Which of the following is the correct mathematical expression to calculate the fixed
overhead spending variance?
A) Static-budget amount — Flexible-budget amount
B) Actual costs incurred — Flexible-budget amount
C) Static-budget amount — Fixed overhead allocated for actual output
D) Flexible-budget amount — Fixed overhead allocated for actual output
Contract disputes regarding cost allocation can be reduced by defining which of the
following?
A) the material items allowed for production
B) the terms used, such as what constitutes direct labor
C) permissible tax deductions
D) minimum profit level the company should earn
Match each one of the examples below with one of the stages of the capital budgeting
decision model.
Stages:
1. Identify Projects
2. Obtain Information
3. Make Predictions
4. Make Decisions by Choosing Among Alternatives
5. Implement the Decision, Evaluate Performance, and Learn
________ a. Issuing corporate stock for the funds to purchase new equipment
________ b. Learning how to effectively operate Machine #8 only takes 15 minutes
________ c. The need to reduce the costs to process the vegetables used in producing
goulash
________ d. Monitoring the costs to operate a new machine
________ e. Percentage of defective merchandise considered too high
________ f. Will introducing the new product substantially upgrade our image as
a producer of quality products?
________ g. Estimating yearly cash flows and setting investment budgets accordingly
using
a 12-year planning horizon.
________ h. Use of the internal rate of return for each alternative
________ i. Tracking realized cash flows and comparing against estimated numbers.
Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $300,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $170,000 are allocated based on the
number of employees. The costs of operating departments A and B are $188,000 and
$282,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Production
Support Departments Departments
Using the direct method, what amount of Personnel Department costs will be allocated to
Department B? (Do not round any intermediary calculations.)
A) $44,737
B) $50,000
C) $107,368
D) $120,000
Heavy Products, Inc. developed standard costs for direct material and direct labor. In
2017, AII estimated the following standard costs for one of their major products, the
10-gallon plastic container.
During June, Heavy Products produced and sold 25,000 containers using 23,000 pounds of
direct materials at an average cost per pound of $75 and 17,500 direct manufacturing
labor-hours at an average wage of $35.75 per hour.
The direct material price variance during June is ________.
A) $115,000 unfavorable
B) $500,000 favorable
C) $500,000 unfavorable
D) $13,125 favorable
For a given job the direct costs associated with the job are ________.
A) actual overhead that has been applied to the job
B) raw materials that can be traced to the job in an economically feasible way
C) All sunk costs that can be traced to the job in an economically feasible way
D) all fixed costs
Nicholas Company manufacturers TVs. Some of the company’s data was misplaced.
Use the following information to replace the lost data:
Required:
a. What are the respective flexible-budget revenues (A)?
b. What are the static-budget revenues (B)?
c. What are the actual variable costs (C)?
d. What is the total flexible-budget variance (D)?
e. What is the total sales-volume variance (E)?
f. What is the total static-budget variance?
Which item is an indication of credibility under the Standards of Ethical Conduct?
A) Maintain an appropriate level of professional expertise by continually developing
knowledge and skills.
B) Refrain from using confidential information for unethical or illegal advantage.
C) Abstain from engaging in or supporting any activity that might discredit the
profession.
D) Disclose delays or deficiencies in information, timeliness, processing, or internal
controls in conformance with organization policy and/or applicable law.
Job costing is ________.
A) used by businesses to price identical products
B) used by businesses to price unique products for different jobs
C) used to calculate equivalent units
D) used to calculate the percentage of work completed
Which of the following illustrates a purpose for allocating costs to cost objects?
A) to provide information for cost-control and pricing decisions
B) to provide information to customers
C) to determine marginal cost
D) to measure capital expenditure
Planet Design Services, Inc., is considering replacing a machine. The following data are
available:
Replacement
Old Machine Machine
Original cost $650,000 $510,000
Useful life in years 10 5
Current age in years 5 0
Book value $400,000 —
Disposal value now $142,000 —
Disposal value in 5 years 0 0
Annual cash operating costs $100,000 $66,000
The difference between keeping the old machine and replacing the old machine is
________.
A) $910,000 in favor of keeping the old machine
B) $198,000 in favor of keeping the old machine
C) $910,000 in favor of replacing the old machine
D) $198,000 in favor of replacing the old machine
Swansea Finishing produces and sells a decorative pillow for $100.00 per unit. In the
first month of operation, 2,000 units were produced and 1,800 units were sold. Actual
fixed costs are the same as the amount budgeted for the month. Other information for
the month includes:
What is cost of goods sold using variable costing?
A) $41,400
B) $73,800
C) $121,000
D) $56,000
Which of the following would explain why a company might need to follow very
stringent rules that specify the way in which joint costs are assigned to products?
A) to satisfy a federal contract reimbursement stipulations
B) So that cost of goods sold is accurate for income tax purposes
C) to satisfy FASB
D) to increase market share
Which of the following questions best relates to the balanced scorecard’s internal
business processes perspective?
A) How do we streamline operations to lower costs to increase profits?
B) How do we motivate employees so that they can become more productive?
C) How can we increase our market share?
D) How can our processes be executed in such a way as to l increase value to
customers?
Goodness-of-fit measures how well the predicted values in a cost estimating equation
________.
A) match the cost driver
B) determine the level of activity
C) match the actual cost observations
D) rely on the independent variable
Which of the following is a journal entry to recognize the disposal value?
A)
B)
C)
D)
Which of the following is a measure of the balanced scorecard’s internal process
perspective?
A) Service response time
B) Customer satisfaction
C) Gross profit percentage
D) Cost reduction
If management wants to choose a method of revenue allocation that best captures the
“benefits received” by customers then they would use ________ to allocate revenue to
products in a bundle.
