The difference between actual variable overhead and budgeted variable overhead based
upon actual hours is referred to as the variable overhead efficiency variance.
Negotiated transfer prices are most appropriate for customized high-volume and
high-cost services.
A company that manufactures small quantities of identifiable products will use a
job-order costing system.
Property taxes on an organization’s plant building are considered as committed costs.
Financial accounting is most concerned with addressing the needs of the firm as a
whole.
The difference between the standard hours worked for a specific level of production
and the actual hours worked is the labor rate variance.
Total quality management (TQM) requires the commitment of all individuals within an
organization.
The learning and growth perspective of the balanced scorecard addresses stakeholder
concerns about profitability and organizational growth.
There is a direct relationship between the complexity of a production process and
overhead costs.
In a pay-for-performance plan, defined performance measures must be highly correlated
with an organization’s operational targets.
A predictor which has an absolute cause and effect relationship to a cost is referred to a
cost driver.
Mission statements typically remain unchanged throughout the life of an organization.
Decentralization can result in a lack of goal congruence among departments.
Managerial accounting is most concerned with meeting the needs of external users.
The term cost driver refers to
A. any activity that can be used to predict cost changes.
B. the attempt to control expenditures at a reasonable level.
C. the person who gathers and transfers cost data to the management accountant.
D. any activity that causes costs to be incurred.
A company has two divisions, A and B; each are operated as a profit center. A charges
B $35 per unit for each unit transferred to B. Other data follow:
A is planning to raise its transfer price to $50 per unit. Division B can purchase units at
$40 each from outsiders, but doing so would idle A’s facilities now committed to
producing units for B. Division A cannot increase its sales to outsiders. From the
perspective of the company as a whole, from whom should Division B acquire the
units, assuming B’s market is unaffected?
A. outside vendors
B. Division A, but only at the variable cost per unit
C. Division A, but only until fixed costs are covered, then should purchase from outside
vendors
D. Division A, in spite of the increased transfer price
The customer value perspective of the balanced scorecard addresses how well the
organization is doing with regard to important customer criteria.
Budgeted production for a period is equal to
A. the beginning inventory + sales – the ending inventory.
B. the ending inventory + sales – the beginning inventory.
C. the ending inventory + the beginning inventory – sales.
D. sales – the beginning inventory + purchases.
Riley Company
Riley Company produces two products from a joint process: A and C. Joint processing
costs for this production cycle are $9,000.
If A and C are processed further, no disposal costs will be incurred or such costs will be
borne by the buyer.
Refer to Riley Company. Using net realizable value at split-off, what amount of joint
processing cost is allocated to Product C (round to the nearest dollar)?
A. $2,718
B. $4,500
C. $6,062
D. $6,282
Priceless Memories Company
Priceless Memories Company manufactures toy trains. Information on Priceless
Memories Company’s labor costs follow:
The following information applies to the upcoming month of July for Priceless
Memories Company:
Refer to Priceless Memories Company. What is Priceless Memories’ budgeted factory
labor cost for July?
A. $13,000
B. $24,000
C. $34,000
D. $15,000
Which of the following costs will vary directly with the level of production?
A. total manufacturing costs
B. total period costs
C. variable period costs
D. variable product costs
Quality inspection points should
A. precede bottlenecks.
B. follow bottlenecks.
C. be placed at the end of all production processes.
D. be placed at random points in the manufacturing process.
Franklin Company
Franklin Company uses a job-order costing system. Assume that Job #309 is the only
one in process. The following information is available:
Refer to Franklin Company. What is the overhead application rate if Franklin uses a
predetermined overhead application rate based on direct labor hours (rounded to the
nearest whole dollar)?
A. $ 0.20
B. $ 5.00
C. $ 5.56
D. $36.36
Danner Company makes ten different styles of inexpensive feather masks. Which of
the following is this company most likely to have?
