1) The high-low method uses cost and activity data from just two periods to establish
the formula for a mixed cost.
2) Direct costs of a cost object are costs related to a particular cost object that can be
allocated to that cost object in an economically feasible (cost-effective) way.
3) One of the most direct financial measures of quality is the costs of quality.
4) Most firms try not to hold more inventory than necessary because shrinkage costs
generally decrease when a firm’s inventory increases.
5) The distinction between direct and indirect costs is clearly set forth in Generally
Accepted Accounting Principles (GAAP).
6) At the end of the year, the direct costs traced to jobs using the budgeted rates will
equal actual direct costs.
7) The choice of a transfer-pricing method has minimal effect on the allocation of
company-wide operating income among divisions.
8) A company operating in a perfectly competitive market has more leeway to set
higher prices than a firm that is a monopolist.
9) In joint costing, the constant gross-margin percentage NRV method is an example of
allocating costs using physical measures.
10) If the sales mix shifts toward the lower-contribution-margin product, the breakeven
quantity will decrease.
11) Corporate brand advertising and general administration costs are examples of
corporate costs.
12) The stand-alone cost allocation method ranks the individual users of a cost object in
order of users most responsible for a common cost and then uses these rankings to
allocate the costs among the users.
13) Greene Manufacturing incurred the following expenses during 2015:
What will be the breakeven point if variable costing is used?
A) 1,334 units
B) 1,125 units
C) 1,000 units
D) 563 units
14) Chess Woods Limited produces two products: wooden chess pieces and wooden
inlaid chess boards. Under their traditional cost system using one cost driver (direct
manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An
analysis of the activities and their costs revealed that three cost drivers would be used
under a new ABC system. These cost drivers would be equipment usage, storage area
for the material, and type of woods used. The new cost of a set of chess pieces was
determined to be $298.00 per set.
The reduction in cost per unit of wooden chess pieces under ABC system is due to
difference in allocation of ________.
A) labor costs
B) prime costs
C) indirect costs
D) material costs
15) Boron Company provided the following information:
Budgeted input82,000gallons
Actual input82,800gallons
Budgeted production80,000units
Actual production81,500units
What is the partial productivity ratio?
A) 1.01 units per gallon
B) 1.02 units per gallon
C) 0.98 units per gallon
D) 0.97 units per gallon
16) Roberson Corporation manufactured 30,000 ice chests during September. The
variable overhead cost-allocation base is $11.25 per machine-hour. The following
variable overhead data pertain to September:
What is the variable overhead spending variance?
A) $3,750 favorable
B) $16,875 unfavorable
C) $13,125 unfavorable
D) $30,375 unfavorable
17) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a single-rate cost-allocation method is used, what amount of cost will be allocated to
the Flashlight Division? Assume actual usage is used to allocate operating costs.
A) $1,247,500
B) $1,300,000
C) $1,487,500
D) $1,387,500
18) A ________ links an indirect cost to a cost object.
A) cost-allocation base
B) cost pool
C) cost assignment
D) cost tracing
19) Which of the following is a part of the formal management control system?
A) mutual commitments among the members of the organization
B) the quality system which provides information about defective products
C) shared values and loyalties among the members of the organization
D) general understanding about acceptable behavior for managers
20) The following information is for Alex Corp:
If the sales mix shifts to one unit of Product X and two units of Product Y, then the
weighted-average contribution margin will ________.
A) increase per unit
B) stay the same
C) decrease per unit
D) decrease by $0.50 per unit
21) Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of
variable costs, and $18,000 of fixed costs.
The number of units that must be sold to achieve $40,000 of operating income is
________.
A) 677 units
B) 717 units
C) 617 units
D) 650 units
22) Heston Company has the following information for the current year:
What is the difference between operating incomes under absorption costing and
variable costing?
A) $140,000
B) $100,000
C) $80,000
D) $10,000
23) Process engineering is an example of ________.
A) prevention costs
B) appraisal costs
C) internal failure costs
D) external failure costs
24) The following information pertains to the Emerald Corp:
What is cost of goods sold?
A) $1,210,000
B) $1,175,000
C) $1,185,000
D) $1,225,000
25) Which of the following is true of a budget?
A) Budgets are used to express only the operational plans and not the strategic plans of
a company.
B) Budgets do not account for nonfinancial aspects of the upcoming period.
C) Budgets are most useful when they are planned independent of the company’s
strategic plans.
D) Budgets help managers to revise their plans and strategies.
26) What are the two components of the sales-quantity variance?
27) What is meant by the term breakeven point? Why should a manager be concerned
about the breakeven point and what helps them study the breakeven analysis?
28) What are the differences between direct costs and indirect costs? Give an example
of each.
29) Explain the three alternative approaches to dispose of the production-volume
variance.
30) What is the role of unused capacity within the selling division in the determination
of a negotiated transfer price to another division?
31) Explain why the term tax shield is used in conjunction with depreciation.
32) Explain the differences between short-run pricing decisions and long-run pricing
decisions.
33) Marshall Company uses a standard cost system. In April, $266,000 of variable
manufacturing overhead costs were incurred and the flexible-budget amount for the
month was $300,000. Which of the following variable manufacturing overhead entries
would have been recorded for March?
34) How is budgeting for a multinational corporation different than budgeting for a
corporation that is strictly domestic?