1) Supervision costs have both value-added and non-value-added components.
2) Evaluating a performance helps in the future decision-making process.
3) An advantage of the single-rate method is that it is the most accurate method of
cost-allocation.
4) An investment center is always a decentralized subunit.
5) Reengineering benefits are most significant when they focus on one business
function rather than crossing functional lines of the business process.
6) Direct manufacturing labor efficiency variance is likely to be unfavorable if
underskilled workers are put on a job.
7) The selling prices method under stand-alone revenue-allocation method is best
because the weights explicitly consider the prices customers are willing to pay for the
individual products
8) Advances in information-gathering technology make it more likely that multiple
cost-pool systems will pass the cost-benefit test.
9) When actual production is below practical capacity, there will be unused-capacity
cost only in the manufacturing function and not in nonmanufacturing parts like
distribution function.
10) To calculate the breakeven point in a multiproduct situation, one must assume that
the sales mix of the various products remains constant.
11) A cost-allocation base is a necessary element when using a strategy that will refine a
costing system.
12) Corporate-sustaining costs are costs of activities to support individual customers,
regardless of the number of units or batches of product delivered to the customer.
13) The sales quantity variance is the difference between budgeted contribution margin
based on actual units sold of all products at the budgeted mix, and contribution margin
in the flexible budget.
14) Zolas’ Heaters is approached by Ms. Leila, a new customer, to fulfill a large
one-time-only special order for a product similar to one offered to regular customers.
Zolas’ Heaters has excess capacity. The following per unit data apply for sales to regular
customers:
If Ms. Leila wanted a long-term commitment, and not a one-time-special order, for
supplying this product, calculate the most likely price to be quoted assuming the
markup remains same?
A) $780
B) $580
C) $520
D) $936
15) Total factor productivity will increase if ________.
A) technical productivity occurs
B) the company uses more total inputs per output
C) the company incurs fewer costs per input
D) current technology becomes obsolete
16) Home Decor Inc., manufactures home cleaning products. The company has two
divisions, Bleach and Cleanser. Because of different accounting methods and inflation
rates, the company is considering multiple evaluation measures. The following
information is provided for 2015:
The company is currently using a 15% required rate of return.
What are Bleach’s and Cleanser’s residual incomes based on book values, respectively?
A) $83,750; $40,000
B) $110,000; $67,500
C) $67,500; $110,000
D) $81,500; $40,250
17) Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to
automate a portion of its prevention activities, it will save $100,000 in variable costs.
The new method will require $50,000 in training costs and $140,000 in annual
equipment costs. Management is willing to adjust the budget for an amount up to the
cost of the new equipment. The budgeted production level is 200,000 units.
Appraisal costs for the year are budgeted at $500,000. The new prevention procedures
will save appraisal costs of $50,000. Internal failure costs average $30 per failed unit of
finished goods. The internal failure rate is expected to be 5% of all completed items.
The proposed changes will cut the internal failure rate by one-half. Internal failure units
are destroyed. External failure costs average $50 per failed unit. The company’s average
external failures average 2.5% of units sold. The new proposal will reduce this rate to
1%. Assume all units produced are sold and there are no ending inventories.
How much will internal failure costs change if the internal product failures are reduced
by 40% with the new procedures?
A) $138,000 decrease
B) $126,000 decrease
C) $120,000 decrease
D) $84,000 increase
18) Purchasing at the EOQ recommended level, how many deliveries will be made
during each time period?
A) 2 deliveries
B) 6.0 deliveries
C) 7.91 deliveries
D) 12 deliveries
19) A manufacturing plant produces two product lines: golf equipment and soccer
equipment. An example of direct costs for the golf equipment line is ________.
A) beverages provided daily in the plant break room
B) monthly lease payments for a specialized piece of equipment needed to manufacture
the golf driver
C) salaries of the clerical staff that work in the company administrative offices
D) overheads incurred in producing both golf and soccer equipment
20) Which of the following can be a reason for a favorable price variance for direct
materials?
A) a decrease in the price of materials due to an oversupply of materials
B) an unexpected increase in the price of materials
C) less amount of material used during production than planned for actual output
D) workers taking less time to produce the products
21) The Frontive Company has assembled the following data pertaining to certain costs
that cannot be easily identified as either fixed or variable. Frontive Company has heard
about a method of measuring cost functions called the high-low method and has
decided to use it in this situation.
