1) Tracking price discounts by customer and by salesperson helps improve customer
profitability.
2) As companies increase supply, the cost of producing an additional unit initially
declines but eventually increases.
3) A cost function is a mathematical description of how a cost changes with changes in
the level of an activity relating to that cost.
4) Inventoriable costs are reported as a liability in balance sheet when incurred and
expensed on the income statement when the product is sold.
5) A favorable variance indicates that budgeted costs are less than actual costs.
6) Manufacturing Cycle Efficiency (MCE) = Value-added Manufacturing Time divided
by Manufacturing Cycle Time.
7) Failure of a firm’s managers to execute the sales plans may create a favorable
sales-volume variance.
8) In process costing, the sales value at splitoff method does not require information on
the processing steps after the splitoff.
9) The target rate of return on investment is another way of referring to the markup
percentage.
10) Direct material costs are the acquisition costs of all materials that eventually
become part of the cost object and cannot be traced to the cost object in an
economically feasible way.
11) Measures which monitor critical performance variables that help managers track
progress toward achieving a company’s strategic goals are collectively called diagnostic
control systems.
12) An advantage of the physical-measure method is that obtaining physical measures
for all products is an easy task.
13) 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.
Data for the Assembly Department for June 2015 are:
Costs for June 2015:
What amount of conversion costs is assigned to the ending Work-in-Process account for
June?
A) $82,800.50
B) $49,639.50
C) $66,186.50
D) $38,256.50
14) Participation of employees in the budgeting process helps ________.
A) create greater commitment towards the budget
B) create demanding but achievable budget
C) decrease deviations from the budget
D) secure communication of sensitive information
15) The net initial investment for a piece of construction equipment is $3,000,000.
Annual cash inflows are expected to increase by $500,000 per year. The equipment has
an 8-year useful life. What is the payback period?
A) 8 years
B) 6.5 years
C) 6 years
D) 5 years
16) Gevorg’s Electronics manufactures TVs and DVDRs. During April, the following
activities occurred:
TVsDVDRs
Budgeted units sold19,40472,996
Budgeted contribution margin per unit$40$75
Actual units sold22,00080,000
Actual contribution margin per unit$45$76
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.
17) Without nonfinancial quality measures, ________.
A) the operating income cannot be improved
B) the short-run effectiveness of financial quality measures is questionable
C) the precise problem areas that need improvement cannot be identified
D) quality problems might not be identified until it is too late
18) The Cybertronics Corporation reported the following information for its Cyclotron
Division:
Income is defined as operating income.
What is the Cyclotron Division’s return on investment?
A) 35%
B) 75%
C) 50%
D) 80%
19) Home Decor Inc., manufactures home cleaning products. The company has two
divisions, Bleach and Cleanser. Because of different accounting methods and inflation
rates, the company is considering multiple evaluation measures. The following
information is provided for 2015:
The company is currently using a 15% required rate of return.
What are Bleach’s and Cleanser’s return on investment based on book values,
respectively?
A) 0.25; 0.67
B) 0.42; 0.52
C) 0.52; 0.47
D) 0.46; 0.25
20) Sherry and John Enterprises are using the kaizen approach to budgeting for 2015.
The budgeted income statement for January 2015 is as follows:
Under the kaizen approach, cost of goods sold and variable operating expenses are
budgeted to decline by 1% per month.
What is budgeted gross margin for March 2015?
A) $392,040
B) $396,000
C) $408,040
D) $411,940
21) To the nearest whole dollar, what should be the total cost of operating the helpline
costs at a volume of 33,800 calls in a month? (Assume that this call volume is within
the relevant range.)
A) $369,000
B) $327,515
C) $392,370
D) $415,740
22) Which of the following terms could be used to correctly describe the wages paid to
the workers that cut up the cloth into the jean pattern shapes?
Conversion Cost Variable Cost
A) Yes Yes
B) Yes No
C) No Yes
D) No No
23) Deocomfort Corporation manufactured 55,500 door jambs during September. The
following fixed overhead data relates to September:
What is the fixed overhead spending variance?
A) $560 unfavorable
B) $100 favorable
C) $100 unfavorable
D) $560 favorable
24) If Beta Corp’s net income is $210,000 and the tax rate is 30%, then the company’s
planned operating income is ________.
A) $325,000
B) $300,000
C) $273,000
D) $357,000
25) It is difficult to determine unused capacity for ________.
A) direct engineered costs
B) discretionary costs
C) variable costs
D) marginal costs
26) Which of the following is also called required rate of return?
A) hurdle rate
B) total cost rate
C) variance rate
D) predetermined overhead rate
27) The flexible-budget variance for materials is $5,000 (U). The sales-volume variance
is $13,000 (U). The price variance for material is $31000 (F). The efficiency variance
for direct manufacturing labor is $7,000 (F). Calculate the efficiency variance for
materials.
A) $36,000 favorable
B) $13,000 unfavorable
C) $6,000 favorable
D) $36,000 unfavorable
28) Which account is credited if direct materials of $20,000 and indirect materials of
$3,000 are sent to the manufacturing plant floor?
A) Manufacturing Overhead Control for $23,000
B) Work-in-Process Control for $23,000
C) Accounts Payable Control for $17,000
D) Materials Control for $23,000