In cost allocation, R&D costs are used to ________.
A) provide information for economic decisions
B) report to external parties when using generally accepted accounting principles
C) calculate costs of a government contract
D) calculate prime cost of a product
Advanced Productivity Company provided the following information:
Budgeted input 73,000 gallons
Actual input 91,000 gallons
Budgeted production 31,500 units
Actual production 30,500 units
What is the partial productivity ratio?
A) 0.34 units per gallon
B) 0.42 units per gallon
C) 0.35 units per gallon
D) 0.43 units per gallon
The following information is for Alex Corp:
What is the operating income, assuming actual sales total 120,000 units, and the sales mix
is two units of Product X and one unit of Product Y?
A) 1,159,500
B) 1,200,000
C) 1,960,000
D) 1,240,500
Which of the following reasons explain why ABC concepts may be of great value to
service companies?
A) It allows for more accurate cost accounting for inventory
B) It promotes more accurate cost of goods sold reporting
C) It helps make financial reporting more accurate
D) A significant portion of the cost structure of a service firm is composed of indirect
costs
Which of the following statements is true of the cost of producing a product?
A) It controls pricing in highly competitive markets.
B) It affects the willingness of a company to supply a product.
C) It includes manufacturing costs, but not product design costs for pricing decisions.
D) It is not a factor to be taken into account while pricing a product.
Hyland Resources Inc. uses practical capacity as the denominator to set the cost of
supplying capacity and for the current period the budgeted cost per unit of supplying
capacity was $44. Practical capacity was set at 14,000 units with theoretical capacity at
20,000 units. During the period, only 11,000 units were produced while the master
budget assumed that the company would produce 13,000 units. What is value of the
manufacturing resources not used during the period?
A) $132,000
B) $308,000
C) $396,000
D) $44,000
Which of the following is the correct formula for the materials price variance?
A) (Actual price of input – Budgeted price of input) x Budgeted quantity of input
B) (Actual quantity of input used – Budgeted quantity of input allowed for actual
output) x Budgeted price of input
C) (Actual price of input – Budgeted price of input) x Actual quantity of input
D) (Actual quantity of input used – Budgeted quantity of input allowed for actual
output) x Actual price of input
The following information pertains to Monroe Company:
∙ Cash is collected from customers in the following manner:
Month of sale 30%
Month following the sale 70%
∙ 40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
∙ Labor costs are 20% of sales. Other operating costs are $37,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
∙ The cash balance on March 1 is $10,000. A minimum cash balance of $6,000 is required
at the end of the month. Money can be borrowed in multiples of $1,000.
How much cash will be collected from customers in March?
A) $96,400
B) $91,600
C) $100,000
D) $118,000
The required rate of return multiplied by the investment is the ________.
A) sunk cost of the investment
B) historical cost of the investment
C) imputed cost of the investment
D) return on sales
A “what-if” technique that examines how a result will change if the original predicted
data are NOT achieved or if an underlying assumption changes is called ________.
A) sensitivity analysis
B) net present value analysis
C) internal rate-of-return analysis
D) adjusted rate-of-return analysis
Which account is debited if materials costing $100,000 are sold?
A) Revenues account
B) Work-in-Process Control account
C) Materials Control account
D) Cost of Goods Sold account
Classic Products Company manufactures colonial style desks. Some of the company’s
data was misplaced. Use the following information to replace the lost data:
What amounts are reported for revenues in the flexible-budget (A) and the static-budget
(B), respectively?
A) $192,250; $175,990
B) $182,250; $188,510
C) $187,250; $185,990
D) $180,990; $188,510
A product costs $600 to manufacture and $20 to market and $10 to distribute (ship to
customers.) R&D costs are allocated at $40 per unit. Based on a targeted rate of return,
manager uses a mark-up of 30%. What is the prospective selling price based on a
Cost-Plus pricing approach?
A) $780
B) $806
C) $819
D) $871
A company’s invested capital is $13,000,000 and management has determined that the
target rate of return on investment is 10%. Last year, the company produced 131,313
units and this year expects to units sales to be 10% above last year. The cost of the
product is estimated to be $13 per unit. What is the target operating income per unit?
(Round any intermediary calculations to the nearest unit and your final answer to the
nearest cent.)
A) $9.00
B) $9.90
C) $13.00
D) $6.50
________ costs support the organization as a whole.
A) Unit-level
B) Batch-level
C) Product-sustaining
D) Facility-sustaining
Which of the following is a is a market-based approach to allocating joint costs?
A) sales units
B) units of production
C) physical measures
D) net realizable value
Return on investment can be increased by ________.
A) increasing current assets
B) increasing return on sales
C) decreasing revenues
D) increasing the debt portion of the capital
Payment of the factory rent would require debits and credits to which accounts?
