Acct 887 Midterm 2

subject Type Homework Help
subject Pages 9
subject Words 1827
subject Authors Charles T. Horngren, Madhav V. Rajan, Srikant M. Datar

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1) Competence includes maintaining an appropriate level of professional expertise by
continually developing knowledge and skills.
2) A refined costing system provides better measurement of the costs of indirect
resources used by different cost objects, no matter how differently various cost objects
use indirect resources.
3) The ability-to-bear criterion is considered superior when the purpose of cost
allocation is motivation.
4) The Salaries Payable Control account has underlying subsidiary ledgers.
5) Goodness of fit has meaning only if the relationship between the cost drivers and
costs is economically plausible.
6) For external reporting purposes, indirect manufacturing costs must be allocated to
individual units.
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7) A firm using a cost-based transfer price will never help have the selling division be
able to achieve goal congruence.
8) An actual cost is the cost incurreda historical or past cost.
9) It is difficult for firms to find appropriate benchmarks because differences can exist
across companies in their strategies, inventory costing methods, depreciation methods,
and so on.
10) The demand-pull feature of JIT production systems results in close coordination
among workstations and smooths the flow of goods.
11) All costs reported on the income statement of a service-sector company are
inventoriable costs.
12) Some companies, make environmental performance a line item on every employee's
salary appraisal report.
13) Standard costing is a cost system that allocates overhead costs on the basis of
overhead cost rates based on actual overhead costs times the standard quantities of the
allocation bases allowed for the actual outputs produced.
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14) Assume the transfer price for a pair of shoes is 180% of total costs of the Stitching
Division and 40,000 of soles are produced and transferred to the Polishing Division.
The Stitching Division's operating income is ________.
A) $896,000
B) $720,000
C) $800,000
D) $880,000
15) Care Inc., has two divisions that operate independently of one another. The financial
data for the year 2015 reported the following results:
The company's desired rate of return is 10%. Income is defined as operating income.
What are the respective residual incomes for the North and South Divisions?
A) $60,000 and $100,000
B) $300,000 and $60,000
C) $300,000 and $100,000
D) $100,000 and $200,000
16) For 2014, Thomas Manufacturing uses machine-hours as the only overhead
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cost-allocation base. The estimated manufacturing overhead costs are $300,000 and
estimated machine hours are 50,000. The actual manufacturing overhead costs are
$420,000 and actual machine hours are 70,000.
Using job costing, the 2014 budgeted manufacturing overhead rate is ________.
A) $6.50 per machine-hour
B) $4.80 per machine-hour
C) $5.50 per machine-hour
D) $6.00 per machine-hour
17) Ruben intends to sell his customers a special round-trip airline ticket package. He is
able to purchase the package from the airline carrier for $150 each. The round-trip
tickets will be sold for $200 each and the airline intends to reimburse Ruben for any
unsold ticket packages. Fixed costs include $5,000 in advertising costs.
How many ticket packages will Ruben need to sell to break even?
A) 34 packages
B) 50 packages
C) 100 packages
D) 150 packages
18) Maloney Corporation manufactures plastic water bottles. It plans to grow by
producing high-quality water bottles at a low cost that are delivered in a timely manner.
There are a number of other manufacturers who produce similar water bottles. Maloney
believes that continuously improving its manufacturing processes and having satisfied
employees are critical to implementing its strategy.
Required:
a.Is Maloney's strategy one of product differentiation or cost leadership? Explain
briefly.
Identify at least one key element that you would expect to see included in the balanced
scorecard:
b.for the financial perspective.
c.for the customer perspective.
d.for the internal business process perspective.
e.for the learning and growth perspective.
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19) Captain Carl's Seascapes produces sea pictures for sale through catalogs. The
company has two workstations, photo production and framing. The photo production
station is limited by the speed of operating the photo development machine. Framing is
limited by the speed of the employees. Framing normally waits for work from photo
production. Each department works an eight-hour day. If Captain Carl's Seascapes adds
an earlier half shift so that photo production begins work four hours earlier than
framing each day, the two departments generally finish their work at about the same
