When a firm adopts the just-in-time method of management,
a. employees are retrained on different equipment, but the plant layout generally
remains unchanged.
b. new machinery and equipment must be purchased from franchised JIT dealers.
c. machinery and equipment are moved into small autonomous production lines called
islands or cells.
d. new, more efficient machinery and equipment are purchased and installed in the
original plant layout.
In a production environment that manufactures goods to customer specifications, a
job-order costing system
a. can be used only if standard costs are used for materials and labor.
b. will provide reasonable product cost information only when all jobs utilize
approximately the same quantities of material and labor.
c. may be maintained using either actual or predetermined overhead rates.
d. emphasizes that large customers create the most costs even though they also provide
the most revenues.
Wyman Company is a graphic design shop that produces jobs to customer
specifications. During January, Job #3051 was worked on and the following
information is available:
What was the total cost of Job #3051 for January?
a. $2,713
b. $2,770
c. $2,812
d. $3,052
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses an activity-based costing
(ABC) system to allocate factory overhead, the materials handing cost allocated to
projection TVs would be:
a. $35,000
b. $45,000
c. $46,875
d. $51,923
The projected sales price for a new product (which is still in the development stage of
the product life cycle) is $50. The company has estimated the life-cycle cost to be $30
and the first-year cost to be $60. On this type of product, the company requires a $12
per unit profit. What is the target cost of the new product?
a. $30
b. $38
c. $42
d. $60
Which of the following should be considered in a cost management system design?
a. yes yes
yes
b. no yes
yes
c. no no
no
d. yes no
yes
Robertson Company.
Robertson Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #8, #12, and #15.
Direct material was requisitioned as follows for each job respectively: 25 percent, 30
percent, and 30 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,800; 3,300; and 4,000; respectively. Indirect labor is $45,000.
Other actual overhead costs totaled $50,000.
Refer to Robertson Company. What is the prime cost of Job #8?
a. $59,100
b. $82,850
c. $86,475
d. $93,680
Weslaco Company has made the following information available for its production
facility for the current month. Fixed overhead was estimated at 19,000 machine hours
for the production cycle. Actual machine hours for the period were 18,900, which
generated 3,900 units.
Weslaco Company’s standard costs are as follows:
Determine the following items:
a. material purchase price variance
b. standard quantity allowed for material
c. total standard cost of material allowed
d. actual quantity of material used
e. labor rate variance
f. standard hours allowed for labor
g. total standard cost of labor allowed
h. labor efficiency variance
i. actual variable overhead incurred
j. standard machine hours allowed
k. variable overhead efficiency variance
l. budgeted fixed overhead
m. applied fixed overhead
n. fixed overhead spending variance
o. volume variance
p. total overhead variance
Slack in operating budgets
a. results from unintentional managerial acts.
b. makes an organization more efficient and effective.
c. requires managers to work harder to achieve the budget.
d. is greater when managers are allowed to participate in the budgeting process.
In a JIT manufacturing environment, product costing information is least important for
use in
a. work in process inventory valuation.
b. pricing decisions.
c. product profitability analysis.
d. make-or-buy decisions.
Calhoun Corporation
Calhoun Corporation’s order quantity for Material T is 5,000 lbs. The company
maintains a safety stock of T at 500 lbs., and its order point is 1,500 lbs.
Refer to Calhoun Corporation. What is the lead time assuming daily usage is 50 lbs.?
a. 30 days
b. 100 days
c. 10 days
d. 20 days
Allocating service department costs to revenue-producing departments is an alternative
to
a. responsibility accounting.
b. the use of profit centers.
c. the use of cost centers.
d. a transfer pricing system.
An appraisal cost is created by
a. installing automated technology.
b. reworking products.
c. verifying procedures.
d. rescheduling and setup.
Overapplied overhead would result if
a. the plant were operated at less than normal capacity.
b. overhead costs incurred were less than costs charged to production.
c. overhead costs incurred were unreasonably large in relation to units produced.
d. overhead costs incurred were greater than costs charged to production.
The ____ is the highest rate of return that can be earned from the most attractive,
alternative capital project available to the firm.
a. accounting rate of return
b. internal rate of return
c. hurdle rate
d. opportunity cost of capital
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation. Assume that Phoenix has overapplied overhead of
$25,000 and that this amount is material. What is the balance in Cost of Goods Sold
after the overapplied overhead is closed?
a. $123,267
b. $144,033
c. $158,650
d. $108,650
If actual overhead is less than applied overhead, which of the following will be true?
Upon closing,
a. underapplied credited
b. underapplied debited
c. overapplied debited
d. overapplied credited
Boston Bakers
Boston Bakers is trying to decide whether it should keep its existing bread-making
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 Boston Bakers. The estimated $650 salvage value of the existing machine in 10
years represents a(n)
a. sunk cost.
b. opportunity cost of selling the existing machine now.
c. opportunity cost of keeping the existing machine for 10 years.
d. opportunity cost of keeping the existing machine and buying the new machine.