A. Product complexity
B. Process complexity
C. Product variety
D. Process customization
Charleston Company
Charleston Company has two departments (Processing and Packaging) and uses a
job-order costing system. Charleston applies overhead in Processing based on machine
hours and on direct labor cost in Packaging. The following information is available for
July:
Refer to Charleston Company What is the overhead application rate for Packaging?
A. $ 0.44
B. $ 2.25
C. $23.00
D. $51.75
Sanchez Products has no Work in Process or Finished Goods inventories at the close of
business on December 31 of the current year. The balances of Sanchez Products’
accounts as of December 31 are as follows:
Pretax income for the current year is:
A. $608,000.
B. $660,000.
C. $712,000.
D. undeterminable from the information given.
Which of the following strategies is used to deal with uncertainty related to a specific
event?
A. Statistical analysis
B. Cost restructuring
C. Hedging
D. Insurance
Painter Corporation
Painter Corporation has the following information for the current month:
All materials are added at the start of the production process. Painter Corporation
inspects goods at 75 percent completion as to conversion.
Refer to Painter Corporation. What are equivalent units of production for material,
assuming FIFO?
A. 100,000
B. 96,500
C. 95,000
D. 120,000
Gwen Taylor borrows $50,000 from her bank on January 1. She is to repay the loan in
equal annual installments over 30 years. How much is her annual repayment if the bank
charges 10 percent interest? Present value tables or a financial calculator are required.
A. $1,667
B. $4,200
C. $2,865
D. $5,304
Piece rate pay
A. is a suitable pay plan for workers engaged in repetitive and complex tasks.
B. involves a salary plus pay for each unit produced or carried out.
C. encourages quality output.
D. does not encourage workers to look at the company’s well being.
Office Systems Corporation
Office Systems Corporation manufactures and sells various high-tech office automation
products. Two divisions of Office Systems Corporation are the Computer Chip Division
and the Computer Division. The Computer Chip Division manufactures one product, a
‘super chip,” that can be used by both the Computer Division and other external
customers. The following information is available on this month’s operations in the
Computer Chip Division:
Presently, the Computer Division purchases no chips from the Computer Chips
Division, but instead pays $45 to an external supplier for the 4,000 chips it needs each
month.
Refer to Office Systems Corporation. Two possible transfer prices (for 4,000 units) are
under consideration by the two divisions: $35 and $40. Corporate profits would be ____
if $35 is selected as the transfer price rather than $40.
A. $20,000 larger
B. $40,000 larger
C. $20,000 smaller
D. the same
Slack in operating budgets
A. results from unintentional managerial acts.
B. makes an organization more efficient and effective.
C. requires managers to work harder to achieve the budget.
D. is greater when managers are allowed to participate in the budgeting process.
Production quality is affected by
A. worker productivity.
B. the amount of failure costs incurred.
C. worker skill level.
D. just-in-time suppliers.
On what needs do (1) management accounting and (2) financial accounting focus?
A cost that remains constant on a per unit basis within the relevant range is a
____________________ cost.
The use of options and forward contracts to manage price risk is referred to as
___________________.
What is the difference between a product cost and a period cost? Give three examples
of each. What is the difference between a direct cost and indirect cost? Give two
examples of each.
The way in which authority and responsibility are distributed in an organization is
___________________________________.
An activity that is essential for business operations but does not add value to a product
is referred to as a ___________________________________ activity.
What information should be contained in a subsidiary ledger for Work in Process
Inventory in a job-order costing system?
What is continuous improvement? How does it relate to total quality management?
Short-term planning designed to address a specific set of circumstances is referred to as
______________________________.
Castle Corporation
The following questions are based on the following data pertaining to two types of
products manufactured by Castle Corporation:
Fixed costs total $300,000 annually. The expected mix in units is 60 percent for Product
Y and 40 percent for Product Z.
Refer to Castle Corporation. What is Castle’s break-even point in sales dollars?