In a lean environment, process problems are more visible than they are in a traditional
environment.
a. True
b. False
Answer:
The internal rate of return method of analyzing capital investment proposals uses
present value concepts to compute a rate of return expected from the proposals.
a. True
b. False
Answer:
Which of the following reasons would cause a company to reject an offer to accept
business at a special price?
a. The additional sale will not conflict with regular sales.
b. The additional sales will increase differential income.
c. The additional sales will not increase fixed expenses.
d. The additional sales will increase fixed expenses.
Answer:
If fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs
are $110, what is the amount of sales required to realize an operating income of
$200,000?
a. 9,231 units
b. 12,000 units
c. 10,769 units
d. 5,833 units
Answer:
The relative distribution of sales among various products sold is referred to as the:
a. by-product mix
b. joint product mix
c. profit mix
d. sales mix
Answer:
Opportunity cost is the amount of increase or decrease in cost that would result from the
best available alternative to the proposed use of cash or its equivalent.
a. True
b. False
Answer:
Horizontal analysis is a technique for evaluating financial statement data
a. for one period of time
b. over a period of time
c. on a certain date
d. as it may appear in the future
Answer:
Using the following partial table of present value of $1 at compound interest, determine
the present value of $50,000 to be received 3 years hence with earnings at the rate of
12% a year:
a. $37,550
b. $31,800
c. $35,600
d. $39,850
Answer:
A summary of the time tickets for August follows:
Present the journal entries to record (a) the labor cost incurred and (b) the application of
factory overhead to production for August. The factory overhead rate is 70% of direct
labor cost.
Answer:
Large batch sizes increase lead time.
a. True
b. False
Answer:
At the end of the fiscal year, the variances from standard are usually transferred to the
finished goods account.
a. True
b. False
Answer:
Which of the following is considered an unusual item affecting the prior period’s
income statement?
a. a change in accounting principles
b. fixed asset impairments
c. an extraordinary item
d. discontinued operations
Answer:
Panamint Systems Corporation is estimating activity costs associated with producing
disk drives, tapes drives, and wire drives. The indirect labor can be traced to four
separate activity pools. The budgeted activity cost and activity base data by product are
provided below.
Determine the activity-based cost for each disk drive unit.
a. $92.25
b. $130.69
c. $394.12
d. $279.57
Answer:
Which of the following costs are conversion costs?
a. direct labor cost and factory overhead cost
b. direct materials cost and direct labor cost
c. factory overhead cost
d. direct materials cost and factory overhead cost
Answer:
The plant managers in a cost center can be held responsible for major differences
between budgeted and actual costs in their plants.
a. True
b. False
Answer:
The excess of sales revenues over variable costs
Match the following terms with their definitions.
a. Relevant range
b. Break-even point
c. Contribution margin
d. Fixed costs
e. Variable costs
Answer:
Ratios and various other analytical measures are not a substitute for sound judgment,
nor do they provide definitive guides for action.
a. True
b. False
Answer:
In horizontal analysis, the current year is the base year.
a. True
b. False
Answer:
a plan showing the units of goods to be sold and the sales to be derived; usually the
starting point in the budgeting process
Match each phrase that follows with the term (a-f) it describes..
a. budget
b. capital expenditures budget
c. sales budget
d. production budget
e. cash budget
f. budgeted balance sheet
Answer:
Given the following information, determine the activity rate for setups.
a. $58.00
b. $18.00
c. $0.75
d. $5.09
Answer:
Roller Paint Co. reported the following data for the month of September. There were no
beginning inventories and all units were completed (no work in process).
In the month of September, 28,000 of the 30,000 units manufactured were sold at a
price of $80 per unit.
(a) Prepare a variable costing income statement.
(b) Prepare an absorption costing income statement.
(c) Briefly explain why there is a difference in income from operations between the two
methods.
Answer:
Target selling price to be achieved in the long term
Match the definitions that follow with the term (a’“e) it defines.
a. Engineering change order
b. Total cost concept
c. Variable cost concept
d. Normal selling price
e. Setup
Answer:
In addition to the differential costs in an equipment-replacement decision, the remaining
useful life of the old equipment and the estimated life of the new equipment are
important considerations.
a. True
b. False
Answer:
Which of the following is not a reason standard costs are separated into two
components?
a. The price and quantity variances need to be identified separately to correct the actual
major differences
b. Identifying variances determines which manager must find a solution to major
discrepancies
c. If a negative variance is overshadowed by a favorable variance, managers may
overlook potential corrections
d. Variances bring attention to discrepancies in the budget and require managers to
revise budgets closer to actual results
Answer:
Tucker Company produced 8,900 units of product that required 3.25 standard hours per
unit. The standard variable overhead cost per unit is $4.00 per hour. The actual variable
factory overhead was $111,000.
Determine the variable factory overhead controllable variance.
Answer:
The Bottling Department of Mountain Springs Water Company had 4,000 liters in
beginning work in process inventory (40% complete). During the period, 66,000 liters
were completed. The ending work in process inventory was 3,000 liters (70%
complete). Using the FIFO method, what are the equivalent units for conversion costs?
Answer:
Explain how variable costing net income will be different than absorption costing net
income under the following situations:
(1) A company had no beginning or ending inventory. During the year, it produced and
sold 10,000 units.
(2) A company had no beginning inventory. During the year, it produced 10,000 units
and sold 8,000 units.
(3) A company had 2,000 units in beginning inventory. During the year, it produced
10,000 units and sold 12,000 units.
Answer:
Discuss how equivalent units are computed under the average cost method.
Answer:
determine the units to be assigned costs
Answer:
Schedule of Activity Costs
From the above schedule, calculate the internal failure costs.
Answer:
Robin Company purchased and used 500 pounds of direct materials to produce a
product with a 520 pound standard direct materials requirement. The standard materials
price is $1.90 per pound. The actual materials price was $2.00 per pound.
Prepare the journal entries to record (1) the purchase of the materials and (2) the
material entering production.
Answer:
Differentiate between period and product costs, including examples of each type of
cost.
Answer:
Using the following information, prepare a factory overhead flexible budget for
Andover Company where the total factory overhead cost is $75,500 at normal capacity
(100%). Include capacity at 75%, 90%, 100%, and 110%. Total variable cost is $6.25
per unit and total fixed costs are $38,000. The information is for month ended August
Answer:
Crane Company Division B recorded sales of $360,000, variable cost of goods sold of
$315,000, variable selling expenses of $13,000, and fixed costs of $61,000; creating a
loss from operations of $29,000. Determine the differential income or loss from the
sales of Division B. Should this division be discontinued?
Answer:
