Lean accounting is much simpler than traditional product costing because ________.
A) it compares value stream costs against costs that include costs of all purchased
materials
B) it computes the cost of individual products
C) calculating actual product costs by value streams requires less overhead allocation
D) adding a larger markup on value stream costs to compensate for some of the
excluded costs is easier than tracing all non value added costs
Zebra Corporation currently produces baseball caps in an automated process. Expected
production per month is 17,000 units, direct material costs are $7.50 per unit, and
manufacturing overhead costs are $60,000 per month. Manufacturing overhead is
entirely fixed costs. What is the flexible budget for 11,000 and 17,000 units,
respectively?
A) $60,000; $187,500
B) $60,000; $105,000
C) $142,500; $187,500
D) $142,500; $105,000
Andy worked 60 hours last week for Bread Works Manufacturing. Of the 60 hours 10
hours were considered overtime, and also Tony was idle for 8 of the 60 hours due to an
equipment malfunction. Andy makes $90 per hour and is paid $135 an hour (time and a
half) for overtime. Andy’s total compensation for that week would be ________, and
assuming Bread Works charges overtime premium and idle time to indirect labor, the
amount of this compensation credited to indirect labor would be ________.
A) $5,850; $1,170
B) $6,300; $2,070
C) $5,130; $2,430
D) $5,400; $1,620
Canton’s Corp. manufactures two sizes of ceramic paperweights, regular and jumbo.
The following information applies to their expectations for the planning period:
Production Estimates
Production units:
Regular = 11,000,000 units
Jumbo = 22,000,000 units
Machine-hours = 600,000 mh
Labor-hours = 1,200,000 dlh
Expected direct costs amounts to $9,130,000 for the period. Support cost requirements of
both products are substantially different from one another. Canton uses an ABC costing
system.
Which of the following statements is true of implementing an ABC system?
A) Managers should never compromise on the cause-and-effect relationship of cost drivers
and costs.
B) The three guidelines for refining costing systems should be ignored while implementing
an ABC costing system.
C) The heterogeneous cost pools give managers greater confidence in the activity and
product cost numbers from the ABC system.
D) Identifying the cost-allocation bases defines the number of activity pools into which
costs must be grouped in an ABC system.
Effective planning of variable overhead costs includes ________.
A) choosing the appropriate level of investment
B) eliminating value-added costs
C) redesigning products or processes to use fewer resources
D) reorganizing management structure
Direct materials are $600, direct labor is $450, variable overhead costs are $650, and
fixed overhead costs are $400. The cost of one unit is ________.
A) $850
B) $1,050
C) $1,700
D) $2,100
Which of the following scenarios is an example of predatory pricing?
A) Ceramic Corp sells its products below average total costs during off-peak seasons.
B) Almeida flowers has arrived at an informal agreement with other sellers in the area
to charge a very high selling price.
C) Anton Inc., sells its products for $25 in the U.S, however it can sell the same product
for double the price in its home country.
D) Duyen Inc., is launching a new product and has decided to sell its product below its
average variable costs until it drives competitors out of market.
Which of the following statements is true of variable overhead costs?
A) Variable overhead costs always have unused capacity.
B) Variable overhead costs have no production-volume variance.
C) Variable overhead costs have no spending variance.
D) Variable overhead costs have no efficiency variance.
Morgan Clay Products manufactures clay molded pottery on an assembly line. Its
standard costing system uses two cost categories, direct materials and conversion costs.
Each product must pass through the Molding Department and the Finishing
Department. Direct materials are added at the beginning of the production process.
Conversion costs are allocated evenly throughout production.
Which of the following journal entries records the Molding Department’s conversion costs
for the month, assuming conversion costs are 20% higher than expected?
A)
B)
C)
D)
Freemore Company has the following sales budget for the last six months of 2018:
Sales are immediately due, however the cash collection of sales, historically, has been as
follows:
55% of sales collected in the month of sale,
35% of sales collected in the month following the sale,
7% of sales collected in the second month following the sale, and
3% of sales are uncollectible.
What is the ending balance of accounts receivable for the end of September, assuming
uncollectible balances are written off at the end of the second month following the sale?
A) $260,550
B) $134,070
C) $113,375
D) $109,250
The top management at Groundsource Company, a manufacturer of lawn and garden
equipment, is attempting to recover from a fire that destroyed some of their accounting
records. The main computer system was also severely damaged. The following
information was salvaged:
What is the Digger Division’s return on investment?
A) 0.25
B) 0.30
C) 0.34
D) 0.43
The district director of 5 mortgage origination offices staffed by bank associates who
cold call potential customers in an attempt to gain home mortgage and home equity
loan business is most likely responsible for a(n) ________.
A) revenue center
B) investment center
C) cost center
D) profit center
Managers need to understand customers because ________.
A) they are the key in influencing the board decisions and help in formulating policies
with the suppliers
B) they guide the managers to formulate pricing policies
C) they are more knowledgeable as they easy access to price and other information
online
D) they influence the costing decisions of the product
One reason for assigning selling and distribution costs to products for analytical
purposes is ________.
A) to justify a varied product-mix
B) that these costs should be included in the cost of goods sold in the income statement
C) to ensure that all costs are considered
D) that all direct costs must be assigned
In some industries, such as legal and consulting, most costs are locked in ________.
