Global competition has forced American industry to
a. seek increased governmental regulation.
b. improve product quality and customer service.
c. narrow product lines.
d. decrease its social responsibility.
In joint-product costing and analysis, which of the following costs is relevant in the
decision when a product should be sold to maximize profits?
a. Separable costs after the split-off point
b. Joint costs to the split-off point
c. Sales salaries for the production period
d. Costs of raw materials purchased for the joint process.
Richards Company
The following information has been taken from the cost records of Richards Company
for the past year:
Refer to Richards Company. The cost of raw material purchased during the year was
a. $316.
b. $336.
c. $360.
d. $411.
Romano Company
The following information pertains to Romano Company for September:
Romano Company applies overhead for Job #323 at 140 percent of direct labor cost and
at 150 percent of direct labor cost for Jobs #325 and #401. The total cost of Jobs #323
and #325 is identical.
Refer to Romano Company. What amount of overhead is applied to Job #325?
a. $8,325
b. $7,500
c. $7,000
d. $5,000
Stocks Corporation
Stocks Corporation has the following information available for June of the current year:
All material is added at the start of production and all products completed are
transferred out.
Refer to Stocks Corporation. Prepare a schedule showing the assignment of costs
assuming the (a) FIFO and (b) weighted average method.
Fixed overhead costs are
a. best controlled on a unit-by-unit basis of products produced.
b. mostly incurred to provide the capacity to produce and are best controlled on a total
basis at the time they are originally negotiated.
c. constant on a per-unit basis at all different activity levels within the relevant range.
d. best controlled as to spending during the production process.
When a company discontinues a segment, total corporate costs may decrease in all of
the following categories except
a. variable production costs.
b. allocated common costs.
c. direct fixed costs.
d. variable period costs.
Discuss briefly the type of information contained on (a) a bill of materials and (b) an
operations flow document.
For product life cycle costing, R&D costs are
a. expensed as incurred.
b. capitalized and allocated over the life cycle.
c. deducted as period costs.
d. charged to specific departments as incurred.
The manager of the Richmond Division of Brazos River Tours is preparing the budget
for the upcoming year. At this point, he has determined that average total assets for the
upcoming year will equal $4,000,000. The manager is evaluated on the amount of
residual income generated by the division. Assume variable costs in the Richmond
Division are expected to equal 60% of total sales and fixed costs are expected to equal
$400,000.
Mayer Company had beginning Work in Process Inventory of 6,000 units that were 45
percent complete as to conversion costs. Mayer Company started and completed 46,000
units this period and had ending Work in Process Inventory of 11,000 units. How many
units were started this period?
a. 46,000
b. 52,000
c. 57,000
d. 63,000
The term cost driver refers to
a. any activity that can be used to predict cost changes.
b. the attempt to control expenditures at a reasonable level.
c. the person who gathers and transfers cost data to the management accountant.
d. any activity that causes costs to be incurred.
The net present value method of evaluating proposed investments
a. measures a project’s internal rate of return.
b. ignores cash flows beyond the payback period.
c. applies only to mutually exclusive investment proposals.
d. discounts cash flows at a minimum desired rate of return.
One reason annual overhead application rates are used is
a. because of seasonal variability of overhead costs.
b. to help budget overhead costs.
c. to minimize the overhead cost assigned to products.
d. to maximize the overhead cost assigned to products.
After the completion of production, standard and actual costs are compared to
determine the ____ of the production process.
a. effectiveness
b. complexity
c. homogeneity
d. efficiency
Parker Company
Below is an income statement for Parker Company:
Refer to Parker Company. What was Parker’s margin of safety?
a. $200,000
b. $75,000
c. $100,000
d. $109,091
Which of the following is not a trend promoting the increased use of business process
reengineering (BPR)?
a. advancement of technology
b. pursuit of increased quality
c. price competition caused by globalization
d. business expansion
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
Which of the following does not create a specific price level change?
a. change in production technology
b. change in the rate of inflation
c. changes due to supply and demand
d. changes in the number of competing suppliers
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 the cost assigned to ending inventory using FIFO?
a. $75,920
b. $58,994
c. $56,420
d. $53,144
Daniels Company started 9,000 units in March. The company transferred out 7,000
finished units and ended the period with 3,500 units that were 40 percent complete as to
both material and conversion costs. Beginning Work in Process Inventory units were
a. 500.
b. 600.
c. 1,500.
d. 2,000.
Which of the following is a term more descriptive of the term “direct costing”?
a. out-of-pocket costing
b. variable costing
c. relevant costing
d. prime costing
Lindburgh Company
Lindburgh Company manufactures toy airplanes. Information on Lindburgh Company’s
labor costs follow:
The following information applies to the upcoming month of July for Lindburgh
Company:
Refer to Lindburgh Company. What is Lindburgh’s budgeted factory labor cost for July?
a. $8,000
b. $15,600
c. $25,600
d. $9,600
Albuquerque Corporation makes and sells the “Desert Icon”, a wall hanging depicting a
magical cactus plant. The Desert Icons are sold at specialty shops for $50 each. The
capacity of the plant is 15,000 Icons. Costs to manufacture and sell each wall hanging
are as follows:
Albuquerque Corporation has been approached by a Utah company about purchasing
2,500 Desert Icons. The company is currently making and selling 15,000 per year. The
Utah company wants to attach its own state label, which increases costs by $.50 each.
