1) Use of practical capacity results in an unrealistically small fixed manufacturing cost
per unit because it is based on an idealistic and unattainable level of capacity.
2) A company should use the same denominator level capacity for all the budgets and
other purposes so as to facilitate comparability and avoid misrepresentation.
3) The balance sheet, income statement, and statement of cash flows are used for
financial accounting, and also for management accounting.
4) Variable costs per unit vary with the level of production or sales volume.
5) External failure costs are costs incurred on defective products after they have been
shipped to customers.
6) An unfavorable variance is conclusive evidence of poor performance.
7) The manufacturing labor budget depends on wage rates, production methods, and
hiring plans.
8) The controller is usually responsible for budgeting.
9) A decision table is a summary of the alternative actions, events, outcomes, and
probabilities of events.
10) The constant gross-margin percentage NRV method allocates joint costs to joint
products in such a way that the gross margin on each joint product is the same as it was
in the previous year.
11) Negotiated transfer prices are often employed when market prices are stable.
12) A life-cycle budget is usually prepared to budget for costs and production for a
period of one year.
13) Causes of a favorable variable overhead efficiency variance might include using
lower-skilled workers than expected.
14) An experience curve is a function that measures the decline in cost per unit in
various business functions of the value chain as the amount of these activities increases.
15) Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015.
Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
The production-volume variance is ________.
A) $8,000
B) $6,000
C) $9,600
D) 0
16) Block Island TV currently sells large televisions for $360. It has costs of $280. A
competitor is bringing a new large television to market that will sell for $300.
Management believes it must lower the price to $300 to compete in the market for large
televisions. Marketing believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Block Island TV sales are currently 100,000
televisions per year.
What is the target cost if the company wants to maintain its same income level, and
marketing is correct (rounded to the nearest cent)?
A) $225.00
B) $227.27
C) $246.68
D) $280.00
17) Within the relevant range, if there is a change in the level of the cost driver, then
________.
A) total fixed costs and total variable costs will change
B) total fixed costs and total variable costs will remain the same
C) total fixed costs will remain the same and total variable costs will change
D) total fixed costs will change and total variable costs will remain the same
18) To improve customer profitability, companies should track ________.
A) only the final invoice price of a sale
B) the volume of the products purchased by each customer
C) the location of each customer
D) the customer profile
19) What is the cost effect of the growth component for conversion costs?
A) $12,500 U
B) $0
C) $90,000 U
D) $90,000 F
20) Eagle Eye Company produces two types of lensesL7 and L9.
What is the total costs assigned to L9 (b) under single indirect-cost pool system?
A) $53,000
B) $57,000
C) $55,000
D) $54,000
21) Which of the following best describes reverse engineering?
A) It refers to the process of disassembling and analyzing competitor’s product.
B) It refers to the process of first setting the target cost and then designing the product.
C) It refers to the process of manufacturing and designing a product after analyzing the
other products of the firm.
D) It refers to the process of studying customer feedback and then designing a product
to match customer requirements.
22) Which of the following is a disadvantage of single-rate method?
A) It is very costly to implement.
B) It may lead operating department managers to make sub-optimal decisions that are in
their own best interest.
C) It does not signal to department managers how variable costs and fixed costs behave
differently.
D) It requires managers to distinguish variable costs from fixed costs, which is often a
challenging task.
23) Pederson Company reported the following:
What is the amount of gross profit margin?
A) $1,750,000
B) $3,525,000
C) $5,405,000
D) $1,645,000
24) A major concern that arises with multiple regression is multicollinearity, which
exists when ________.
A) the dependent variable is not normally distributed
B) the standard errors of the coefficients of the individual variables decrease
C) the R2 statistic is low
D) two or more independent variables are highly correlated with one another