The Pareto principle is important to consider when an organization is
a. assessing whether to employ activity-based costing versus attribute-based costing.
b. evaluating the number of activities that are value-added versus those that are
non-value-added.
c. deciding whether to offer a product in one color versus in ten colors.
d. determining whether simultaneous engineering activities will be impacted by the
“Rule of One.”
Miller Corporation faces a marginal tax rate of 30 percent. One project that is currently
under evaluation has a cash flow in the fifth year of its life that has a present value of
$12,000 (after-tax). Miller Corporation assumes that all cash flows occur at the end of
the year and the company uses 13 percent as its discount rate. What is the pre-tax
amount of the cash flow in year 5? (Round to the nearest dollar.) Present value tables
or a financial calculator are required.
a. $15,475
b. $22,108
c. $31,582
d. $73,692
Joint costs are most frequently allocated based upon relative
a. profitability.
b. conversion costs.
c. prime costs.
d. sales value.
Mayflower Corporation manufactures products on a job-order basis. The job cost sheet
for Job #656 shows the following for September:
At the end of September, what total cost appears on the job cost sheet for Job #656?
a. $5,725
b. $5,765
c. $6,765
d. $8,325
Residual income is the
a. contribution margin of an investment center, less the imputed interest on the invested
capital used by the center.
b. contribution margin of an investment center, plus the imputed interest on the invested
capital used by the center.
c. income of an investment center, less the imputed interest on the invested capital used
by the center.
d. income of an investment center, plus the imputed interest on the invested capital used
by the center.
Beasley Company
Beasley Company prepared a cash budget by quarters for the upcoming year. Missing
data amounts are indicated with question marks or lower case letters; these lower case
letters will be referred to in the questions that follow.
Beasley requires a minimum balance of $10,000 to start a quarter.
All data are in thousands.
Beasley Corporation
Cash Budget
Refer to Beasley Company. The repayment (including interest) of financing during the
second quarter (item d) is:
a. $ 4
b. $ 0
c. $17
d. $ 7
Weaknesses of the high-low method include all of the following except
a. only two observations are used to develop the cost function.
b. the high and low activity levels may not be representative.
c. the method does not detect if the cost behavior is nonlinear.
d. the mathematical calculations are relatively complex.
If a company carries safety stock and its annual carrying costs per unit are $0.30, what
formula yields the total annual carrying costs?
a. $0.30 [(EOQ/2) + Safety stock)]
b. $0.30 (EOQ + Safety stock)
c. $0.30 [(EOQ 2) + Safety stock)]
d. $0.30 (EOQ – Safety stock)
Ryan Company
Ryan Company manufactures products X and Y from a joint process that also yields a
by-product, Z. Revenue from sales of Z is treated as a reduction of joint costs.
Additional information is as follows:
Joint costs were allocated using the sales value at split-off approach.
Refer to Ryan Company. The joint costs allocated to product X were
a. $ 84,000
b. $100,800.
c. $150,000.
d. $168,000.
Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Savannah Motors. The $20,000 cost of the new machine represents a(n)
a. sunk cost.
b. future relevant cost.
c. future irrelevant cost.
d. opportunity cost.
A standard cost system may be used in
a. job order costing, but not process costing.
b. process costing, but not job order costing.
c. either job order costing or process costing.
d. neither job order costing nor process costing.
A quality audit involves a review of
a. yes yes
yes
b. no yes
yes
c. no no
no
d. yes no
yes
Multiplying the depreciation deduction by the tax rate yields a measure of the
depreciation tax
a. deferral.
b. benefit.
c. payable.
d. loss.
Warning Industries is considering two alternative ways to depreciate a proposed
investment. The investment has an initial cost of $100,000 and an expected five-year
life. The two alternative depreciation schedules follow:
Assuming that the company faces a marginal tax rate of 40 percent and has a cost of
capital of 10 percent, what is the difference between the two methods in the present
value of the depreciation tax benefit? Present value tables or a financial calculator
are required.
a. $7,196
b. $0
c. $2,878
d. $6,342
Davis Company
Davis Company uses a job-order costing system. Assume that Job #504 is the only one
in process. The following information is available:
Refer to Davis Company. What is the total cost of Job #504 assuming that overhead is
applied at the rate of 135% of direct labor cost (rounded to the nearest whole dollar)?
a. $192,650
b. $268,250
c. $275,000
d. $329,675
Control charts are appropriate devices in
a. total quality control.
b. statistical process control.
c. total quality management.
d. all of the above.
A project’s after-tax net present value is increased by all of the following except
a. revenue accruals.
b. cash inflows.
c. depreciation deductions.
d. expense accruals.