When JIT is implemented, which of the following changes in the accounting system
would notbe expected?
a. fewer cost allocations
b. elimination of standard costs
c. combining labor and overhead into one product cost category
d. combing raw material and materials in work-in-process into one product cost
category
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. How many units must be accounted for?
a. 118,200
b. 128,200
c. 130,000
d. 138,200
Which of the following formulas is the best representation of the concept of target
costing?
a. target cost + profit margin = selling price
b. selling price – target cost = profit margin
c. selling price – profit margin = target cost
d. target cost – standard cost = profit margin
The distinction between direct and indirect costs depends on whether a cost
a. is controllable or non-controllable.
b. is variable or fixed.
c. can be conveniently and physically traced to a cost object under consideration.
d. will increase with changes in levels of activity.
The Education Innovations Corporation produces puzzles in its Colorado manufacturing
plant. The company is currently evaluating ways to improve productivity. The
accountant of the firm’s parent organization suggested that management implement a
new compensation plan based on throughput performance measure as an incentive to
increase productivity. To demonstrate how such a measure might work, the accountant
gathered the following production data for a recent month:
a. How many defective units were produced?
b. Compute manufacturing cycle efficiency.
c. Compute process productivity.
d. Compute process quality yield.
e. Compute hourly throughput.
The Lumber Division
The Lumber Division of Home Innovations Company reported the following results for
a recent year
Refer to the Lumber Division
What was the asset turnover ratio of the Lumber Division?
a. 1.538
b. 2.97
c. 0.650
d. 1.20
In an internal transfer, the buying division records the transaction by
a. debiting Accounts Receivable.
b. crediting Accounts Payable.
c. debiting Intracompany Cost of Goods Sold.
d. crediting Inventory.
Tactical planning usually involves which level of management?
a. middle
b. top
c. middle and top
d. operational
Normal spoilage units resulting from a continuous process
a. are extended to the EUP schedule.
b. result in a higher unit cost for the good units produced.
c. result in a loss being incurred.
d. cause estimated overhead to increase.
When the cost of lost units must be assigned, and those same units must be included in
an equivalent unit schedule, these units are considered
a. normal and discrete.
b. normal and continuous.
c. abnormal and discrete.
d. abnormal and continuous.
Which of the following would notnormally affect the compensation strategy of a firm?
a. organizational goals
b. location of firm
c. competition
d. number of subsidiaries
The efficiency variance computed on a three-variance approach is
a. equal to the efficiency variance computed on the four-variance approach.
b. equal to the variable overhead spending variance plus the efficiency variance
computed on the four-variance approach.
c. computed as the difference between applied variable overhead and actual variable
overhead.
d. computed as actual variable overhead minus the flexible budget for variable overhead
based on actual hours worked.
The preparation of an organization’s budget
a. forces management to look ahead and try to see the future of the organization.
b. requires that the entire management team work together to make and carry out the
yearly plan.
c. makes performance review possible at all levels of management.
d. all of the above.
Winters Company uses a weighted average process costing system and started 36,000
units this month. Winters had 15,000 units that were 25 percent complete as to
conversion costs in beginning Work in Process Inventory and 6,000 units that were 35
percent complete as to conversion costs in ending Work in Process Inventory. What are
equivalent units for conversion costs?
a. 43,350
b. 47,100
c. 48,900
d. 51,000
Lewis Company uses a weighted average process costing system. Material is added at
the start of production. Lewis Company started 13,000 units into production and had
4,500 units in process at the start of the period that were 60 percent complete as to
conversion costs. If Lewis Company transferred out 11,750 units, how many units were
in ending Work in Process Inventory?
a. 1,250
b. 3,000
c. 3,500
d. 5,750
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a FIFO method of process costing, compute the
average cost per EUP for Material B.
a. $20.10
b. $31.25
c. $20.00
d. $31.00
Managers must often use multiple measures to effectively rank capital projects.
Discrete production losses are assumed to occur throughout the process.
If the net present value is positive, the actual return on a project exceeds the required
rate of return.
The formula for price/rate variance is (AP – SP)x AQ.
Sales minus cost of goods sold is referred to as variable contribution margin.
A benchmarking process that is non-industry specific and focuses on how companies
compete is referred to as ___________________________________.
Standards that allow for waste and inefficiency are referred to as
______________________________.
The learning and growth perspective of the balanced scorecard addresses the things that
an organization needs to do well to meet customer needs and expectations.
A set of formal methods used to plan and control the cost-generating activities of an
organization is referred to as a(n) ________________________________________.
The process of investigating, comparing, and evaluating a company’s products or
services against those of other companies is referred to as ____________________.
The journal entry to record normal spoilage specifically identified with a particular job
includes a debit to Work in Process.
A company that manufactures custom bridal gowns will use a job-order costing system
to track production costs.
A benchmarking process that focuses on how best-in-class companies achieve their
results is referred to as ___________________________________.
Efficient inventory management relies largely on cost-minimization strategies.
Increases in per unit variable costs and total fixed costs should be minimized through
the process of ________________________________.
Why are fixed costs generally more relevant in long-run decisions than short-run
decisions?
Retailers generally have a much lower degree of conversion than do manufacturing or
professional firms.