In deciding whether an organization will keep an old machine or purchase a new
machine, a manager would ignorethe
a. estimated disposal value of the old machine.
b. acquisition cost of the old machine.
c. operating costs of the new machine.
d. estimated disposal value of the new machine.
Baker Company
Baker Company produces three products: A, B, and C from the same process. Joint
costs for this production run are $2,100.
If the products are processed further, Baker Company will incur the following disposal
costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
Refer to Baker Company. Using net realizable value at split-off, what amount of joint
processing cost is allocated to Product A (round to the nearest dollar)?
a. $706
b. $951
c. $700
d. $444
Management can decide where to concentrate its quality prevention dollars using
a. statistical process control charts.
b. just-in-time inventory systems.
c. a feedback loop.
d. Pareto analysis.
Beasley Company
Beasley Company prepared a cash budget by quarters for the upcoming year. Missing
data amounts are indicated with question marks or lower case letters; these lower case
letters will be referred to in the questions that follow.
Beasley requires a minimum balance of $10,000 to start a quarter.
All data are in thousands.
Beasley Corporation
Cash Budget
Refer to Beasley Company. The collections from customers during the first quarter
(item a) are:
a. $50
b. $60
c. $57
d. $73
Brazosport Pipe Corporation
The capital budgeting committee of the Brazosport Pipe Corporation is evaluating the
possibility of replacing its old pipe-bending machine with a more advanced model.
Information on the existing machine and the new model follows:
Refer to Brazosport Pipe Corporation. The $80,000 market value of the existing
machine is
a. a sunk cost.
b. an opportunity cost of selling the old machine.
c. irrelevant to the equipment replacement decision.
d. a historical cost.
Which of the following statements is false?
a. A primary purpose of cost accounting is to determine valuations needed for external
financial statements.
b. A primary purpose of management accounting is to provide information to managers
for use in planning, controlling, and decision making.
c. The act of converting production inputs into finished products or services necessitates
cost accounting.
d. Two primary hallmarks of cost and management accounting are standardization of
procedures and use of generally accepted accounting principles.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product D?
a. $4,433
b. $2,276
c. $1,108
d. $1,182
Terrell Corporation
Terrell Corporation produces various products used in the construction industry. The
Plumbing Division produces and sells 100,000 copper fittings each month. Relevant
information for last month follows:
Top-level managers are trying to determine how a transfer price can be set on a transfer
of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products
Division.
Refer to Terrell Corporation. If the Plumbing Division is operated as an autonomous
investment center and its capacity is 100,000 fittings per month, the per-unit transfer
price is not likely to be below
a. $0.75.
b. $1.60.
c. $2.10.
d. $2.50.
Backflush costing is concerned with which of the following?
a. yes no
b. no no
c. yes yes
d. no yes
Jackson Company.
Jackson Company manufactures wood file cabinets. The following information is
available for June of the current year.
The direct labor rate is $9.60 per hour and overhead for the month was $9,600.
Refer to Jackson Company. What are prime costs and conversion costs, respectively if
there were 1,500 direct labor hours and $21,000 of raw material was purchased?
a. $29,100 and $33,900
b. $33,900 and $24,000
c. $33,900 and $29,100
d. $24,000 and $33,900
Brennan Company
The following information is for Brennan Company’s September production:
(Round all answers to the nearest dollar.)
Refer to Brennan Company. What is the labor efficiency variance?
a. $825 F
b. $825 U
c. $835 F
d. $835 U
Patterson Company
The following information is for Patterson Company’s July production:
(Round all answers to the nearest dollar.)
Refer to Patterson Company. What is the labor efficiency variance?
a. $1,875 U
b. $ 938 U
c. $1,875 F
d. $1,125 U
Mass customization is closely associated with
a. yes no no yes
b. yes yes yes no
c. no yes no no
d. yes no yes yes
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. Calculate equivalent units of production for conversion
using weighted average.
a. 34,325
b. 37,125
c. 38,375
d. 39,925
The opportunity cost of making a component part in a factory with excess capacity for
which there is no alternative use is
a. the total manufacturing cost of the component.
b. the total variable cost of the component.
c. the fixed manufacturing cost of the component.
d. zero.
A small manufacturing company recently stated its sales goal for a period was
$100,000. At this level of activity, its budgeted expenses were $80,000. Its actual sales
were $100,000, but its actual expenses were $85,000. This company operated
a. effectively and efficiently.
b. neither effectively nor efficiently.
c. effectively but not efficiently.
d. efficiently but not effectively.
Which service department cost allocation method assigns costs directly to
revenue-producing areas with no other intermediate cost pools or allocations?
a. step method
b. indirect method
c. algebraic method
d. direct method
For a particular product in high demand, a company decreases the sales price and
increases the sales commission. These changes will not increase
a. sales volume.
b. total selling expenses for the product.
c. the product contribution margin.
d. the total variable cost per unit.
The estimated maximum potential activity for a specified time is:
a. theoretical capacity
b. practical capacity
c. normal capacity
d. expected capacity
A company wishing to isolate variances at the point closest to the point of responsibility
will determine its material price variance when
a. material is purchased.
b. material is issued to production.
c. material is used in production.
d. production is completed.
