1) Reverse engineering can be used to analyze competitors’ products to determine
product designs and materials and to understand the technologies competitors use.
2) The dependent variable is a cost to be predicted and managed, whereas an
independent variable or cost driver is the factor used to predict the dependent variable.
3) A company is said to be involved in predatory pricing even when it is compelled to
sell its products are a price below the average variable cost because of pricing of the
competitor.
4) A sales-volume variance may be the result of quality problems leading to customer
dissatisfaction.
5) The income under variable costing will always be the same as the income under
absorption costing.
6) The net present value method focuses on ________.
A) cash flows and discount rate
B) inventory cost and cost of capital
C) working capital and cost of capital
D) operating income and required rate of return
7) Flify Manufacturing Inc., incurred total indirect manufacturing labor costs of
$500,000. The company is labor intensive. Total labor hours during the period were
5,000. Using qualitative analysis, the manager and the management accountant
determine that over the period the indirect manufacturing labor costs are mixed costs
with only one cost driverlabor-hours. They separated the total indirect manufacturing
labor costs into costs that are fixed ($110,000 based on 8,000 hours of labor) and costs
that are variable ($390,000) based on the number of labor-hours used. The company has
estimated 7,000 labor hours during the next period.
Which of the following represents the correct linear cost function?
A) y = $390,000 + $ 48.75X
B) y = $110,000 + $100 X
C) y = $110,000 + $78 X
D) y = $390,000 + $62.50 X
8) Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells
blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD;
DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart
does not inspect the DVDs due to Globe’s reputation for high quality. Annual demand is
312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
Relevant ordering costs per purchase order$114.50
Carrying costs per package per year:
Relevant insurance, materials handling,
breakage, etc., per year$ 4.50
What are the annual relevant ordering costs?
A) $9,057
B) $7,157
C) $8,266
D) $7,121
9) Trintal Corporation manufactures two models of motorized go-carts, a standard and a
deluxe model. The following activity and cost information has been compiled:
Assume a traditional costing system applies the $40,000 of overhead costs based on
direct labor hours. What is the total amount of overhead cost assigned to the deluxe
model?
A) $16,000
B) $24,000
C) $25,000
D) $15,000
10) Management accounting is considered most likely to be successful when it
________.
A) helps creditors evaluate the company’s performance
B) helps investors improve their decisions
C) is timely
D) is relevant and reported annually
11) Which of the following is a step to overcome problems related to data collection for
estimating cost function?
A) The analyst should remove the inflationary effects.
B) The analyst should consider fixed costs as variable.
C) The analyst should also use extreme values while calculating cost functions.
D) The analyst should not use accrual accounting.
12) The revenue effect of price recovery is calculated by multiplying the difference in
selling price (current year minus the previous year) by ________.
A) actual units sold in the current year
B) budgeted units sold in the previous year
C) budgeted units sold in the current year
D) actual units sold in the previous year
13) A demand-pull system in which each component in a production line is produced
immediately as needed by the next step in the production line is referred to as
________.
A) just-in-time purchasing
B) materials requirements planning
C) relevant total costs
D) economic order quantity
14) The required rate of return multiplied by the investment is the ________.
A) sunk cost of the investment
B) historical cost of the investment
C) imputed cost of the investment
D) return on sales
15) Jeff Corporation is having trouble selling its inventory because of its ongoing
dispute with its logistical partner. The company was not able to sell any inventory in the
month of January because of the dispute. It manufactured 8,000 units in January. Jeff
had no other fixed costs commitment other than fixed manufacturing costs of $100,000.
It follows absorption costing. If actual production in January was equal to the
denominator level, what is the amount of sales required to attain breakeven point?
A) 1250 units
B) 125 units
C) 10 units
D) 0 units
16) The number of units that High Corp must sell to reach targeted operating income of
$25,000 is ________.
A) 6,000 units
B) 7,500 units
C) 3,334 units
D) 4,334 units
17) Statistical quality control includes a control chart that ________.
A) graphs a series of random events of a process
B) plots each observation relative to specified ranges that represent the expected
distribution
C) plots control observations over various periods of time
D) plots only those observations outside specified limits
18) Ventaz Corp has a variable demand. Historically, its demand has ranged from 30 to
50 windows per day with an average of 40. Alex works eight hours a day, five days a
week. Each order is one window and each window takes 11 minutes.
Alex plans to add doors to its product line and anticipates that they will average 3 doors
per day. Each door takes 10 minutes to install.
What is the average waiting time, in minutes, if Alex continues to be the only worker?
A) 237.0 minutes
B) 337.0 minutes
C) 257.0 minutes
D) 720.0 minutes
19) The Charmatz Corporation has a central copying facility. The copying facility has
only two users, the Marketing Department and the Operations Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 80,000 copies and by the
Operations Department was 360,000 copies.
If a single-rate cost-allocation method is used, what amount of copying facility costs
will be budgeted for the Marketing Department?
A) $18,000
B) $3,600
C) $14,400
D) $16,800
20) The flexible budget will report ________ for the fixed costs.
A) $343,500
B) $270,000
C) $274,800
D) $216,000
21) Power Company has been unhappy with the financial accounting variances that its
cost accounting system has been producing, because its managers believe that there is
more to evaluating an operation than just examining accounting numbers. Therefore, it
has started gathering data to assist in the examination of nonfinancial results of
operations. The following information relates to the manufacture of remote control units
for televisions, radios, and stereo components:
Required:
a.What is the partial productivity of direct materials for each year?
b.What is the partial productivity of direct manufacturing labor for each year?
c.Did each area improve between 2011 and 2012? Explain.
d.What will be the projected direct material and labor needs for 2013 if remote control
units increase by 12,000 units, assuming Power Company applies the constant returns
to scale technology?
22) Sport-in Corporation manufactured 10,000 golf bags during April. The following
fixed overhead data pertain to March:
What is the flexible-budget amount?
A) $250,000
B) $200,500
C) $258,300
D) $204,700
23) Moira Company has just finished its first year of operations and must decide which
method to use for adjusting cost of goods sold. Because the company used a budgeted
indirect-cost rate for its manufacturing operations, the amount that was allocated
($435,000) to cost of goods sold was different from the actual amount incurred
($425,000).
Ending balances in the relevant accounts were:
Required:
a.Prepare a journal entry to write off the difference between allocated and actual
overhead directly to Cost of Goods Sold. Be sure your journal entry closes the related
overhead accounts.
b.Prepare a journal entry that prorates the write-off of the difference between allocated
and actual overhead using ending account balances. Be sure your journal entry closes
the related overhead accounts.
24) Direct material cost is an example of ________.
A) conversion costs
B) discretionary costs
C) engineered costs
D) downsized costs
25) The ________ function supports the six functions of value-chain analysis.
A) administration
B) controlling
C) planning
D) direction