The unfavorable volume variance may be due to all of the following factors except
a. failure to maintain an even flow of work
b. machine breakdowns
c. unexpected increases in the cost of utilities
d. failure to obtain enough sales orders
In using the variable cost concept of applying the cost-plus approach to product pricing,
fixed manufacturing costs and both fixed and variable selling and administrative
expenses must be covered by the markup.
a. True
b. False
The correct ordering of the steps is a. 2, 4, 3, 1
b. 4, 2, 3, 1
c. 2, 3, 4, 1
d. 2, 3, 1, 4
If the costs for direct materials, direct labor, and factory overhead were $522,200,
$82,700, and $45,300, respectively, for 16,000 equivalent units of production, the
conversion cost per equivalent unit was $8.00.
a. True
b. False
The debits to Work in Process’”Assembly Department for April, together with data
concerning production, are as follows:
All direct materials are placed in process at the beginning of the process and the
average cost method is used to cost inventories.
The conversion cost per equivalent unit (to the nearest cent) for April is
a. $2.70
b. $2.53
c. $3.31
d. $5.60
Most operating decisions of management focus on a narrow range of activity called the
a. relevant range of production
b. strategic level of production
c. optimal level of production
d. tactical operating level of production
The costs of services charged to a profit center on the basis of its use of those services
are
a. operating expenses
b. noncontrollable charges
c. service department charges
d. activity charges
Service organizations can use activity-based costing to allocate selling and
administrative costs to services provided.
a. True
b. False
For short-run production planning, information in the absorption costing format is more
useful to management than is information in the variable costing format.
a. True
b. False
Edna’s Chocolates had planned to sell chocolate covered strawberries for $3.00 each.
Due to various factors, the actual price was $2.75. Edna’s was able to sell 1,000 more
strawberries than the anticipated 4,000. What is (1) the quantity factor and (2) the price
factor for sales?
a. (1) $3,000, (2) $(1,250)
b. (1) $3,000, (2) $(3,000)
c. (1) $1,250, (2) $3,000
d. (1) $(4,000) (2) $(3,000)
The direct labor costs and factory overhead costs incurred by a production department
are referred to as conversion costs.
a. True
b. False
Plots only the difference between total sales and total costs
Match the following terms (a-e) with their definitions.
a. Profit-volume chart
b. Cost-volume-profit chart
c. Sales mix
d. Operating leverage
e. Margin of safety
If employees accept a wage contract that decreases the unit contribution margin, the
break-even point will decrease.
a. True
b. False
Falcon Co. produces a single product. Its normal selling price is $30.00 per unit. The
variable costs are $19.00 per unit. Fixed costs are $25,000 for a normal production run
of 5,000 units per month. Falcon received a request for a special order that would not
interfere with normal sales. The order was for 1,500 units with a special price of $20.00
per unit. Falcon has the capacity to handle the special order, and for this order, a
variable selling cost of $1.00 per unit would be eliminated.
Should the special order be accepted?
a. cannot determine from the data given
b. yes
c. no
d. there would be no difference in accepting or rejecting the special order
Conversion cost is the combination of direct labor cost and factory overhead cost.
a. True
b. False
In a push manufacturing system, raw materials are released to production based on
forecasted demand.
a. True
b. False
Sets the price according to competitors
Match the definitions that follow with the term (a’“e) it defines.
a. Demand-based concept
b. Competition-based concept
c. Product cost concept
d. Target costing
e. Production bottleneck
A company reports the following:
Determine the (a) inventory turnover, and (b) number of days’ sales in inventory. Round
your answer to one decimal place.
One of the advantages of decentralization is that delegating authority to managers
closest to the operation always results in better decisions.
a. True
b. False
Materials used by Square Yard Products Inc. in producing Division 3’s product are
currently purchased from outside suppliers at a cost of $5 per unit. However, the same
materials are available from Division 6. Division 6 has unused capacity and can
produce the materials needed by Division 3 at a variable cost of $3 per unit. A transfer
price of $3.20 per unit is established, and 40,000 units of material are transferred, with
no reduction in Division 6’s current sales.
How much will Square Yard Products total income from operations increase?
a. $32,000
b. $112,000
c. $80,000
d. $150,000
Which of the following is not a characteristic of a job order costing system?
a. It accumulates cost for each department within the factory.
b. It provides a separate record for the cost of each quantity of product that passes
through the factory.
c. It is best suited for industries that manufacture custom goods.
d. It uses only one work in process account.
Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while
fixed costs are $75,000. Determine the (a) break-even point in sales units, and (b)
break-even point in sales units if the selling price increased to $100 per unit.
The computations involved in the net present value method of analyzing capital
investment proposals are less involved than those for the average rate of return method.
a. True
b. False