When computing variances from standard costs, the difference between actual and
standard price multiplied by actual quantity used yields a
a. combined price-quantity variance.
b. price variance.
c. quantity variance.
d. mix variance.
Disclosing detailed financial information to all employees is a characteristic of
a. open-book management.
b. data mining.
c. diversity.
d. strategic alliance.
To reflect greater uncertainty (greater risk) about a future cash inflow, an analyst could
a. increase the discount rate for the cash flow.
b. decrease the discounting period for the cash flow.
c. increase the expected value of the future cash flow before it is discounted.
d. extend the acceptable length for the payback period.
The distinction between avoidable and unavoidable costs is similar to the distinction
between
a. variable costs and fixed costs.
b. variable costs and mixed costs.
c. step-variable costs and fixed costs.
d. discretionary costs and committed costs.
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. A transfer price based on market price would be set at
____ per unit.
a. $2.10
b. $2.50
c. $1.60
d. $2.25
Gwen Taylor borrows $50,000 from her bank on January 1. She is to repay the loan in
equal annual installments over 30 years. How much is her annual repayment if the bank
charges 10 percent interest? Present value tables or a financial calculator are
required.
a. $1,667
b. $4,200
c. $2,865
d. $5,304
A cost management system should provide the means to develop
a. the most accurate product or service costs.
b. a reasonably accurate product or service cost given cost-benefit considerations.
c. a product or service cost that does not include any non-value-added overhead.
d. a costing system that traces all costs directly to individual products or services.
The difference between EUP calculated using FIFO and EUP calculated using weighted
average is the equivalent units
a. started and completed during the period.
b. residing in beginning Work in Process Inventory.
c. residing in ending Work in Process Inventory.
d. uncompleted in Work in Process Inventory.
Buxton Company is currently operating at a loss of $15,000. The sales manager has
received a special order for 5,000 units of product, which normally sells for $35 per
unit. Costs associated with the product are: direct material, $6; direct labor, $10;
variable overhead, $3; applied fixed overhead, $4; and variable selling expenses, $2.
The special order would allow the use of a slightly lower grade of direct material,
thereby lowering the price per unit by $1.50 and selling expenses would be decreased
by $1. If Buxton wants this special order to increase the total net income for the firm to
$10,000, what sales price must be quoted for each of the 5,000 units?
a. $23.50
b. $24.50
c. $27.50
d. $34.00
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product Z (round to the nearest dollar)?
a. $5,500
b. $4,000
c. $2,390
d. $5,610
A cost is sunk if it
a. is not an incremental cost.
b. is unavoidable.
c. has already been incurred.
d. is irrelevant to the decision at hand.
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. How much of the new account cost will be assigned to
the University branch?
a. $10,000
b. $20,000
c. $30,000
d. $50,000
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
Refer to Riley Company. Using approximated net realizable value at split-off, what
amount of joint processing cost is allocated to Product C (round to the nearest dollar)?
a. $4,500
b. $5,986
c. $6,062
d. $6,282
A pay plan that does not encourage the overall company good is
a. profit sharing.
b. an employee stock option plan.
c. contingent pay.
d. monthly salary.
Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Savannah Motors. The $4,000 of annual operating costs that are common to
both the old and the new machine are an example of a(n)
a. sunk cost.
b. irrelevant cost.
c. future avoidable cost.
d. opportunity cost.
Spears Manufacturing Company
Spears Manufacturing Company produces beach chairs. Chair frames are all the same
size, but can be made from plastic, wood, or aluminum. Regardless of frame choice, the
same sailcloth is used for the seat on all chairs. Spears has set a standard for sailcloth of
$9.90 per square yard and each chair requires 1 square yard of material. Spears
produced 500 plastic chairs, 100 wooden chairs, and 250 aluminum chairs during June.
The total cost for 1,000 square yards of sailcloth during the month was $10,000. At the
end of the month, 50 square yards of sailcloth remained in inventory.
Refer to Spears Manufacturing Company. The unfavorable material price variance for
sailcloth purchases for the month was
a. $ 100.
b. $ 495.
c. $1,090.
d. $1,585.
Which of the following falls under the Activity-Based Management umbrella?
a. no no
yes
b. yes no
no
c. yes yes
yes
d. no yes
no
A managerial preference for a very low degree of operating leverage might indicate that
a. an increase in sales volume is expected.
b. a decrease in sales volume is expected.
c. the firm is very unprofitable.
d. the firm has very high fixed costs.
Sanchez Products has no Work in Process or Finished Goods inventories at the close of
business on December 31 of the current year. The balances of Sanchez Products’
accounts as of December 31 are as follows:
Pretax income for the current year is:
a. $608,000.
b. $660,000.
c. $712,000.
d. undeterminable from the information given.
Simultaneous engineering can be used to
a. reduce both product and process complexity.
b. integrate activity-based costing with value chain analysis.
c. reduce the time-to-market of new products through elimination of batch-level
activities.
d. reduce manufacturing cycle efficiency by reducing process waste.
Fox Corporation
Fox Corporation. has the following information for August:
All material is added at the start of the process and all finished products are transferred
out.
