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Feedback regarding previous actions may affect ________.
A) future predictions
B) implementation of the decision
C) the decision model
D) All of these answers are correct.
The preparation of all the budgets in the master budget forces managers to think about
their business operations and to formulate plans, while:
A) detecting inaccurate historical records to avoid errors in budgets
B) setting expectations against which actual results can be compared
C) completing the budgeting tasks with minimal cross functional feedback
D) ignoring financial risks and opportunities
Comfort chair company manufacturers a standard recliner. During February, the firm's
Assembly Department started production of 73,000 chairs. During the month, the firm
completed 78,600 chairs, and transferred them to the Finishing Department. The firm
ended the month with 10,100 chairs in ending inventory. There were 15,700 chairs in
beginning inventory. All direct materials costs are added at the beginning of the
production cycle and conversion costs are added uniformly throughout the production
process. The FIFO method of process costing is used by Comfort. Beginning work in
process was 35% complete as to conversion costs, while ending work in process was
85% complete as to conversion costs.
What is the cost of the goods transferred out during February?
(Round intermediary calculations to the nearest cent.)
A) $429,194.09
B) $454,987.05
C) $478,261.76
D) $507,400.00
For each of the following methods of allocating joint costs, give a positive or a negative
aspect of selecting each one to allocate joint costs.
a. sales value at split-off
b. estimated net realizable value method
c. the constant gross margin method
d. a physical measure such as volume
Which one of the following activities would most likely be considered a long-run
pricing decision?
A) one-time-only special order pricing that would result in achieving the break-even
point
B) product mix adjustments in a competitive market
C) setting prices to generate a reasonable rate of return on investment
D) changing prices in response to weak demand
Terbium Corporation manufactures water toys. It plans to grow by producing
high-quality water toys that are delivered in a timely manner. There are a number of
other manufacturers who produce similar water toys. Terbium believes that
continuously improving its manufacturing processes and reengineering processes to
downsize and eliminate excess capacity are critical to implementing its strategy. To
further company strategy, measures on the balanced scorecard would most likely
include ________.
A) number of process improvements
B) price premium earned
C) longer cycle times
D) an increase in operating income from increased profit margins
The income statement of a service-sector firm reports ________.
A) period costs only
B) cost of goods sold
C) both period costs and cost of of goods sold
D) direct labor costs
Castleton Corporation manufactured 41,000 units during March. The following fixed
overhead data relates to March:
What is the amount of fixed overhead allocated to production?
A) $128,210.13
B) $117,000.00
C) $125,500.00
D) $123,000.00
Handley Manufacturing Company has prepared the following flexible budget for
August and is in the process of interpreting the variances. F denotes a favorable
variance and U denotes an unfavorable variance.
The most likely explanation of the above variances for Material A is that ________.
A) a lower price than expected was paid for Material A
B) higher-quality raw materials were used than were planned
C) the company used a higher-priced supplier
D) Material A used during September was $2,000 less than expected
R&D costs are treated as period costs because ________.
A) these costs may increase revenues in the current period
B) these costs may increase revenues in the future period
C) these costs may decrease revenues in the current period
D) these costs are expensed when the goods are sold
Which of the following is true if the production volume decreases?
A) fixed cost per unit increases
B) average cost per unit decreases
C) variable cost per unit increases
D) variable cost per unit decreases
Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand
has ranged from 30 to 50 windows per day with an average of 43. Alex is the one
production worker and he works eight hours a day, five days a week. Each order is one
window and each window takes 5 minutes.
What is the average waiting time in minutes?
A) 2.50
B) 4.06
C) 2.03
D) 21.50
Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2018, manufacturing overhead cost estimates total $600,000 for
an annual production capacity of 12 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After
analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2018, two customers, Money Managers and Hospital Systems, are expected to use
the following printing services:
Using pages printed as the only overhead cost driver, what is the manufacturing overhead
cost estimate for Money Managers during 2018?
A) $4,300
B) $2,800
C) $3,500
D) $4,784
An important difference between financial measures of quality and nonfinancial
measures of quality is that ________.
A) financial measures of quality tend to be useful indicators of future long-term
performance, while nonfinancial measures have more of a short-term focus
B) nonfinancial measures of quality tend to be useful indicators of future long-term
performance, while financial measures of quality have more of a short-term focus
C) nonfinancial measures are generally too subjective to have any long-term value,
while financial measures are too objective for taxation purposes
D) nonfinancial measures are generally too subjective to have any short-term value,
while financial measures are too objective to have medium-term value
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank
and recorded DVDs. DVD Mart purchases DVDs from Globe at $29.00 per DVD;
DVDs are shipped in packages of 70. Globe pays all incoming freight, and DVD Mart
does not inspect the DVDs due to Globe's reputation for high quality. Annual demand is
320,000 DVDs at a rate of 6500 DVDs per week. DVD Mart earns 13% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
What is the economic order quantity?
A) 63.26 packages
B) 44.19 packages
C) 5.81 packages
D) 62.49 packages
Which of following is a firm's risk of outsourcing the production of a part?
A) fluctuation in the manufacturing costs
B) leakage of intellectual property
C) increased need of skilled workers
D) scarcity of indirect labor
Malive Park Department is considering a new capital investment. The following
information is available on the investment. The cost of the machine will be $179,000.
The annual cost savings if the new machine is acquired will be $35,000. The machine
will have a 10-year life, at which time the terminal disposal value is expected to be
zero. Malive Park is assuming no tax consequences. Malive Park has a 14% required
rate of return. What is the payback period for the investment?
A) 4.1 years
B) 5.1 years
C) 10.0 years
D) 10.2 years
One of the benefits of a well implemented and executed budget is communication.
