1) A major advantage of using actual costs for transfer prices is that often inefficiencies
are NOT passed along to the receiving division.
2) In a cost function y = 18,000, the slope coefficient is zero.
3) Work-in-process inventory are goods partially worked on but not yet completed.
4) Revenue gains or price increases from fewer delays is a financial measure to increase
the output of bottlenecks.
5) A percentage of products started and completed without requiring any rework is an
example of nonfinancial performance measure.
6) Quality is defined as the total features and characteristics of a product or a service
made or performed according to specifications to satisfy customers at the time of
purchase and during use.
7) Managing environmental costs is an example of life-cycle costing and value
engineering.
8) Cost-leadership strategy always advocates cuts in personnel to achieve cost
reduction.
9) A packaging department is most likely a profit center.
10) The last step in a process-costing system is to compute cost per equivalent unit.
11) Luzent Company produces two types of entry doors: Deluxe and Standard. The
assignment basis for support costs has been direct labor dollars. For 2015, Luzent
compiled the following data for the two products:
Last year, Luzent Manufacturing purchased an expensive robotics system to allow for
more decorative door products in the deluxe product line. The CFO suggested that an
ABC analysis could be valuable to help evaluate a product mix and promotion strategy
for the next sales campaign. She obtained the following ABC information for 2015:
Required:
a.Using the current system, what is the estimated
1.total cost of manufacturing one unit for each type of door?
2.profit per unit for each type of door?
b.Using the current system, estimated manufacturing overhead costs per unit are less for
the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely
explanation for this?
c. “ABC systems may result in misallocation of indirect costs.” Do you agree? Give
reasons for your answer.
d.What considerations need to be examined when determining a sales mix strategy?
e. While implementing an ABC system for the first time, achieving a significant change
overnight is difficult and this may demotivate employees. How can managers overcome
this problem?
12) Tony worked 48 hours last week for Bread Works Manufacturing. Of the 48 hours 5
hours were considered overtime, and also Tony was idle for 4 of the 48 hours due to an
equipment malfunction. Tony makes $50 per hour and is paid $75 an hour (time and a
half) for overtime. Tony’s total compensation for that week would be ________, and
assuming Bread Works charges overtime premium and idle time to indirect labor, the
amount of this compensation credited to indirect labor would be ________.
A) $2,950; $325
B) $2,900; $280
C) $2,750; $300
D) $2,500; $350
13) Sky High sells helicopters. During the current year, 100 helicopters were sold
resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of
fixed costs. Breakeven point in units is ________.
A) 80 units
B) 64 units
C) 60 units
D) 78 units
14) Luke’s Football Manufacturing Company reported:
To isolate these variances at the end of the accounting period, John would debit Fixed
Manufacturing Overhead Allocated for ________.
A) $390,000
B) $395,000
C) $400,000
D) $405,000
15) The Swivel Chair Company manufacturers a standard recliner. During February, the
firm’s Assembly Department started production of 145,000 chairs. During the month,
the firm completed 175,000 chairs and transferred them to the Finishing Department.
The firm ended the month with 18,000 chairs in ending inventory. All direct materials
costs are added at the beginning of the production cycle. Weighted-average costing is
used by Swivel.
What were the equivalent units for materials for February?
A) 193,000 chairs
B) 173,000 chairs
C) 163,000 chairs
D) 153,000 chairs
16) The Swivel Chair Company manufacturers a standard recliner. During February, the
firm’s Assembly Department started production of 145,000 chairs. During the month,
the firm completed 175,000 chairs and transferred them to the Finishing Department.
The firm ended the month with 18,000 chairs in ending inventory. All direct materials
costs are added at the beginning of the production cycle. Weighted-average costing is
used by Swivel.
How many chairs were in inventory at the beginning of the month? Conversion costs
are incurred uniformly over the production cycle.
A) 8,000 chairs
B) 18,000 chairs
C) 38,000 chairs
D) 48,000 chairs
17) Roiann and Dennett Law Office employs 12 full-time attorneys and 10
paraprofessionals. Direct and indirect costs are applied on a professional labor-hour
basis that includes both attorney and paraprofessional hours. Following is information
for 2014:
What are the actual direct-cost rate and the actual indirect-cost rate, respectively, per
professional labor-hour?