A) when they are incurred
B) during the design stage
C) during the customer-service stage
D) during the marketing stage
Which of the following statements is true of normal spoilage?
A) It is a spoilage which is not inherent in a particular production process.
B) It occurs due to machine breakdowns and operator errors.
C) It is usually regarded as avoidable and controllable.
D) It arises even when the process is carried out in an efficient manner.
The flexible budget contains ________.
A) budgeted amounts for actual output
B) static budget amounts for planned output
C) actual costs for actual output
D) actual costs for planned output
Under backflush costing approach where three trigger points are used (stage A, stage C,
and stage D), the purchase of materials is:
A) credited to the Materials and In-Process Inventory Control account
B) debited to the Materials and In-Process Inventory Control account
C) debited to the Materials Inventory Control account
D) ignored because the manufacturing process moves so quickly from acquisition of
materials to the sale of the finished good
Following a strategy of product differentiation, Somerset Corporation makes a high-end
computer monitor, CM7. Somerset Corporation presents the following data for the
years 2017 and 2018:
Somerset Corporation produces no defective units but it wants to reduce direct materials
usage per unit of CM7 in 2018. Manufacturing conversion costs in each year depend on
production capacity defined in terms of CM7 units that can be produced. Selling and
customer-service costs depend on the number of customers that the customer and service
functions are designed to support. Somerset Corporation has 100 customers in 2017 and
115 customers in 2018. The industry market size for high-end computer monitors increased
5% from 2017 to 2018.
Required:
a. What is operating income for 2017?
b. What is operating income in 2018?
c. What is the change in operating income from 2017 to 2018?
How many actions and events will a decision table contain?
A) 1 action and 3 events
B) 1 action and 6 events
C) 2 actions and 3 events
D) 3 actions and 6 events
Quantum Company uses the high-low method to estimate the cost function. The
information for 2017 is provided below:
Machine-hours Labor Costs
Highest observation of cost driver 600 $36,000
Lowest observation of cost driver 400 $26,000
What is the estimated cost function for the above data?
A) y = 26,000 + 62.00X
B) y = 6,000 + 50.00X
C) y = 36,000 + 60.00X
D) y = 30,000 + 65.00X
Among different types of costs associated with inventory, the incoming freight charges
of inventories are ________.
A) purchasing costs
B) ordering costs
C) stockout costs
D) carrying costs
Games R Us manufactures various games. For March, there were no beginning
inventories of direct materials and no beginning or ending work in process. Conversion
costs is the only indirect manufacturing cost category currently used. Journal entries are
recorded when materials are purchased and when conversion costs are allocated under
backflush costing.
Which of the following journal entries properly records the purchase of direct materials?
A)
B)
C)
D)
To apply CVP analysis in a not-for profit organization ________.
A) managers need to focus on the customer base rather than the cost drivers
B) managers need to focus on measuring their output, which is the same as tangible
units sold by manufacturing and merchandising companies
C) managers need to focus on measuring their input, which is different from the
tangible units consumed by manufacturing and merchandising companies
D) managers need to focus on measuring their output, which is different from the
tangible units sold by manufacturing and merchandising companies
Time Again, LLC produces and sells a mantel clock for $100 per unit. In 2017, 42,125
clocks were produced and 37,958 were sold. Other information for the year includes:
What is the inventoriable cost per unit using variable costing?
A) $66.00
B) $51.50
C) $48.00
D) $103.50
Xtech Games Inc. has a new video game cassette for the upcoming holiday season. It is
trying to determine the target cost for the game if the selling price per unit will be set at
$70, the going price for video games, and the firm wants to earn a target operating
income of 30% of sales. What will be the target cost per unit for the new game?
A) $70
B) $49
C) $30
D) $21
Archoid’s Flowering Plants provides the following information for the month of May:
What is the budgeted contribution margin per composite unit for the actual mix? (Round
any intermediary calculations two decimal places.)
A) $14.40
B) $15.72
C) $19.00
D) $15.28
Cost behavior refers to ________.
A) how costs react to a change in the level of activity
B) whether a cost is incurred in a manufacturing, merchandising, or service company
C) classifying costs as either perpetual or period costs
D) whether a particular expense is expensed in the same or the following period
________ describes the flow of goods, services, and information from the purchase of
materials to the delivery of products to consumers, regardless of whether those
activities occur in the same organization or with other organizations.
A) Supply chain
B) Production process
C) Quality control
D) Customer relationship management
The costs of quality are the costs incurred ________.
A) to enhance large scale production
B) to prevent the production of a low quality product
C) due to defective and low quality product
D) because of warranties, normal spoilage, abnormal spoilage, and scrap
Service companies and not-for-profit organizations ________.
A) cannot use CVP because they don’t manufacture a product
B) cannout use CVP because there is no way to distinguish fixed and variable costs
C) can use CVP by focusing on measuring the organization’s output
D) can use CVP by treating all costs as variable
The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has
only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 80,000 technician hours and
by the Small Plane Department was 120,000 technician hours. If a dual-rate cost-allocation
method is used, what amount of materials laboratory costs will be allocated to the Large
Plane Department? Assume budgeted usage is used to allocate fixed materials laboratory
costs and actual usage is used to allocate variable materials laboratory costs.
A) $10,300,000
B) $10,100,000
C) $9,600,000
D) $10,800,000
