The breakeven point is the activity level where ________.
A) revenues equal fixed costs
B) revenues equal variable costs
C) contribution margin equals total costs
D) revenues equal the sum of variable and fixed costs
Which of the following represents cross-sectional data?
A) indirect manufacturing labor costs for the past 5 years
B) number of machine-hours used for the past 10 years
C) personnel costs of a month at 10 different organizations
D) maintenance cost of machine in a plant for the past 3 years
Taunton Company uses the high-low method to estimate its cost function. The
information for 2017 is provided below:
Machine-hours Costs
Highest observation of cost driver 3,000 $345,000
Lowest observation of cost driver 2,500 $315,000
What is the slope coefficient?
A) $115.00
B) $126.00
C) $60.00
D) $120.00
Quick Connect manufactures high-tech cell phones. Quick Connect has a policy of
adding a 20% markup to full costs and currently has excess capacity. The following
information pertains to the company’s normal operations per month:
For long-run pricing of the cell phones, what price will most likely be used by Quick
Connect?
A) $32.75
B) $91.00
C) $123.75
D) $148.50
Which of the following is the costing system used for mass produced like or similar
units of products?
A) inventory-costing systems
B) job-costing systems
C) process-costing systems
D) weighted-average costing systems
Managers are examining a possible replacement of a machine decision and generate the
following numbers:
Book value of old machine $1,00,000
Current disposal value of old machine $50,000
Loss on disposal of old machine $300,000
Cost of new machine $600,000
In performing an analysis and in attempt to answer the question, “should we replace the
old machine”, which of the following statements would be true
A) the book value of the old machine is relevant
B) the book value of the old machine and the current disposal value of the old machine
are both relevant
C) the cost of the new machine and the current disposal value of the old machine are
relevant
D) the book value of the old machine and the current disposal value of the old machine
are the only relevant items
Timekeeper Inc. manufactures clocks on a highly automated assembly line. Its costing
system uses two cost categories, direct materials and conversion costs. Each product
must pass through the Assembly Department and the Testing Department. Direct
materials are added at the beginning of the production process. Conversion costs are
allocated evenly throughout production. Timekeeper Inc. uses weighted-average
costing.
What is the total amount debited to the Work-in-Process account during the month of
June?
A) $229,500
B) $1,006,000
C) $1,144,000
D) $1,235,500
High Traffic Products Corporation has two departments, Small and Large. Central costs
could be allocated to the two departments in various ways.
If total payroll processing costs of $34,560 are allocated on the basis of number of
employees, the amount allocated to the Small Department would be ________. (Do not
round interim calculations. Round the final answer to the nearest whole dollar.)
A) $24,960
B) $28,560
C) $17,280
D) $9,600
Torid Company processes 18,700 gallons of direct materials to produce two products,
Product X and Product Y. Product X sells for $10 per gallon and Product Y, the main
product, sells for $150 per gallon. The following information is for December:
The manufacturing costs totalled $30,000.
How much is the ending inventory for the byproduct if byproducts are recognized in the
general ledger at the point of sale?
A) $0
B) $1750
C) $3000
D) $26,250
Superior Electronics manufactures TVs and DVDRs. During April, the following
activities occurred:
Required:
Compute the following variances in terms of the contribution margin.
a. Determine the total sales-mix variance.
b. Determine the total sales-quantity variance.
c. Determine the total sales-volume variance.
Venus Corporation incurred fixed manufacturing costs of $4,800 during 2017. Other
information for 2017 includes:
The budgeted denominator level is 1,600 units.
Units produced total 770 units.
Units sold total 630 units.
Beginning inventory was zero.
The company uses variable costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Operating income using variable costing will be ________ than operating income if
using absorption costing.
A) $2,490 higher
B) $2,490 lower
C) $1,890 higher
D) $420 lower
Jamal, Kareem, Rashid and Associates are in the process of evaluating its new client
services for the business consulting division.
∙ Estate Planning, a new service, incurred $180,000 in development costs and employee
training.
∙ The direct costs of providing this service, which is all labor, averages $30 per hour.
∙ Other costs for this service are estimated at $450,000 per year.
∙ The current program for estate planning is expected to last for two years. At that time,
a new law will be in place that will require new operating guidelines for the tax
consulting.
