A variable cost will be an effective cost driver.
The payback period typically ignores the time value of money.
Information that has a bearing on future events is relevant in the decision-making
process.
In a standard job-order costing system, factory overhead is applied using actual rates
times standard input.
In computing a transfer price, the maximum price should be no higher than the lowest
market price at which the buying segment can obtain the good or service externally.
Line managers are directly responsible for achieving organizational goals.
Decentralization means that a unit manager has the authority to make all decisions
concerning that specific unit.
Cost-volume-profit analysis is a technique available to management to understand
better the interrelationships of several factors that affect a firm’s profit. As with many
such techniques, the accountant oversimplifies the real world by making assumptions.
Which of the following is not a major assumption underlying CVP analysis?
A. All costs incurred by a firm can be separated into their fixed and variable
components.
B. The product selling price per unit is constant at all volume levels.
C. Operating efficiency and employee productivity are constant at all volume levels.
D. For multi-product situations, the sales mix can vary at all volume levels.
The financial perspective of the balanced scorecard addresses how well the
organization is doing with regard to important customer criteria.
If a company carries safety stock and its annual carrying costs per unit are $0.30, what
formula yields the total annual carrying costs?
A. $0.30 x [(EOQ/2) + Safety stock)]
B. $0.30 x (EOQ + Safety stock)
C. $0.30 x [(EOQ x 2) + Safety stock)]
D. $0.30 x (EOQ – Safety stock)
Stewart Company
The following information relates to financial projections of Stewart Company:
Refer to Stewart Company. If Stewart Company achieves its projections, what will be
its degree of operating leverage?
A. 6.00
B. 1.20
C. 1.68
D. 2.40
StatPro Corporation
StatPro Corporation is a manufacturer of a versatile statistical calculator. The following
information is a summary of defective and returned units for the previous year.
Refer to StatPro Corporation. The profit lost by selling defective units to Pittman
Company totals $1,440. The total rework cost for 700 units is $28,000. The difference
between the profit earned on a good unit and a defective unit is $12. How many total
defective units did StatPro Corporation produce?
A. 120
B. 740
C. 736
D. 820
Brennan Company
The following information is for Brennan Company’s September production:
(Round all answers to the nearest dollar.)
Refer to Brennan Company. What is the labor rate variance?
A. $1,040 U
B. $1,040 F
C. $1,420 U
D. $1,420 F
If underapplied overhead is considered to be immaterial, it is closed to which of the
following accounts?
A. yes yes yes
B. no yes yes
C. yes no no
D. no no yes
Moore Company.
Moore Company uses a job-order costing system and the following information is
available from its records. The company has three jobs in process: #6, #9, and #13.
Direct material was requisitioned as follows for each job respectively: 30 percent, 25
percent, and 25 percent; the balance of the requisitions was considered indirect. Direct
labor hours per job are 2,500; 3,100; and 4,200; respectively. Indirect labor is $33,000.
Other actual overhead costs totaled $36,000.
Refer to Moore Company. How much overhead is applied to Work in Process?
A. $ 69,000
B. $ 99,960
C. $132,960
D. $144,000
Ultimate Vision Corporation
Ultimate Vision Corporation has two product lines: LCD televisions and projection
televisions. The company has budgeted the following production and overhead costs for
the upcoming year:
Refer to Ultimate Vision Corporation. If the company uses number of units produced to
allocate factory overhead, the machine maintenance cost allocated to LCD TVs would
be:
A. $51,923
B. $55,385
C. $69,231
D. $72,000
Management is considering replacing an existing sales commission compensation plan
with a fixed salary plan. If the change is adopted, the company’s
A. break-even point must increase.
B. margin of safety must decrease.
C. operating leverage must increase.
D. profit must increase.
Discuss why units are lost during production.
Lowering existing costs of producing a good or service is referred to as
___________________.
Define value chain and provide a graphic of the interacting flows of information within
the value chain.
How do changes in volume affect the break-even point?
A judgment regarding an entity’s method of funding an investment is considered to be
a(n) _______________________ decision.
The assumed range of activity that reflects the company’s normal operating range is
referred to as the ______________________________.
When a company has work performed by an external supplier, it is engaging in
____________________.
Why is the net realizable value of scrap used to lower estimated overhead costs in
setting a predetermined overhead rate in a job order costing situation in which scrap is
expected on most jobs?
Why has BPR usage increased?