1) A price-bidding decision for a one-time-only special order includes an analysis of all
________.
A) manufacturing costs
B) cost drivers related to the product
C) direct and indirect variable costs of each function in the value chain
D) fixed manufacturing costs
2) Costs incurred in precluding the production of products that do not conform to
specifications are ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
3) At an activity level of 6,900 units in a month, Zelinski Corporations total variable
maintenance and repair cost is $408,756 and its total fixed maintenance and repair cost
is $230,253. What would be the total maintenance and repair cost, both fixed and
variable, at an activity level of 7,100 units in a month? Assume that this level of activity
is within the relevant range.
A) $648,270
B) $639,009
C) $650,857
D) $657,531
4) Comfort Manufacturing is a small textile manufacturer using machine-hours as the
single indirect-cost rate to allocate manufacturing overhead costs to the various jobs
contracted during the year. The following estimates are provided for the coming year
for the company and for the Winton High School band jacket job.
For Comfort Manufacturing, what is the annual manufacturing overhead cost-allocation
rate?
A) $0.50
B) $0.80
C) $0.45
D) $33.33
5) The Fortise Corporation manufactures two types of vacuum cleaners, the Victor for
commercial building use and the House-Mate for residences. Budgeted and actual
operating data for the year 2015 were as follows:
What is the total sales-volume variance in terms of the contribution margin?
A) $1,170,000 favorable
B) $1,260,000 favorable
C) $850,000 unfavorable
D) $320,000 unfavorable
6) What is the Digger Division’s return on investment?
A) .25
B) .30
C) .45
D) .60
7) ________ method includes fixed manufacturing overhead costs as inventoriable
costs.
A) Variable costing
B) Absorption costing
C) Throughput costing
D) Activity-based costing
8) Difend Cleaners has been considering the purchase of an industrial dry-cleaning
machine. The existing machine is operable for three more years and will have a zero
disposal price. If the machine is disposed now, it may be sold for $100,000. The new
machine will cost $350,000 and an additional cash investment in working capital of
$100,000 will be required. The new machine will reduce the average amount of time
required to wash clothing and will decrease labor costs. The investment is expected to
net $110,000 in additional cash inflows during the first year of acquisition and $250,000
each additional year of use. The new machine has a three-year life, and zero disposal
value. These cash flows will generally occur throughout the year and are recognized at
the end of each year. Income taxes are not considered in this problem. The working
capital investment will not be recovered at the end of the asset’s life.
What is the net present value of the investment, assuming the required rate of return is
10%? Would the company want to purchase the new machine?
A) $144,240 ; yes
B) $180,000 ; yes
C) $(180,000); no
D) $(144,240); no
9) An unfavorable sales-mix variance would most likely be caused by ________.
A) a new competitor providing better service in the high-margin product sector
B) a competitor having distribution problems with high-margin products
C) the company offering low-margin products at a higher price
D) the company experiencing quality-control problems that get negative media
coverage of low-margin products
10) Dynondo Incorporated planned to use materials of $12 per unit but actually used
materials of $13 per unit, and planned to make 1,500 units but actually made 1,800
units.
The sales-volume variance for materials is ________.
A) $3,600 favorable
B) $3,900 unfavorable
C) $3,600 unfavorable
D) $3,900 favorable
11) Which of the following statements is true of the methods for allocating joint costs?
A) Under the cause-and-effect criterion, the physical-measure method is highly
desirable.
B) Byproducts are never excluded from the denominator used in the physical-measure
method.
C) The NRV method is never used when the selling prices of joint products vary
frequently.
D) The sales value at splitoff method follows the benefits-received criterion of cost
allocation.
12) Max’s Movie Store encounters revenue-allocation decisions with its bundled
product sales. Here, two or more of the movie videos are sold as a single package.
Managers at Max’s are keenly interested in individual product-profitability figures.
Information pertaining to its three bundled products and the stand-alone selling prices
of its individual products is as follows:
Required:
a.With selling prices as the weights, allocate the $25 packaged price of “All Three” to
the three videos using the stand-alone revenue-allocation method.
b.Allocate the $25 packaged price of “All Three” to the three types of videos using the
incremental revenue-allocation method. Assume New Releases is the primary product,
followed by Older Releases, and then Classics.
13) The difference between operating incomes under variable costing and absorption
costing centers on how to account for ________.
A) direct materials costs
B) fixed manufacturing costs
C) variable manufacturing costs
D) selling and administrative costs
14) Corise’s Cola was to manufacture 500 cases of cola next week. The accountant
provided the following analysis of total manufacturing costs.
What is the estimated cost of producing the 500 cases of cola?
A) $115,115
B) $57,730
C) $24,380
D) $9,744
15) The actual information pertains to the month of September. As part of the budgeting
process, Kriger Fencing Company developed the following static budget for September.
Kriger is in the process of preparing the flexible budget and understanding the results.
The primary reason for low operating profits was ________.
A) the variable-cost variance
B) increased fixed costs
C) a poor management accounting system
D) lower sales volume than planned
16) The following data are available for Brennan Soft Toys Company for the year ended
September 30, 2015.
Required:
a.Determine operating income using the variable-costing approach.
b.Determine operating income using the absorption-costing approach.
c.Explain why operating income is not the same under the two approaches.
17) The Enor Machine Company is evaluating a capital expenditure proposal that
requires an initial investment of $99,360 and has predicted cash inflows of $20,000 per
year for 8 years. It will have no salvage value.
Required:
a.Using a required rate of return of 10%, determine the net present value of the
investment proposal.
b.Determine the proposal’s internal rate of return.
18) Frazer Corp sells several products. Information of average revenue and costs is as
follows:
What is the operating income earned if the company sells 15,000 units?
A) $162,750
B) $150,000
C) $148,500
D) $152,500
19) The ________________________ is the amount remaining from sales revenue after
all variable expenses have been deducted.
A) cost structure
B) gross margin
C) contribution margin
D) committed fixed cost