1) At the end of the accounting period, most companies close variance accounts to:
A.Raw-Material Inventory
B.Work-in-Process Inventory
C.Finished-Goods Inventory
D.Cost of Goods Sold
E.Income Summary
2) Assume that a capital project is being analyzed by a discounted-cash-flow approach,
and an employee first assumes no income taxes and then later assumes a 30% income
tax rate. How would depreciation expense be incorporated in the analysis?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
3) Borders Overnight operates an overnight package delivery service that competes
with Federal Express and United Parcel Service (UPS). Top management is considering
the use of a balanced scorecard to evaluate operations.
A. What is a balanced scorecard and other than customer-satisfaction measures, what
are its typical key components?
B. List four customer-satisfaction measures that Borders might use to evaluate
performance.
4) Which of the following would likely be a suitable cost driver for the amount of direct
materials used?
A.The number of units sold
B.The number of direct labor hours worked
C.The number of machine hours worked
D.The number of units produced
E.The number of employees working in the factory
5) The controller for Wofford Machining has established the following overhead cost
pools and cost drivers:
Order no. 715 has the following production requirements:
Machine setups: 7
Raw material: 11,200 units
Inspections: 16
Machine hours: 850
Required:
A. Compute the total overhead that should be assigned to order no. 715 by using
activity-based costing.
B. Suppose that Wofford were to use a single, predetermined overhead rate based on
machine hours. Compute the rate per hour and the total overhead assigned to order no.
715 .
C. Discuss the merits of an activity-based costing system in comparison with a
traditional costing system.
6) Successful adoptions of activity-based costing typically occur when companies rely
heavily on:
A.finance personnel
B.accounting personnel
C.manufacturing personnel
D.office personnel
E.multidisciplinary project teams
7) Which of the following choices correctly classifies a committed fixed cost and a
discretionary fixed cost?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
8) Internal controls focus on all of the following except:
A.effectiveness of operations
B.reliability of financial reporting
C.compliance with applicable laws and regulations
D.maximization of profit and cash flows
E.efficiency of operations
9) Which of the following methods ignores the fact that some service departments
provide service to other service departments?
A.Direct method
B.Indirect method
C.Step-down method
D.Reciprocal method
E.Dual-cost allocation method
10) At the economic order quantity:
A.total annual inventory costs, holding costs, and ordering costs are all minimized
B.total annual inventory costs and holding costs are minimized
C.total annual inventory costs are minimized, and holding costs equal ordering costs
D.total annual inventory costs are minimized, and holding costs exceed ordering costs
E.total annual inventory costs are minimized, and ordering costs exceed holding costs
11) Consider the following statements about pricing and the law:
I. American antitrust laws restrict certain types of pricing behavior.
II. The term “price discrimination” involves charging different prices to different
customers for the same goods and services.
III. Charging different prices to different customers for the same goods is permissible if
price differences are based on cost differences of producing and/or selling the good.
Which of the above statements is (are) true?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
12) A custom-home builder would likely utilize:
A.job-order costing
B.process costing
C.mass customization
D.process budgeting
E.joint costing
13) Sales margin shows:
A.the amount of income generated by each dollar of capital investment
B.the number of sales dollars generated by each dollar of capital investment
C.the percentage of each sales dollar that remains as profit after all expenses are
covered
D.the amount of capital investment generated by each sales dollar
E.the amount of capital investment generated by each dollar of income
14) Vincente Corporation has a machining capacity of 200,000 hours per year.
Utilization of capacity is normally 75%; it has been as low as 40% and as high as 90%.
An analysis of the accounting records revealed the following selected costs:
Vincenteuses the high-low method to analyze cost behavior.
Required:
A. Classify each of the costs as being either variable, fixed, or semivariable.
B. Calculate amounts for the two unknowns in the preceding table.
C. Calculate the total amount that Viscount would expect at a 75% utilization rate for
Cost A, Cost B, and Cost C.
D. Develop an equation that Vincente can use to predict total cost for any level of hours
within its range of operation.
15) The adoption of a 24/7 customer service help line is an example of a:
A.business-value-added activity
B.customer-value-added activity
C.nonvalue-added activity
D.batch-related activity
E.product-sustaining activity
16) Which of the following statements regarding price elasticity is false?
A.The concept of price elasticity is an extension of the economic pricing model
B.Demand is elastic if a price change has a large negative impact on sales volume
C.Demand is elastic if price changes have no impact on sales volume
D.Measuring price elasticity is an important objective of market research
E.Demand is relatively inelastic if price changes have little impact on sales quantity
17) Snyder, Inc., which has excess capacity, received a special order for 4,000 units at a
price of $15 per unit. Currently, production and sales are anticipated to be 10,000 units
without considering the special order. Budget information for the current year follows.