In a normal cost system, a debit to Work in Process Inventory would notbe made for
a. actual overhead.
b. applied overhead.
c. actual direct material.
d. actual direct labor.
All costs that are incurred between the split-off point and the point of sale are known as
a. sunk costs.
b. incremental separate costs.
c. joint cost.
d. committed costs.
Hall Company manufactures pool tables. The company has a policy of maintaining a
finished goods inventory equal to 35 percent of the next month’s planned sales. Each
card table requires 4 hours of labor. The budgeted labor rate for the coming year is $12
per hour. Planned sales for the months of July, August, and September are respectively
6,000; 8,000; and 5,000 units. What is Hall Company’s budgeted direct labor cost for
August?
a. $ 83,400
b. $333,600
c. $417,600
d. $434,400
The number of orders that will be submitted each year for raw material is given by
which formula?
a. Economic order quantity order point
b. Total annual material needs/economic order quantity
c. Order point/economic order quantity
d. Total annual material needs/safety stock
The ____ would not affect the economic order quantity.
a. company’s weighted average cost of capital
b. cost of purchase requisition forms
c. cost of insuring inventory
d. cost of a stockout
Which of the following cost drivers is often disregardedin a traditional costing system?
a. Pounds of direct material
b. Machine hours
c. Direct labor dollars
d. Variety of products manufactured
Focus on cost control and assessing core competencies are part of which cost
management element?
a. motivational
b. informational
c. reporting
d. all of the above
The reward system for subunit managers of mature businesses should emphasize
a. long-term competitive prospects.
b. near-term profit and cash flow.
c. success in product design and development.
d. exceeding last year’s subunit profit.
If an actual discretionary cost is exactly equal to the budgeted level of that cost, which
of the following statements is true?
a. Funds were appropriately spent.
b. The discretionary activity was efficient.
c. The discretionary activity was effective.
d. None of the above.
Industrial Solutions Company
Industrial Solutions Company manufactures a cleaning solvent. The company employs
both skilled and unskilled workers. To produce one 55-gallon drum of solvent requires
Materials A and B as well as skilled labor and unskilled labor. The standard and actual
material and labor information is presented below:
Standard:
Material A: 30.25 gallons @ $1.25 per gallon
Material B: 24.75 gallons @ $2.00 per gallon
Skilled Labor: 4 hours @ $12 per hour
Unskilled Labor: 2 hours @ $ 7 per hour
Actual:
Material A: 10,716 gallons purchased and used @ $1.50 per gallon
Material B: 17,484 gallons purchased and used @ $1.90 per gallon
Skilled labor hours: 1,950 @ $11.90 per hour
Unskilled labor hours: 1,300 @ $7.15 per hour
During the current month Industrial Solutions Company manufactured 500 55-gallon
drums.
Round all answers to the nearest whole dollar.
Refer to Industrial Solutions Company. What is the total material price variance?
a. $877 F
b. $877 U
c. $931 U
d. $931 F
____ is a “pull” system of production and inventory control.
a. EDI
b. EOQ
c. JIT
d. ABC
Period costs include
a. yes no
yes
b. no yes
yes
c. no no
no
d. yes yes
yes
Continental Publishing Company
The Magazine Division of Continental Publishing Company had the following financial
data for the year:
Refer to Continental Publishing Company. What was the Magazine Division’s segment
income?
a. $150,000
b. $100,000
c. $250,000
d. $ 50,000
Hennessey Company manufactures card tables. The company has a policy of
maintaining a finished goods inventory equal to 40 percent of the next month’s planned
sales. Each card table requires 3 hours of labor. The budgeted labor rate for the coming
year is $13 per hour. Planned sales for the months of April, May, and June are
respectively 4,000; 5,000; and 3,000 units. What is Hennessey Company’s budgeted
direct labor cost for May?
a. $54,600
b. $163,800
c. $226,200
d. $179,400
Property taxes on an organization’s plant building are considered as committed costs.
Costs of normal shrinkage and normal continuous losses in a process costing
environment are handled by the method of neglect.
Phantom profits result when absorption costing is used and production exceeds sales.
A variable cost will be an effective cost driver.
In June 20y0, the Johnson Company has Cost of Goods Manufactured of $296,000;
beginning Finished Goods Inventory of $29,730; and ending Finished Goods Inventory
of $19,990. Prepare an income statement in good form. (Ignore taxes.) The following
additional information is available:
The learning and growth perspective of the balanced scorecard addresses stakeholder
concerns about profitability and organizational growth.
If overapplied factory overhead is immaterial,the account is closed by a credit to Cost
of Goods Sold.
The benefits of discretionary costs are usually measurable in monetary terms.
The relative sales value method requires a common physical unit for measuring the
output of each product.
Discuss the accounting treatment of spoilage in a job-order costing system.
A company’s break-even point is the level where total revenues equal total costs.
The most theoretically correct method of allocating service department costs is the
algebraic method.
Most smaller businesses are organized as corporations.
There is typically a direct relationship between prevention costs and failure costs.
Profit margin indicates management’s efficiency with regard to sales and expenses.