What is the cost function?
A) y = $45,370 + $4.19X
B) y = $24,700 + $4.40X
C) y = $34,000 + $4.94X
D) y = $5,200 + $3.90X
22) Merchandising-sectors ________.
A) purchase and then sell tangible products without changing their basic form
B) provide intangible products
C) purchase materials and components and convert them into finished goods
D) purchase and then sell tangible products by changing their basic form
23) Speedy Dress Manufacturing has two workstations, cutting and finishing. The
cutting station is limited by the speed of operating the cutting machine. Finishing is
limited by the speed of the workers. Finishing normally waits for work from cutting.
Each department works an eight-hour day. If cutting begins work two hours earlier than
finishing each day, the two departments generally finish their work at about the same
time. Not only does this eliminate the bottleneck, but also it increases finished units
produced each day by 160 units. All units produced can be sold even though the change
increases inventory stock by 20% from 400 units. The cost of operating the cutting
department two more hours each day is $1,600. The contribution margin of the finished
products is $6 each. Inventory carrying costs are $0.40 per unit per day.
What is the change in the daily contribution margin if the change is made?
A) $(608)
B) $(634)
C) $(672)
D) $800
24) Which of the following reduces manufacturing cycle times and delays?
A) increasing the capacity of a bottleneck resource
B) selling of an existing equipment to save up on depreciation costs
C) increasing the time it takes for setups and processing
D) outsourcing the job to a third party
25) Managing inventories to increase net income requires companies to effectively
manage costs associated with goods for sale.
Required:
Classify the below listed items as either Purchasing Costs, Ordering Costs, Carrying
Costs, Stockout Costs, Costs of Quality, or Shrinkage Costs.
________a.costs of obtaining purchase approvals
________b.costs resulting from embezzlement by employees
________c.internal failure costs
________d.opportunity cost of the investment tied up in inventory
________e.costs associated with storage
________f.costs of lost sales as a result of not having an item requested by a customer
________g.freight-in charges
________h.special processing costs
________i.costs of wages for work-in-process inspections
________j.costs that result from misclassifications and clerical errors
26) Costs in the cost pool having the same or a similar cause-and-effect or
benefits-receiving relationship
with the cost-allocation base can be achieved in adopting ________.
A) indirect cost pools
B) homogeneous cost pools
C) hetrogeneous cost pools
D) direct cost pools
27) Which of the following statements is true of the methods for allocating joint costs?
A) The net realizable value method uses the sales value of the units sold during the
accounting period to allocate joint costs.
B) The sales value at splitoff method always results in the same gross-margin
percentage for all products.
C) The sales value at splitoff method allocates joint costs to each product in proportion
to the sales value of total production.
D) The net realizable value method results in the same joint production cost per unit for
all products.
28) Which of the following forms a part of decision making in CVP analysis?
A) selection of inventory method for financial reporting purposes
B) decision to form a capital policy
C) decision to advertise
D) decision to improve the efficiency of the work force
29) Which of the following statements is true of costs associated with goods for sale?
A) Information-gathering technology increases the reliability and timeliness of
inventory information and increases the costs related to inventory.
B) Opportunity costs are not recorded in financial accounting systems because they are
not a significant component in several cost categories.
C) The costs of receiving and inspecting the items are included in the purchase orders
are ordering costs.
D) Opportunity costs are recorded in financial accounting systems but are a not
significant component in several cost categories.
30) Synor Coffee, Inc., sells two types of coffee, Colombian and Blue Mountain. The
monthly budget for U.S. coffee sales is based on a combination of last year’s
performance, a forecast of industry sales, and the company’s expected share of the U.S.
market. The following information is provided for March:
ActualBudget
Budgeted and actual fixed corporate-sustaining costs are $60,000 and $72,000,
respectively.
Required:
a.Calculate the actual contribution margin for the month.
b.Calculate the contribution margin for the static budget.
c.Calculate the contribution margin for the flexible budget.
d.Determine the total static-budget variance, the total flexible-budget variance, and the
total sales-volume variance in terms of the contribution margin.