A) stand-alone revenue -allocation based on unit costs
B) stand-alone revenue-allocation based on selling prices
C) stand-alone revenue-allocation based on physical units
D) stand-alone revenue-allocation based on unit costs
Which option should Patrick choose to maximize income assuming there is a 40%
probability that 70 units will be sold and a 60% probability that 40 units will be sold?
A) Option 1
B) Option 2
C) Option 3
D) All options maximize income equally.
An order is received by a company and then spends 1 day in assembly and 3 days in
finishing before being stored in the warehouse. On average, the units are stored for 3
days before being shipped to a customer. Which of the following measures would be
true?
A) work-in-process time of 7 days
B) manufacturing cycle time of 4 days
C) pass-through time of 6 days
D) manufacturing cycle time of 7 days
Bradford, Inc., expects to sell 11,000 ceramic vases for $21 each. Direct materials costs
are $3, direct manufacturing labor is $11, and manufacturing overhead is $5 per vase.
The following inventory levels apply to 2019:
On the 2019 budgeted income statement, what amount will be reported for sales?
A) $241,500
B) $220,500
C) $252,000
D) $231,000
Cool Air Inc., manufactures single room sized air conditioners. The cost accounting
system estimates manufacturing costs to be $250 per air conditioner, consisting of 80%
variable costs and 20% fixed costs. The company has surplus capacity available. It is
Cool Air Inc.’s policy to add a 30% markup to full costs.
A medium sized motel chain is currently expanding and has decided to create more
rooms and air condition all of its rooms, which are currently not air conditioned. Cool
Air Inc. is invited to submit a bid to the motel chain. What per unit price will Cool Air
Inc. most likely bid for this special order of 200 units? Assume that the price is being
fixed for a long-term commitment.
A) $250.00 per unit
B) $200.00 per unit
C) $325.00 per unit
D) $300.00 per unit
Johnson Company had planned for operating income of $10 million in the master
budget with a contribution margin of $3 million, but actually achieved operating
income of only $7 million and a contribution margin of $2.5 million.
A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million unfavorable.
Rally Synthesis Inc. manufactures and sells 100 bottles per day. Fixed costs are $22,000
and the variable costs for manufacturing 100 bottles are $30,000. Each bottle is sold for
$1,200. How would the daily profit be affected if the daily volume of sales drop by
10%?
A) profits are reduced by $9,000
B) profits are reduced by $3,000
C) profits are reduced by $12,000
D) profits are reduced by $59,000
700 shirts are sold as seconds at $18 per shirt. Cost of spoiled shirts is $501,400. Cost
of shirts at inspection point equals $9,508,000. Calculate the net cost of the spoilage.
A) $9,495,400
B) $488,800
C) $514,000
D) $9,520,600
Assigning direct costs to a cost object is called ________.
A) cost allocation
B) cost assignment
C) cost pooling
D) cost tracing
Jordan Company has two departments, Assembly and Machining. Overhead is applied
based on direct labor cost in Department Assembly and machine-hours in Department
Machining. The following additional information is available:
Required:
a. Compute the budgeted factory overhead rate for Assembly.
b. Compute the budgeted factory overhead rate for Machining.
c. What is the total overhead cost of Job 10?
d. If Job 10 consists of 50 units of product, what is the unit cost of this job?
Grounded Coffee Products manufactures coffee tables. Grounded Coffee Products has a
policy of adding a 20% markup to full costs and currently has excess capacity. The
following information pertains to the company’s normal operations per month:
For long-run pricing of the coffee tables, what price will most likely be used by Grounded
Coffee?
A) $64.75
B) $103.00
C) $167.75
D) $201.30
Ethical challenges for management accountants include ________.
A) whether to accept gifts from suppliers, knowing it is an effort to indirectly influence
decisions
B) adhering to the principles of accounting
C) whether to file a tax return this year
D) whether to accept gifts higher incentives from the company for their performance
Lancelot 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 Case High School band jacket job.
For Lancelot Manufacturing, what is the annual manufacturing overhead cost-allocation
rate?
A) $0.75
B) $1.25
C) $0.50
D) $50.00
Which of the following would not lead to a build up inventory as a strategy to increase
operating income?
A) Cutting overhead costs as year-end approaches.
B) Plant manager switching to make products that absorb the highest amounts of fixed
cists
C) Plant manager accepting an order to increase production and build up inventory
when another plant in the same company would be better suited to take on the order
D) Allocating resources to production by deferring maintenance of equipment and
building beyond the current period
Which of the following best describes an Advanced Pricing Agreement (APA)?
A) An agreement between a corporation and a foreign subsidiary as to what method,
cost or market-based, will be used to set a transfer price for products.
B) A binding agreement between a foreign government’s taxing authority, the IRS and a
U.S. based corporation to help avoid disputes related to transfer pricing.
C) An agreement under IRS code Section 482 that requires a company to utilize market
based transfer prices and to document them for tax return purposes.
D) A binding agreement between the IRS and a corporation to help avoid disputes
related to transfer pricing.
Which of the following statements about actual costing is true?
A) Manufacturing costs of a job are available earlier under actual costing.
B) Corrective actions can be implemented sooner under actual costing.
C) Actual costing uses budgeted indirect-cost rates calculated annually.
D) Actual costing uses actual indirect-cost rates calculated annually.
Managers of supplier departments ________.
A) view the budgeted rates positively if unfavorable cost variances occur due to price
decreases outside of their control
B) view the budgeted rates negatively if favorable cost variances occur due to price
decreases outside of their control
C) view the budgeted rates negatively if unfavorable cost variances occur due to price
increases outside of their control
D) view the budgeted rates negatively if unfavorable cost variances occur due to price
decreases outside of their control