Absorption costing is more useful than variable costing in determining a company’s
break-even point.
Cost based transfer prices are most appropriate for low cost and low volume services.
Present value and future value computations assume the use of compound interest.
Activity-based costing is appropriate for a company that has low overhead costs that
are proportional to the unit volumes of products.
The portion of an asset that was consumed during a period is referred to an expired
cost.
Increasing the discount period on accounts receivable will increase an organization’s
cash levels.
Accelerating inventory turnover will increase an organization’s levels of cash.
A short-run challenge for a business is achieving profitability.
Supply chain management can reduce the processing time for an organization to obtain
raw materials.
In a pull system of production control, inventory is produced in anticipation of
customer or work center demand.
Allocating joint costs based upon a physical measure considers the revenue-generating
ability of individual products.
A company that produces sugar will use a process costing system to track production
costs.
A fixed overhead volume variance is a controllable variance.
Performance evaluation measures in an organization
A. affect the motivation of subunit managers to transact with one another.
B. always promote goal congruence.
C. are less motivating to managers than overall organizational goals.
D. must be the same for all managers to eliminate suboptimization.
Houston National Bank
Houston National Bank had the following activities, traceable costs, and
physical flow of driver units:
The above activities are used by the Memorial branch and the University branch:
Refer to Houston National Bank. What is the cost per driver unit for new account
activity?
A. $0.09
B. $0.075
C. $30.00
D. $50.00
Abnormal spoilage is
A. spoilage that is forecasted or planned.
B. spoilage that is in excess of planned.
C. accounted for as a product cost.
D. debited to Cost of Goods Sold.
Residual income is the
A. contribution margin of an investment center, less the imputed interest on the invested
capital used by the center.
B. contribution margin of an investment center, plus the imputed interest on the
invested capital used by the center.
C. income of an investment center, less the imputed interest on the invested capital used
by the center.
D. income of an investment center, plus the imputed interest on the invested capital
used by the center.
StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The total failure cost is
A. $15,000.
B. $13,500.
C. $11,250.
D. $8,250.
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product X (round to the nearest dollar)?
A. $5,500
B. $2,500
C. $4,000
D. $3,243
The time value of money is considered in long-range investment decisions by
A. assuming equal annual cash flow patterns.
B. investing only in short-term projects.
C. assigning greater value to more immediate cash flows.
D. ignoring depreciation and tax implications of the investment.
The Robbins Company manufactures special purpose machines to order. On January 1,
there were two jobs in process, #705 and #706. The following costs were applied to
these jobs in the prior year:
During January, the following transactions took place:
Actual overhead is applied to individual jobs at the end of each month using a rate
based on actual direct labor costs.
Required:
Reverse engineering is used in
A. statistical process control.
B. process benchmarking.
C. results benchmarking.
D. price fixing.
The following information regarding fixed production costs from a manufacturing firm
is available for the current year:
Which of the following statements is not true?
A. The maximum amount of fixed production costs that this firm could deduct using
absorption costs in the current year is $116,000.
B. The maximum difference between this firm’s the current year income based on
absorption costing and its income based on variable costing is $16,000.
C. Using variable costing, this firm will deduct no more than $16,000 for fixed
production costs.
D. If this firm produced substantially more units than it sold in the current year, variable
costing will probably yield a lower income than absorption costing.
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.
Which of the following is not a primary component of a control system?
A. operator
B. communications network
C. effector
D. assessor
Bridges Corporation
The following information has been taken from the cost records of Bridges Corporation
for the past year:
Refer to Bridges Company. Cost of Goods Sold was
A. $711
B. $746
C. $796
D. $816
Which of the following is the least likely to be a relevant item in deciding whether to
replace an old machine?
A. acquisition cost of the old machine
B. outlay to be made for the new machine
C. annual savings to be enjoyed on the new machine
D. life of the new machine
Kinney Corporation estimates that it will consume 400,000 units of Part 303 in the
coming year. The ordering cost for this unit is $3.20. Kinney Corporation wants to
maintain a safety stock of 1,000 units, and its factory operates 200 days per year. What
is the order point if the lead time is 2 days?
Discuss the four different levels of costs identified by activity based costing (ABC).
How should these types of costs be treated in the determination of product cost?
Increases in per unit variable costs and total fixed costs should be minimized through
the process of ________________________________.
Wholesome Wheat Corporation
Wholesome Wheat Corporation grows grain in rural areas of the South. The
corporation’s costs per bushel of grain (based on an average yield of 130 bushels per
acre) follow:
Wholesome Wheat Corporation defines direct material costs as seed, fertilizer, water,
and other chemicals. The variable overhead costs represent maintenance and repair
costs of machinery. The fixed overhead costs are completely comprised of depreciation
expense on machinery and real estate taxes.
Refer to Wholesome Wheat Corporation. Assume that the current date is March 15. On
this date, the corporation must make a decision as to whether it is financially better off
to plant a certain farm with grain or leave the land idle (no income is derived from idle
land). Grain prices have been severely depressed in recent years and Wholesome
Wheat’s best guess is that grain prices will be around $2.00 per bushel at the time the
crop is ready for harvest. Should the company plant grain or leave the land idle?
Explain.
When a relationship between one independent variable and one dependent variable is
analyzed, the regression is referred to as ____________________.
Costs incurred in the past to acquire an asset are referred to as
_________________________.