time. Not only does this eliminate the bottleneck, but it also increases finished units
produced each day by 200 units. All units produced can be sold. The cost of operating
the photo production department four more hours each day is $1,250. The contribution
margin of the finished products is $10 each.
What is the change in the daily contribution margin if the change is made?
A) $250
B) $750
C) $2,000
D) $800
20) Branded Shoe Company manufactures only one type of shoe and has two divisions,
the Stitching Division and the Polishing Division. The Stitching Division manufactures
shoes for the Polishing Division, which completes the shoe and sells it to retailers. The
Stitching Division 'sells'shoes to the Polishing Division. The market price for the
Polishing Division to purchase a pair of shoes is $42. (Ignore changes in inventory.)
The fixed costs for the Stitching Division are assumed to be the same over the range of
40,000-100,000 units. The fixed costs for the Polishing Division are assumed to be $14
per pair at 100,000 units.
Stitching's costs per pair of soles are:
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Polishing's costs per completed pair of shoes are:
What is the transfer price per pair of shoes from the Stitching Division to the Polishing
Division if the transfer price per pair of soles is 125% of full costs?
A) $12.50
B) $22.50
C) $30.00
D) $35.00
21) To guide cost allocation decisions, the benefits-received criterion ________.
A) generally uses the cost driver as the cost allocation base
B) advocates allocating costs in proportion to the cost object's ability to bear costs
allocated to it
C) is the primarily used criterion in activity-based costing
D) may use an allocation base of division revenues to allocate advertising costs
22) Which of the following statements is true of relevant inventory costs?
A) The salaries paid to clerks, stock keepers, and materials handlers are relevant
carrying costs if they are unaffected by changes in inventory levels.
B) The costs of expediting an order from a supplier are relevant incremental costs of
stockouts.
C) Warehouse rent, warehouse workers' salaries and costs of insurance, that change
with the quantity of inventory held are irrelevant carrying costs.
D) Those ordering costs that change with the number of orders placed are irrelevant
ordering costs.
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23) A capital budgeting tool that management can use to summarize the difference in
the future net cash inflows from an intangible asset at two different points in time is
referred to as:
A) the accrual accounting rate-of-return method
B) the net present value method
C) sensitivity analysis
D) the payback method
24) Netzone Company is in semiconductor industry and fabrication of silicon-wafer
chips splits off two types of memory chips, Standard and Premium. The following
information was collected for last quarter of the calendar year:
Direct materials processed:200 kgs (Both standard and premium chips weigh 10 grams
each)
The cost of purchasing 200 kgs of direct materials and processing it up to the splitoff
point to yield a total of 16,500 chips of good products was $1,950,000.
Beginning inventories totalled 100 chips for Standard and 50 chips for Premium.
Ending inventory amounts reflected 100 chips of Standard and 50 chips of Premium.
October costs per unit were the same as November.
When using a physical-volume measure, what is the approximate amount of joint costs
that will be allocated Premium chips?
A) $768,182
B) $1,170,000
C) $975,000
D) $780,000
25) Managers use customer-profitability analysis report to ensure that ________.
A) unpaid invoices are categorized according to age by due date
B) costs related to customers are segmented into different cost pools on the basis of
different types of cost drivers or cost-allocation bases
C) customers making large contributions to the operating income of a company receive
a high level of attention from the company
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D) cost allocation of indirect cost is in place
26) Four Seasons Company makes snow blowers. Materials are added at the beginning
of the process and conversion costs are uniformly incurred. At the beginning of
September, work in process is 40% complete and at the end of the month it is 60%
complete. Other data for the month include:
Required:
a.Prepare a production cost worksheet with supporting schedules using the
weighted-average method of process costing.
b.Prepare journal entries to record transferring of materials to processing and from
processing to finished goods.
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27) Life-cycle budgeting is particularly important when ________.
A) the development period for R&D is short and inexpensive
B) there are significant nonproduction costs
C) most costs are locked in during production
D) a low percentage of costs are incurred before any revenues are received

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