The weighted average method combines beginning inventory and current production to
compute cost per unit of production.
An important function of a cost management system is to relate resource consumption
and cost to alternative product and process design.
Decentralization is a transfer of authority from the bottom to the top of an
organization.
Line personnel give assistance to staff employees.
Normal capacity considers present and future production levels and cyclical
fluctuations.
Standard costing is compatible with both FIFO and weighted average methods of
costing.
Costs of normal shrinkage and normal continuous losses in a process costing
environment are handled by the method of neglect.
A measuring device that identifies what is actually happening in the process being
controlled is an assessor.
When a standard costing system is used with process costing, Work in Process
inventory is recorded using standard costs.
Lance is interested in entering the catfish farming business. He estimates if he enters
this business, his fixed costs would be $50,000 per year and his variable costs would
equal 30 percent of sales. If each catfish sells for $2, how many catfish would Lance
need to sell to generate a profit that is equal to 10 percent of sales?
A. 40,000
B. 41,667
C. 35,000
D. No level of sales can generate a 10 percent net return on sales.
Economic value added (EVA) applies the target rate of return to the market value of the
capital invested in a division.
Business process reengineering (BPR) is not associated with
A. employee layoffs.
B. outsourcing initiatives.
C. technology acquisition.
D. plant expansion.
All attempts to reduce variability and defects in products reflect the implementation of
A. activity analysis.
B. statistical process control.
C. quality control.
D. control charts.
Financial accounting
A. is primarily concerned with internal reporting.
B. is more concerned with verifiable, historical information than is cost accounting.
C. focuses on the parts of the organization rather than the whole.
D. is specifically directed at management decision-making needs.
Truman Corporation
The following information has been extracted from the financial records of Truman
Corporation for its first year of operations:
Refer to Truman Corporation. Based on absorption costing, what amount of period
costs will Truman Corporation deduct?
A. $70,000
B. $79,000
C. $30,000
D. $58,000
For traditional costing purposes, R&D costs are
A. capitalized and allocated over the product life cycle.
B. expensed as incurred.
C. capitalized and amortized over three years.
D. charged to the future accounting periods that receive the benefit of the R&D
expenditures.
Terrell Corporation
Terrell Corporation produces various products used in the construction industry. The
Plumbing Division produces and sells 100,000 copper fittings each month. Relevant
information for last month follows:
Top-level managers are trying to determine how a transfer price can be set on a transfer
of 10,000 of the copper fittings from the Plumbing Division to the Bathroom Products
Division.
Refer to Terrell Corporation. If the Plumbing Division is operated as an autonomous
investment center and its capacity is 100,000 fittings per month, the per-unit transfer
price is not likely to be below
A. $0.75.
B. $1.60.
C. $2.10.
D. $2.50.
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What is cost per equivalent unit for conversion costs using
FIFO?
A. $4.00
B. $4.19
C. $4.34
D. $4.38
The pro forma income statement is not a component of the
A. master budget.
B. financial budgets.
C. operating budgets.
D. capital budget.
Brewer Corporation would like to institute an activity-based costing system to allocate
overhead to its products. The company’s Shipping Department incurs costs of $750,000
per year and has nine employees. The Shipping Department has determined that three
major activities that occur during the year.
During the year, 60,000 phone calls were made in the department; 25,000 sales invoices
were reviewed; and 15,000 shipments were initiated. Product 101 required 300 phone
calls, 225 sales invoice reviews, and 175 shipping orders. Product 102 required 400
phone calls, 500 sales invoice reviews, and 350 shipping orders.
Placing quality inspection points ahead of bottlenecks will reduce
A. product flow.
B. the number of defective products.
C. the influence of constraints on production flow.
D. the critical path time.
Santa Fe Music, Inc.
Santa Fe Music, Inc. sells electronic keyboards. The following information regarding
operating costs has been extracted from budgets of Santa Fe Music for December of
this year and the first few months of next year:
In addition to the above operating costs, enough keyboards are purchased each month to
maintain the inventory at 40 percent of the projected next month’s sales. The firm is
expected to be in compliance with this policy on December 1. Budgeted sales are:
Refer to Santa Fe Music, Inc. The average cost of a keyboard is $500. Merchandise is
paid for in the month following its purchase. All other expenses are paid in the month in
which they are incurred.
Prepare a purchases budget for December through March; then prepare a cash
disbursements budget for Santa Fe Music, Inc. for the first three months of next year.
A budget that indicates the funds to be generated or consumed during the period is
referred to as a ______________________________.
Two incidental products of a joint process are ____________________ and
____________________.
Burns Corporation
Information relating to the current operations of Burns Corporation follows:
Refer to Burns Corporation. Burns’s break-even point was 1,000 units. Compute Burns’s
sales price per unit.
What are the four types of responsibility centers? What is the focus of each of these
responsibility centers?
The quoted price for inventory minus discounts plus shipping charges is referred to as
the ______________________________.
Discuss from where an organization receives information and what happens to
information within an organization.
Grant Company.
Grant Company uses a job-order costing system and develops its predetermined
overhead rate based on machine hours. The company has two jobs in process at the end
of the cycle, Jobs #177 and #179.
Refer to Grant Company. What amount of overhead is charged to Jobs #177 and #179?
Machine hours are split between Jobs #177 and #179-65 percent and 35 percent,
respectively. Actual machine hours equal budgeted machine hours.
Distinguish between discrete and continuous production losses and the method of
accounting for these losses.