Which of the following best describes communication within the budgetary cycle?
A) meshing and balancing of all aspects of production or service
B) making each manager aware of the plan and allowing each manager to understand
the importance of the plan
C) allocation of scarce resources across all functional areas of the company
D) the calculation of deviations from plan
Which of the following is a disadvantage of dual pricing?
A) It strongly preserves the autonomy of divisions, and the division managers are
motivated to put forth effort to increase the operating income of their respective
divisions, causing inefficiencies.
B) The price arrived by using dual pricing has no specific relationship to either costs or
the market price.
C) It insulates managers from the realities of the marketplace because costs, not market
prices, affect the revenues of the supplying division.
D) It assumes that the minimum transfer price equals the incremental cost per unit
incurred up to the point of transfer minus the opportunity cost per unit to the selling
division.
Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may
be allocated to the two departments in various ways.
If administrative expense of $62,800.00 is allocated on the basis of number of employees,
the cost per cost driver rate would be ________.
A) $433.10
B) $314.00
C) $1,141.82
D) $46.18
Sales of Granite City Products Inc. have been on a steady decline for the last 12
months. A market research study conducted revealed that the product of Granite City
Products Inc. can be sold only for $440 as opposed to the current market price charged
of $540 per unit. Granite City Products Inc. has decided to revise its sales price to $440.
The annual sales target volume of the product after price revision is 260 units. Granite
City Products Inc. wants to earn 30% on its sales amount.
What are the target sales revenues?
A) $148,720
B) $114,400
C) $80,080
D) $42,120
An example of a performance measure with a long time horizon is ________.
A) direct materials efficiency variances
B) overhead spending variances
C) number of new patents developed
D) quality of room service
The contribution margin income statement ________.
A) reports gross margin
B) is allowed for external reporting to shareholders
C) categorizes costs as either direct or indirect
D) can be used to predict operating income at different levels of activity
Determining which products should be produced when the plant is operating at full
capacity is referred to as a(n) ________.
A) outsourcing analysis
B) total alternative approach
C) product-mix decision
D) short-run focus decision
________ are the subdivisions of income that management accountants use for the
strategic analysis of operating income.
A) Growth, price-recovery and cost leadership components
B) Growth, price-recovery and productivity components
C) Cost leadership, price-recovery and productivity components
D) Growth, cost leadership and productivity components
Spoilage that is not inherent in a particular production process and would not arise
under efficient operating conditions is referred to as ________.
A) incremental spoilage
B) usual spoilage
C) abnormal spoilage
D) indirect spoilage
The AARR method is similar to the IRR method as ________.
A) both calculate the return using after-tax cash flows
B) both calculate the return using operating-income numbers after considering accruals
and taxes
C) both calculate the result in terms of percentage
D) both consider the time value of money
After conducting a market research study, Magnificent Manufacturing decided to
produce a new interior door to complement its exterior door line. It is estimated that the
new interior door can be sold at a target price of $260. The annual target sales volume
for interior doors is 20,000. Magnificent has target operating income of 40% of sales.
What is the target cost for each interior door?
A) $364
B) $260
C) $156
D) $104
The sales-volume variance is subdivided into ________.
A) sales-mix variance and static-budget variance
B) sales-mix variance and sales-quantity variance
C) flexible-budget variance and fixed-budget variance
D) market-share variance and static-budget variance
W.T. Ginsburg Engine Company manufactures part ACT31107 used in several of its
engine models. Monthly production costs for 1,000 units are as follows:
Direct materials $42,000
Direct labor 10,500
Variable overhead costs 32,500
Fixed overhead costs 18,000
Total costs $103,000
It is estimated that 6% of the fixed overhead costs assigned to ACT31107 will no longer
be incurred if the company purchases ACT31107 from the outside supplier. W.T.
Ginsburg Engine Company has the option of purchasing the part from an outside
supplier at $94.75 per unit.
If W.T. Ginsburg Engine Company purchases 1,000 ACT31107 parts from the outside
supplier per month, then its monthly operating income will ________. (Round any
intermediary calculations and your final answer to the nearest cent.)
A) increase by $8,670
B) increase by $21,330
C) decrease by $8,670
D) decrease by $21,330
Which of the following is an advantage of using full cost of the product as the cost
base?
A) Managers are informed regarding the minimum long-run cost they need to recover to
stay in business.
B) Using the full cost of the product as a basis for pricing increases the temptation to
cut prices below full costs.
C) Fixed cost allocations can be arbitrary while using full cost of the product as the cost
base.
D) It requires a detailed analysis of cost behavior for computations and hence promotes
a better understanding of the cost behavior.
Which of the following has accelerated need for refined cost systems?
A) global monopolies
B) rising prices
C) intense competition
D) a shift toward increased direct costs
Harbor Corp currently leases a corporate suite in an office building for a cost of
$300,000 a year. Only 81% of the corporate suite is currently being used. A start-up
business has proposed a plan that would use the other 19% of the suite and increase the
overall costs of maintaining the space by $28,139. If the stand-alone method were used,
what amount of cost would be allocated to the start-up business? (Round the final
answer to the nearest dollar.)
A) $79,793
B) $57,000
C) $62,346
D) $51,654
Advantage Inc. employs 29 professional cleaners. Budgeted costs total $1,955,000 of
which $1,702,000 is direct costs. Budgeted indirect costs are $839,500 and actual
indirect costs were $795,600. Budgeted professional labor-hours are 1,150,000 and
actual hours were 1,221,875. What is the budgeted direct cost-allocation rate?
A) $1.70 per hour
B) $1.60 per hour
C) $0.73 per hour
D) $1.48 per hour
