Francis Kenney is paid $26 an hour for straight-time and $31 an hour for overtime. One
week she worked 46 hours, which included 6 hours of overtime. What is the overtime
premium incurred to the company?
A) $186
B) $72
C) $31
D) $432
Knowledge Transfer Associates is in the process of evaluating its new client services for
the business systems consulting division.
∙ Server Planning, a new service, incurred $270,000 in development costs.
∙ The direct costs of providing the service, which is all labor, averages $40 per hour.
∙ Other costs for this service are estimated at $310,000 per year.
∙ The current program for server planning is expected to last for two years. At that time,
expected new operating systems are likely to make the service non viable.
∙ Customer service expenses average $300 per client, with each job lasting an average
of 60 hours. The current staff expects to bill 22,800 hours for each of the two years the
program is in effect. Billing averages $100 per hour.
What is the estimated life-cycle operating income for both years combined?
A) $944,000
B) $1,618,000
C) ($674,000)
D) $1,348,000
Which of the following is a part of the formal management control system?
A) mutual commitments among the members of the organization
B) the accounting information system provides metrics about costs, revenues, and
contribution margins
C) shared values and loyalties among the members of the organization
D) general understanding about acceptable behavior for managers
Globus Autos sells a single product. 8,000 units were sold resulting in $83,000 of sales
revenue, $21,000 of variable costs, and $10,000 of fixed costs. If Globus reduces the
selling price by $1.20 per unit, the new margin of safety is:
A) 6,911 units
B) 3,042 units
C) 4,958 units
D) 8,000 units
Which of the following entries is correct to record depreciation expense of Assembly
Department?
A) Debit: Work in Process—Assembly
Credit: Finished Goods
B) Debit: Work in Process—Assembly
Credit: Accumulated Depreciation
C) Debit: Finished Goods
Credit: Work in Process—Assembly
D) Debit: Accumulated Depreciation
Credit: Work in Process—Assembly
A company sells a software suite that includes a word processor and spreadsheet
applications. The suite sells for $250 and the items are also available separately for
$200 (spreadsheet) and $170 (word processor). The spreadsheet app is by far the best
seller of the standalone product sales. Using the incremental-revenue allocation method
and assuming that the spreadsheet is the primary product, how much of the $250
revenue from the bundled product sale would be allocated to the spreadsheet and to the
word processing products?
A) $200 of revenue for the spreadsheet and $50 for the word processor
B) $200 of revenue for the spreadsheet and $0 for the word processor
C) $135 of revenue for the spreadsheet and $115 for the word processor
D) $250 of revenue for the spreadsheet and $0 for the word processor
TrueValue Company makes all types of office desks. The General Desk Division is
currently producing 10,000 desks per year with a capacity of 15,000. The variable costs
assigned to each desk are $300 and annual fixed costs of the division are $900,000. The
General desk sells for $400.
The Executive Division wants to buy 5,000 desks at $250 for its custom office design
business. The General Desk manager refused the order because the price is below
variable cost. The executive manager argues that the order should be accepted because
it will lower the fixed cost per desk from $90 to $60 and will take the division to its
capacity, thereby causing operations to be at their most efficient level.
Required:
a. Should the order from the Executive Division be accepted by the General Desk
Division? Why?
b. From the perspective of the General Desk Division and the company, should the
order be accepted if the Executive Division plans on selling the desks in the outside
market for $420 after incurring additional costs of $100 per desk?
c. What action should the company president take?
Charlie Chairs Inc., manufactures plastic moldings for car seats. Its costing system
utilizes two cost categories, direct materials and conversion costs. Each product must
pass through Department A and Department B. Direct materials are added at the
beginning of production. Conversion costs are allocated evenly throughout production.
How many units were completed and transferred out of Department A during February?
A) 440 units
B) 800 units
C) 760 units
D) 1000 units
Relevant data in a make-or-buy decision of a part include which of the following?
A) The portion of fixed costs that would be incurred whether the product is made or
purchased
B) Some portion of fixed costs that would be saved if the product is outsourced
C) Annual plant insurance costs
D) Management consultant fees to restructure the organization framework of the
company and improve overall strategic planning
For 2018, Rest-Well Bedding uses machine-hours as the only overhead cost-allocation
base. The direct cost rate is $6.00 per unit. The selling price of the product is $21.00.
The estimated manufacturing overhead costs are $275,000 and estimated 40,000
machine hours. The actual manufacturing overhead costs are $350,000 and actual
machine hours are 50,000.
Using job costing, the 2018 actual indirect-cost rate is ________.
A) $7.00 per machine-hour
B) $5.50 per machine-hour
C) $8.75 per machine-hour
D) $8.50 per machine-hour
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 80,000 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) $14,153,333
B) $10,293,333
C) $9,200,000
D) $12,650,000
The cost function y = 13,000 + 9X ________.
A) represents a mixed cost
B) will intersect the y-axis at 9
C) has a slope coefficient of 13,000
D) is a curved line
Which of the following is not a step of value-engineering?
A) Understanding customer requirements and value-added and non-value added costs
B) Set a price using the market approach
C) Anticipating how costs are locked in before they are incurred
D) Using cross-functional teams to redesign products and process to reduce costs while
meeting customer needs
The Golden Shades Corporation disposes a capital asset with an original cost of
$320,000 and accumulated depreciation of $140,000 for a salvage price of $42,000.