A) Debit: Work-in-Process Control account
Credit: Cash
B) Debit: Manufacturing Overhead Control account
Credit: Cash
C) Debit: Cost of Goods Sold account
Credit: Prepaid Rent
D) Debit: Factory Depreciation account
Credit: Accumulated Depreciation Control
Strategy is formulated ________.
A) by identifying the most important customers
B) by forecasting the composition of adequate fixed assets
C) based on the qualified opinion of external auditors
D) by eliminating sunk costs
An unfavorable variance indicates that ________.
A) the actual costs are less than the budgeted costs
B) the actual revenues exceed the budgeted revenues
C) the actual units sold are less than the budgeted units
D) the budgeted contribution margin is more than the actual amount
Big Bernard Corporation was recently formed to produce a semiconductor chip that
forms an essential part of the personal computer manufactured by a major corporation.
The direct materials are added at the start of the production process while conversion
costs are added uniformly throughout the production process. June is Big Bernard’s first
month of operations, and therefore, there was no beginning inventory. Direct materials
cost for the month totaled $950,000, while conversion costs equaled $4,625,000.
Accounting records indicate that 475,000 chips were started in June and 425,000 chips
were completed.
Ending inventory was 50% complete as to conversion costs.
Required:
a. What is the total manufacturing cost per chip for June?
b. Allocate the total costs between the completed chips and the chips in ending
inventory.
Costs expensed on the income statement in the accounting period incurred are called
________.
A) direct costs
B) indirect costs
C) period costs
D) inventoriable costs
A favorable price variance for direct manufacturing labor might indicate that ________.
A) employees were paid more than planned
B) unexpected increase in direct labor rates
C) underskilled employees are being hired
D) congestion due to scheduling problems
Sky High Company has two departments, X and Y. The following estimates are for the
coming year:
A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is
________.
A) $25.00 per direct labor-hour
B) $12.60 per direct labor-hour
C) $27.50 per direct labor-hour
D) $16.50 per direct labor-hour
Which of the following journal entries is used to record actual variable overhead costs
incurred?
A) Accounts Payable
Variable Overhead Control
B) Variable Overhead Control
Accounts Receivable
C) Work-in-Process Control
Variable Overhead Control
D) Variable Overhead Control
Accounts Payable and various other accounts
Which of the following is an appropriate step when identifying relevant costs to make a
business
decision?
A) assuming all variable costs are relevant
B) assuming all fixed costs are irrelevant
C) separating total costs into business function costs and full costs
D) separating total costs into variable and fixed components
High Traffic Products Corporation has two departments, Small and Large. Central costs
could be allocated to the two departments in various ways.
If advertising expense of $432,600 is allocated on the basis of sales, the cost per cost
driver rate would be ________.
A) $0.2 per dollar of sales
B) $0.21 per dollar of sales
C) $0.23 per dollar of sales
D) $0.22 per dollar of sales
The lower the inputs for a given set of outputs or the higher the outputs for a given set
of inputs, the higher the level of ________.
A) overallocation
B) expenditure
C) productivity
D) labor costs
Which of the following is true about transfer pricing?
A) The maximum price that the buying division is willing to pay is the higher of the
eventual contribution generated from an internal transaction and the price of purchasing
from an external party
B) The selling division must always set a transfer price above the market price of the
product to make the transaction economically feasible for the buying division.
C) There is generally a minimum transfer price the selling division will not go below
based on its own cost structure.
D) The transfer-price range lies between the its fixed cost per unit and the higher of its
contribution or price at which the product is available from external suppliers
Davidson Corporation manufactured 58,500 units during September. The following
fixed overhead data relates to September:
What is the amount of fixed overhead allocated to production?
A) $171,990
B) $170,220
C) $170,520
D) $58,500
In CVP analysis, focusing on target net income rather than operating income ________.
A) will increase the breakeven point
B) will decrease the breakeven point
C) will not change the breakeven point
D) will help managers construct a better capital policy
An example of a numerator reason for calculating annual indirect-cost rates includes
________.
A) fewer production workdays in a month
B) cost of raw materials purchased
C) higher snow-removal costs during the winter
D) the number of units produced
The Fabrication Division of American Car Company has offered to purchase 90,000
batteries from the Electrical Division for $104 per unit. At a normal volume of 250,000
batteries per year, production costs per battery are as follows:
The Electrical Division has been selling 250,000 batteries per year to outside buyers at
$136 each; capacity is 350,000 batteries per year. The Fabrication Division has been
buying batteries from outside sources for $130 each.
Required:
a. Should the Electrical Division manager accept the offer? Explain.
b. From the company’s perspective, will the internal sales be of any benefit? Explain.
In the estimation of a cost function using quantitative analysis, the independent variable
________.
A) is the cost to be predicted
B) is the product of fixed costs and slope coefficient
C) is the factor used to predict the dependent variable
D) is the product of total costs and slope coefficient