∙ Customer service expenses average $104 per client, with each job lasting an average
of 500 hours. The current staff expects to bill 50,000 hours for each of the two years the
program is in effect. Billing averages $46 per hour.
What is estimated life-cycle operating income for the first year?
A) $339,600
B) $149,200
C) $159,600
D) $319,200
Which of the following is true with activity based cost accounting?
A) Activity-based costing ignores the allocation of marketing and distribution costs.
B) Activity-based costing is more likely to result in major differences from traditional
costing systems if the firm manufactures only one product rather than multiple
products.
C) The focus is on activities that account for a sizable fraction of indirect costs .
D) Chances of product-cost cross-subsidization are higher in activity-based costing
compared to traditional costing systems.
Which of the following is an example of nonfinancial performance measure?
A) percentage of products started and completed without requiring any rework
B) direct manufacturing labor efficiency variance
C) direct materials price variance
D) quantity discounts obtained on order of large quantity
Which of the following is true about what the Internal Revenue Service requires for
calculating indirect manufacturing costs per unit?
A) a method of which fairly apportions indirect production costs among the various
items produced
B) requires that theoretical capacity be used as a means of allocating indirect
manufacturing costs
C) requires the use of master-budget capacity utilization
D) requires the use of normal capacity utilization
Illumination Corporation operates one central plant that has two divisions, the
Flashlight Division and the Night Light Division. The following data apply to the
coming budget year:
Budgeted costs of operating the plant for 2000 to 3000 hours:
Fixed operating costs per year $500,000
Variable operating costs $850 per hour
Budgeted long-run usage per year:
Flashlight Division 2000 hours
Night Light Division 1000 hours
Practical capacity 4000 hours
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1500 hours and by the Night
Light Division was 800 hours. If a dual-rate cost-allocation method is used, what amount
of operating costs will be budgeted for the Night Light Division?
A) $930,000
B) $950,000
C) $975,000
D) $780,000
Xylon Corp. has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $940,000 for
an annual production capacity of 10 million pages.
For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing
manufacturing overhead costs, it was determined that number of design changes,
setups, and inspections are the primary manufacturing overhead cost drivers. The
following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
Under ABC costing, what is the inspection cost allocated to Hospital Systems?
A) $704
B) $80
C) $286
D) $6,574
For a business that offers customers a store where product can be purchased and picked
up or a delivery service that can ship the product directly to the customer, which of the
following would most likely be the best cost allocation base for distribution costs?
A) number of customer service phone calls and emails per period
B) number of pounds of product shipped or delivered
C) Electricity costs for the period
D) Number of products sold
Assume your goal in life is to retire with $2,800,000. How much would you need to
save at the end of each year if interest rates average 10% and you have a 30-year work
life? (Round the final answer to the nearest whole dollar.)
A) $9333
B) $17,022
C) $186,667
D) $160,464
Hockey Accessories Corporation manufactured 21,400 duffle bags during March. The
following fixed overhead data pertain to March:
What is the amount of fixed overhead spending variance?
A) $8,500 unfavorable
B) $3,460 favorable
C) $3,460 unfavorable
D) $8,500 favorable
Short Grass Incorporated is a distributor of golf balls. Martin’s Golf Supplies is a local
retail outlet which sells golf balls. Martin’s purchases the golf balls from Short Grass
Incorporated at $1.15 per ball; the golf balls are shipped in cartons of 52. Short Grass
Incorporated pays all incoming freight, and Martin’s Golf Supplies does not inspect the
balls due to Short Grass’ reputation for high quality. Annual demand is 157,520 golf
balls at a rate of 3291 balls per week. Martin’s Golf Supplies earns 12% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
Purchasing at the EOQ recommended level, how many deliveries will be made during each
time period? (Round costs to the nearest cent and quantities to the nearest whole number.)
A) 2 deliveries
B) 4.3 deliveries
C) 9.8 deliveries
D) 12 deliveries
Which of the following is true of planning in decision making?
A) It helps an organization to select goals and strategies.
B) It improves the quality of products.
C) It helps in evaluating performance.
D) It helps in the analysis of actual performance.
When analyzing the change in operating income, the strategy component of
price-recovery will increase when ________.
