1) It is appropriate to incorporate expected learning-curve efficiencies when evaluating
performance.
2) An organization which uses product differentiation strategy will charge higher prices.
3) After a budget is agreed upon and finalized by the management team, the amounts
should NOT be changed for any reason.
4) Revenue allocation based on the number of physical units is only appropriate when
individual products in the bundle are of equal value.
5) Price discrimination is the practice of charging a higher price for the same product or
service when demand approaches the physical limit of the capacity to produce that
product or service.
6) If a company’s sales mix is 2 units of product A for every 3 units of product B, and
the company sells 3,000 units in total of both products, only 2,000 units of product A
will be sold.
7) Because the variable costs are directly and causally linked to usage, charging them as
a function of the actual usage is appropriate.
8) Costs are accounted for in two basic stages: assignment followed by accumulation.
9) Which of the following is true of transfer pricing?
A) It creates costs for the selling subunit.
B) It creates revenues for the buying subunit.
C) It helps top managers evaluate the performance of individual subunits.
D) It makes managers’ information-processing and decision-making tasks difficult.
10) To apply CVP analysis in not-for profit organization ________.
A) managers need to focus on the customer base rather than the cost drivers
B) managers need to focus on measuring their output, which is the same as tangible
units sold by manufacturing and merchandising companies
C) managers need to focus on measuring their input, which is different from the
tangible units consumed by manufacturing and merchandising companies
D) managers need to focus on measuring their output, which is different from the
tangible units sold by manufacturing and merchandising companies
11) Which of the following reports to the CFO?
A) external auditor
B) distribution manager
C) production manager
D) treasurer
12) What is the allocated joint costs of Butter Cream?
A) $35,200
B) $12,500
C) $34,700
D) $10,800
13) Ireland Corporation planned to be in operation for three years.
During the first year, 2015, it had no sales but incurred $240,000 in variable
manufacturing expenses and $80,000 in fixed manufacturing expenses.
In 2016, it sold half of the finished goods inventory from 20×1 for $200,000 but it had
no manufacturing costs.
In 2017, it sold the remainder of the inventory for $240,000, had no manufacturing
expenses and went out of business.
Marketing and administrative expenses were fixed and totaled $40,000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.
14) When using the high-low method, the two observations used are the high and low
observations of the ________.
A) cost driver
B) fixed cost component
C) slope coefficient
D) direct cost
15) Which of the following statements is true of discretionary costs?
A) They arise from day-to-day operational decisions.
B) They include conversion cost, direct material costs.
C) They have measurable cause-and-effect relationship between output and resources
used.
D) They have high level of uncertainty.
16) New-product development time is the time taken by companies to ________.
A) test the prototype and start the large scale production of a product
B) design and develop the prototype product
C) create new products and bring them to market
D) improvise existing products and re-launch them to market
17) Which of the following is an operating department?
A) machining
B) accounting
C) materials management
D) production control
18) Cost accumulation is ________.
A) the collection of cost data in some organized way by means of an accounting system
B) anything for which a cost measurement is desired
C) anything for which a profit measurement is desired
D) the collection of profit data in some organized way by means of an accounting
system
19) Bright Inc., manufactures table lamps and is considering raising the price by $30 a
unit for the coming year. With a $30 price increase, demand is expected to fall by 2,000
units.
Would you recommend the $30 price increase?
A) No, because demand decreased.
B) No, because the contribution margin decreases.
C) Yes, because inventory turnover increases.
D) Yes, because operating income increases.
20) 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 total production per day if the change is made?
A) 50 units
B) 200 units
C) 400 units
D) 600 units
21) Fresh Wreath Corporation manufactures wreaths according to customer
specifications and ships them to customers using United Parcel Service (UPS). Which
two terms below describe the cost of shipping these wreaths?
A) variable cost and product cost
B) variable cost and period cost
C) fixed cost and product cost
D) fixed cost and period cost
22) Ms. Janice Meyers, the company president, has heard that there are multiple
breakeven points for every product. She does not believe this and has asked you to
provide the evidence of such a possibility. Some information about the company for
2011 is as follows:
What are breakeven sales in units using absorption costing?
A) 5,625 units
B) 6,667 units
C) 6,897 units
D) 8,000 units
23) Which of the following statements best defines backflush costing system?
A) an integrated costing system covering a company’s accounting, distribution,
manufacturing, purchasing, human resources, and other functions
B) a costing system that omits recording some of the journal entries relating to the
stages from the purchase of direct materials to the sale of finished goods
C) a push-through system in which each component in a production line is produced
immediately as needed by the next step in the production line
D) a costing system that comprises a single database that collects data and feeds it into
software applications supporting all of a company’s business activities
24) Which of the following statements best defines a materials requirements planning
system?
A) a demand-pull system in which each component in a production line is produced
immediately as needed by the next step in the production line
B) a push-through system that manufactures finished goods for inventory on the basis
of demand forecasts
C) a demand-pull system that manufactures finished goods for inventory on the basis of
demand forecasts
D) a push-through system in which each component in a production line is produced
immediately as needed by the next step in the production line
25) Homogeneous cost pool leads to ________.
A) more accurate costs of a given cost object
B) more resources being assigned to that cost object
C) the need for more cost drivers
D) the need for different cost allocation bases to allocate the costs