Expected standards tend to yield unfavorable variances.
Value refers to a product meeting the highest number of a customer’s needs at the lowest
possible cost.
Segment margin measures a segment’s contribution to the coverage of indirect
expenses.
A management information system is a part of a management control system.
The effect of substituting a non-standard mix of materials during the production process
is referred to as a material mix variance.
Joint costs include all materials, labor and overhead that are incurred before the split-off
point.
Product complexity refers to the number of processes through which a product flows.
Conducting a quality audit is an appraisal cost.
Decentralization can lead to greater job enrichment and satisfaction.
Cost accounting serves as a bridge between financial and managerial accounting.
The estimated maximum potential activity for a specified time is known as theoretical
capacity.
Retailers generally have a much lower degree of conversion than do manufacturing or
professional firms.
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. Assume that 8,000 units were transferred to
Decorating at a total cost of $16,000. What is the conversion cost per equivalent unit in
Decorating?
A. $11.32
B. $11.46
C. $12.00
D. $12.78
Continental Publishing Company
The Magazine Division of Continental Publishing Company had the following financial
data for the year:
Refer to Continental Publishing Company. If expenses increased by $20,000 in the
Magazine Division,
A. return on investment would decrease.
B. residual income would increase.
C. the target rate of return would decrease.
D. asset turnover would decrease.
Robertson Company.
Robertson Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #8, #12, and #15.
Direct material was requisitioned as follows for each job respectively: 25 percent, 30
percent, and 30 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,800; 3,300; and 4,000; respectively. Indirect labor is $45,000.
Other actual overhead costs totaled $50,000.
Refer to Robertson Company. What is the prime cost of Job #8?
A. $59,100
B. $82,850
C. $86,475
D. $93,680
Bottlenecks are
A. machine constraints in the production line.
B. machine constraints that restrict the production cycle so idle time at other processes
occurs.
C. useful for identifying any production spot slowdown.
D. restrictions on raw material sources but not the quantity of output.
Richardson Company
The following information is available for Richardson Company for its first year of
operations:
Refer to Richardson Company. If Richardson Company had used variable costing, what
amount of income before income taxes would it have reported?
A. $30,000
B. ($7,500)
C. $67,500
D. cannot be determined from the information given
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. How much of the deposit cost will be assigned to the
University branch?
A. $ 1,800
B. $ 3,600
C. $ 5,400
D. $36,000
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a FIFO method of process costing, compute the
average cost per EUP for Material B.
A. $20.10
B. $31.25
C. $20.00
D. $31.00
A cost that remains constant in total but varies on a per-unit basis with changes in
activity is called a(n)
A. expired cost.
B. fixed cost.
C. variable cost.
D. mixed cost.
Bailey Corporation. incurred 2,300 direct labor hours to produce 600 units of product.
Each unit should take 4 direct labor hours. Bailey Corporation applies variable
overhead to production on a direct labor hour basis. The variable overhead efficiency
variance
A. will be unfavorable.
B. will be favorable.
C. will depend upon the capacity measure selected to assign overhead to production.
D. is impossible to determine without additional information.
At the break-even point, fixed costs are always
A. less than the contribution margin.
B. equal to the contribution margin.
C. more than the contribution margin.
D. more than the variable cost.
If the profitability index for a project exceeds 1, then the project’s
A. net present value is positive.
B. internal rate of return is less than the project’s discount rate.
C. payback period is less than 5 years.
D. accounting rate of return is greater than the project’s internal rate of return.
Dallas Co. has a production process in which the inspection point is at 65 percent of
conversion. The beginning inventory for July was 35 percent complete and ending
inventory was 80 percent complete. Normal spoilage costs would be assigned to which
of the following groups of units, using FIFO costing?
A. no yes yes
B. yes yes yes
C. no no yes
D. yes no no
Process quality yield is used in the measurement of
A. throughput.
B. cash flows.
C. asset turnover.
D. profit margin.
Southern Digital, Inc.
The Southern Digital, Inc. produces a high-quality computer chip. Unit production costs
(based on capacity production of 100,000 units per year) follow:
Refer to Southern Digital, Inc. Assume, for this question only, that the Memory
Division is producing and selling at capacity. What is the minimum selling price that
the division would consider on a ‘special order” of 1,000 chips on which no variable
period costs would be incurred?
A. $100
B. $72
C. $81
D. $94
Another name for absorption costing is
A. full costing.
B. direct costing.
C. job order costing.
D. fixed costing.
How do control charts mesh with the concept of total quality control (TQC)?
Costs that preclude product defects resulting from flaws in processing are referred to as
______________________________.
A method of examining processes to identify and eliminate or reduce functions that add
little customer value to products or services is referred to as
__________________________________________________.
What are the primary reasons for using a predetermined overhead rate?
Explain why different types of organizations will have different sets of budgets.
Seminole Wire Corporation
The Wire Products Division of Seminole Wire Corporation produces “bales” of steel
wire that are used in various commercial applications. The bales sell for an average of
$20 each and The Wire Products Division has the capacity to produce 10,000 bales per
month. The Consumer Products Division of Seminole Wire Corporation uses
approximately 2,000 bales of steel wire each month in its production of various
appliances. The operating information for the Wire Products Division at its present level
of operations (8,000 bales per month) follows:
The Consumer Products Division currently pays $15 per bale for wire obtained from its
external supplier.
Refer to Seminole Wire Corporation. If Wire Products Division transferred 2,000 wire
bales to the Consumer Products Division at 200 percent of full absorption cost, what
would be the transfer price?