1) Ridez Manufacturing currently produces 1,000 bicycles per month. The following
per unit data apply for sales to regular customers:
The plant has capacity for 3,000 bicycles and is considering expanding production to
2,000 bicycles. What is the per unit cost of producing 2,000 bicycles?
A) $78.50 per unit
B) $170 per unit
C) $72.50 per unit
D) $77.50 per unit
2) Purple Purpose Inc., is in the process of evaluating a new product using the following
information:
A new transformer has two production runs each year, each with $10,000 in setup costs.
The new transformer incurred $30,000 in development costs and is expected to be
produced over the next three years.
Direct costs of producing the transformers are $40,000 per run of 4,500 transformers
each.
Indirect manufacturing costs charged to each run are $45,000.
Destination charges for each transformer average $1.00.
Customer service expenses average $0.20 per transformer.
The transformers are selling for $25 the first year and will increase by $3 each year
thereafter.
Sales units equal production units each year.
What is the estimated life-cycle operating income for the first year?
A) ($5,800)
B) (2,600)
C) 2,600
D) 5,800
3) A company’s actual performance should be compared against budgeted amounts for
the same accounting period so that ________.
A) adjustments for future conditions can be included
B) to avoid any feedback from the budgets due to past miscues
C) inefficiencies of the past year can be included
D) a rolling budget can be implemented
4) The difference between budgeted fixed manufacturing overhead and the fixed
manufacturing overhead allocated to actual output units achieved is called the fixed
overhead ________.
A) efficiency variance
B) flexible-budget variance
C) combined-variance analysis
D) production-volume variance
5) A soft drink bottler incurred the following factory utility cost: $3,936 for 800 cases
bottled and $3,988 for 900 cases bottled. Factory utility cost is a mixed cost containing
both fixed and variable components. The variable factory utility cost per case bottled is
closest to:
A) $4.92
B) $0.52
C) $4.43
D) $4.66
6) Home Decor Inc., manufactures home cleaning products. The company has two
divisions, Bleach and Cleanser. Because of different accounting methods and inflation
rates, the company is considering multiple evaluation measures. The following
information is provided for 2015:
The company is currently using a 15% required rate of return.
What are Wheels’s and Assembly’s return on investment based on current values,
respectively?
A) 0.21; 0.25
B) 0.25; 0.21
C) 0.14; 0.25
D) 0.25; 0.14
7) A locked-in cost is a(n) ________.
A) opportunity cost that is fixed in the short run
B) cost that can be changed in the short run
C) cost that has not yet been incurred, but based on decisions that have already been
made, will be incurred in the future
D) cost that has been incurred, but based on decisions that have already been made, will
be not incurred in the future
8) Which of the following is a reason for companies adopting variable costing for
internal reporting purposes?
A) It is cost-effective to use variable costing for both internal and external reporting.
B) It reduces the incentives for undesirable buildup of inventories.
C) It measures the cost of all manufacturing resources, whether variable or fixed,
necessary to produce inventory.
D) It assists in accurate pricing decisions in case of long-run pricing.
9) 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.
For every $25,000 of ticket packages sold, operating income will increase by ________.
A) $6,250
B) $12,500
C) $18,750
D) $15,000
10) How much is the ending inventory for the byproduct if byproducts are recognized
in the general ledger at the point of sale?
A) $0
B) $375
C) $1,500
D) $2,500
11) If the Tudor Retailing Company uses the high-low method of analysis, the total
monthly fixed cost for Tudor Retailing Company would be estimated to be:
A) $34,500
B) $17,000
C) $27,000
D) $22,000
12) Which of the following statements is true of sell-or-process-further decisions in
joint costing?
A) Joint costs incurred before the splitoff point are relevant in deciding whether to
process the product further.
B) All separable costs in joint-cost allocations are incremental costs.
C) Separable costs incurred before the splitoff point are irrelevant in deciding whether
to process the product further.
D) Costs that differ between the alternatives of selling products or processing further
are relevant.
13) If there was no beginning work in process and no ending work in process under the
weighted-average process costing method, the number of equivalent units for direct
materials, if direct materials were added at the start of the process, would be ________.
A) more than the units started or transferred in during the period
B) equal to the units completed during the period
C) less than the units completed during the period
D) equal to total of units started and units completed during the period
14) Flexible budget contribution margin is equal to ________.
A) actual contribution margin per unit times actual units sold of each product
B) actual contribution margin per unit times budgeted units sold of each product
C) budgeted contribution margin per unit times budgeted units sold of each product
D) budgeted contribution margin per unit times actual units sold of each product
15) The accounting system that corresponds to the project dimension in capital
budgeting is the ________.
A) net present value method
B) internal rate of return
C) accrual accounting rate of return
D) life-cycle costing
16) When direct materials are requisitioned the ________ account is increased.
A) Manufacturing Overhead Control
B) Work-in-Process Control
C) Materials Control
D) Accounts Payable Control