1) Absorption costing helps managers to artificially inflate profits by encouraging the
production of products that absorb the highest amount of fixed manufacturing costs.
2) The weighted-average process costing method does not distinguish between units
started in the previous period but completed during the current period and units started
and completed during the current period.
3) When there is a lesser degree of homogeneity, fewer cost pools are required to
accurately explain the use of company resources.
4) Misleading cost numbers are larger when only unit-level cost drivers are used for
allocating overheads of multiple complex products.
5) A major weakness of comparing two companies using only operating incomes as the
basis of comparison is that it ignores the differences in the size of the investment.
6) Allocated fixed overhead can be expressed in terms of allocation-base units or in
terms of the budgeted fixed cost per unit.
7) Product costs are recorded as expenses in the period in which the related products are
sold.
8) If two different direct materialssuch as the circuit board and microphoneare added to
the process at different times, a company will need two different direct-materials
categories to assign direct materials cost.
9) The major advantages of quantitative methods are that they are objective, so
managers can use them to evaluate different cost drivers.
10) The first step in designing accounting based performance measures is to choose a
target level of performance and feedback mechanism.
11) The reciprocal allocation method ________.
A) is the most widely used because of its simplicity
B) requires the ranking of support departments in the order that the allocation is to
proceed
C) highlights the complete reciprocated costs of support departments and how these
costs differ from budgeted or actual costs of the departments
D) allocates support-department costs to other support departments and to operating
departments in a sequential manner that partially recognizes the mutual services
provided among all support departments
12) Sport-in Corporation manufactured 10,000 golf bags during April. The following
fixed overhead data pertain to March:
Which of the following is the correct mathematical expression to calculate the fixed
overhead production-volume variance?
A) static-budget amount – flexible-budget amount
B) flexible-budget amount – actual costs incurred
C) actual costs incurred – fixed overhead allocated for actual output
D) budgeted fixed overhead – fixed overhead allocated for actual output
13) Which item is an indication of integrity under the Standards of Ethical Conduct?
A) Refrain from engaging in any conduct that would prejudice carrying out duties
ethically.
B) Communicate information fairly and objectively.
C) Keep information confidential except when disclosure is authorized or legally
required.
D) Recognize and communicate professional limitations or other constraints that would
preclude responsible judgment or successful performance of an activity.
14) The following information pertains to the January operating budget for Casey
Corporation, a retailer:
Budgeted sales are $200,000 for January
Collections of sales are 50% in the month of sale and 50% the next month
Cost of goods sold averages 70% of sales
Merchandise purchases total $150,000 in January
Marketing costs are $3,000 each month
Distribution costs are $5,000 each month
Administrative costs are $10,000 each month
For January, budgeted gross margin is ________.
A) $100,000
B) $140,000
C) $60,000
D) $50,000
15) ERP systems store vast quantities of information about the materials, machines and
equipment, labor, power, maintenance, and setups needed to manufacture different
products. This helps simplify the budgeting process as ERP systems ________.
A) can quickly calculate the manufacturing and nonmanufacturing costs based on a
given sales quantity
B) automatically identify and record changes in processes involved in producing
products
C) identify which underlying assumptions are likely to change
D) always use a rolling budget ensuring that a budget is always available for a specified
future period
16) Gross margin is ________.
A) sales revenue less variable costs
B) sales revenue less cost of goods sold
C) contribution margin less fixed costs
D) contribution margin less variable costs
17) Sensitive performance measures ________.
A) the salary component of the managers
B) are not affected by managers’ performance and fail to induce them to improve
C) motivate managers as well as limit their exposure to risk
D) increases the exposure of credit
18) For May, Woodruff will report a(n) ________.
A) favorable sales-mix variance
B) unfavorable sales-mix variance
C) favorable sales-volume variance
D) unfavorable sales-volume variance
19) For external reporting ________.
A) costs are classified as either inventoriable or period costs
B) costs reflect current values
C) there are no prescribed rules since no one is exactly sure how investors and creditors
will use these numbers
D) costs include amounts that reflect both current and future benefits
20) In describing the cost equation, Y = a + bX, “a” is:
A) the dependent variable cost.
B) the independent variable the level of activity.
C) the total fixed cost.
D) the variable cost per unit of activity.
21) Kaizen refers to incorporating cost reductions ________.
A) in each successive budgeting period
B) in each successive sales forecast
C) in all customer service centers
D) in all areas of the organization
22) Which of the following statements best describes conversion costs?
A) Conversion costs are all manufacturing and nonmanufacturing cost.
B) Conversion costs are all manufacturing costs other than direct materials costs.
C) Conversion costs are all nonmanufacturing costs including marketing costs.
D) Conversion costs are all nonmanufacturing costs other than fixed selling and
distribution costs.
23) Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of
variable costs, and $1,500 of fixed costs.
Contribution margin per unit is ________.
A) $4.00
B) $11.00
C) $10.00
D) $8.00
24) The spreading of underallocated or overallocated overhead among ending
work-in-process, finished goods, and cost of goods sold is called ________.
A) the adjusted allocation rate approach
B) the proration approach
C) the write-off of cost of goods sold approach
D) the weighted-average cost approach
25) An example of a nonfinancial measure for customer satisfaction is ________.
A) average manufacturing time for key products
B) contribution margin
C) percentage of products that fail soon after delivery
D) time taken on machine repairs and costs incurred