Costs of decentralization include all of the following except
A. more elaborate accounting control systems.
B. potential costs of poor decisions.
C. additional training costs.
D. slow response time to changes in local conditions.
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:
Andersen Corporation
Andersen Corporation has the following information for the current month:
All materials are added at the start of the production process. Andersen Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Andersen Corporation. Assume that the costs per EUP for material and
conversion are $2.00 and $2.25, respectively. What is the amount of the period cost for
July using FIFO?
A. $0
B. $12,750
C. $14,750
D. $17,000
All of the following objectives are reasons to allocate service department costs to
compute full cost except to
A. provide information on cost recovery.
B. abide by regulations that may require full costing in some instances.
C. provide information on controllable costs.
D. reflect production’s “fair share” of costs.
Witte Company produces three products from a joint process. The products can be sold
at split-off or processed further. In deciding whether to sell at split-off or process
further, management should
A. allocate the joint cost to the products based on relative sales value prior to making
the decision.
B. allocate the joint cost to the products based on a physical quantity measure prior to
making the decision.
C. subtract the joint cost from the total sales value of the products before determining
relative sales value and making the decision.
D. ignore the joint cost in making the decision.
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.
The size of the safety stock is directly affected by all of the following except the
A. cost of a stockout.
B. probability of a stockout.
C. carrying cost of stock.
D. economic order quantity.
The FASB requires which of the following to be used in preparation of external
financial statements?
A. variable costing
B. standard costing
C. activity-based costing
D. absorption costing
Prepare the necessary journal entries from the following information for Alltizer
Company, which uses a perpetual inventory system.
a. Purchased raw material on account, $56,700.
b. Requisitioned raw material for production as follows: direct material-80 percent of
purchases; indirect material-15 percent of purchases.
c. Direct labor wages of $33,100 are accrued as are indirect labor wages of $12,500.
d. Overhead incurred and paid for is $66,900.
e. Overhead is applied to production based on 110 percent of direct labor cost.
f. Goods costing $97,600 were completed during the period.
g. Goods costing $51,320 were sold on account for $77,600.
A project under consideration by Radisson Corporation would require a working
capital investment of $200,000. The working capital would be liquidated at the end of
the project’s 10-year life. If Radisson Corporation has an after-tax cost of capital of 10
percent and a marginal tax rate of 30 percent, what is the present value of the working
capital cash flow expected to be received in year 10? Present value tables or a financial
calculator are required.
A. $36,868
B. $77,100
C. $53,970
D. $23,130
Which performance plan is most tied to company objectives?
A. profit sharing
B. pensions
C. piece rate
D. merit pay
Baker Company
Baker Company produces three products: A, B, and C from the same process. Joint
costs for this production run are $2,100.
If the products are processed further, Baker Company will incur the following disposal
costs upon sale: A, $3.00; B, $2.00; and C, $1.00.
Refer to Baker Company. Using a physical measurement method, what amount of joint
processing cost is allocated to Product B (round to the nearest dollar)?
A. $494
B. $679
C. $927
D. $700
When a profitable corporation sells an asset at a loss, the after-tax cash flow on the sale
will
A. exceed the pre-tax cash flow on the sale.
B. be less than the pre-tax cash flow on the sale.
C. be the same as the pre-tax cash flow on the sale.
D. increase the corporation’s overall tax liability.
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 four-variance approach, what is the fixed
overhead spending variance?
A. $7,000 U
B. $3,125 F
C. $ 750 U
D. $ 750 F
Which of the following is not a method for allocating service department costs?
A. step method
B. indirect method
C. direct method
D. algebraic method
Which of the following is an example of a committed fixed cost?
A. investment in production facilities
B. advertising
C. preventive maintenance
D. employee training programs
Which service department cost allocation method assigns indirect costs to cost objects
after considering interrelationships of the cost objects?
A. no no
B. no yes
C. yes yes
D. yes no
Colorful Creations Corporation
The Colorful Creations Corporation makes wreaths in two departments: Forming and
Decorating. Forming began the month with 500 wreaths in process that were 100
percent complete as to material and 40 percent complete as to conversion. During the
month, 6,500 wreaths were started. At month end, Forming had 2,100 wreaths that were
still in process that were 100 percent complete as to material and 50 percent complete
as to conversion. Assume Forming uses the weighted average method of process
costing. Costs in the Forming Department are as follows:
The Decorating Department had 600 wreaths in process at the beginning of the month
that were 80 percent complete as to material and 90 percent complete as to conversion.
The department had 300 units in ending Work in Process that were 50 percent complete
as to material and 75 percent complete as to conversion. Decorating uses the FIFO
method of process costing, and costs associated with Decorating are:
Refer to Colorful Creations Corporation. What was the cost transferred out of Forming
during the month?
A. $5,341
B. $6,419
C. $8,245
D. $8,330
An operations flow document
A. tracks the cost and quantity of material through an operation.
B. tracks the network of control points from receipt of a customer’s order through the
delivery of the finished product.
C. specifies tasks to make a unit and the times allowed for each task.
D. charts the shortest path by which to arrange machines for completing products.
Richards Company
The following information has been taken from the cost records of Richards Company
for the past year:
Refer to Richards Company. Cost of Goods Sold was
A. $691.
B. $716.
C. $736.
D. $801.