Which f the following methods focuses on reducing costs during the manufacturing
stage?
A) Target costing
B) Kaizen costing
C) Cost-plus pricing
D) Life-cycle costing
Which of the following is a component of operating budgets?
A) production budget
B) budgeted statement of cash flows
C) capital expenditures budget
D) budgeted balance sheet
Which of the following costs can be classified into both value-added and
non-value-added costs?
A) production control costs
B) machine breakdown costs
C) rework costs
D) direct material costs
Columbus Company provides the following ABC costing information:
The above activities used by their three departments are:
How much of the gas cost will be assigned to the Lawn Department?
A) $1,800
B) $3,800
C) $2,400
D) $8,000
What is the breakeven point in units, assuming a product’s selling price is $300, fixed
costs are $18,000, unit variable costs are $20, and operating income is $6,000?
A) 22 units
B) 86 units
C) 60 units
D) 65 units
To guide cost allocation decisions, the cause-and-effect criterion ________.
A) is used less frequently than the other criteria
B) is the primary criterion used in activity-based costing
C) considers fairness as a matter of judgment rather than an operational criterion
D) advocates allocating costs in proportion to the cost object’s ability to bear costs
allocated to it
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 2018:
ASSETS INCOME
The company is currently using a 15% required rate of return.
What are Bleach’s and Cleanser’s return on investment based on current values,
respectively?
A) 43%; 29%
B) 29%; 43%
C) 54%; 36%
D) 36%; 54%
Operating decisions primarily deal with ________.
A) the best use of scarce resources
B) how to obtain funds to acquire resources
C) acquiring equipment and buildings
D) satisfying stockholders
Variance analysis should be used ________.
A) to understand why variances arise and to improve future performance
B) as the sole source of information for performance evaluation
C) to punish employees that do not meet standards
D) to set the standards which are very easy to achieve to encourage employees to focus
on meeting standards
Warranty repair cost is an example of which of the following?
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
Raul Technologies is concerned that increased sales did not result in increased profits
for 2018. Both variable unit and total fixed manufacturing costs for 2017 and 2018
remained constant at $35 and $3,500,000, respectively.
In 2017, the company produced 100,000 units and sold 80,000 units at a price of $87.50
per unit. There was no beginning inventory in 2017. In 2018, the company made 70,000
units and sold 90,000 units at a price of $87.50. Selling and administrative expenses
were all fixed at $350,000 each year.
Required:
a. Prepare income statements for each year using absorption costing.
b. Prepare income statements for each year using variable costing.
c. Explain why the income was different each year using the two methods. Show
computations.
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank
and recorded DVDs. DVD Mart purchases DVDs from Globe at $25.00 per DVD;
DVDs are shipped in packages of 63. Globe pays all incoming freight, and DVD Mart
does not inspect the DVDs due to Globe’s reputation for high quality. Annual demand is
314,000 DVDs at a rate of 6600 DVDs per week. DVD Mart earns 15% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
What are the annual relevant ordering costs?
A) $91,977
B) $11,949
C) $8449
D) $8353
If deciding whether to eliminate a distribution channel, allocating corporate-sustaining
costs to distribution channels ________.
A) helps define cost reduction possibilities
B) gives the misleading impression of potential cost savings
C) identifies administrative inefficiencies
D) evaluates the effectiveness of sales personnel
Which of the following is a reason why budgets in multinational companies are not
used to evaluate the firm’s performance relative to its budgets?
A) Evaluations based on budgets can be meaningless due to factors such as exchange
rate risk and other volatility.
B) Evaluations based on budgets are not possible because of cultural differences in the
budgeting approach.
C) Evaluations based on relative regional performance are considered more meaningful
as compared to evaluations against budgets.
D) Evaluations based on budgets are harder when managers use sophisticated
techniques to minimize foreign currency exposure.
Process costing ________.
A) allocates all product costs, including materials, and labor
B) results in different costs for different units produced
C) is commonly used by general contractors who construct custom-built homes
D) is used exclusively in manufacturing
If 1,000 units are produced and only 700 units are sold, ________ results in the greatest
amount of expense reported on the income statement.
A) throughput costing
B) variable costing
C) absorption costing
D) job costing
Locil Corporation recently purchased a new machine for $307,890 with a eight-year
life. The old equipment has a remaining life of eight years and no disposal value at the
time of replacement. Net cash flows will be $90,000 per year. What is the internal rate
of return?
