Wyatt Corporation
Wyatt Corporation has the following standard costs associated with the manufacture
and sale of one of its products:
Refer to Wyatt Corporation. The volume variance under absorption costing is
a. $8,000 F.
b. $4,000 F.
c. $4,000 U.
d. $8,000 U.
The financial perspective of the balanced scorecard addresses how well the organization
is doing with regard to important customer criteria.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using net realizable value at split-off, what amount of
joint processing cost is allocated to Product G?
a. $1,017
b. $1,550
c. $2,170
d. $4,263
Holding total production in units constant, as the proportion of defective units to total
units declines, all of the following measures will be affected, except
a. total unit sales.
b. throughput.
c. process quality yield.
d. process productivity.
Horner Company
Horner Company manufactures a single product. Each unit sells for $15. The firm’s
projected costs are listed below:
Refer to Horner Company. What is Horner’s projected degree of operating leverage for
the current year?
a. 2.25
b. 1.80
c. 3.75
d. 1.67
Which of the following would be considered a detector?
a. computer program
b. source document
c. variance report
d. all of the above
A prospective project under consideration by the Internet Division of Communications
Corporation. has an estimated residual income of $(20,000). If the project requires an
investment of $400,000, the
a. project generates a negative return on investment.
b. project’s return on investment is zero.
c. project’s return on investment is 5% less than the company’s target rate.
d. company’s target rate is 15%
The life cycles of many products are becoming shorter
a. causing companies to recognize that it may be more advantageous to confront, rather
than compete with, the competition.
b. making products in the maturity stage of their life cycle the basis on which firms
expect growth to be generated.
c. so companies spend less and less on product design and development because
products will not last as long as previously.
d. meaning that tools such as benchmarking and target costing become less important in
adapting to the competitive environment.
Relative to traditional product costing, activity-based costing differs in the way costs
are
a. processed.
b. allocated.
c. benchmarked.
d. incurred.
Jenkins Manufacturing
The following information is available for Jenkins Manufacturing Company for the
month of June when the company produced 2,100 units:
Refer to Jenkins Manufacturing Company. What is the material quantity variance?
a. $275 F
b. $290 F
c. $290 U
d. $275 U
A disadvantage of participatory budgets is that
a. there is a high degree of acceptance of the goals and objectives by operating
management.
b. they are usually more realistic.
c. they lead to better morale and higher motivation.
d. they usually require more time to prepare.
Schmidt Corporation manufactures card tables. The company has a policy of
maintaining a finished goods inventory equal to 40 percent of the next month’s planned
sales. Each card table requires 3 hours of labor. The budgeted labor rate for the coming
year is $13 per hour. Planned sales for the months of April, May, and June are
respectively 4,000; 5,000; and 3,000 units. The budgeted direct labor cost for June for
Schmidt Corporation is $136,500. What are budgeted sales for July for Schmidt
Corporation?
a. 3,500 units
b. 4,250 units
c. 4,000 units
d. 3,750 units
In a production process with a machine constraint, if a quality control point is to be
established, it should be set up
a. within the machine’s processes.
b. directly after the machine has performed its functions.
c. immediately before the machine.
d. at the end of the production process.
Stillwater Corporation
The following information is available for Stillwater Corporation for the current year:
All materials are added at the start of production.
Refer to Stillwater Corporation. What is the cost per equivalent unit for conversion
costs using weighted average?
a. $4.62
b. $4.21
c. $4.48
d. $4.34
Grant Corporation
The following information is available for Grant Corporation for the current month:
All materials are added at the start of production and the inspection point is at the end
of the process.