No selling expenses would be incurred on this order. The corporation believes that it
must make an additional $1 on each Desert Icon to accept this offer.
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
Refer to Riley Company. Using net realizable value at split-off, what amount of joint
processing cost is allocated to Product C (round to the nearest dollar)?
a. $2,718
b. $4,500
c. $6,062
d. $6,282
If a project generates a net present value of zero, the profitability index for the project
will
a. equal zero.
b. equal 1.
c. equal -1.
d. be undefined.
Given the following information for Simpson Corporation, prepare the necessary
journal entries, assuming that the Raw Material Inventory account contains both direct
and indirect material.
a. Purchased raw material on account $28,500.
b. Put material into production: $15,000 of direct material and $3,000 of indirect
material.
c. Accrued payroll of $90,000, of which 70 percent was direct and the remainder was
indirect.
d. Incurred and paid other overhead items of $36,000.
e. Transferred items costing $86,500 to finished goods.
f. Sold goods costing $71,300 on account for $124,700.
Which of the following types of employee compensation are tax-exempt?
a. contingent pay
b. profit sharing
c. cafeteria plans
d. stock appreciation rights
In comparing financial and management accounting, which of the following more
accurately describes management accounting information?
a. historical, precise, useful
b. required, estimated, internal
c. budgeted, informative, adaptable
d. comparable, verifiable, monetary
Wimberley Company
Wimberley Company has the following information available for December when 3,500
units were produced (round answers to the nearest dollar).
Refer to Wimberley Company. What is the material quantity variance?
a. $2,250 F
b. $2,250 U
c. $225 F
d. $2,475 U
Brennan Company
The following information is for Brennan Company’s September production:
(Round all answers to the nearest dollar.)
Refer to Brennan Company. What is the material price variance (calculated at point of
purchase)?
a. $ 735 F
b. $ 735 U
c. $ 710 F
d. $ 710 U
Accounting for product costs in a JIT environment
a. uses a job order costing system.
b. classifies processing costs as raw (or direct) material, direct labor, and overhead.
c. is more complex than in other types of manufacturing environments.
d. follows process costing procedures whereby costs are accumulated by the process
(cell) and attached to units processed for the period.
In a CVP graph, the area between the total cost line and the total revenue line represents
total
a. contribution margin.
b. variable costs.
c. fixed costs.
d. profit.
Tri-Cities Savings and Loan
Tri-Cities Savings and Loan has three departments that generate revenue: loans,
checking accounts, and savings accounts. Tri-Cities Savings and Loan has two service
departments: Administration/Personnel and Maintenance. The service departments
provide service in the order of their listing. The following information is available for
direct costs. Administration/ Personnel costs are best allocated based on number of
employees while Maintenance costs are best allocated based on square footage
occupied.
Refer to Tri-Cities Savings and Loan. Using the direct method, compute the amount
allocated to each department from Administration/Personnel.
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. On average, a keyboard sells for $1,500. Of each sale, 40
percent of the sales price is collected in the month of sale. The balance is collected in
the month following the sale.
Prepare a cash budget for the first three months of next year. The beginning cash
balance on January 1 is budgeted to be $50,000.
Costs that support an overall production or service process are referred to as
______________________________.
A situation in which managers pursue goals and objectives that are in the best interests
of a particular segment rather than in the best interests of the organization as a whole is
referred to as ____________________.
When using a market-based transfer price, a decision must be made how price disputes
will be handled.
What are the differences between committed fixed costs and discretionary fixed costs?
In a job-order costing system, costs are accumulated for each individual job.
When production is completed on a job, finished goods are transferred to the
_________________________________account.
Joint costs may be allocated to by-products as well as primary products.
Traditional costing systems tend to misallocate overhead to high-volume standard
products
The internal rate of return is the rate at which a project’s net present value is zero.
A function or activity in which an organization seeks to excel above its competitors is a
______________________________.
ISO 9000 registration is required for regulated products sold in the United States.
The point of purchase model calculates the materials price variance using the quantity
of materials used in production.
What are the six primary goals of a cost management system? Illustrate how a CMS
achieves each of these goals.
A cost object is anything for which management wants to collect or accumulate costs.
A cost that shifts upward or downward when activity changes by a certain interval is
referred to as a step cost.
Consider the regression equation y = a + bX. The portion of the equation that represents
fixed costs is __________.
Ecology Solutions Corporation
The Green Division of Ecology Solutions Co. has developed a wind generator that
requires a special “S” ball bearing. The Ball Bearing Division of Ecology Solutions Co.
has the capability to produce such a ball bearing.
Unfortunately, the Ball Bearing Division is operating at capacity and will need to
reduce production of another existing product, the “T” bearing, by 1,000 units per
month to provide the 600 “S” bearings needed each month by the Green Division. The
“T” bearing currently sells for $50 per unit. Variable costs incurred to produce the “T”
bearing are $30 per unit; variable costs to produce the new “S” bearing would be $60
per unit.
The Green Division has found an external supplier that would furnish the needed “S”
bearings at $100 per unit. Assume that both the Green Division and Ball Bearing
Division are independent, autonomous investment centers.
Refer to Ecology Solutions Co. What is the minimum price that Ball Bearing Division
would consider to produce the “S” bearing if the Ball Bearing Division did not need to
forfeit any of its existing sales to produce the “S” bearing?