1) Products S5 and CP8 each are assigned $100.00 in indirect costs by a traditional
costing system. An activity analysis revealed that although production requirements are
identical, S5 requires 45 minutes less setup time than CP8.
According to an ABC system, CP8 is ________ under the traditional system.
A) undercosted
B) overcosted
C) fairly costed
D) accurately costed
2) Indirect manufacturing costs ________.
A) can be traced to the product that created the costs
B) can be easily identified with the cost object
C) generally include the cost of material and the cost of labor
D) may include both variable and fixed costs
3) Tall Statues Inc., produces wood statues. Management has provided the following
information:
What is the total throughput contribution?
A) $1,069,500
B) $897,000
C) $1,173,000
D) $759,000
4) A company reported revenues of $375,000, cost of goods sold of $118,000, selling
expenses of $11,000, and total operating costs of $70,000. Gross margin for the year is
________.
A) $257,000
B) $246,000
C) $176,000
D) $252,000
5) The major challenge when planning fixed overhead is ________.
A) calculating total costs
B) calculating the cost-allocation rate
C) choosing the appropriate level of capacity
D) choosing the appropriate planning period
6) The step-down method ________.
A) partially recognizes the services provided among support departments
B) does not recognize the total services that support departments provide to each other
C) is conceptually the most precise method
D) results in allocating only the support costs used by operating departments
7) Hanung Corp has two service departments, Maintenance and Personnel. Maintenance
Department costs of $300,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $100,000 are allocated based on the
number of employees. The costs of operating departments A and B are $160,000 and
$240,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Using the direct method, what amount of Maintenance Department costs will be
allocated to Department A?
A) $210,000
B) $225,000
C) $198,000
D) $200,000
8) The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
What is the economic order quantity?
A) 1,936.50 units
B) 1,414.21 units
C) 1,552.65 units
D) 2,598.07 units
9) Which of the following statements about actual costing is true?
A) Manufacturing costs of a job are available earlier under actual costing.
B) Corrective actions can be implemented sooner under actual costing.
C) Actual costing uses budgeted indirect-cost rates calculated annually.
D) Actual costing uses actual indirect-cost rates calculated annually.
10) Bee Company’s cost formula for total selling and administrative expenses, with “X”
equal to the number of units sold would be:
A) Y = $123,200 + $4.80X
B) Y = $123,200 + $6.80X
C) Y = $275,000 + $4.80X
D) Y = $166,200 + $6.80X
11) Grace Greeting Cards Incorporated is starting a new business venture and are in the
process of evaluating its product lines. Information for one new product, traditional
parchment grade cards, is as follows:
Sixteen times each year, a new card design will be put into production. Each new
design will require $600 in setup costs.
The parchment grade card product line incurred $75,000 in development costs and
is expected to be produced over the next four years.
Direct costs of producing the designs average $0.50 each.
Indirect manufacturing costs are estimated at $50,000 per year.
Customer service expenses average $0.10 per card.
Current sales are expected to be 2,500 units of each card design. Each card sells for
$3.50.
Sales units equal production units each year.
Required:
a.What are the estimated life-cycle revenues?
b.What is the estimated life-cycle operating income for the first year?
c.What is the estimated life-cycle operating income per year for the years after the first
year?
d.What is the total estimated life-cycle operating income?
12) Which of the following is true of normal capacity utilization?
A) It will be less than the real capacity available to a company.
B) It can result in setting selling prices that are not competitive.
C) It results in the lowest cost estimate of the four capacity options when used for
product costing.
D) It represents the maximum units of production intended for current capacity.
13) Which of the following is a responsibility of the CFO?
A) preparing financial statements
B) managing short-term and long-term financing
C) investing in new equipment
D) conducting internal audit
14) Violet Sales Corp, reports the year-end information from 2016 as follows:
Violet is developing the 2016 budget. In 2016 the company would like to increase
selling prices by 3.5%, and as a result expects a decrease in sales volume of 15%. All
other operating expenses are expected to remain constant. Assume that cost of goods
sold is a variable cost and that operating expenses are a fixed cost.
Should Violet increase the selling price in 2016?
A) Yes, because sales revenue increases for 2016
B) Yes, because gross margin increases for 2016
C) No, because sales volume decreases for 2016
D) No, because operating income decreases for 2016
15) Fixed costs equal $15,000, unit contribution margin equals $25, and the number of
units sold equal 1,150. Operating income is ________.
A) $28,750
B) $13,750
C) $15,000
D) $14,750
16) To the nearest whole dollar, what should be the total property taxes at a sales
volume of 39,700 units? (Assume that this sales volume is within the relevant range.)
A) $802,900
B) $748,295
C) $832,195
D) $861,490
17) The primary user of management accounting information is a(n) ________.
A) the controller
B) a shareholder evaluating a stock investment
C) bondholder
D) external regulator
18) Which of the following is true of CVP analysis?
A) Costs may be separated into separate inventoriable and period components with
respect to the level of output.
B) Total revenues and total costs are linear in relation to output units.
C) Unit selling price, unit variable costs, and unit fixed costs are known and remain
constant.
D) Proportion of different products will vary according to demand and supply when
multiple products are sold.
19) Which of the following measures capacity levels in terms of demand for the output
of the plant?
A) practical capacity and theoretical capacity
B) theoretical capacity and normal capacity utilization
C) normal capacity utilization and master-budget capacity utilization
D) master-budget capacity utilization and practical capacity
20) In a manufacturing company, direct labor costs combined with direct materials costs
are known as:
A) period costs.
B) conversion costs.
C) prime costs.
D) opportunity costs.