In comparing the three basic approaches to transfer pricing, which of the following
statements would be true?
A) A cost-based approach preserves subunit autonomy while negotiated transfer prices
do not.
B) Market-based transfer pricing motivates managers but negotiated prices do not.
C) Cost-based transfer pricing systems are more difficult to implement and often make
more time to implement than negotiated transfer pricing.
D) Market-based transfer pricing achieves goal congruence when markets are
competitive while cost-based can achieve goal congruence, but not always.
Which of the following is the numerator in the mathematical expression for accrual
accounting rate-of-return (AARR)?
A) increase in expected average investment
B) increase in expected average annual after-tax operating income
C) increase in expected average cash flow
D) increase in expected net initial investment
Management accounting ________.
A) focuses on estimating future revenues, costs, and other measures to forecast
activities and their results
B) provides information about the company as a whole
C) reports information that has occurred in the past that is verifiable and reliable
D) provides information that is generally available only on a quarterly or annual basis
Any factor where a change in the factor causes a change in the speed with which an
activity is undertaken is referred to as ________.
A) a time driver
B) a cost driver
C) manufacturing lead time
D) customer-response time
Longball Company manufactures basketball backboards. The following information
pertains to the company’s normal operations per month:
Required:
a. For long-run pricing, what is the full-cost base per unit?
b. Longball Company is approached by an overseas city to fulfill a one-time-only special
order for 1,000 units. All cost relationships remain the same except for an additional
one-time setup charge of $40,000. No additional design, marketing, or distribution costs
will be incurred. What is the minimum acceptable bid per unit on this one-time-only
special order?
Which of the following is true of value engineering?
A) It is the process of building a new product by first determining the selling price of
the product.
B) It is the process by which a company analyzes its own process to reduce cost.
C) It is the process by which a systematic evaluation of all aspects of the value chain,
with the objective of reducing costs and achieving a predetermined quality level.
D) It is the process by which the competitor’s products are disassembled and analyzed.
Which of the following is an output measure for a hospital?
A) number of doctors needed to cater to patients
B) number of patients admitted every day in a hospital
C) number of days spent by a patient in a hospital
D) charges applicable on the number of days spent by a patient in a hospital
Which of the following is considered a cost of quality?
A) external failure costs
B) opportunity costs
C) sunk costs
D) contingent liabilities
A finance manager has to select one of the four different suppliers of raw materials. The
total cost functions under the four options are given below. Assume the quality of the
raw material to be the same, which of the following is preferred by the finance
manager?
A) y = 600 + 4.96X
B) y = 600 + 5.49X
C) y = 600 + 4.41X
D) y = 600 + 4.67X
A company would use multiple cost-allocation bases ________.
A) if managers believed the benefits exceeded the additional costs of that costing
system
B) because there is more than one way to allocate overhead
C) because this is a simpler approach than using one cost allocation base
D) if managers believe that using multiple cost-allocation bases is the only acceptable
method
Buzz’s Educational Software Outlet sells two or more of the video games as a single
package. Managers are keenly interested in individual product-profitability figures.
Information pertaining to three bundled products and the stand-alone prices is as
follows:
Using the stand-alone method with selling price as the weight for revenue allocation, what
amount of revenue will be allocated to Reading Fun in the first package (Reading Fun &
Math Fun)? (Do not round any intermediary calculations.)
A) $14.90
B) $33.10
C) $30.00
D) $18.00
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 90,000 technician hours. If a dual-rate cost-allocation
method is used, what amount of materials laboratory costs will be budgeted for the Large
Plane Department?
A) $9,846,000
B) $9,012,500
C) $7,658,000
D) $11,587,500
Nile Corp. has identified three cost pools to allocate overhead costs. The following
estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
Cost driver Actual level
Direct labor-hours 240
Machine-hours 1,700
Square feet of area 50
If Nile Corp. uses the three activity cost pools to allocate overhead costs, what are the
activity-cost driver rates for supervision of direct labor, machine maintenance, and facility
rent, respectively?
