A cost accumulation system should most likely be reevaluated when a company has
A. automated one or more production processes.
B. introduced new products to its customers.
C. had its industry deregulated.
D. all of the above.
Terrell and Associates, CPA’s provides two types of services: audit and tax. All
company personnel can perform either service. In efforts to market its services, the
company relies on radio and billboards for advertising. Information on the company’s
projected operations for the coming year follows:
Setup time is
A. no no yes
B. yes yes no
C. yes no yes
D. no yes yes
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 incremental cost to purchase the new machine is
A. $11,000
B. $13,000.
C. $18,000.
D. $20,000.
Which service department cost allocation method assigns costs directly to
revenue-producing areas with no other intermediate cost pools or allocations?
A. step method
B. indirect method
C. algebraic method
D. direct method
If a company obtains two salable products from the refining of one ore, the refining
process should be accounted for as a(n)
A. mixed cost process.
B. joint process.
C. extractive process.
D. reduction process.
The fixed costs of service departments should be allocated to production departments
based on
A. actual short-run utilization based on predetermined rates.
B. actual short-run units based on actual rates.
C. the service department’s expected costs based on expected long-run use of capacity.
D. the service department’s actual costs based on actual utilization of services.
An actual cost system differs from a normal cost system in that an actual cost system
A. assigns overhead as it occurs during the manufacturing cycle.
B. assigns overhead at the end of the manufacturing process.
C. does not assign overhead at all.
D. does not use an Overhead Control account.
Managing constraints is a process of
A. backflush costing.
B. design for manufacturability.
C. just-in-time redesign.
D. continuous improvement.
Costs that are incurred for monitoring and inspecting are:
A. prevention costs
B. detection costs
C. appraisal costs
D. failure costs
Brennan Company
The following information is for Brennan Company’s September production:
(Round all answers to the nearest dollar.)
Refer to Brennan Company. What is the labor efficiency variance?
A. $825 F
B. $825 U
C. $835 F
D. $835 U
Richardson Company
The following information is available for Richardson Company for its first year of
operations:
Refer to Richardson Company. What was the total amount of Selling,General and
Administrative expense incurred by Richardson Company?
A. $30,000
B. $62,500
C. $6,000
D. can’t be determined from the information given
Glover Company produces a part that has the following costs per unit:
London Corporation can provide the part to Glover for $23 per unit. Glover Company
has determined that 50 percent of its fixed overhead would continue if it purchased the
part. However, if Glover no longer produces the part, it can rent that portion of the plant
facilities for $70,000 per year. Glover Company currently produces 12,000 parts per
year. Which alternative is preferable and by what margin?
A. Make-$24,000
B. Make-$60,000
C. Buy-$10,000
D. Buy-$46,000
Which of the following has sales value?
A. no no
B. yes no
C. yes yes
D. no yes
Hahn Corporation
Hahn Corporation produces a single product that sells for $7.00 per unit. Standard
capacity is 100,000 units per year; 100,000 units were produced and 80,000 units were
sold during the year. Manufacturing costs and selling and administrative expenses are
presented below.
There were no variances from the standard variable costs. Any under- or overapplied
overhead is written off directly at year-end as an adjustment to cost of goods sold.
Hahn Corporation had no inventory at the beginning of the year.
Refer to Hahn Corporation. What is the net income under variable costing?
A. $50,000
B. $80,000
C. $90,000
D. $120,000
Benchmarking against direct competitors creates the risk of
A. creating products or services with identical specifications.
B. becoming stagnant relative to process improvements.
C. being taken over by the competitors to prevent a loss of ideas.
D. all of the above.
Patterson Company
The following information is for Patterson Company’s July production:
(Round all answers to the nearest dollar.)
Refer to Patterson Company. What is the labor efficiency variance?
A. $1,875 U
B. $ 938 U
C. $1,875 F
D. $1,125 U
Which of the following statements is trueregarding capital budgeting methods?
A. The Fisher rate can never exceed a company’s cost of capital.
B. The internal rate of return measure used for capital project evaluation has more
conservative assumptions than the net present value method, especially for projects that
generate a positive net present value.
C. The net present value method of project evaluation will always provide the same
ranking of projects as the profitability index method.
D. The net present value method assumes that all cash inflows can be reinvested at the
project’s cost of capital.