1) Productivity describes the relationship between different quantities of inputs
consumed and the quantities of output produced.
2) When budgeted cost-allocation rates are used, variations in actual usage by one
division affect the costs allocated to other divisions.
3) The cost of units completed can differ materially between the weighted average and
the FIFO methods of process costing.
4) Insensitivity of demand to price changes is called demand inelasticity.
5) In a contribution format income statement, the gross margin minus selling and
administrative expenses equals net operating income.
6) In a job-costing system the cost object is an individual unit, batch, or lot of a distinct
product or service.
7) Department costing systems always properly recognize how resources are used by
products as they require the creation of multiple indirect cost pools.
8) In using high-low method, the slope coefficient is calculated by dividing the
difference between highest and lowest observations of the cost driver by the difference
between costs associated with highest and lowest observations of the cost driver.
9) Freight in charges forms part of purchasing costs of inventory.
10) Carbon Composite Poles manufactures fishing poles that have a price of $125.00. It
has costs of $90. A competitor is introducing a new fishing pole that will sell for
$110.00. Management believes it must lower the price to $110.00 to compete in the
highly cost-conscious fishing pole market. Marketing department believes that the new
price will allow Carbon to maintain the current sales level of 200,000 poles per year.
Required:
a.What is the target cost for the new price if target operating income is 25% of sales?
b.What is the change in operating income for the year if only the selling price is
changed and costs remain the same?
c.What is the target cost per unit if the selling price is reduced to $110.00 and the
company wants to maintain its same income level?
11) Put the following ABC implementation steps in order ________.
A Compute the allocation rates.
B Compute the total cost of the products.
C Identify the products that are the cost objects.
D Select the cost allocation bases.
A) DACB
B) DBCA
C) BADC
D) CDAB
12) Coldbrook Company has two sources of funds: long-term debt with a market and
book value of $15 million issued at an interest rate of 10%, and equity capital that has a
market value of $9 million (book value of $5 million). Coldbrook Company has profit
centers in the following locations with the following operating incomes, total assets,
and current liabilities. The cost of equity capital is 15%, while the tax rate is 30%.
What is the for Bish Bash Falls?
A) $338,563
B) $305,000
C) $275,500
D) $255,500
13) The total production-volume variance should be ________.
A) $80,000 F
B) $80,000 U
C) $108,000 F
D) $108,000 U
14) Prime costs include ________.
A) direct materials and direct manufacturing labor costs
B) direct manufacturing labor and manufacturing overhead costs
C) direct materials and manufacturing overhead costs
D) only direct materials
15) Which of the following is most likely to be a cost driver for the variable portion of
marketing costs?
A) percentage of markup on cost
B) number of units produced
C) increase in revenues attributable to such marketing
D) number of units units sold
16) Which of the following is a storage cost?
A) labor cost
B) deterioration
C) direct material
D) overhead cost
17) As a result of learning curve, ________.
A) unit costs increase as productivity increases and the unit-cost function behaves
nonlinearly
B) unit costs decrease as productivity increases and the unit-cost function behaves
nonlinearly
C) unit costs increase as productivity increases and the unit-cost function behaves
linearly
D) unit costs decrease as productivity increases and the unit-cost function behaves
linearly
18) Monticello Corp manufactures expensive tables. Its varnishing department is fully
automated and requires substantial inspection to keep the machines operating properly.
An improperly varnished table is very expensive to correct. Inspection hours for the
5,000 tables varnished in September totaled 1,500 hours by 8 employees. Eight quarts
of varnish were used, on average, for each table. The standard amount of varnish per
table is nine quarts. The cost of inspection for September was equal to the budgeted
amount of $40,000.
The $40,000 represents a(n) ________.
A) activity cost pool
B) possible cost allocation base
C) internal failure cost
D) work-in-process control
19) A local accounting firm employs 20 full-time professionals. The budgeted annual
compensation per employee is $40,500. The average chargeable time is 500 hours per
client annually. All professional labor costs are included in a single direct-cost category
and are allocated to jobs on a per-hour basis.
Other costs are included in a single indirect-cost pool, allocated according to
professional labor-hours. Budgeted indirect costs for the year are $787,500, and the
firm expects to have 90 clients during the coming year.
What is the budgeted indirect-cost rate per hour?
A) $1,575.00 per hour
B) $78.75 per hour
C) $18.00 per hour
D) $17.50 per hour
20) Buildz Manufacturing currently produces 1,000 tables per month. The following per
unit data for 1,000 tables apply for sales to regular customers:
The plant has capacity for 3,000 tables and is considering expanding production to
3,000 tables. What is the total cost of producing 3,000 tables?
A) $255,000
B) $225,000
C) $175,000
D) $235,000
21) If a computer manufacturer used its common stock price as a Balanced Scorecard
control measure, it would represent the ________ perspective.
A) financial
B) customer
C) internal business process
D) learning and growth
22) The Corata Appliance Manufacturing Corporation manufactures two vacuum
cleaners, the Standard and the Super. The following information was gathered about the
two products:
What is the total sales-volume variance in terms of the contribution margin?
A) $260,000 unfavorable
B) $260,000 favorable
C) $530,000 unfavorable
D) $790,000 favorable