A) 24%
B) 29%
C) 33%
D) 37%
Fairhaven Company needs 1,000 motors in its manufacture of boats. It can buy the
motors from Asian Motors for $1,250 each. Southwestern’s plant can manufacture the
motors for the following costs per unit:
Direct materials $ 600
Direct manufacturing labor 250
Variable manufacturing overhead 200
Fixed manufacturing overhead 350
Total $1,400
If Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead
applied will not be avoided.
Required:
a. Should the company make or buy the motors?
b. What additional factors should Southwestern consider in deciding whether or NOT to
make or buy the motors?
The Corata Appliance Manufacturing Corporation manufactures two vacuum cleaners,
the Standard and the Super. The following information was gathered about the two
products:
What is the total sales-quantity variance in terms of the contribution margin? (Round
intermediary calculations to two decimal places.)
A) $316,000 favorable
B) $179,760 favorable
C) $495,760 favorable
D) $136,240 favorable
The annual relevant carrying costs of inventory consists of the sum of the ________.
A) relevant ordering costs and the relevant costs of quality
B) relevant ordering costs plus the relevant opportunity costs of capital
C) relevant incremental costs plus the relevant opportunity costs of capital
D) relevant incremental costs plus the relevant ordering costs
Which of the following costs is a relevant inventory carrying cost of carrying
inventory?
A) The lost contribution margin on future sales forgone as a result of customer
dissatisfaction in product quality.
B) The lost contribution margin on sales forgone because of the shortage of inventory.
C) The costs of storage space owned that cannot be used for other profitable purposes
when inventories decrease.
D) The costs of shrinkage.
A plant manufactures several different products. If a particular product is the cost
object, then the wages of the plant supervisor can be classified as a(n) ________.
A) direct cost because it occurs in the production facility
B) indirect manufacturing cost and therefore is an inventoriable cost
C) variable cost as it will vary on a per unit basis depending on volume
D) period cost
Bradford, Inc., expects to sell 8,000 ceramic vases for $21 each. Direct materials costs
are $4, direct manufacturing labor is $10, and manufacturing overhead is $4 per vase.
The following inventory levels apply to 2019:
On the 2019 budgeted income statement, what amount will be reported for cost of goods
sold?
A) $198,000
B) $151,200
C) $144,000
D) $136,800
The effect of spreading fixed manufacturing costs over a shrinking master-budget
capacity utilization amount results in ________.
A) greater utilization of capacity
B) increased unit costs
C) more competitive selling prices
D) greater demand for the product
Hockey Accessories Corporation manufactured 23,000 duffle bags during March. The
following fixed overhead data pertain to March:
What is the amount of fixed overhead allocated to production?
A) $621,000
B) $634,500
C) $639,711
D) $612,779
Osium Company made the following journal entry:
Which of the following statements is true of the given journal entry?
A) Osium overallocated variable manufacturing overhead.
B) A $30,000 unfavorable spending variance was recorded.
C) Work-in-Process is currently overstated.
D) A $80,000 unfavorable efficiency variance was recorded.
Which of the following statements is a benefit of measuring environmental and social
performance?
A) It limits the number of performance measures, identifying only the most critical
ones.
B) It helps to communicate the strategy to all members of the organization.
C) It enhances the identification of cause-and-effect relationships to evaluate benefits.
D) It uses financial measures to serve as leading indicators of future nonfinancial
performance.
Which of the following best describes conformance quality?
A) it is the first step of a quality management system such as ISO 9000
B) it is the performance of a product or service according to design and product
specifications
C) it is making the product according to design, engineering, and manufacturing
specifications
D) it focuses on how a product meets customer needs and wants
Which of the following is true of indirect costs?
A) Indirect costs are always considered sunk costs.
B) All indirect costs are included in cost of goods sold.
C) Indirect costs always vary in direct proportion to the level of production.
D) Indirect costs cannot be traced to a particular cost object in an economically feasible
way.
Waldorf Company has two sources of funds: long-term debt with a market and book
value of $5,400,000 issued at an interest rate of 12%, and equity capital that has a
market value of $4,300,000 (book value of $2,100,000). Waldorf Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 12%, while the tax rate is 35%.
What is the EVA for Wichita? (Round intermediary calculations to four decimal places.)
A) $975,000
B) $959,040
C) $434,040
D) $356,760
