1) Under both variable and absorption costing, research and development costs are
period costs.
2) Actual prices paid for materials usually serve as actual direct-cost rates for charging
material costs to jobs.
3) Backflush costing is a costing method that supports creating value for the customer
by costing the entire value stream thereby eliminating waste in the accounting process.
4) The cost of electricity used in the production of multiple products would be classified
as a indirect cost.
5) The management accounting system is an informal management control system
which provide information about the firm’s costs, revenues, and income.
6) The SEC requires companies to disclose the performance criteria-such as a firm’s
profitability, revenue growth, and market share-used to reward executives.
7) The sales method for recognizing byproducts is conceptually correct because it is
consistent with the matching principle.
8) Property taxes and insurance premiums paid on a factory building are examples of
period costs.
9) The average waiting time is the average amount of time an order will wait at the
company’s shipping office before it is sent to the customer.
10) Manufacturing overhead costs incurred for the month are:
Which account is debited assuming utilities and repairs were on account?
A) Manufacturing Overhead Control, 75,000
B) Utilities Overhead Control, 30,000
C) Accumulated Depreciation Control, 25,000
D) Accounts Payable Control, 50,000
11) The higher the denominator level, the ________.
A) higher the budgeted fixed manufacturing cost rate
B) lower the amount of fixed manufacturing costs allocated to each unit produced
C) higher the favorable production-volume variance
D) more likely actual output will exceed the denominator level
12) The total of the manufacturing overhead costs listed above for December is:
A) $30,000
B) $82,000
C) $647,000
D) $340,000
13) In a process-costing system average unit costs are calculated ________.
A) by dividing total costs in a given accounting period by total units produced in that
period
B) by multiplying total costs in a given accounting period by total units produced in that
period
C) by dividing total costs in a given accounting period by units started in that period
D) by multiplying total costs in a given accounting period by units started in that period
14) Midose’s Stables used two different independent variables (trainer hours and
number of horses) in two different equations to evaluate the cost of training horses. The
most recent results of the two regressions are as follows:
Trainer’s hours:
Number of horses:
What is the estimated total cost for the coming year if 15,000 trainer hours are incurred
and the stable has 350 horses to be trained, based upon the best cost driver?
A) $96,327.90
B) $338,258.95
C) $345,854.65
D) $14,277,440.95
15) Dave Rigby is paid $30 an hour for straight-time and $40 an hour for overtime. One
week he worked 45 hours, which included 5 hours of overtime, and 3 hours of idle time
caused by material shortages. What is the direct labor cost incurred to the company?
A) $1,260
B) $1,400
C) $1,310
D) $1,210
16) Which of the following cost is included in cost of goods sold?
A) customer service cost
B) manufacturing labor cost
C) distribution cost
D) marketing cost
17) Cosgrove, Inc., is a wholesaler that distributes a single product. The company’s
revenues and expenses for the last three months are given below:
Required:
a. Determine which expenses are mixed and, by use of the high-low method, separate
each mixed expense into variable and fixed elements. (Use unit sales as the activity
measure.) State the cost formula for each mixed expense.
b. Compute the company’s contribution margin for May.
18) The following information pertains to Max Corporation:
What is the gross profit margin earned by the company?
A) $52,000
B) $50,000
C) $48,500
D) $53,500
19) Which of the following statements is true of a backflush costing system?
A) All costs are tracked sequentially as products pass through each stage of production.
B) When inventories are minimal, as in JIT production systems, backflush costing
complicates costing systems.
C) Usage of a backflush costing system can result in incomplete accounting records.
D) Backflush costing increases the ability of the accounting system to pinpoint the uses
of resources at each step in the production process.
20) Assume your goal in life is to retire with $2,500,000. How much would you need to
save at the end of each year if interest rates average 7% and you have a 20-year work
life?
A) $30,130
B) $60,983
C) $250,205
D) $832,952
21) Three major influences on pricing decisions are ________.
A) competition, costs, and customers
B) competition, demand, and production efficiency
C) continuous improvement, customer satisfaction, and supply
D) variable costs, fixed costs, and mixed costs
22) The high-low method ________.
A) measures the difference between actual cost and estimated cost for each observation
of the cost driver
B) calculates the standard deviation of residuals
C) calculates the slope coefficient using only two observed values within the relevant
range and their respective costs
D) measures how well the predicted values, y, based on the cost driver, X, match actual
cost observations, Y
23) Baseballic Corporation manufactures baseball uniforms and uses budgeted
machine-hours to allocate variable manufacturing overhead. The following information
relates to the company’s manufacturing overhead data:
What is the flexible-budget amount for variable manufacturing overhead?
A) $225,000
B) $218,500
C) $213,750
D) $221,750
24) Ski Valet provides materials that let people teach themselves how to snow ski. It has
six different skill-level programs. Each one includes visual and audio learning aids
along with a workbook that can be submitted to the company for grading and evaluation
purposes, if the person so desires.
The accounting system of Ski Valet is very traditional in its reporting functions with the
calendar year being the company’s fiscal year. It includes an abundance of information
that can be used for various reporting purposes.
The company has found that any new idea soon runs its course with an effective life of
about three years. Therefore, the company is always in the development stage of some
new program. Program development requires experts in the area to provide the
know-how of the item being developed and a development team that puts together the
video, audio, and workbook materials. The actual costs of reproducing the packages are
relatively inexpensive when compared to the development costs.
Required:
How might product life-cycle budgeting aid the company in improving its overall
operations?
25) Backflush costing does not strictly adhere to generally accepted accounting
principles. Explain why. Also, describe the types of businesses that might use backflush
costing.
26) Archambeau Products Company manufactures office furniture. Recently, the
company decided to develop a formal cost accounting system and classify all costs into
three categories. Categorize each of the following items as being appropriate for (1)
cost tracing to the finished furniture, (2) cost allocation of an indirect manufacturing
cost to the finished furniture, or (3) as a nonmanufacturing item.
27) Paragon University operates an extensive and an expensive registration, testing, and
counseling center, through which all students are required to pass through when they
enter the university. The registration effort’s costs (for the most part) are almost
impossible to allocate based upon which students require time, effort, etc. The cost of
this center is approximately 15% of the total costs of Paragon. This department engages
in no other activities than the registration of students. Paragon is interested in
determining the profitability of the three technical departments it operates. Paragon has
the perception that some departments are more profitable than others, and it would like
to determine an appropriate method of allocating the costs of this registration center.
Required:
Recommend to Paragon University a method (or methods) of allocating the costs of
registration to the three departments.
28) Otylia Manufacturing Company assembles its product in several departments. It has
two departments that process all units. During February, the beginning work in process
in the cutting department was half completed as to conversion, and complete as to direct
materials. The beginning inventory included $12,000 for materials and $3,000 for
conversion costs. Ending work-in-process inventory in the cutting department was 40%
complete. Direct materials are added at the beginning of the process.
Beginning work in process in the finishing department was 75% complete as to
conversion. Beginning inventories included $16,000 for transferred-in costs and
$20,000 for conversion costs. Ending inventory was 25% complete. Additional
information about the two departments follows:
Required:
Prepare a production cost worksheet using weighted-average for the cutting department.
29) What is an operating department and how is it different from a support department?
Give examples of each.
30) What are ISO 9000 and ISO 14000?
31) Describe management accounting and financial accounting.