1) management accountants are frequently asked to analyze various decision situations
including the following:
i. the cost of a special device that is necessary if a special order is accepted.
ii. the cost proposed annually for the plant service for the grounds at corporate
headquarters.
iii. joint production costs incurred, to be considered in a sell-or-process-further
decision.
iv. the costs associated with alternative uses of plant space, to be considered in a
make/buy decision.
v. the cost of obsolete inventory acquired several years ago, to be considered in a
keep-versus-disposal decision.
the costs described in situations i and iv above are:
a.prime costs
b.sunk costs
c.discretionary costs
d.relevant costs
e.opportunity costs
2) stylish sitting is a retailer of office chairs located in san francisco, california. due to
increased market competition, the cfo of stylish sitting has grown worried about the
firm’s upcoming income stream. the cfo asked you to use the company financial
information provided below.
the annual breakeven point, in unit sales, is:
a.15,000 units
b.24,000 units
c.36,000 units
d.13,000 units
e.19,000 units
3) the difference between sales price per unit and variable cost per unit is the:
a.contribution margin per unit (cm)
b.total contribution margin (cm)
c.contribution margin ratio
d.margin of safety (mos)
e.breakeven point
4) which of the following is not an environmental performance indicator?
a.fossil fuel use
b.carbon emissions
c.pollutants production
d.all of the above
5) stephenson company’s computer system recently crashed, erasing much of the
company’s financial data. the following accounting information was discovered soon
afterwards on the cfo’s back-up computer disk.
the cfo of stephenson company has asked you to recalculate the following accounts and
report to him by week’s end.
what should be the amount of total manufacturing cost?
a.$340,000
b.$350,000
c.$380,000
d.$395,000
6) under job costing, factory overhead costs are assigned to products or services using
labor or machine hours which are:
a.multiple cost pools
b.a homogeneous cost pool
c.volume-based cost drivers
d.non-volume-based cost drivers only
e.activity-based cost drivers
7) the objectives of cost allocation are to:
a.motivate, provide incentives, and determine fair rewards
b.accurately define, divide and spread direct costs
c.value, measure, and interpret cost data
d.connect, communicate, and discern information
e.define, refine, and re-define indirect costs
8) fresplanade co. had the following historical pattern for its credit sales:
75% collected in the month of sale
12% collected in the first month after sale
8% collected in the second month after sale
3% collected in the third month after sale
2% uncollectible
the sales on open account (credit sales) have been budgeted for the last six months of
the year as shown below:
july $72,000
august $84,000
september $96,000
october $108,000
november $120,000
december $102,000
the estimated cash collections during july from credit sales made in july by fresplanade
co. is:
a.$83,160
b.$79,380
c.$87,840
d.$54,000
e.$71,640
9) in order to assure that accounting information is accurate and to avoid potentially
costly mistakes in the decision making process, firms should:
a.design and monitor an effective system of internal accounting controls
b.have the internal auditors and controller each check the accounting data before it is
released to management
c.purchase an accounting system that is designed specifically for the industry in which
the firm conducts business
d.none of the above
10) the decline of the u.s. dollar relative to other currencies has caused firms outside the
u.s., such as bmw and volkswagen to:
a.experience increasing sales in the u.s
b.experience increasing sales worldwide
c.locate plants in the u.s. to reduce overall manufacturing costs
d.require dealers to make payments in the euro
e.none of the above
11) thompson refrigerators inc. needs to prepare pro forma financial statements for the
next fiscal year. to do so, the company must forecast its total overhead cost. the actual
machine hours and total overhead cost are presented below for the past six months.
using the high-low method, total monthly fixed overhead cost is calculated to be:
a.$5,095.10
b.$5,462.80
c.$5,661.90
d.$5,875.30
e.$5,966.40
12) volume-based versus abc overhead rate: medical arts hospital (mah) uses a
hospital-wide overhead rate based on nurse-hours. the intensive care unit (icu), which
has 30 beds, applies overhead using patient-days. its budgeted cost and operating data
for the year follow:
required:
1> calculate the icu’s overhead costs for the month of june using
a. the hospital-wide rate
b. the icu department-wide rate
c. the cost driver rates for the icu department
2> explain the differences and determine which overhead assignment method is more
appropriate
13) the major problem with relevant cost determination is that it fails to recognize the:
a.impact of variable costs in the long run
b.long-term nature of most product-related decisions
c.’sunk” nature of most fixed product costs
d.short-term nature of most product-related decisions
e.need to calculate costs more precisely
14) information pertaining to yekstop corp.’s sales revenue is presented below.
management estimates that 4% of credit sales are eventually uncollectible. of the
collectible credit sales, 65% are likely to be collected in the month of sale and the
remainder in the month following the sale. the company desires to begin each month
with an inventory equal to 75% of the sales projected for the month. all purchases of
inventory are on open account; 30% will be paid in the month of purchase, and the
remainder paid in the month following the month of purchase. the purchase costs are
approximately 60% of the selling prices.
total budgeted inventory purchases in december by yekstop corp. are:
a.$86,250
b.$140,400
c.$226,650
d.$258,750
e.$345,000
15) l & l, cpas, employs two full-time professional cpas and five support employees.
budgeted direct salary costs include $160,000 for each cpa. the support employees are
considered as indirect costs, and this cost was budgeted for $200,000 though the actual
cost was $225,000. actual salaries were $155,000 for each cpa. direct and indirect costs
are applied on a cpa-labor-hour basis. total budgeted cpa-labor-hours were 5,000 . if a
client used 500 labor-hours, what are the budgeted direct-cost rate and the budgeted
indirect-cost rate, respectively?
a.$100; $40
b.$62; $40
c.$90; $40
d.$64; $40
e.$62; $45