Golden Shades’s tax rate is 35%. Calculate the after-tax cash inflow from the disposal
of the capital asset.
A) $48,300
B) $138,000
C) $42,000
D) $90,300
Which of the following is an example of nonlinear cost function?
A) variable-cost functions
B) fixed-cost functions
C) learning curves
D) mixed cost functions
A customer cost hierarchy categorizes costs related to customers into different cost
pools on the basis of different ________.
A) contribution-margin ratios of products
B) distribution-channel costs
C) levels of cause-and-effect relationships
D) division-sustaining costs
Mid City Products Inc. (MCP), developed standard costs for direct material and direct
labor. In 2017, MCP estimated the following standard costs for one of their most
popular products.
During September, MCP produced and sold 1,000 units using 2,200 pounds of direct
materials at an average cost per pound of $2.00 and 360 direct labor hours at an average
wage of $15.15 per hour.
The direct material efficiency variance during September is ________.
A) $660 favorable
B) $660 unfavorable
C) $460 favorable
D) $460 unfavorable
Which of the following statements is of true engineered costs?
A) They arise from periodic (usually annual) decisions regarding the maximum amount
to be incurred.
B) They have a detailed, physically observable, and repetitive relationship with output.
C) They include advertising, executive training, and R&D.
D) They have high level of uncertainty.
Furniture, Inc., sells lamps for $30. The unit variable cost per lamp is $22. Fixed costs
total $9,600.
Required:
a. What is the contribution margin per lamp?
b. What is the breakeven point in lamps?
c. How many lamps must be sold to earn a pretax income of $8,000?
d. What is the margin of safety, assuming 1,500 lamps are sold?
The Fortise Corporation manufactures two types of vacuum cleaners, the Victor for
commercial building use and the House-Mate for residences. Budgeted and actual
operating data for the year 2017 were as follows:
What is the total sales-volume variance in terms of the contribution margin?
A) $1,924,000 favorable
B) $1,404,000 favorable
C) $5,200,000 unfavorable
D) $1,924,000 unfavorable
Customer response time comprises of ________.
A) manufacturing cycle time and delivery time only
B) receipt time and manufacturing cycle time only
C) receipt time, manufacturing cycle time, and delivery time
D) manufacturing time and delivery time only
________ is the generation of, and experimentation with, ideas related to new products,
services, or processes.
A) Research and development
B) Design of products, services, or processes
C) Production
D) Marketing
Processing orders and shipping products or providing services to customers is known as
________.
A) after-sales services
B) distribution
C) marketing
D) supply chain
Cost allocation is ________.
A) the process of tracking both direct and indirect costs associated with a cost object
B) the process of determining the opportunity cost of a cost object chosen
C) the assignment of indirect costs to the chosen cost object
D) made based on material acquisition document
Kitchens Sales Inc. is approached by Mr. Louis Cifer, a new customer, to fulfill a large
one-time-only special order for a product similar to one offered to regular customers.
The following per unit data apply for sales to regular customers:
Direct materials $554
Direct labor 364
Variable manufacturing support 56
Fixed manufacturing support 120
Total manufacturing costs 1,094
Markup (50%) 547
Targeted selling price $1,641
Kitchens Sales inc. has excess capacity. Mr. Cifer wants the cabinets in cherry rather
than oak, so direct material costs will increase by $66 per unit. The average marketing
cost of Kitchens Sales product is $173 per order. Other than price, what other items
should Kitchens Sales consider before accepting this one-time-only special order?
A) reaction of shareholders
B) reaction of existing customers to the lower price offered to Mr. Louis Cifer
C) demand for cherry cabinets
D) price is the only consideration
Which of the following best describes an interactive control system?
A) ensures adherence to legal or ethical accounting policies and procedures
B) ensures prompt and severe reprimand of unethical conduct, regardless of the benefits
that might accrue to the company from unethical action
C) ensures that employees’ intrinsic motivation, the desire to achieve self-satisfaction
for performing well regardless of external rewards such as bonuses or promotion
D) ensures frequent face-to-face communications among managers and employees
regarding the critical uncertainties
Crimpson Company has invested $2,200,000 in a plant to make commercial juicer
machines. The target operating income desired from the plant is $306,000 annually. The
company plans annual sales of 7700 juicer machines at a selling price of $300 each.
What is the cost base of each juicer machine for Crimpson Company?
A) $260.26
B) $39.74
C) $300.00
D) $285.71
The most likely cost driver of direct labor costs is the ________.
A) number of machine setups for the product
B) number of miles driven
C) number of production hours
D) number of machine hours
A product may be passed from one subunit to another subunit in the same organization.
The product is known as a(n) ________.
A) interdepartmental product
B) intermediate product
C) subunit product
D) transfer product
In linear programming, the goals of management are expressed in ________.
A) an objective function
B) constraints
C) operating policies
D) business functions
One possible reason for unfavorable variable overhead efficiency variance for materials
handling is ________.
A) inefficient layout of product distribution channels
B) loosely budgeted standard hours
C) very low wait time at work centers
D) very tight standards for materials-handling time