A) capacity is reduced
B) market share is increased
C) selling prices are increased
D) more units are sold
Customer relationship management initiatives use technology to coordinate all
________.
A) advertising and marketing techniques to attract customers
B) research activities
C) customer-facing activities
D) quality control management activities
Zolas’ Heaters is approached by Ms. Leila, a new customer, to fulfill a large
one-time-only special order for a product similar to one offered to regular customers.
Zolas’ Heaters has excess capacity. The following per unit data apply for sales to regular
customers:
If Ms. Leila wanted a long-term commitment, and not a one-time-special order, for
supplying this product, calculate the most likely price to be quoted assuming the markup
remains the same?
A) $790
B) $590
C) $520
D) $1027
With a step fixed-cost function ________.
A) the cost varies with the changes in the activity
B) fixed cost is often approximated with a continuous variable-cost function
C) fixed cost changes proportionally with the level of activity
D) the cost remains the same over wide ranges of the activity in each relevant range
Which of the following statements best define a product differentiation strategy?
A) It describes how an organization can increase customer base by differentiating its’
product prices from its competitors.
B) It is an organization’s ability to achieve lower costs relative to competitors through
productivity and efficiency improvements, elimination of waste, and tight cost control.
C) It describes how an organization can decrease product prices by differentiating its’
raw materials from its competitors.
D) It is an organization’s ability to offer products or services its customers perceive to
be superior and unique relative to the products or services of its competitors.
Ocean Grove Vending Company has invested $980,000 in a plant to make vending
machines. The target operating income desired from the plant is $196,000 annually. The
company plans annual sales of 1600 vending machines at a selling price of $1100 each.
What is the cost base of each vending machine for Ocean Grove Vending Company?
A) $1100
B) $1422
C) $978
D) $613
How many units would have to be sold to yield a target operating income of $26,000,
assuming variable costs are $27 per unit, total fixed costs are $2,000, and the unit
selling price is $32?
A) 400 units
B) 1,038 units
C) 5,600 units
D) 1,273 units
Nantucket Industries manufactures and sells two models of watches, Prime and
Luxuria. It expects to sell 3,200 units of Prime and 1,300 units of Luxuria in 2019.The
following estimates are given for 2019:
Nantucket had an inventory of 230 units of Prime and 85 units of Luxuria at the end of
2018. It has decided that as a measure to counter stock outages it will maintain ending
inventory of 370 units of Prime and 200 units of Luxuria.
Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $11.
There were 140 units of Crimpson in stock at the end of 2018.The management does not
want to have any stock of Crimpson at the end of 2019.
How many units of Prime watches must be produced in 2019?
A) 3,570 units
B) 3,340 units
C) 3,200 units
D) 2,970 units
The Swivel Chair Company manufacturers a standard recliner. During February, the
firm’s Assembly Department started production of 147,000 chairs. During the month,
the firm completed 180,000 chairs and transferred them to the Finishing Department.
The firm ended the month with 21,000 chairs in ending inventory. All direct materials
costs are added at the beginning of the production cycle. Weighted-average costing is
used by Swivel. How many chairs were in inventory at the beginning of the month?
Conversion costs are incurred uniformly over the production cycle.
A) 42,000 chairs
B) 21,000 chairs
C) 39,900 chairs
D) 54,000 chairs
Mid City Products Inc. (MCP), developed standard costs for direct material and direct
labor. In 2017, MCP estimated the following standard costs for one of their most
popular products.
During September, MCP produced and sold 2,000 units using 8,200 pounds of direct
materials at an average cost per pound of $7.00 and 1,160 direct labor hours at an average
wage of $17.50 per hour.
The direct labor efficiency variance during September is ________.
A) $680 favorable
B) $700 unfavorable
C) $600 favorable
D) $100 unfavorable
Which of the following statements is true of the the economic order quantity decision
model?
A) The economic order quantity increases with higher demand and higher carrying
costs and decreases with higher ordering costs.
B) The simplest version of the economic order quantity model assumes there are only
ordering costs, carrying costs, stockout costs, and purchasing costs.
C) It assumes the purchase order lead time is not known with certainty.
D) The larger the order quantity, the lower the annual relevant ordering costs and the
higher the annual relevant carrying costs.