Refer to Grant Corporation. What is the cost assigned to normal spoilage and how is it
classified using weighted average?
a. $6,193 allocated between WIP and Transferred Out
b. $6,424 allocated between WIP and Transferred Out
c. $6,193 assigned to loss account
d. $6,424 assigned to units Transferred Out
Budgeted sales for the first six months for Pratt Company are listed below:
Pratt Company has a policy of maintaining an inventory of finished goods equal to 30
percent of the next month’s budgeted sales. If Pratt Company plans to produce 8,000
units in June, what are budgeted sales for July?
a. 3,000 units
b. 4,500 units
c. 10,000 units
d. 15,000 units
Levine Company
Levine Company has a job-order costing system and an overhead application rate of
125 percent of direct labor cost. Job #123 is charged with direct material of $18,000 and
overhead of $9,000. Job #124 has direct material of $4,500 and direct labor of $12,000.
Refer to Levine Company. What amount of direct labor cost has been charged to Job
#123?
a. $ 7,200
b. $ 9,000
c. $11,250
d. $18,000
The Statement of Cash Flows indicates the cash inflows and outflows from
a. investing, financing, and borrowing activities.
b. operating, investing, and sending activities.
c. merchandising, financing, and investing activities.
d. operating, investing, and financing activities.
Which of the following is the least likely to be a relevant item in deciding whether to
replace an old machine?
a. acquisition cost of the old machine
b. outlay to be made for the new machine
c. annual savings to be enjoyed on the new machine
d. life of the new machine
Which of the following will decreasethe break-even point?
a. yes yes
yes
b. yes no
yes
c. yes no
no
d. no yes
no
The first step in determining the cost per EUP per cost component under the weighted
average method is to
a. add the beginning Work in Process Inventory cost to the current period’s production
cost.
b. divide the current period’s production cost by the equivalent units.
c. subtract the beginning Work in Process Inventory cost from the current period’s
production cost.
d. divide the current period’s production cost into the EUP.
McKenzie Corporation consumes 1,200,000 gallons of Material Y per year. Its order
quantity is 30,000 gallons. It maintains a safety stock of 10,000 gallons and its annual
carrying costs are $0.25 per gallon per year. If the ordering cost is $20 per order, what
are the total annual ordering costs?
a. $600
b. $800
c. $8,300
d. $1,200
Cost accounting is necessitated by
a. the high degree of conversion found in certain businesses.
b. external reporting requirements for manufacturing companies.
c. management’s need to be aware of all production activities.
d. management’s need for information to be used for planning and controlling activities.
Ewing Company manufactures a specialized product. Department 2 adds new material
to the units received from Department 1 at the end of process. A normal loss occurs
early in processing. Production and cost data for Department 2 for the month of April
are as follows:
Required:Determine the following for Department 2 under (a) weighted average the
method of costing and (b) the FIFO method of costing: (1) unit costs for each cost
component, (2) cost of production transferred to finished goods, (3) cost of work in
process inventory of April 30.
Exotic Chocolate Company produces baking chocolate for use by commercial
organizations. The company is analyzing its operations in preparation for reconfiguring
its factory setup.
Currently, each batch of chocolate requires the following processes:
a) Calculate the total cycle time necessary to manufacture a batch of chocolate.
b) Identify the value-added functions
c) Calculate the manufacturing cycle efficiency (MCE) of this process.
d) Assume that a management consultant has established a goal that Exotic Chocolate
Company increase its MCE to 5 percent or greater. Identify three possible areas in
which the company could reduce its cycle time.
The cost sheets for incomplete jobs at the end of the period comprise the subsidiary
ledger for
a. Finished Goods Inventory.
b. Raw Material Inventory.
c. Work in Process Inventory.
d. Supplies Inventory.
Magnificent Motor Corporation
The Engine Division of Magnificent Motor Corporation uses 5,000 carburetors per
month in its production of automotive engines. It presently buys all of the carburetors it
needs from two outside suppliers at an average cost of $100. The Carburetor Division
of Magnificent Motor Corporation manufactures the exact type of carburetor that the
Engine Division requires. The Carburetor Division is presently operating at its capacity
of 15,000 units per month and sells all of its output to a foreign car manufacturer at
$106 per unit. Its cost structure (on 15,000 units) is:
Assume that the Carburetor Division would not incur any variable selling costs on units
that are transferred internally.