A division of Shamrock Corporation reported a return on investment of 20% for a
recent period. If the division’s asset turnover was 5, its profit margin must have been
a. 100%
b. 4%
c. 25%
d. 2%
Products at Conroy Manufacturing are sent through two production departments:
Fabricating and Finishing. Overhead is applied to products in the Fabricating
Department based on 150 percent of direct labor cost and $18 per machine hour in
Finishing. The following information is available about Job #297:
What is the total cost of Job #297?
a. $2,647
b. $3,005
c. $3,093
d. $3,203
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What are the equivalent units for conversion using the FIFO
method?
a. 118,360
b. 122,860
c. 123,860
d. 128,360
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 total cost assigned to goods transferred out
using weighted average?
a. $435,080
b. $429,824
c. $428,656
d. $423,400
ABC should be used in which of the following situations?
a. single-product firms with multiple steps
b. multiple-product firms with only a single process
c. multiple-product firms with multiple processing steps
d. in all manufacturing firms
Buckingham Company
Buckingham Company uses a standard cost system for its production process and
applies overhead based on direct labor hours. The following information is available for
May when Buckingham produced 4,500 units:
Refer to Buckingham Company. Using the three-variance approach, what is the
efficiency variance?
a. $9,937 F
b. $2,187 F
c. $2,187 U
d. $2,937 F
Just-in-time (JIT) inventory systems
a. result in a greater number of suppliers for each production process.
b. focus on a “push” type of production system.
c. can only be used with automated production processes.
d. result in inventories being either greatly reduced or eliminated.
Companies have often produced significant amounts of excess inventory because of
a. variable overhead allocation methodologies.
b. fixed overhead allocation methodologies.
c. variable and fixed overhead allocation methodologies.
d. the financial accounting requirement to expense research and development as
incurred.
To make game playing successful, the employees must be able to
a. mine data.
b. form strategic alliances.
c. win.
d. use ERP.
The accounting function in an organization is expected to support managers in which of
the following functions?
a. yes yes no
b. no yes no
c. no no yes
d. yes yes yes
Chambers Company
Chambers Company produces two products from a joint process: X and Z. Joint
processing costs for this production cycle are $8,000.
If X and Z are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Chambers Company. Using a physical measure, what amount of joint
processing cost is allocated to Product Z (round to the nearest dollar)?
a. $4,000
b. $3,243
c. $5,500
d. $4,757
Stayton Enterprises
Refer to Stayton Enterprises. For April, Cost of Goods Manufactured was
a. $141,000
b. $133,000.
c. $125,000.
d. $121,000.
Willborn Builders in the building construction business. In Year 2, it is expected that 40
percent of a month’s sales will be collected in cash, with the balance being collected the
following month. Of the purchases, 50 percent are paid the following month, 30 percent
are paid in two months, and the remaining 20 percent are paid during the month of
purchase. The sales force receives $2,000 a month base pay plus a 2 percent
commission. Labor expenses are expected to be $4,000 a month. Other operating
expenses are expected to run about $2,000 a month, including $500 for depreciation.
The ending cash balance for Year 1 was $4,500.
Required:
The cost object under the control of a manager is called a(n) ____ center.
a. cost
b. revenue
c. responsibility
d. investment
In an activity-based costing system overhead costs are first recorded in activity center
pools before being recorded in a general ledger
In an “end-of-pipe” strategy, managers produce the pollutant, and then clean it up.
What are five advantages that nonfinancial performance measures have over financial
performance measures
Non-financial measures are generally less timely than are financial performance
measures.
What items affect comparability of different divisions within the same company on the
basis of EVA, ROI and RI?
The final step in the master budget process is preparation of the
_________________________.
The difference between actual variable overhead and budgeted variable overhead based
upon actual hours is referred to as the
_______________________________________________________.
The financial perspective of the balanced scorecard addresses stakeholder concerns
about profitability and organizational growth.
Downsizing often results in one-time charges against income.
When management by exception is employed, both favorable and unfavorable variances
should be investigated.
Expatriate workers should receive a compensation package that reflects cost of living
factors and currency fluctuations.
The interrelationships between an organization and its suppliers and customers are
collectively referred to as a(n) _________________________.
Discuss the four categories of quality costs.
In an actual cost system, factory overhead is assigned directly to products and services.
Oil Division
The Oil Division is one of the operating units of Automotive Solutions, Inc. The
following operating data of the division is presented below:
Refer to the Oil Division. What was the segment income of the Oil Division for the
year?
In a net present value analysis, how can an analyst explicitly and formally consider the
influence of risk on the present value of certain cash flows?
How has the increase in product variety affected the costs of American business?
A specific product cannot be a cost object.