A) $0.60 per dlh; $0.16 per mh; $1.70 per sq ft
B) $1.67 per dlh; $6.25 per mh; $0.56 per sq ft
C) $0.60 per dlh; $0.16 per mh; $1.80 per sq ft
D) $0.50 per dlh; $0.16 per mh; $1.88 per sq ft
Zitrik Corporation manufactured 90,000 buckets during February. The variable
overhead cost-allocation base is $5.00 per machine-hour. The following variable
overhead data pertain to February:
What is the flexible-budget amount?
A) $54,000
B) $50,000
C) $50,500
D) $54,540
Smart Office Systems Inc, (SOSI) a manufacturer of office equipment, in 2017, one of
its best years, SOSI sold 1,000,000 units of its YAZ1 calculator for $20 each. In 2016, it
sold 930,000 of that same unit for $17.75 each. The cost of the calculator was $16 and
$15.00 for 2017 and 2016 respectively. Using the data from 2017 and 2016, what was
SOSI’s revenue effect of growth?
A) $1,242,500 U
B) $192,500 F
C) $1,242,500 F
D) $280,000 U
A company produces 11,000 units of which 600 are spoiled units because the process,
even though carefully and efficiently executed is unable to produce good units 100% of
the time. Another 80 units are spoiled because machines broke down and there also
were operator errors. What is the normal spoilage rate (round to two decimal places)
A) 6.18%
B) 5.81%
C) 5.45%
D) 0.73%
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:
T-SHIRTS SWEATSHIRTS
Production and sales volume 192,000 units 24,000 units
Selling price $17.00 $29.00
Direct material $1.70 $ 5.00
Direct labor $4.30 $ 7.20
Manufacturing overhead $3.50 $ 3.00
Gross profit $ 7.50 $13.80
Selling and administrative $4.10 $ 7.00
Operating profit $3.40 $ 6.80
Tiger Pride’s managers have decided to revise their current assignment of overhead
costs to reflect the following ABC cost information:
Under the revised ABC system, supervision costs allocated to Sweatshirts will be
________. (Do not round interim calculations. Round the final answer to the nearest whole
dollar.)
A) $52,920
B) $104,800
C) $123,480
D) None of these answers are correct.
Transferring products internally at a market price leads to optimal decisions when all of
the following conditions are prevalent except ________.
A) the market for the transferred product (intermediate product) is perfectly competitive
B) there are no additional costs to the company from buying in the external market
instead of transacting internally
C) the interdependence of subunits is minimal
D) there are additional benefits to the company by selling in the external markets
instead of transferring internally
Which of the following statements is true of just-in-time production systems?
A) In a just-in-time production system, a master production schedule specifies the
quantity and timing of each item to be produced.
B) Sales budget triggers each step of the production process in a just in time production
system.
C) Defects arising at one workstation affect other workstations in the line quickly
because of the tight links between workstations.
D) Production is organized in manufacturing cells in a just in time production system,
which are production centers that use a “push-through” approach whereby finished
goods are manufactured on the basis of demand forecasts.
Which of the following items will be same for a flexible budget and a master budget?
A) total variable cost
B) total expected fixed costs
C) total contribution margin
D) total expected revenues
A manufacturing plant produces two product lines: golf equipment and soccer
equipment. An example of a direct cost for the golf equipment line is ________.
A) beverages provided daily in the plant break room for the entire staff
B) monthly lease payments for a specialized piece of equipment needed to manufacture
the golf driver
C) salaries of the clerical staff that work in the company administrative offices
D) overheads incurred in producing both golf and soccer equipment
Venus Corporation incurred fixed manufacturing costs of $6,300 during 2017. Other
information for 2017 includes:
The budgeted denominator level is 1,600 units.
Units produced total 760 units.
Units sold total 640 units.
Beginning inventory was zero.
The company uses variable costing and the fixed manufacturing cost rate is based on
the budgeted denominator level. Manufacturing variances are closed to cost of goods
sold.