Refer to Fox Corporation. Assume that weighted average process costing is used. What
is the cost per equivalent unit for material?
a. $0.55
b. $1.05
c. $1.31
d. $1.83
The master budget
a. reflects the determination of an organization’s cost of capital.
b. serves as a managerial tool for the organization.
c. includes only an organization’s pro forma financial statements.
d. utilizes only information from the financial accounting system.
Goodall Corporation is working at full production capacity producing 10,000 units of a
unique product, RST. Manufacturing costs per unit for RST follow:
The unit manufacturing overhead cost is based on a variable cost per unit of $2 and
fixed costs of $30,000 (at full capacity of 10,000 units). The non-manufacturing costs,
all variable, are $4 per unit, and the selling price is $20 per unit. A customer, Hendricks
Company, has asked Goodall to produce 2,000 units of a modification of RST to be
called XYZ. XYZ would require the same manufacturing processes as RST. Hendricks
Company has offered to share equally the non-manufacturing costs with Goodall. XYZ
will sell at $15 per unit.
Required:
When job-order costing is used, the primary focal point of cost accumulation is the
a. department.
b. supervisor.
c. item.
d. job.
Cibolo Company
Cibolo Company has the following information available for March when 4,200 units
were produced (round answers to the nearest dollar).
Refer to Cibolo Company. What is the material price variance (based on quantity
purchased)?
a. $2,505 F
b. $2,505 F
c. $2,625 F
d. $2,625 F
Petrie Company manufactures chairs. If raw material used was $100,000 and Raw
Material Inventory at the beginning and end of the period, respectively, was $27,000
and $31,000, what was amount of raw material was purchased?
a. $ 96,000
b. $104,000
c. $158,000
d. $131,000
Costs that are incurred for monitoring and inspecting are:
a. prevention costs
b. detection costs
c. appraisal costs
d. failure costs
Parker Company
Below is an income statement for Parker Company:
Refer to Parker Company. Based on the cost and revenue structure on the income
statement, what was Parker’s break-even point in dollars?
a. $200,000
b. $325,000
c. $300,000
d. $290,909
The selling, general, and administrative expense budget is based on the ____ budget.
a. production
b. sales
c. cash
d. purchases
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 major opportunity cost associated with the
continued use of the existing machine is
a. $30,000 of annual savings in operating costs.
b. $20,000 of salvage in 5 years on the new machine.
c. lost sales resulting from the inefficient existing machine.
d. $400,000 cost of the new machine.
Shannon Companies
Refer to Shannon Companies. For Company A, what are the budgeted cash collections?
a. $700
b. $500
c. $300
d. $400
Epplin Company
The following information is provided for Epplin Company for the month of
September:
Refer to Epplin Company. What is the efficiency variance?
a. $4,450 F
b. $4,450 U
c. $1,000 F
d. $1,000 U
Commodore Company
Commodore Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
September when Commodore produced 5,000 units:
Refer to Commodore Company. Using the three-variance approach, what is the
spending variance?
a. $2,525 U
b. $2,775 U
c. $4,375 U
d. $4,375 F
In a Pareto inventory analysis, the items that are most likely to be controlled with a
red-line system are the
a. A items.
b. B items.
c. C items.
d. items on a perpetual inventory.
A cost that varies inversely with the level of production is known as a
____________________ cost.
An operation whose exact nature cannot be observed is referred to as a(n)
_________________________.
When implementing TQM, an organization should establish long-term relationships
with as many suppliers as possible.
Explain why different types of organizations will have different sets of budgets.
If a normal loss is anticipated on a specific job, the overhead application rate should
include an amount for the cost of defective units less disposal value.
A company that manufactures small quantities of identifiable products will use a
process costing system.
What are the principles of open-book management?
Explain the meaning of the coefficient of determination in cost estimation.
Dynamic Designs, Inc. has developed a new design to produce track shoes that are used
in cross-country races. The company’s shoe design is innovative in that the insole is
made od a product that provides a greater cushion and adapts more easily to a runner’s
foot. Management estimates expected annual capacity to be 80,000 units; overhead is
applied using expected annual capacity. The company’s cost accountant predicts the
following current year activities and related costs:
Other than any possible under- or overapplied fixed overhead, management expects no
variances from the previous manufacturing costs. Under- or overapplied fixed overhead
is to be written off to Cost of Goods Sold.
Required:
A process in which an end product or service is examined using reverse engineering is
referred to as ___________________________________.
Why may a JIT control system be useful in disclosing a firm’sinefficienciesand
problems?
A variable cost remains constant on a per-unit basis as production increases.
A debit to the Factory Overhead account represents actual overhead costs.
When a standard costing system is used with process costing, Work in Process
inventory is recorded using standard costs.
A device for determining what is happening in a process being controlled is referred to
as a(n) ____________________.
To increase the probability of success, it is important to involve customers in business
processing reengineering (BPR) projects.
Define confrontation strategy and indicate why many companies may believe it is the
only way to face competitors.
A coefficient of determination has a value between 0 and +1.