Refer to Magnificent Motor Corporation. If the two divisions agree to transact with one
another, corporate profits will
a. drop by $30,000 per month.
b. rise by $20,000 per month.
c. rise by $50,000 per month.
d. rise or fall by an amount that depends on the level of the transfer price.
If a division is set up as an autonomous profit center, then goods shouldnotbe
transferred
a. in at a cost-based transfer price.
b. out at a cost-based transfer price.
c. in or out at cost-based transfer price.
d. to other divisions in the same company.
Glover Company produces a part that has the following costs per unit:
London Corporation can provide the part to Glover for $23 per unit. Glover Company
has determined that 50 percent of its fixed overhead would continue if it purchased the
part. However, if Glover no longer produces the part, it can rent that portion of the plant
facilities for $70,000 per year. Glover Company currently produces 12,000 parts per
year. Which alternative is preferable and by what margin?
a. Make-$24,000
b. Make-$60,000
c. Buy-$10,000
d. Buy-$46,000
Wyman Corporation
Wyman Corporation. has the following information for May:
All material is added at the start of the process and all finished products are transferred
out.
Refer to Wyman Corporation. How many units were transferred out in May?
a. 17,600
b. 19,500
c. 25,100
d. 27,000
In the application of “variable costing” as a cost-allocation process in manufacturing,
a. variable direct costs are treated as period costs.
b. nonvariable indirect manufacturing costs are treated as product costs.
c. variable indirect manufacturing costs are treated as product costs.
d. nonvariable direct costs are treated as product costs.
Duval Corporation
The Duval Corporation has recently evaluated a proposal to invest in cost-reducing
production technology. According to the evaluation, the project would require an initial
investment of $17,166 and would provide equal annual cost savings for five years.
Based on a 10 percent discount rate, the project generates a net present value of $1,788.
The project is not expected to have any salvage value at the end of its five-year life.
Refer to Duval Corporation. What are the expected annual cost savings of the project?
Present value tables or a financial calculator are required.
a. $3,500
b. $4,000
c. $4,500
d. $5,000
In a process costing system, the journal entry to record the transfer of goods from
Department #2 to Finished Goods Inventory is a
a. debit Work in Process Inventory #2, credit Finished Goods Inventory.
b. debit Finished Goods Inventory, credit Work in Process Inventory #1.
c. debit Finished Goods Inventory, credit Work in Process Inventory #2.
d. debit Cost of Goods Sold, credit Work in Process Inventory #2.
Of the following budgets, which one isleastlikely to be determined by the dictates of
top management?
a. sales
b. material usage
c. revenues
d. general and administrative
How do changes in volume affect the break-even point?
The difference between the actual wages paid to employees and the standard wages for
all hours worked is the labor efficiency variance.
A production plant could be a cost object.
What are the five steps involved in implementing a cost control system?
If incremental revenues beyond split-off exceed incremental costs, a product should be
processed further.
A segment of a production or service process for which management wants a separate
report is referred to as a(n) ______________________________.
Managerial accounting is most concerned with meeting the needs of external users.
Castle Corporation
The following questions are based on the following data pertaining to two types of
products manufactured by Castle Corporation:
Fixed costs total $300,000 annually. The expected mix in units is 60 percent for Product
Y and 40 percent for Product Z.
Refer to Castle Corporation. What is Castle’s break-even point in sales dollars?
The first stage in the budgeting process is the preparation of a sales budget.
The point at which individual products are first identifiable in a joint process is referred
to as the _________________________.
A measure of profit produced above the cost of capital is referred to as
___________________________________.
When an organization attempts to “adjust” its profits to meet a specific target, it is
guilty of ______________________________.
Lincoln Company
Lincoln Company applies overhead based on direct labor hours and has the following
available for the current month:
Refer to Lincoln Company. Compute all the appropriate variances using the
three-variance approach.
Costs that have been found to bear observable and known relationships to a quantifiable
activity base are referred to as __________________________________.
The portion of variance in a dependent variable explained by an independent variable is
referred to as the _________________________________________.
How can a company produce both variable and absorption costing information from a
single accounting system?