processes that are truly cost saving
15) Which of the following inventory costing methods results in the least amount of
costs being inventoried?
A) absorption costing
B) variable costing
C) throughput costing
D) direct costing
16) Activity-based-costing analysis makes no distinction between ________.
A) direct-materials inventory and work-in-process inventory
B) short-run variable costs and short-run fixed costs
C) parts of the supply chain
D) components of the value chain
17) Which of the following is true if a slope coefficient in a cost function is decreased
from the last year?
A) fixed cost per unit has decreased
B) variable cost per unit has decreased
C) production has decreased
D) contribution margin has decreased
18) Harbor Corp currently leases a corporate suite in an office building for a cost of
$280,000 a year. Only 80% of the corporate suite is currently being used. A start-up
business has proposed a plan that would use the other 20% of the suite and increase the
overall costs of maintaining the space by $20,000.
If the incremental method were used, what amount of cost would be allocated to the
start-up business?
A) $20,000
B) $300,000
C) $60,000
D) $75,000
19) The following information pertains to the January operating budget for Casey
Corporation.
Budgeted sales for January $200,000 and February $100,000.
Collections for sales are 60% in the month of sale and 40% the next month.
Gross margin is 30% of sales.
Administrative costs are $10,000 each month.
Beginning accounts receivable is $20,000.
Beginning inventory is $14,000.
Beginning accounts payable is $65,000. (All from inventory purchases.)
Purchases are paid in full the following month.
Desired ending inventory is 20% of next month’s cost of goods sold (COGS).
For January, budgeted net income is ________.
A) $60,000
B) $50,000
C) $40,000
D) $30,000
20) The flexible budget contains ________.
A) budgeted amounts for actual output
B) budgeted amounts for planned output
C) actual costs for actual output
D) actual costs for planned output
21) The budgeted indirect-cost rate is calculated ________.
A) at the beginning of the year
B) during the year
C) at the end of each quarter
D) at the end of the year
22) Morgan Clay Products manufactures clay molded pottery on an assembly line. Its
standard costing system uses two cost categories, direct materials and conversion costs.
Each product must pass through the Molding Department and the Finishing
Department. Direct materials are added at the beginning of the production process.
Conversion costs are allocated evenly throughout production.
What is the balance in ending work-in-process inventory?
A) $25,500
B) $19,250
C) $15,600
D) $14,175
23) In the manufacturing sector, ________.
A) only variable costs are subtracted to determine gross margin
B) fixed overhead costs are subtracted to determine gross margin
C) fixed overhead costs are subtracted to determine contribution margin
D) all operating costs are subtracted to determine contribution margin
24) Kaelker Corporation reports that at an activity level of 7,000 units, its total variable
cost is $590,730 and its total fixed cost is $372,750. What would be the total cost, both
fixed and variable, at an activity level of 7,100 units? Assume that this level of activity
is within the relevant range.
A) $963,480
B) $977,244
C) $971,919
D) $970,362
25) ________ include a budgeted statement of cash flows and a budgeted balance sheet.
A) Revenue budgets
B) Financial budgets
C) Operating budgets
D) Production budgets
26) Leslie Manufacturing reported the following:
How much of the above would be considered period costs for Leslie Manufacturing?
A) $104,000
B) $140,000
C) $150,000
D) $147,000
27) Finmin Company has the following sales budget for the last six months of 2015:
Sales are immediately due, however the cash collection of sales, historically, has been
as follows:
65% of sales collected in the month of sale,
25% of sales collected in the month following the sale,
8% of sales collected in the second month following the sale, and
2% of sales are uncollectible.
What is the ending balance of accounts receivable for the end of September, assuming
uncollectible balances are written off at the end of the second month following the sale?
A) $199,000
B) $97,000
C) $89,800
D) $86,000
28) This question refers to flexible-budget variance formulas with the following
descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. The
best label for the formula [(AP)(AQ) – (BP)(BQ)] is the ________.
A) efficiency variance.
B) price variance
C) total flexible-budget variance
D) spending variance
29) Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its
costing system uses two cost categories, direct materials and conversion costs. Each
product must pass through the Assembly Department and the Testing Department.
Direct materials are added at the beginning of the production process. Conversion costs
are allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
Data for the Assembly Department for June 2015 are:
Costs for June 2015:
What is the direct materials cost per equivalent unit during June?
A) $569
B) $560
C) $552
D) $480