A) $27.00; $4.17
B) $29.80; $5.40
C) $32.40; $5.00
D) $27.00; $5.00
18) Goodness-of-fit measures how well the predicted values in a cost estimating
equation ________.
A) match the cost driver
B) determine the level of activity
C) match the actual cost observations
D) rely on the independent variable
19) Soda Manufacturing Company provides vending machines for soft-drink
manufacturers. The company has been investigating a new piece of machinery for its
production department. The old equipment has a remaining life of four years and the
new equipment has a value of $91,110 with a four-year life. The expected additional
cash inflows are $30,000 per year. What is the internal rate of return?
A) 12%
B) 16%
C) 10%
D) 8%
20) A favorable efficiency variance for direct manufacturing labor indicates that
________.
A) a lower wage rate than planned was paid for direct labor
B) a higher wage rate than planned was paid for direct labor
C) less direct manufacturing labor-hours were used during production than planned for
actual output
D) more direct manufacturing labor-hours were used during production than planned
for actual output
21) The Brital Company processes unprocessed milk to produce two products, Butter
Cream and Condensed Milk. The following information was collected for the month of
June:
Direct Materials processed:28,000 gallons
The costs of purchasing the of unprocessed milk and processing it up to the splitoff
point to yield a total of 28,000 gallons of saleable product was $46,000.
The company uses constant gross-margin percentage NRV method to allocate the joint
costs of production.
What is the allocated joint costs of Condensed Milk?
A) $34,500
B) $13,500
C) $33,700
D) $11,500
22) Antique Corp uses the investment center concept for the museums that it manages.
Selected operating data for three of its museums for 2015 are as follows:
Required:
a.Compute the return on investment for each division.
b.Which museum manager is doing best based only on ROI? Why?
c.What other factors should be included when evaluating the managers?
23) Which cost estimation method may use time-and-motion studies to analyze the
relationship between inputs and outputs in physical terms?
A) the accrual accounting method
B) the high-low method
C) the industrial engineering method
D) the cash accounting method
24) Which of the following statements refers to management accounting information?
A) There are no regulations governing the reports.
B) The reports are generally delayed and historical.
C) The audience tends to be stockholders, creditors, and tax authorities.
D) It primarily measures manager’s compensation on reported financial results.
25) A ________ is a grouping of individual indirect cost items.
A) cost allocation base
B) cost assignment
C) cost pool
D) job-costing system
26) When machine-hours are used as an overhead cost-allocation base, the most likely
cause of a favorable variable overhead spending variance is ________.
A) excessive machine breakdowns
B) the production scheduler efficiently scheduled jobs
C) a decline in the cost of energy
D) strengthened demand for the product
27) Genent Industries, Inc. (GII), developed standard costs for direct material and direct
labor. In 2015, GII estimated the following standard costs for one of their major
products, the 30-gallon heavy-duty plastic container.
During July, GII produced and sold 3,000 containers using 1,000 pounds of direct
materials at an average cost per pound of $19 and 625 direct manufacturing labor hours
at an average wage of $11.75 per hour.
The direct material price variance during July is ________.
A) $1,100 unfavorable
B) $1,100 favorable
C) $1,000 unfavorable
D) $2,000 unfavorable
28) Which of the following is a disadvantage of using negotiated transfer price?
A) It requires each division manager to put forth effort to increase division operating
income.
B) Negotiated transfer prices take away the divisional autonomy as prices depend on
bargaining strength.
C) Negotiations usually require much time and energy thereby consuming precious
managerial time.
D) It may lead to divisional enmity because negotiation process may cause frictions
among departments.
29) In making the decision to invest in the model 260 machine, the opportunity cost
was:
A) $418,000
B) $456,000
C) $474,000
D) $496,000
30) Software For You encounters revenue-allocation decisions with its bundled product
sales. Here, two or more units of the software are sold as a single package. Managers at
Software For You are keenly interested in individual product-profitability figures.
Information pertaining to its three bundled products and the stand-alone selling prices
of its individual products is as follows:
Required:
a.Using the stand-alone revenue-allocation method, allocate the $380 packaged price of
“All Three” to the three software products
1.with selling prices as the weights.
2.with individual product costs as the weights.
3.based on physical units.
b.Allocate the $380 packaged price of “All Three” to the three software products using
the incremental revenue-allocation method. Assume Word Processing is the primary
product, followed by Spreadsheet, and then Accounting Software.
