Strategic alliances can result in improved operating efficiencies for multiple
organizations.
Reinvestment assumptions are different under each method of ranking capital projects.
Abnormal continuous losses are absorbed by all units in ending inventory and
transferred out on a EUP basis.
To increase the probability of success, it is important to involve customers in business
processing reengineering (BPR) projects.
Joint costs may be allocated to by-products as well as primary products.
Joint costs occur after the split-off point in a production process.
Pareto analysis is frequently used to aid management in deciding where to concentrate
quality prevention cost dollars.
The margin of safety is computed by dividing 1 by the degree of operating leverage.
In a standard job-order costing system, factory overhead is applied using predetermined
rates times standard input.
The internal business perspective of the balanced scorecard focuses on using an
organization’s intellectual capital to adapt to or influence customer needs and
expectations.
Joint costs may be allocated to main products, but not to by-products.
In a just-in-time (JIT) environment, the optimal situation is to have only one vendor for
any given item.
In a totally automated organization, using theoretical capacity will generally provide the
lowest fixed overhead application rate.
In a job-order costing system, costs are accumulated for each individual job.
A coefficient of determination has a value between -1 and +1.
Which of the following always has a direct cause-effect relationship to a cost?
A. yes yes
B. yes no
C. no yes
D. no no
The material purchases budget tells a manager all of the following except the
A. quantity of material to be purchased each period.
B. quantity of material to be consumed each period.
C. cost of material to be purchased each period.
D. cash payment for material each period.
The projected sales price for a new product (which is still in the development stage of
the product life cycle) is $50. The company has estimated the life-cycle cost to be $30
and the first-year cost to be $60. On this type of product, the company requires a $12
per unit profit. What is the target cost of the new product?
A. $30
B. $38
C. $42
D. $60
Control charts are appropriate devices in
A. total quality control.
B. statistical process control.
C. total quality management.
D. all of the above.
Detroit Manufacturing Company makes three products: A and B are considered main
products and C a by-product.
Production and sales for the year were:
220,000 lbs. of Product A, salable at $6.00
180,000 lbs. of Product B, salable at $3.00
50,000 lbs. of Product C, salable at $.90
Production costs for the year:
Required: Using the by-product revenue as a cost reduction and net realizable value
method of assigning joint costs, compute unit costs (a) if C is a by-product of the
process and (b) if C is a by-product of B.
An item or event that has a cause-effect relationship with the incurrence of a variable
cost is called a
A. mixed cost.
B. predictor.
C. direct cost.
D. cost driver.
Horner Company
Horner Company manufactures a single product. Each unit sells for $15. The firm’s
projected costs are listed below:
Refer to Horner Company. What is Horner’s projected margin of safety for the current
year?
A. $133,333
B. $150,000
C. $80,000
D. $100,000
Nelson Corporation
Nelson Corporation has the following information available for May of the current
year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Nelson Corporation. Prepare a schedule showing the computation for cost per
equivalent unit assuming the (a) FIFO and (b) weighted average method.
Griffith Corporation
Griffith Corporation is considering an investment in a labor-saving machine.
Information on this machine follows:
Refer to Griffith Corporation. What is the internal rate of return on this project (round
to the nearest 1/2%)? Present value tables or a financial calculator are required.
A. 37.5%
B. 25.0%
C. 10.5%
D. 13.5%
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What are equivalent units of production for conversion
costs using FIFO?
A. 79,700
B. 79,500
C. 81,100
D. 80,600
In a job-order costing system,
A. standards cannot be used.
B. an average cost per unit within a job cannot be computed.
C. costs are accumulated by departments and averaged among all jobs.
D. overhead is typically assigned to jobs on the basis of some cost driver.
If a cost can be reduced to zero in the short run without significantly harming the
organization, the cost is a
A. variable cost.
B. committed cost.
C. discretionary cost.
D. product cost.
Which of the following competitive strategies is least profitable?
A. differentiation
B. cost leadership
C. confrontation
D. price fixing
Wyman Corporation
Wyman Corporation. has the following information for May:
All material is added at the start of the process and all finished products are transferred
out.
Refer to Wyman Corporation. Assume that FIFO process costing is used. What is the
cost per equivalent unit for conversion?
A. $3.05
B. $3.87
C. $4.25
D. $6.40
Avoidable costs are usually
A. committed.
B. common.
C. discretionary.
D. joint.
Careful analysis of the capital budget is an important control activity for
A. variable costs.
B. discretionary costs.
C. committed costs.
D. period costs.
Industrial Solutions Company
Industrial Solutions Company manufactures a cleaning solvent. The company employs
both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires
Materials A and B as well as skilled labor and unskilled labor. The standard and actual
material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ $1.25 per gallon
Material B: 24.75 gallons @ $2.00 per gallon
Skilled Labor: 4 hours @ $12 per hour
Unskilled Labor: 2 hours @ $ 7 per hour
Actual:
Material A: 10,716 gallons purchased and used @ $1.50 per gallon
Material B: 17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours: 1,950 @ $11.90 per hour
Unskilled labor hours: 1,300 @ $7.15 per hour
During the current month Industrial Solutions Company manufactured 500 55-gallon
drums.
Round all answers to the nearest whole dollar.
Refer to Industrial Solutions Company. What is the labor yield variance?
A. $2,583 U
B. $2,583 F
C. $1,138 F
D. $1,138 U
When cost driver analysis is used, organizational profit or loss can be determined by
subtracting
A. organizational costs from total margin provided by products.
B. organizational costs from total product revenue.
C. total product costs from total product revenue.
D. total unit, batch, product/process, and organizational level costs incurred for a period
from total product revenue.
A system that accounts for both environmental costs and the impact of environmental
issues is referred to as a(n)
__________________________________________________.
What are some of the benefits of a well-prepared budget?
An observation that is found outside the relevant range is referred to as a(n)
____________________.
Explain the meaning of the coefficient of determination in cost estimation.
The number of good units or quantity of services that are produced and sold by an
organization within a specified time is referred to as ____________________.
Whitmore Corporation
Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product
in the current year. At that level of volume, it projects a sales price of $30 per unit, a
contribution margin ratio of 40 percent, and fixed costs of $5 per unit.
Refer to Whitmore Corporation. What is the company’s projected breakeven point in
dollars and units?
The costing method that includes beginning work-in-process inventory in the
computation of equivalent units is the ________ method.
The final step in the master budget process is preparation of the
_________________________.
Discuss process costing in a multi-department atmosphere.
Why is it important for a company to be (geographically) close to its suppliers to
implement a JIT inventory control system?