Cost of goods sold includes $30,000 of fixed manufacturing cost. If the special order is
accepted, the company’s income will:
A.increase by $2,000
B.decrease by $2,000
C.increase by $14,000
D.decrease by $14,000
E.None of the other answers are correct
18) When the step-down method is used, the service department whose costs are
allocated first is often the department that:
A.obtains the highest yield
B.has the lowest cost
C.is the newest
D.serves the greatest number of other service departments
E.serves the fewest other service departments
19)
Refer to the figure above. The triangular area between the horizontal axis and Line A, to
the left of 4,000, represents:
A.fixed cost
B.variable cost
C.profit
D.loss
E.sales revenue
20) Briefly define and discuss the terms in each of the pairs that follow.
A. Direct and indirect costs
B. Direct materials and indirect materials
C. Manufacturing overhead and direct labor
21) All other things being equal, which of the following would be the most attractive to
an investor?
A.A cash inflow of $10,000 in five years
B.A cash inflow of $2,000 each year for the next five years
C.A cash inflow of $5,000 in year 1 and $5,000 in year 5
D.A cash inflow of $10,000 today
E.All of these would be equally attractive to an investor
22) Which of the following should have the strongest cause and effect relationship with
overhead costs?
A.Cost followers
B.Non-value-added costs
C.Cost drivers
D.Value-added costs
E.Units of output
23) In an activity-based costing system, direct materials used would typically be
classified as a:
A.unit-level cost
B.batch-level cost
C.product-sustaining cost
D.facility-level cost
E.matrix-level cost
24) Summers Corporation recently used $75,000 of direct materials and $9,000 of
indirect materials in production activities. The journal entries reflecting these
transactions would include:
A.a debit to Manufacturing Overhead for $9,000
B.a debit to Manufacturing Overhead for $84,000
C.a debit to Raw-Material Inventory for $75,000
D.a debit to Work-in-Process Inventory for $84,000
E.a credit to Manufacturing Overhead for $9,000
25) A cost object is:
A.a collection of costs to be assigned
B.a responsibility center, product, or service to which cost is to be assigned
C.the tool used to charge cost dollars to user departments
D.the primary function of a responsibility accounting system
E.a common cost
26) Northcutt’s production data for a new deluxe product were taken from the most
recent quarterly production budget:
In addition, Northcutt produces 5,000 units a month of its standard product. It takes two
direct labor hours to produce each standard unit and 2.25 direct labor hours to produce
each deluxe unit. Northwest’s cost per labor hour is $15. Direct labor cost for July
would be budgeted at:
A.$183,750
B.$187,125
C.$189,125
D.$194,750
E.None of the other answers are correct
27) James Company has an asset that cost $5,000 and currently has accumulated
depreciation of $2,000. Suppose the firm sold the asset for $2,500 and is subject to a
30% income tax rate.
The net after-tax cash flow of the disposal is:
A.$2,100
B.$2,350
C.$2,500
D.$2,650
E.None of the other answers are correct
28) Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct
professional labor hours. Overhead was estimated to be $150,000, direct professional
labor hours were estimated to be 15,000, and direct professional labor cost was
projected to be $225,000. During the year, Media incurred actual overhead costs of
$146,000, actual direct professional labor hours of 14,500, and actual direct labor cost
of $222,000. By year-end, the firm’s overhead was:
A.$1,000 underapplied
B.$1,000 overapplied
C.$4,000 underapplied
D.$4,000 overapplied
E.$5,000 underapplied
29) The concepts and tools used to measure the performance of people and departments
are known as:
A.goal congruence
B.planning and control
C.responsibility accounting
D.delegation of decision making
E.strategic control
30) Alexandria Corporation applies fixed manufacturing overhead to production on the
basis of machine hours worked. The following data relate to the month just ended:
Actual fixed overhead incurred: $1,245,000
Budgeted fixed overhead: $1,200,000
Anticipated machine hours: 240,000
Standard machine hours per finished unit: 8
Actual finished units completed: 31,250
Required:
A. Compute Alexandria’s standard fixed-overhead rate per machine hour.
B. Determine Alexandria’s fixed-overhead budget variance and fixed-overhead volume
variance.
C. Calculate the amount of fixed overhead applied to production.
D. Consider the two events that follow and determine whether the event will affect the
fixed-overhead budget variance, the fixed-overhead volume variance, both variances, or
neither variance. Assume that Alexandria has not yet revised its standards to reflect
these events if a revision is warranted.
1> A raw material shortage halted production for two days.
2> An additional assembly-line supervisor was hired at the beginning of the month.
31) Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The
cost of platinum is approximately $360 per ounce; the company maintains an ending
platinum inventory equal to 10% of the following month’s production usage. The
following data were taken from the most recent quarterly production budget:
The cost of platinum to be purchased to support August production is:
A.$195,840
B.$198,000
C.$200,160
D.$391,680
E.None of the other answers are correct