Fixed manufacturing costs included in ending inventory total ________.
A) $995
B) $3,308
C) $473
D) $0
A system that emphasizes lean production techniques, low quantities of inventory, and
close coordination among production workstations is called ________.
A) Economic order quantity production
B) Just-in-time production
C) Materials requirements planning production
D) Push-through system
Block Island TV currently sells large televisions for $380. It has costs of $290. A
competitor is bringing a new large television to market that will sell for $320.
Management believes it must lower the price to $320 to compete in the market for large
televisions. Marketing believes that the new price will cause sales to increase by 10%,
even with a new competitor in the market. Block Island TV sales are currently 120,000
televisions per year.
What is the target cost if the company wants to maintain its same income level, and
marketing is correct (rounded to the nearest cent)?
A) $224.00
B) $238.18
C) $230.00
D) $290.00
Sutton Hot Dog Stand sells hot dogs for $1.35. Variable costs are $1.05 per unit with
fixed production costs of $90,000 per month at a level of 400,000 units. Fixed
administrative costs total $30,000. Sales average 400,000 units per month, with planned
production of 400,000 hot dogs.
Required:
a. What are breakeven unit sales under variable costing?
b. What are breakeven unit sales under absorption costing if she sells everything she
prepares?
c. What are breakeven unit sales under absorption costing if average sales are 498,000
and planned production is changed to 500,000?
Ventaz Corp manufactures small windows for back yard sheds. Historically, its demand
has ranged from 30 to 50 windows per day with an average of 43. Alex is the one
production worker and he works eight hours a day, five days a week. Each order is one
window and each window takes 7 minutes. Alex plans to add doors to its product line
and anticipates that they will average 2 doors per day. Each door takes V4 minutes to
install.
What is the average waiting time, in minutes, if Alex continues to be the only worker?
A) 220 minutes
B) 289 minutes
C) 241 minutes
D) 963 minutes
Which of the following is true if the volume of sales increases (within a relevant
range)?
A) total fixed cost increases
B) total variable cost decreases
C) total variable cost increases
D) total fixed cost decreases
Which of the following companies will use a process costing system?
A) an oil refining company
B) a manufacturer of ships
C) a custom kitchen cabinet company
D) an advertising firm
All Rite Manufacturing reported the following:
What is All Rite’s gross margin (or gross profit)?
A) $54,000
B) $217,000
C) $211,000
D) $60,000
The conference method estimates cost functions ________.
A) using quantitative methods that can be very time consuming and costly
B) based on analysis and opinions gathered from various departments
C) using time-and-motion studies
D) by mathematically analyzing the relationship between inputs and outputs in physical
terms
An organization that is using the cost leadership approach would ________.
A) incur costs for innovative R&D
B) provide products at a higher cost than competitors
C) focus on productivity through efficiency improvements
D) bring products to market rapidly
For a company which produce its products in batches, the CEO’s salary is a(n)
________ cost.
A) batch-level
B) output unit-level
C) facility-sustaining
D) product-sustaining
Which of the following statements best defines a trigger point in a sequential-tracking
costing system?
A) the inventory level at which a new purchase order is generated
B) the point at which the sum of annual relevant stockout and ordering costs is minimal
C) the production level at which the costing system becomes incapable of tracking the
production costs
D) a stage in the production cycle at which journal entries are made in the accounting
system
Lavender Company is a logistics company and has recently implemented ABC system.
Using activity-based information, it decides to reduce the bulkiness of the packages
delivered, thereby reducing costs. This suggests that ABC system helps managers in
________ decisions.
A) pricing
B) product-mix
C) process-improvement
D) product-design
Allocation of corporate-sustaining costs is useful for which of the following?
A) evaluating the performance of salespersons with individual customer accounts
B) motivating distribution-channel management
C) focusing on the cause-and-effect relationships with the cost-allocation bases
D) motivating division managers to examine how corporate costs are planned and
controlled