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1) The two broad strategies that companies follow are cost leadership strategy and
product differentiation strategy.
2) In a series of interdepartmental transfers, each department is regarded as separate and
distinct for accounting purposes.
3) Management by exception is the practice of concentrating on areas not operating as
anticipated (such as a cost overrun) and placing less attention on areas operating as
anticipated.
4) The shorter the time horizon, the lower the percentage of total costs considered fixed.
5) The only disadvantage of JIT purchasing is the higher levels of carrying and
inspection costs.
6) A favorable fixed overhead flexible-budget variance indicates that actual fixed costs
exceeded the lump-sum amount budgeted.
7) Sandra Clothing Company has invested $48,000,000 in its business. The target rate
of return for the company is 15%. It has long-term assets of $20,000,000. Cost of debt
for the company is 12%. It expects to sell 8,000 units in the upcoming year. What will
be the target operating income per unit for Sandra Clothing Company?
A) $300
B) $375
C) $720
D) $900
8) Which of the following statements is true of the economic-order-quantity decision
model?
A) It assumes purchasing costs are relevant because the cost per unit changes due to the
quantity ordered.
B) It assumes that quality costs are considered only to the extent that these costs affect
ordering or carrying costs.
C) It assumes that stockout costs are relevant even if no stockouts occur.
D) It assumes that ordering costs and carrying costs are irrelevant.
9) Marketing is the ________.
A) generation of, and experimentation with, ideas related to new products, services, or
processes
B) detailed planning and engineering of products, services, or processes
C) acquisition, coordination, and assembly of resources to produce a product or deliver
a service
D) the manner by which companies promote and sell their products or services to
customers or perspective customers
10) Buildz Manufacturing currently produces 1,000 tables per month. The following per
unit data for 1,000 tables apply for sales to regular customers:
What is the per unit cost when producing 3,000 tables?
A) $58.33
B) $175.00
C) $85.00
D) $125.45
11) Kason, Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs
are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per
pool cue. The following inventory levels apply to 2016:
How many pool cues need to be produced in 2016?
A) 22,500 cues
B) 22,000 cues
C) 20,500 cues
D) 19,500 cues
12) 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 total production per day if the change is made?
A) 6400 units
B) 800 units
C) 880 units
D) 1600 units
13) Wilde Corporation budgeted the following costs for the production of its one and
only product for the next fiscal year:
Wilde has an annual target operating income of $900,000.
The markup percentage for setting prices as a percentage of variable manufacturing
costs is ________.
A) 51.40%
B) 87.04%
C) 65.30%
D) 21.30%
14) Which of the following is the numerator in the mathematical expression for accrual
accounting rate-of-return (AARR)?
A) increase in expected average investment
B) increase in expected average annual after-tax operating income
C) increase in expected average cash flow
D) increase in expected net initial investment
15) Weighty Steel processes a single type of steel. For the current period the following
information is given:
All materials are added at the beginning of the production process. The beginning
inventory was 40% complete as to conversion, while the ending inventory was 30%
completed for conversion purposes.
Weighty uses the weighted-average costing method.
What is the total cost assigned to the units completed and transferred this period?
A) $107,010
B) $109,440
C) $113,160
D) $120,100
16) Uninder Company uses the high-low method to estimate the cost function. The
information for 2015 is provided below:
What is the estimated cost function for the above data?
A) y = 13,000 + 43.75X
B) y = 5,500 + 30X
C) y = 22,000 + 40X
D) y = 16,500 + 52X
17) Filippucci Company used a budgeted indirect-cost rate for its manufacturing
operations, the amount allocated ($200,000) is different from the actual amount
incurred ($225,000).
Ending balances in the relevant accounts are:
Under the writeoff approach, the difference between Manufacturing Overhead Control
and Manufacturing Overhead Allocated is adjusted in the ________.
A) Cost of Goods Sold account
B) Work-in Process account
C) Manufacturing Overhead account
D) Miscellaneous Expenses account
18) The amount reported for fixed overhead on the static budget is also reported
________.
A) as actual fixed costs
B) as allocated fixed overhead costs
C) as flexible budget costs
D) as committed variable costs
19) R&D costs are treated as period costs because ________.
A) these costs may increase revenues in the current period
B) these costs may increase revenues in the future period
C) these costs may decrease revenues in the current period
D) these costs are expensed when the goods are sold
