1) For each cost pool listed select an appropriate allocation base from the list below. An
allocation base may be used only once. Assume a manufacturing company.
Allocation bases for which the information system can provide data:
1.Number of employees per department
2.Employee wages and salaries per department
3.Number of sales orders
4.Hours of operation of each production department
5.Machine hours by department
6.Operations costs of each department
7.Hours of computer use per month per department
8.Number of units sold
Cost pools:
________a.Vice President of Finance’s office expenses
________b.Computer operations used in conjunction with manufacturing
________c.Personnel Department
________d.Sales-order costs
________e.Energy costs
2) Budgets should ________.
A) be flexible
B) be administered rigidly
C) only be developed for short periods of time
D) include only variable costs
3) A plot of data that results in one extreme observation most likely indicates that
________.
A) more than one cost pool should be used
B) an unusual event such as a plant shutdown occurred during that month
C) the cost-allocation base has been incorrectly identified
D) individual cost items do not have the same cost driver
4) The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory
has only two users, the Large Plane Department and the Small Plane Department. The
following data apply to the coming budget year:
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours
and by the Small Plane Department was 65,000 technician hours.
If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be budgeted for the Small Plane Department?
A) $10,575,000
B) $9,633,333
C) $8,433,333
D) $8,633,333
5) Which of the following is a difference between a diagnostic control system and an
interactive control system?
A) A diagnostic control system focuses on meeting expectations, while an interactive
control system focuses on standards of ethical behavior.
B) A diagnostic control system focuses on standards of ethical behavior while an
interactive control system focus on meeting expectations.
C) A diagnostic control system focuses on meeting expectations, while an interactive
control system focuses on organizational attention and learning on key strategic issues.
D) A diagnostic control system focuses on organizational attention and learning on key
strategic issues, while an interactive control system focuses on meeting expectations.
6) Domose Inc. planned to use $150 of material per unit but actually used $147 of
material per unit, and planned to make 1,100 units but actually made 900 units.
The flexible-budget variance for materials is ________.
A) $2,700 favorable
B) $2,700 unfavorable
C) $3,300 unfavorable
D) $3,300 favorable
7) Price discounts are influenced by ________.
A) the volume of product purchased
B) the prime cost of production
C) the operational budget
D) the contribution -margin per unit
8) Anderson Corporation has provided the following production and average cost data
for two levels of monthly production volume. The company produces a single product.
The best estimate of the total monthly fixed manufacturing cost is:
A) $388,000
B) $954,800
C) $376,000
D) $328,000
9) Elton, Inc., expects to sell 6,000 ceramic vases for $20 each. Direct materials costs
are $2, direct manufacturing labor is $10, and manufacturing overhead is $3 per vase.
The following inventory levels apply to 2016:
How many ceramic vases should be produced in 2016?
A) 5,900 vases
B) 6,100 vases
C) 7,000 vases
D) 6,000 vases
10) Variances should be investigated ________.
A) when they are kept below a certain amount
B) when there is a small variance for critical items such as product defects
C) even though the cost of investigation exceeds the benefit
D) when there is an in-control occurrence
11) Jean Peck’s Furniture’s manufactures tables for hospitality sector. It takes only bulk
orders and each table is sold for $300 after negotiations. In the month of January, it
manufactures 3,000 tables and sells 2,250 tables. Actual fixed costs are the same as the
amount fixed costs budgeted for the month.
The following information is provided for the month of January:
At the end of the month Jean Peck’s Furniture’s has an ending inventory of finished
goods of 750 units. The company also incurs a sales commission of $10 per unit.
What is the cost of goods sold per unit when using absorption costing?
A) $120
B) $128
C) $150
D) $158
12) Velshi Printers has contracts to complete weekly supplements required by forty-six
customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for
an annual production capacity of 12 million pages.
For 2015 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 2015, two customers, Money Managers and Hospital Systems, are expected to
use the following printing services:
Assuming activity-cost pools are used, what are the activity-cost driver rates for design
changes, setups, and inspections cost pools?
A) $400 per change, $128 per setup, $10 per inspection
B) $360 per change, $320 per setup, $6.40 per inspection
C) $168 per change, $538 per setup, $42 per inspection
D) $286 per change, $152 per setup, $20 per inspection
13) The Allianz Company produces a specialty wood furniture product, and has the
following information available concerning its inventory items:
Relevant ordering costs per purchase order$450
Relevant carrying costs per year for each package:
Required annual return on investment15%
Required other costs per year$4
Annual demand is 30,000 packages per year. The purchase price per package is $48.
If Premium Company has a safety stock of 480 units and the average daily demand is
60 units, how many days can be covered if the shipment from the supplier is delayed by
4 days?
A) 8 days
B) 4 days
C) 12 days
D) 7 days
14) Different management levels in Bates, Inc., require varying degrees of managerial
accounting information. Because of the need to comply with the managers’ requests,
four different variances for manufacturing overhead are computed each month. The
information for the September overhead expenditures is as follows:
Required:
a.Compute a 4-variance analysis for the plant controller.
b.Compute a 3-variance analysis for the plant manager.
c.Compute a 2-variance analysis for the corporate controller.
d.Compute the flexible-budget variance for the manufacturing vice president.
15) Which account is debited if materials costing $100,000 are sold?
A) Revenues account
B) Work-in-Process Control account
C) Materials Control account
D) Cost of Goods Sold account
16) Diamond Manufacturing Company provides glassware machines for major
department store retailers. The company has been investigating a new piece of
machinery for its production department. The old equipment has a remaining life of
four years and the new equipment has a value of $87,776 with a four-year life. The
expected additional cash inflows are $32,000 per year. What is the internal rate of
return?
A) 10%
B) 12%
C) 17%
D) 20%