In an outsourcing decision, unavoidable fixed costs are irrelevant.
Management talent is increased in a diverse group of employees.
Open-book management systems are usually easy to implement.
Adopting a just-in-time (JIT) manufacturing process may enable a company to increase
manufacturing cycle efficiency (MCE).
Fixed cost per unit varies directly with production.
The price variance reflects the difference between the price paid for inputs and the
standard price for those inputs.
Batch level costs occur once for each unit produced.
In a just-in-time (JIT) environment, end-of-period variance analysis and reporting does
not occur.
When implementing TQM, an organization should establish long-term relationships
with as many suppliers as possible.
Pearce Company
Pearce Company uses a standard cost system for its production process. Pearce
Company applies overhead based on direct labor hours. The following information is
available for July:
Refer to Pearce Company Using the three-variance approach, what is the volume
variance?
A. $13,260 U
B. $2,640 F
C. $6,930 U
D. $0
All of the following are explanations of cost changes. Which of these influences can be
substantially affected by cost containment measures?
A. inflation/deflation
B. changes in quantities purchased
C. technological change
D. changes in supply chain costs
If actual direct labor hours (DLHs) are less than standard direct labor hours allowed
and overhead is applied on a DLH basis, a(n)
A. favorable variable overhead spending variance exists.
B. favorable variable overhead efficiency variance exists.
C. favorable volume variance exists.
D. unfavorable volume variance exists.
Lindburgh Company
Lindburgh Company manufactures toy airplanes. Information on Lindburgh Company’s
labor costs follow:
The following information applies to the upcoming month of July for Lindburgh
Company:
Refer to Lindburgh Company. What is Lindburgh’s budgeted factory labor cost for
July?
A. $8,000
B. $15,600
C. $25,600
D. $9,600
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. What are equivalent units of production for conversion
costs, assuming FIFO?
A. 97,750
B. 100,000
C. 101,750
D. 104,500
Of the following budgets, which one is least likely to be determined by the dictates of
top management?
A. sales
B. material usage
C. revenues
D. general and administrative
The number of product defects discovered by consumers is what kind of performance
indicator?
A. yes no no yes
B. no yes no yes
C. no yes yes no
D. yes no no yes
To evaluate the performance of individual departments, interdepartmental transfers of a
product should preferably be made at prices
A. equal to the market price of the product.
B. set by the receiving department.
C. equal to fully-allocated costs of the producing department.
D. equal to variable costs to the producing department.
TriCities Corporation
TriCities Corporation adds material at the start to its production process and has the
following information available for August:
Refer to TriCities Corporation. Compute the number of units started and completed in
August.
A. 29,500
B. 34,500
C. 36,500
D. 39,000
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. What are equivalent units of production for material
assuming weighted average is used?
A. 105,500
B. 106,000
C. 107,000
D. 110,000
The sum of the material mix and material yield variances equals
A. the material purchase price variance.
B. the material quantity variance.
C. the total material variance.
D. none of the above.
Sullivan Company
Sullivan Company is preparing its Manufacturing Overhead budget for the second
quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced;
budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount
being factory depreciation.
Refer to Sullivan Company. If the budgeted cash disbursements for factory overhead
for June are $80,000, then the budgeted production for June must be:
A. 7,400 units
B. 6,200 units
C. 6,500 units
D. 7,000 units
Burns Corporation
Information relating to the current operations of Burns Corporation follows:
Refer to Burns Corporation. Compute Burns’s degree of operating leverage.
If revenues are intentionally underestimated during the budgeting process,
______________________________ has been created.
Weaver Corporation
Weaver Corporation is considering an investment in a new product line. The investment
would require an immediate outlay of $100,000 for equipment and an immediate
investment of $200,000 in working capital. The investment is expected to generate a net
cash inflow of $100,000 in year 1, $150,000 in year 2, and $200,000 in years 3 and 4.
The equipment would be scrapped (for no salvage) at the end of the fourth year and the
working capital would be liquidated. The equipment would be fully depreciated by the
straight-line method over its four-year life.
Refer to Weaver Corporation. If Weaver uses a discount rate of 16 percent, what is the
NPV of the proposed product line investment?
Present value tables or a financial calculator are required.
Define a variable cost and a fixed cost. What causes changes in these costs? Give two
examples of each.
Lamar Company
Lamar Company produces only two products and incurs joint processing costs that total
$3,750. Products Alpha and Beta are produced in the following quantities during each
month: 4,500 and 6,000 gallons, respectively. Lamar Company also runs one ad each
month that advertises both products at a cost of $1,500. The selling price per gallon for
the two products are $20 and $17.50, respectively.
Refer to Lamar Company. What amount of joint processing costs is allocated to each
product based on gallons produced?
Oil Division
The Oil Division is one of the operating units of Automotive Solutions, Inc. The
following operating data of the division is presented below:
Refer to the Oil Division. What was the segment income of the Oil Division for the
year?
Can standard costing be used in job-order costing? If so, what conditions must exist? If
not, explain why.